The tiny island nation has managed to successfully keep its economy afloat, with the exception of 2009 when its GDP growth dipped below zero, thanks in large part to its diverse economic base. Today, Malta continues to target niche sectors and bolster a vital part of its economy: small and medium businesses
Whilst the Eurozone suffered negative GDP growth in 2013, Malta was bucking the trend and proving to be a top performer, boasting 2.5 per cent expansion. The European Commission forecasts that 2014 and the coming few years will see a rise, albeit meagre, in the region. As for Malta, its healthy growth figures are also expected to inch upwards.
To what does the tiny Mediterranean island owe this robustness? Maltese business leaders such as Louis Farrugia of Farsons Group of Companies (the name behind the first locally brewed beer and modern-day Malta’s leading food and beverage company) don’t hesitate to attribute the success to Malta’s diversified economy. “Our mix is that of manufacturing as well as financial services,” says Mr Farrugia. “We also have a maritime industry due to our strategic position and of course tourism, which is fundamental to our whole economy.”
The Bank of Valletta (BOV), Malta’s longest established bank and one of its largest, was “instrumental in helping the Maltese economy to transform itself from one that was based on military spending to one that has a good mix of economic activities,” says bank Chairman John Cassar White.
In terms of the banking sector, Mr White says Malta’s financial institutions weathered the worst of the global crisis well, thanks to their tendency to adopt “rather conservative business models”, which saved the taxpayers from having to bail the banks out.
According to the Minister of Economy, Investment and Small Business, Dr Christian Cardona, previous administrations had put into place many essential elements for sustaining growth and had managed successfully to target niche markets. He goes on to say that the government of Joseph Muscat has focused even further on harnessing Malta’s strengths; namely, “our English language, geostrategic position, stable social environment, superb quality of life, our excellent education system, our health services and the easy accessibility to government”.
Given its size, it is only natural that the government be accessible, yet it goes the extra mile to also be highly responsive. For example, when the Chamber of Commerce, Enterprise and Industry presented the Prime Minister with its Economic Vision 2014-2020, the document was “instantly circulated to all ministries”, says Dr Cardona. The next step was to “consolidate each observation, fuse them into one document, send it to the Chamber and start a discussion. This is not a process exclusive to the Chamber’s Economic Vision; we do it with the Malta Employers’ Association, with working unions and every other stakeholder.”
In its Economic Vision, the Chamber of Commerce identified several key economic sectors to leverage: financial services, ICT (including digital gaming), filming, life sciences, maritime transport and advanced logistics, aviation and advanced logistics, tourism, green and low carbon, health services, education services and lastly, manufacturing.
Meanwhile, the state’s investment promotion agency, Malta Enterprise, has carried out a process called micro targeting, which essentially matches Malta’s specialised industries and sectors with potential investors in targeted overseas countries, and even specific provinces. “We attracted investors in sectors in which they’d be comfortable to invest. Micro targeting did excellently,” claims Dr Cardona.
One of the niche sectors that has done particularly well is that of oil and gas services. Despite having very little in terms of its own hydrocarbon reserves, Malta affords oil companies a safe, comfortable and convenient home base from which to operate in North Africa. “Oil and gas is a sector with its ups and downs,” explains Paul Abel, Chairman of Ablecare Oilfield Services Group, “but the downs are not as low as those of other businesses because, when there is a slump, there is maintenance that needs to be done; when it’s busy, then it’s busy.”
At the turn of the millennium, Mr Abel, who calls Malta “a five-star hub for the general oil industry”, transformed what was a highly successful mechanical and electrical engineering company into one that focused purely on the oil and gas industry. Recently, the Ablecare group made another groundbreaking move: in late October its manpower agency (Ableman International) launched the Ableman Drilling Careers Academy in collaboration with Texas’ Lone Star College. The first of its kind in Europe, this new academy offers a ten-week, full-time practical course in line with the requirements of the International Association of Drilling Contractors (IADC).
Whereas Ablecare and Farsons (now building a €27-million beer packaging facility, with a view to treble exports over the next five years) are well-established business groups, Malta is increasingly looking to boost its SMEs. “We are identifying Malta government investments and will create a Malta Equity Initiative,” says Economy Minister Dr Cardona, who adds that the government is also examining ways to make it possible for SMEs to participate in public procurement.
For its part, Bank of Valletta recently launched the BOV 4 SMEs Financing programme to support local businesses in their capital investment projects requirements with competitive interest rates. This has been made possible thanks to the European Central Bank’s targeted longer-term refinancing operations (TLTROs), and comes on the heels of the full implementation of BOV’s Joint European Resources for Micro to Medium Enterprises (JEREMIE) programme, in which the bank lent €62 million in new loans to more than 650 SMEs.