Published on 28 June 2018 on ConservativeHome.com.
My lifelong passion for bravery, in general, and gallantry medals, in particular, means that I have long had a soft spot for Malta. As the only country in the world to be awarded the George Cross – for its tenacious resistance to Germany and Italy during the Second World War – my admiration for the island’s once-besieged people is immense.
However, my support for Malta as a business location where UK companies might wish to set up a base after Brexit has nothing at all to do with any sentiment.
As a hard-nosed, self-made businessman, I believe that Malta represents the best destination for ambitious UK firms that must have a post-Brexit presence in the European Union.
I should make my position abundantly clear: I have long been – and firmly remain – pro-Brexit, and the UK itself will be the best location for nearly all UK companies.
However, some UK firms have understandably decided, particularly in a period of uncertainty, that they will need a base in the EU in future, with Paris, Frankfurt and other large European cities the favoured locations for many such companies in a post-Brexit era that begins in March next year.
At first glance, Malta might not seem a natural rival to such well-established financial centres. However, from what I have seen at first-hand from my regular visits to the island, Malta can match, or even better, other European countries in terms of what the island can offer to UK firms and its employees.
Malta is a small island (some 17 miles long and nine wide) that lies south of Italy and has a population of 436,000. It gained its independence from the UK in 1964, and became a member of the EU in 2004, adopting the euro as its official currency four years later.
With the help of a colleague, I interviewed ten political, business, financial and legal high-flyers – including the Prime Minister and the Finance Minister – to obtain an insight into what modern-day Malta has to offer.
To start with, the country’s economy has rarely, if ever, been in better shape. Last year saw an extremely healthy 6.6 per cent growth in GDP. Malta’s unemployment rate is incredibly low: officially 3.5 per cent but, in reality, virtually everyone who wants to work and is able to work can find a job. Inflation is at just 1.6 per cent and Malta recently recorded its first trade surplus for more than three decades.
Successive governments from both main parties – Labour and Nationalist – have provided strong, stable leadership. Dr Joseph Muscat, the current Labour Prime Minister, may be broadly left of centre but his supporters and opponents alike acknowledge that he is aggressively pro-business.
Malta has a diverse, open-market economy. The four key pillars of its economy are tourism, manufacturing, financial services and internet gambling. However, aviation, maritime, technology, pharmaceutical and a variety of other business all have a notable presence on the island.
Many foreign firms have been attracted to Malta by its advantageous tax system, both for companies and their workers, as well as the island’s relatively cheap costs in comparison to major European cities.
Yet, arguably the key to the country’s economic prosperity is the solution-solving attitude and solid work ethic of its business leaders and workforce. There is a standing joke on the island that goes: “We got our cooking skills from the Italians and our work ethic from the British. God forbid it was the other way around!”
Joking apart, Malta has no worthwhile natural resources (other than the sun and the sea) and, as a result, its law-makers and regulators realised some time ago that for the country to be successful it had to be forward-thinking and innovative.
At his office in the historic Auberge de Castille in the capital city of Valletta, Dr Muscat, who is currently a year into his second term as Prime Minister, explained that his Government is embarking on a path whereby UK firms will “co-locate”, rather than “re-locate”, to Malta. He said:
“Our attitude is that we do not want to tell UK firms: ‘leave the UK and come to Malta’. We don’t think that is realistic and we are not going to be antagonistic, with a predatory agenda. Instead we want to be seen as part of the solution to a potential problem when it comes to Brexit.”
“I think that our constructive attitude is being appreciated. We hope to provide a win-win situation. We can offer arguably the leanest, pro-business jurisdiction in Europe.”
Professor Edward Scicluna, Malta’s Finance Minister, echoed the sentiments of the Prime Minister in his message to UK firms:
“It is not a question of whether you stay [in the UK] or you leave. It’s about protecting yourself. In a time of uncertainty, you protect yourself by having one foot here and one foot there. So what most UK businesses are talking about is not relocating but co-locating, at least until the dust settles.
“In this situation, Malta is there for these people because we are in the EU and we have a closeness with the UK. Our message is: ‘we are here and we are ready. If you have ideas that would be mutually beneficial, then let’s do business together’.”
