Tuesday, Oct 17, 2017
Government | Services | Europe | Malta

FDI in Malta

Investors bet on Malta’s long-term appeal

11 months ago

Mario Galea, CEO of Malta Enterprise (Photo: DOI – Jason Borg)
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Mario Galea

CEO of Malta Enterprise

Malta is not only successful in attracting companies and industries to set up shop on the islands, but it also provides a steady, sustainable environment for them to grow and develop, as evidenced by the number who remain in business decades after first coming to the country. CEO of the national economic investment agency Malta Enterprise, Mario Galea discusses Malta’s long-term advantages.


You have 30 years of experience in Malta Enterprise, what has changed in these 30 years with business and at Malta Enterprise?

Well a lot has changed, not only in Malta Enterprise but also on international business. Today, the international business is totally different. Till the digital age, practically, business was basically a transferring business from one territory to another. Basically, you have a company, for example in the United States or Germany, and they want to expand in a particular territory for some reason and they shift production from one place to another.

Today, the process is totally different, with globalization and the internationalization of markets; the business model of international companies is totally different. Also the competition has changed: 20 years ago Malta’s competition was mostly made up of five or six countries. Today, the competition is much higher. You don’t only have countries but also territories within countries, and regions. So if you look at Germany, which is one of our prime markets, you have to compete with maybe 30 or 35 regions which are all doing investment promotion; the same with the UK or Italy. So the competition is not only one of geographical competition, like Malta, Greece, Cyprus, or Portugal; it is mostly areas within those territories. Because even in those territories, there are some areas that are more competitive than others.

The bottom line is that we have to be very focused. We have to approach individual companies, we have to do a lot of deskwork, a lot of research. You need to learn about the companies you are trying to approach, you need to learn their pluses and their minuses, and you need to give companies a business opportunity. If you just go on a general level, it is not likely that you get the attention of companies. Maybe with general information, you will attract the wrong companies, but with a lot of research and some market intelligence, one can approach companies with specific proposals that then it would be easier, at least to be heard and to put your message across. Then once you get your message across, one can start obviously negotiating, bringing projects to fruition.

Now, in these 30 years, Malta has been successful—actually more than 30 years because our first experience of FDI in the production sectors came about 50 years ago. A good number of companies that came at that time are still present in Malta, which is a very important testimonial for Malta because it does not show only that Malta can be good in marketing its message, that it can attract companies to invest here, but it is important that the country as a whole offers a sustainable environment for companies to grow here, to reach different markets from here. Today, in some instances, subsidiaries of companies who came to Malta, 30 or 40 years ago, have outgrown their parent company, like for example in the case of Playmobil, the toy company. Today, Playmobil’s Malta’s operation is very strategic to the whole group. Basically it produces for the whole group and the development and the production carried out in Malta is critical to the whole group.

Playmobil is not the only example: there are a lot of companies today that came to Malta as a production extension, I would say, because their parent company wanted to set up production, but toda they basically live on their own. So from Malta they have developed new products, they have developed new markets, they have developed new skills and have become sustainable in their own right.


Why would major investors or industries come here? What is it that you have to offer?

There is no general answer to this but obviously there are advantages for every sector, in some cases for every operation. Let me give two examples. In aviation, we are strong in the MRO (maintenance, repair and overhaul) business and also supplying aircraft with goods, provisions, and so on. There, the basic advantage of Malta is that because of where it is—in the center of the Mediterranean, lying between Europe and Africa. It makes sense for aircraft flying in the area to do their MRO business in Malta to get provisions from Malta, to get their goods from or to Malta, and utilize Malta as their center of operations.

That advantage does not apply for ICT for example. If you are in the IT business, whether you are in Malta or you are in Hawaii, you can operate there. Then there are other advantages in for example the gaming sector, which is predominantly run on IT; there the advantage is taxation.

Although in some cases, some companies have also discovered other advantages in Malta: IT skills in software, the opportunity of having a call center, the opportunity of doing back-office operations, and so on. In life sciences, for example, dealing with the hospitals, or the university, the fact that our health care is of a very good level provides different opportunities for research, for projects related to pharmaceuticals or some research on blood, for example, or human tissue.

So every sector or every subsector has its why. The how is universal to the investment promotion approach. The why then is totally different, why a company would come here—that varies from one company to another. In fact, if you look at the ownership of the companies we have today in Malta, with the exception of the large ones which are mostly quoted on the stock exchange, the rest come from different places, so we have companies from Sweden, the USA, the UK, Germany, Italy, and the Middle East. We export all over the world. Our exports to the European Union are about 35%, and we export around 20% to Asia. This mix is healthy, first of all because you’re dealing in different currencies: we export in sterling, dollars, euros, and so on. So the fact that our economy is very diversified, you can cushion a little bit the effects of what is happening around us—the currency fluctuations, economic fluctuations, sometimes regulatory fluctuations.


Would you say Malta’s brand represents high added value rather than, say, cheap labor costs that other countries promote?

I think our message is good value added and quality. I think we are competitive in a niche where we compete on quality. Compared with southern Italy or Greece, we are probably more expensive. But we are not as expensive as Germany, France or the UK. In the Mediterranean, I would not say we are expensive, but cost effective.

