Malta at a Glance: an overview of a new EU member state

Malta at a GlanceA tiny island nation with big plans, Malta joined the EU in May 2004 and is taking ambitious steps to consolidate its traditional position as a bridge between North and South.

Size isn’t everything

Malta may be small, but size hasn’t diluted this tiny Mediterranean island’s ambitions. One of the ten countries that joined the European Union in May 2004, Malta is determined to make the most of its new status as an EU member, and has been aggressive in formulating and implementing legislative and regulatory systems to encourage investment and growth in key target sectors and leverage maximum advantage from its unique position as a stepping stone between Europe and North Africa.

As a result, the island’s traditional reputation as a sun and sea destination for holidaymakers is changing rapidly as Malta pursues its redefined role within the world business community. Recognising the intrinsic value of its geographic location, its highly skilled, multi-lingual, flexible workforce, Malta is a tiny island state with a formidable determination to succeed on the world stage.

Mediterranean island nation

Just over 100 square miles in area, the Maltese islands, comprising Malta, Gozo and Comino, lie midway between Europe and North Africa, 60 miles south of Sicily and 120 miles north of Libya. Malta’s 390,000 inhabitants are among the most international of peoples. With a 7000-year history that has seen a succession of foreign conquerors ruling the island until 1964, when Malta gained Independence from Britain after 160 years, the islanders have acquired a unique ability to adapt to new ideas and adopt, and improve, the best of them to their ultimate advantage.

Creating an economy

In the four decades since Independence, Malta’s leaders have laid the foundations for a sustainable economy based on tourism, industry and services. Apart from the natural beauty of the islands, with their golden limestone, crystal clear sea and charming rural landscape, Malta has no natural resources bar its people. And, while from the mid-Sixties to the mid-Eighties, Malta sold itself as a manufacturing base for products like textiles and electronics, using low wages and plentiful supply of labour as its main selling point, by the end of the Eighties it was recognised that educating the workforce to include highly qualified professionals would attract higher value added products and services to the island.

Today, Malta still has a heavy reliance on tourism, which contributes 25 percent of GDP, and continues to perform well as the relatively new CIT sector (Conference and Incentive Travel) takes over as one of the most lucrative elements within the Maltese tourism industry. Similarly, the island has been very successful in diversifying other areas of its economy, and new industry sectors like iGaming, ICT, Financial Services and Pharmaceuticals, particularly the generics industry, are joining the traditional economic generators and creating a solid base of diverse operations from which Malta expects to compete at international level. Attracting foreign direct investment to the islands remains a priority for the government; however the focus now is towards higher value activities and services that utilise the excellent, state-of-­the-art IT and telecoms infrastructure, highly skilled, English-speaking human resources and strategic potential of the island.

Malta and EU membership

Two years after Malta’s accession to the European Union, in May 2004, this historic move is seen by many in the business community as an opportunity to penetrate the world’s largest market of over 400 million people. The process of adapting all legislation and regulation to comply with the EU’s Aqcuis Communautaire has given Malta a solid base upon which to conduct business and facilitate investment, and Maltese-based companies now also benefit from the EU’s previously inaccessible free trade agreements with non-member countries, and are eligible to participate in EU projects and programmes aimed at promoting business and expanding trade opportunities between the EU and the rest of the world.

Not yet part of the Euro-zone, Malta’s objective is to adopt the Euro on January 1 2008. While this depends on the achievement of the Maaastricht criteria, which requires Malta to bring down its structural deficit to below 3%, national debt to below 60% of GDP, and unemployment and inflation levels in line with the EU average, government’s ‘determination in this regard appears to be paying off, with European Commission analysis placing the structm:al deficit at end 2005 at 3.9% and estimating that, providing current efforts are sustained, the island will be able to reduce its structural deficit to under the 3% mark this year.

Malta’s commitment to the adoption of the Euro in 2008, backed by its efforts in terms of achieving the Maastricht criteria, is a key element in Malta’s attractiveness to investors, and while membership of the EU may be seen by some to have brought a mixed bag of blessings to the islands, adoption of the Euro on January 1 2008 will be instrumental in determining the country’s future economic performance.

Generic pharmaceuticals

Malta is fast becoming recognised as a particularly attractive centre for the generic pharmaceuticals industry, and the islands’ favourable legal environment for generics producers has attracted a number of leading international names to migrate to Malta.

Including Activis, Arrow Pharmaceutical Group, Siegfried Holdings and Combino Pharm, all of whom were attracted by the Maltese patent law that allows firms to experiment on patented drugs before the patent expires, a provision known as the Bolar Exemption. This trend is expected to continue over the next ten years at least, with the industry being encouraged through the creation of a suitable infrastructure, to expand further and make itself viable and self-sustainable in the long term.

Software development and E-business

Encouraged by government initiatives and the state-of-the-art telecoms infrastructure, Malta offers one of the most progressive environments in the world for IT, iGaming and e-Business activities. Investment in this area’is increasing at a rapid pace and the announcement by Malta’s government in February that the developers of the renowned Dubai Internet City, Tecom Investments, are to spend US$300 million to set up SmartCity@Malta, an IT village that is planned to open in 2008, was something of a triumph for island, which faced stiff competition from various other countries for the project. As the largest foreign direct investment project the island has ever seen, the expectation is that SmartCity will become the European outpost for global ICT or media companies that want to establish a presence in Europe, as well as North Africa.

This fits in well with Malta’s aspirations in the ITC sector. Currently ranked 27th in the world in its potential for IT development by the World Economic Forum, Microsoft, Cisco, and Oracle have all established a significant presence on the island with the aim of using Malta as a research and development testing ground for e-government solutions. The first companies to take advantage of what Malta offers were the offshore betting and gaming companies, of which over 140 have already established a presence on the island, and Malta has now set its sights on attracting business such as disaster recovery, data processing, software development, data storage, payment gateways, database management, supply chain management centres and a variety of related services.

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