The individual who deserves huge credit for creating a growing interest in Malta from UK firms is Joseph Zammit Tabona, a chartered accountant by profession, a successful businessman and a former Maltese High Commissioner to the UK.
Tabona, who is both the Special Envoy for Investment Promotion to the Prime Minister and the Chairman of the Malta-UK Business Promotion Task Force, has arranged a series of events in which he is constantly drumming home to UK firms all that Malta has to offer them. He told me:
“The setting up of any co-location structure in Malta will enable UK based companies – or companies that would naturally have chosen the UK as their natural European base – to be present in an English-speaking EU jurisdiction.”
Along with other political and business leaders, Tabona is quick to point out the unique advantages that Malta has over centres such as Paris and Frankfurt.
English (along with Maltese) is one of the country’s two official languages. Furthermore, legislative, judicial and company documents are available in English and, in a court of law, it is the English version that prevails.
Furthermore, Malta offers a wonderful quality of life, with its rich history and its Mediterranean climate that is close to perfection: mild winters, and warm/hot summers. Indeed, Malta has 300 days of sunshine every year for those who want to pursue an outdoor leisure life, whether it is yachting, diving or walking. Good education and health systems, plus excellent flight connections to many European countries and beyond (more than 80 destinations in all) are other positives that the island can boast.
Malta is a safe place to live too, with violent crime rare. Indeed, in 2016 Malta was ranked as the world’s second best place for foreigners to live by a wide-ranging global industry survey.
Malta is the smallest EU member state yet, in some cases, its size can be advantageous. Dr Michael Psaila, a Partner with Mamo TCV, a leading Maltese legal firm, said:
“We are a small country, but this can be an advantage rather than a disadvantage. Our size means that we are nimble and agile. The professional community is also closely knit and works hard towards achieving the same goal. Even though we are small, we punch well above our weight in many areas.”
Over the past two or three decades Malta has taken calculated risks in that it has embraced new areas of international business on a regular basis, and many have been very successful. Some, like the 1988 offshore services project with high levels of secrecy and very low or no tax, were not and were quickly reversed. Others expose the country to criticism – notably internet gambling.
In a similar vein, though now in an era of heightened transparency and compliance within the EU, Malta is currently enthusiastic about blockchain, the cryptographically-enhanced decentralised digital ledger technology.
Dr Max Ganado, a partner with leading Maltese legal firm, Ganado Advocates, has in recent years helped to draw up some of the new legislation that has enabled international companies locating in Malta to thrive while still being carefully regulated. He said:
“The game changer has been that when foreign companies, including those from the UK, came to Malta, they found a high level of sophistication and innovation. We address the needs of firms and we move quickly in order to solve legal and technical problems they face – usually on legal uncertainties in the general eco-system in which they operate. We aim to do the same for blockchain.”
Britons already on the island praise Malta as both a place to work and live. The Dowty Group became the first British manufacturing company to set up a base on Malta: Sir George Dowty, an inventor and engineer, employed a 60-strong workforce in 1961 that later peaked at 1,500 in the early 1970s.
Today, after three major take-overs and mergers, the Dowty Group is part of Trelleborg, the giant Swedish engineering company that, even in an age of increased automation, still employs 600 people on the Hal Far Industrial estate on Malta.
Martin Hignett is the Managing Director of Trelleborg Sealing Solutions Malta. Although British, he has lived and worked on the island for 14 years – since Malta joined the EU – and he has no plans to leave.
Hignett, aged 56, who is married with two sons, who were educated both in Malta and in the UK, said:
“We [as The Dowty Group] originally came here in 1961 as a low-cost alternative to the UK. What we found here was tremendous resource in terms of engineering, in terms of talent, English speaking and very hospitable government and people. Basically it was – and still is – a very easy place to set up a business.”
“Malta is a bit of a surprise – a pleasant surprise. British people tend to think of the island as a holiday destination and they are shocked when they come here to see industry and the types of company that are based here. On this industrial estate, the various firms are not rivals and so they tend to help each other – on everything from purchasing to transport – in a way that would not happen in the UK. People here tend to be approachable, flexible and accessible.”