We compete on quality. For example, on innovation we compete on value, the skills of the people, and on flexibility. That is very important, that if a customer wants 100,000 units of a particular product quickly, if you go to a large company, they will not produce it for you because their schedule would be taken up. In Malta, you can find companies that can produce for you.

Also, we are very quick to adjust our production schedules; so if someone wants a different product, we can produce. For example, in software, someone who wants to do 1 million of a particular type of software would go to India or maybe to Pakistan nowadays. But if someone wants a tailor-made package for a chain of hotels or for Visa and MasterCard and so on for plastic money, then Malta is ideal because you can interact with your people. Malta is basically reachable: it’s a two or three-hour flight from everywhere in Europe, so you can get people coming to Malta to interact with the people producing your items; then we are competitive and we have created a brand.

Something which is very interesting is that if someone comes to see Malta, their first impression would be that our largest economic contributor is tourism because tourists are visible. If you stay in Sliema or in Bugibba, you see tourism; you do not see factories. So tourism is very visible. However manufacturing gives more contribution directly and indirectly than tourism, but manufacturing is not visible. Visitors don’t see ST Microelectronics [one of Malta’s leading exporters] coming out of their factory with their goods, you know, it is not visible, while tourism is highly visible.


During a meeting with MITA (Malta Information Technology Agency), it was stated that coming to Malta was also a way to try new things, to be innovative and to see Malta as a showroom. For example, Microsoft came with their solutions and basically test in Malta. What are the sectors in ICT that can be tested here and reproduced on a greater scale in other countries? 

Yes, and that is not the only example: Huawei from China are doing the same thing. Also, one very interesting example is that Vodafone UK started its international business in Malta, maybe 25 years ago when there were those large phone handsets, because Malta was easy to manage. They were monitoring what was happening, they were doing some market testing. For example, they thought their biggest clients were going to be doctors, lawyers, etc. They were completely wrong: their biggest clients were people who were in the trades, people who were building houses, laying tiles, etc., because the professionals sit in an office—at that time they did not need a mobile—while people who were on the go outside needed a mobile phone.

In Malta it is easy, even for example in some areas of life sciences; you can do samples for clinical trials, you can get, say, 10,000 people around over two weeks, basically from around the place where you are. To get that in London or in Madrid, it is very difficult. The size of Malta can be a disadvantage but it can also be an advantage.

Also, we make very quick decisions: our decision time is very quick so on a good project, in 15 days we close the deal, if the due diligence is okay. So that is also a very big advantage, that internal communication between the decision makers is also very quick.


You mentioned that when investors come here they have all different needs, and there is one thing that is difficult to provide: the workforce. How can you ensure that they have the skills required?

We have practically no unemployment in Malta; however, there is some under-employment. I am sure that if there is a good company that wants to set up, they can find workers. They will not find many so if they are in software and want 200 people in C programming; you will not find 200 people waiting for you to get a job. If you want 20 people, 30 people, you will find them.

Malta is small; you need to get a good general manager, then he will know people and you will get people. If you do not get enough, then you will have to see Malta within the view of the European Union. Somehow, there are a lot of countries around us with very high unemployment, you have southern Italy, you have some parts of Spain, to some extent, you have some parts of Africa, so you can get people—it is not difficult to get people.

With Maltese people, although there is practically no unemployment, people do tend to be loyal to their industry. Migration from one industry to another is not very high. So if you train people, it is likely that out of 10, nine will stay with you. So the acquired knowledge to the company would be good. Obviously, the foreigners are more volatile; you can get foreigners and they will leave. So one needs to balance that out.

We need to get foreigners into Malta. I think today about 25% of the working population is made up of foreigners. The birth rate in Malta is going down, it is not increasing, so it is not likely that we will have more Maltese in the labor market in the next 20 years, so we need to get foreign people to work here as well.


How are you working with the educational sector?

We work with the University of Malta, the Malta College of Arts Science and Technology (MCAST), and we work with private institutions. For example, we have an industry participating in courses with MCAST by providing technical competencies, sometimes we get technical competencies from foreign universities; so many times we finance programs of MCAST from our budgets.


Is there anything you would like to add?

Yes, I think Malta can offer something that may not be not flavor of the month. There are countries around us that are doing a lot of branding; one could say they make a lot of effort, but then after two months or three months, something happens. For example, at the moment Turkey is set to be fair. Turkey is one of our competitors; I would rank it as one of the top five competitors of Malta, up until, say, a few months ago. Today the situation in some parts of Turkey is such that maybe some foreign investors would seriously rethink whether it was a good decision to invest in Turkey.

Malta is not a quick win, so our costs are not as competitive or as cheap as in some other countries, but we offer a safe environment from all senses and long-term sustainability. If someone is interested in setting up business for two years, he is not going to be in our interest. If someone wants to set up a good business on a sustainable basis, then Malta is one of the best countries—and this is not because I am saying it. If one looks at the testimonials that we have around, there are very few regions in Europe that can say they have a manufacturing industry where the average age is about 30 or 35 years. Most of the industries, even though we have had a lot of recent additions, that came to Malta in the 60s and 70s are still here. I think that is a very good sign because it shows that Malta offers an environment for industry to be profitable. Maybe you will not make as much profit as if you go to a very cheap country, but in a very cheap country you will then have to pay the price of stability. We offer a very good combination—competitiveness plus stability, industrial stability, political stability, stability with the unions: Malta is a place of stability. 




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