This year’s EY survey on Malta’s attractiveness among foreign direct investment (FDI) companies based here clearly showed that there are three key concerns which are significantly influencing the attractiveness of Malta as an FDI location: political and regulatory stability, cost-competitiveness and the availability of skills.

Malta’s political and regulatory stability had already featured as an area of primary concern in last year’s survey, with Malta’s greylisting having certainly further influenced respondents’ sentiment this year.

FDI investors conveyed a strong message on the need to give utmost focus on Malta’s reputational value and brand identity.

From the outset, one must recognise that, even if a country is ideally located, offers the right infrastructure and is supported with the right facilities, resources and incentives to attract FDI investment, this will always be conditioned by the reputation the country commands. The two go hand in hand. 

Today, we repeatedly hear about the growing compliance awareness and its implementation in various sectors, which is all clearly essential. Yet, what we should ultimately be aspiring for is much more than being compliant.

We need a mindset change with bolder and more ambitious aspirations and while, in the short term, restoring our reputation by getting off the grey list is a priority beyond that we need to move from restoring to building and strengthening our reputation.

Just like in today’s corporate world, a brand represents what a business does but, ultimately, its reputation defines what people remember. Therefore, rectifying any reputational concerns before embarking on a national branding effort is, of course, an essential precondition.

Our national brand identity may be more complex and far-reaching and, therefore, requires a well thought out strategy. We need to carefully review and, possibly, redefine our branding to ensure Malta remains highly relevant and visible on the FDI investment radar.

To attain and maintain the right reputation along with an attractive national brand, we also need to ensure the authorities always place and fully empower the best minds in positions of influence, be it in public administration, institutional authority or regulatory responsibility. Likewise, with respect to Malta’s diplomatic or other forms of national representation.

Just as we all want our businesses to be managed by the most skilled and productive managers in order to attain our corporate goals, we should, likewise, expect the same from all decision-takers and policymakers.

With respect to cost-competitiveness, notably, but not exclusively, corporate taxation, labour costs and shipping costs are under growing pressure.

Competitiveness is not only about costs but also about capabilities

Corporate taxation continued to rank highest in the attractiveness survey scoreboard, despite a significant decline in respondents scoring, compared to previous years. Of course, retaining a competitive tax regime is important, even if this decline is not necessarily negative. Indeed, it may also be an opportunity to better realign FDI investment considerations, without being overly dependent on corporate taxation, more so considering the ongoing international tax reform debate.

Pressure on labour costs are particularly conditioned by the tight labour market, with the growing shift in workers attitude from job security to job mobility further complicating matters.

With respect to transport and logistics, this was significantly regarded as not attractive by many survey respondents. This is evidently becoming a growing issue, more so when also considering the prevailing inflationary pressures, which include exorbitant increases in shipping costs.

Such transport and logistics costs are already having an increasingly significant impact on our manufacturing competitiveness, keeping in mind that the costs of our insularity will always be higher when operating from an island economy with no raw materials nor a sizeable home market. 

Despite these growing cost pressures, it is important for us to fully recognise that competitiveness is not only about costs but also about capabilities.

As amply reflected by most survey respondents, Malta’s skills shortage remains a recurrent issue which is conditioning our economic expansion due to our inability to satisfy the increasing demand for specialised skills.

Furthermore, if we truly want to firmly place Malta on the international investment map, we need to continuously promote a stronger entrepreneurial culture within an environment which is fully responsive to the need of retaining our competitiveness, which, after all, is a prerequisite for a sustainable economy.

Here, despite the growing sensitivity on environmental responsibility, it is somewhat conflicting to note that survey respondents placed “a shift to a low-carbon economy” at the bottom of their priorities to remain globally competitive. 

This may indicate that while investors recognise their responsibility towards climate change and that of operating in an environmentally sustainable manner, it may also indicate that they feel that investment here may condition, if not outright hamper, their competitiveness.

Attaining the right combination to ensure sustainable competitiveness is a necessary, yet delicate balancing act. Both sustainability and competitiveness are interdependent and intrinsically linked.

Going forward, there is the need to seek ways how to better guide and support the transition for business to reach the set sustainability goals.

To conclude, the changes, or, rather,  deterioration, within the survey scoreboard on Malta’s attractiveness, as considered by present FDI investors, must be well noted and acted upon. We simply cannot afford to overlook the message being conveyed here. It certainly deserves a hard and objective review.

Let us, of course, keep in mind that Malta still offers several positive considerations, yet we must always strive to further improve the value proposition to attract additional investment.

There remains considerable work to be done to effectively address and reverse the negative trend within the sentiment expressed by FDI investors. Nevertheless, much of this is within our reach, provided we start by recognising that this requires a determined effort. 

Norman Aquilina, Group CEO, Simonds Farsons Cisk plc