Malta is a proud republic that no longer depends on Britain to the extent it did both before and after gaining its independence more than half a century ago. However, its laws and its regulatory practices are broadly based on those of its former “mother” country.
Tonio Zarb, a Senior Partner with KMPG which, along with its sister company KPMG Crimsonwing, employs more than 600 people on the island, said:
“Historical ties are definitely relevant and important – they run deep. They are visible all over the island from our customs, to the surnames of some of our people, to the fact that English is one of our two official languages and our language of business.”
Significantly, too, Malta, like the UK, remains an enthusiastic member of the Commonwealth.
Political and business leaders are in agreement that if a UK company is looking to have a subsidiary firm or a smaller base in Malta its senior staff should find time to visit the island.
David Valenzia, Territory Senior Partner with accountancy giants PWC (PricewaterhouseCoopers), said:
“To all my potential clients, I say: ‘Come to Malta and meet the people you are going to do business with and who will help you. Once you are here, you will feel what we are all about – a business-friendly environment – and get to see the high quality of professional services that are available’.
“We have a highly-educated workforce – lawyers, accountants and those familiar with new technology – and a lot of us have been exposed to the way the British do business. I like to think a lot of us are very good at what we do. We then have the Mediterranean side to us too, where we are sociable and that makes people feel comfortable coming to Malta.”
Significantly, with its location and the contacts of its islanders, Malta offers a gateway for UK firms to new North African markets too, particularly those in Egypt, Morocco, Tunisia and Libya.
Malta Enterprise, the country’s economic development agency, also works hard to promote the island to UK business leaders, while the Malta Stock Exchange recently published a document entitled “21 Reasons why Malta is a great place to locate your business.”
So is Malta the answer for all UK firms seeking to co-locate post-Brexit? In short: no. Giant companies who are looking to employ thousands or even tens of thousands of people in a EU base will almost certainly need to look elsewhere: Malta simply does not have the resources to handle such a substantial influx of labour. It is better suited to small and medium sized firms with UK insurance companies and other financial service firms being amongst the many operators who have already indicated that Malta can meet all their needs.
Does Malta have any failings? Yes, although these are, for the most part, being addressed. To some extent, as one businessman put it succinctly, Malta is “a victim of its own success”.
Political and business leaders agree that the country’s infrastructure needs improving, with public transport, roads, housing and planning all falling into the “can-do-better” category.
Another drawback is a shortage of both skilled and unskilled labour: low unemployment, though generally good for an economy, also has its drawbacks. Malta’s current “home grown” workforce is estimated at 150,000, while its foreign workforce is around half that number. There is “free movement” between EU member countries for all workers but Malta is striving to attract more workers from non-EU countries.
Malta has also suffered reputational damage in the past year from allegations of political corruption/money laundering and the tragic murder of the woman journalist at the centre of many of the claims. Daphne Caruana Galizia, aged 53 and a mother of three, was killed by a car bomb on October 16 2017: her three alleged killers have been charged in connection with her death, while the “Mr Big” who apparently ordered the murder remains at large.
Malta also needs to retain its unique beauty and charm, despite its business expansion and growing population. Space will always be an issue on the island, meaning the landscape and the environment that are treasured by islanders and visitors alike must receive protection.
In short, Malta, like all countries, has its challenges, but the future for the country looks bright. Kenneth Farrugia, who is Chairman of FinanceMalta, a public-private initiative set up to promote the island as an international financial centre, and who is also Chief Business Development Officer at the Bank of Valetta, the country’s largest bank, said:
“This is not an economic bubble that is going to burst. The diversity of our economy is contributing to our sustained growth. We are enjoying the boom but there is a feeling amongst the business community that the best is yet to come.”
Early in the Second World War, Malta became the most bombed place on earth as, during a two-year-period, the German and Italian air forces dropped an estimated 14,000 bombs during 3,000 air raids.
The award of the George Cross to Malta by King George VI on April 15 1942 was in recognition of the courage, strength, resilience and determination of its people. If UK firms decide that they need a EU base post-Brexit, these qualities are the ones that they will benefit from if they choose to co-locate to the island.Read this article on ConservativeHome.com