Malta strides ahead despite recent setbacks

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PWM: Prime minister, Malta has been an example for many other countries in terms of regulation, growth, planning and development. Is this still the case or do you feel that now there are a lot more problems and challenges you need to negotiate?

Joseph Muscat The irony is that the bigger the challenges, the more we manage to make strides ahead, the more we manage to obtain successes and I really think that if you look at our track record historically over the past 50 years, but also at just the past five years, we have achieved a record level of economic growth, lowest ever unemployment levels, and one of the highest employment levels within the European Union and within the eurozone. 

And this is not just because it happened but it’s because we have embarked on a very thorough and very detailed reform strategy in the key areas of our economy that have been begging for reform for many years, for many generations. 

We reformed our labour market, our social security market, making it easier for people to get into the labour market, making work pay, enacting social reforms and now infrastructure reforms. So, really and truly the success that we have achieved so far is just a prelude to the many successes I believe we will achieve. 

PWM: But despite these achievements, prime minister, the president said recently that a dark cloud has been hanging over Malta since the murder of a prominent investigative journalist in October. The kind of coverage we’re seeing in the foreign press and the Maltese press, is that merely conjecture or is there some reality to more organised criminal activity here?

Joseph Muscat I believe an achievement for the country is that it is the first time the state has managed to arrest and prosecute the perpetrators of a major crime on the island.

So, those who are allegedly responsible for the murder of a journalist, something which is unacceptable in this society and we don’t stand for that, it’s something which is indefensible. We will make sure that the whole truth is known but we are proud that we have managed, through the state institutions, to prosecute the alleged murderers of this person. 

Having said that, we might take exception to some of the reports but we still respect whoever makes them. We still think that they don’t correctly represent our country. This is a free democratic country with very solid institutions and this is not just what the government is saying. This is basically what can be seen and felt through the reports of independent institutions.

PWM: And what can you do to help the international community further believe in Malta?

Joseph Muscat We engage. We don’t go away and hide. We come in front of the cameras, we answer questions. Even though those questions might be uncomfortable, even though maybe the answers given to those questions might not please the journalists putting the questions. But we want to engage. We will continue to engage because we are extremely confident about the institutions in our country. 

PWM: Is it right for the gaming industry to have such a strong foothold on the island? 

Christian Cardona Gaming is one of the main pillars of – and contributors to – our economy. It is indeed also a very volatile industry. However, we have also built this sector on reputation. It is very robust, it is very resilient, it also provides a lot of employment for citizens who come from different countries from the European Union and, of course, together with other sectors, like the manufacturing sector which plays a very important role in our economy, seems to be forecasted to improve in its presence on the island.

Joseph Muscat It’s not simply because of a jurisdiction of choice but it’s because of a choice of an ecosystem and, at the end of the day, one cannot see Malta or any other member state of the European Union just saying, well, Malta has half a million people, how come there are so many gaming companies there? That is, I think, an isolationist point of view to the whole economic issues that we’re in. 

Our internal market is not half a million people. Our internal market is 400 million people and that is one of the basic principles of the single market. 

PWM: The Citizenship by Investment programme offering EU passports in exchange for major investments has proven very successful for Malta but it has attracted some controversy. Is it a major part of the programme going forward?

Edward Scicluna It’s very surprising that there is so much negative talk when a small island goes for a programme which other countries have done for years. I know very well the US has such a programme, the UK has it, France has it. Now, when Malta or Cyprus or a small island manages to go for it, all of a sudden, you know, all hell breaks loose and it shouldn’t be like that.

It’s a recognition for global citizens, so to speak, that if they contribute in terms of investment in any sort of way, you recognise them by in return granting them that citizenship. 

Joseph Muscat It is something that we discussed with the European Commission. The rules are very clear. In our case everything is public and I’ve had people in this office, maybe some of the wealthiest people on earth, asking me why they weren’t accepted in this programme, and we tell them basically it hasn’t got to do with how much money you have, it has to do with the talent you bring, with the ideas you bring with you. No one is accusing the programme of wrongdoing; they are accusing the programme of attracting high profile people. I think there is nothing wrong in having high profile people interested in joining a community.

Edward Scicluna May I add that these funds are going to a wealth fund which will not be used for current public expenditure but invested for future generations. So, it’s a good thing in itself as well.

PWM: Every developing financial centre has its sweet spot in financial services. What is the sweet spot for you here in Malta?

Joe Bannister Well, I think two things. One, we tend to punch a little bit above our size and become successful and that gets noticed and then somehow everybody is saying, well, this is wrong. However, they don’t take any notice of the fact that we are part of the club and we obey the rules of the club.

The second thing is that we’ve always been innovative. The so-called sandbox, we call it, innovation through regulation, we study regulations, and within those rules we develop new structures and develop new products, whether it’s in the fund business, whether it’s in insurance, this PCC, the Protected Cell Company. Now we’ve created another structure for securitisation. 

So, essentially we sell ourselves through regulation. Operators need good regulation, they need an open regulator, they need to discuss with the regulator their requirements and then we move forward.

PWM: Will Brexit be good or bad for Malta?

Christian Cardona So, the number of variables are very interesting for us as a country and we have set up a taskforce which is meeting very regularly in order to analyse the potentials that there could exist in terms of co-location of companies, of subsidiaries from the UK into our jurisdiction. This is one of the options, the setting up of subsidiaries or branches in Malta from the UK. And also there is the other option which falls within the investment services operations in Malta to passport UK operations to the EU. 

Joe Bannister Well, for us in the financial sector it represents threats and opportunities. The threat which I’m concerned about is that in the financial sector a lot of our young people get further training in the UK. So, we have to see how that is going to develop when essentially the UK becomes a third country and it’s no longer a home member state, so we have to look at the situation, how these are going to be supported and not pay the excessive fees. 

The second one is that there are a number of small insurance companies which essentially will have difficulty in selling in the UK, unless passporting rights are arranged. But I don’t see it as a big threat. The positive side is that we see a large number of insurance companies. I think we’re about to license the fourth one. I expect to see about 15 of these on the island. 

We’re seeing a number of payment services companies and existing fund managers also relocating business from the UK, increasing their capacity here. So, as we go ahead I think some insurance companies may leave, but I’m not particularly worried because they are small companies. But I think we need to give the training a bigger push and see how we can look at the situation.

PWM: Prime minister, should regulation be seen as a business opportunity rather than a hindrance to prospective clients?

Joseph Muscat Well, that is how we view it ourselves. I think we have built a very solid reputation of being a jurisdiction where our regulators are tough. I think regulators have always to be tough at the end of the day. But while being tough they need to be really and truly pragmatic in their approach, so not bending rules but seeking solutions. And that is where I think our regulators have managed to really and truly deliver over the years and where we will continue to deliver. 

I also think that regulation offers an opportunity for innovation. So, in itself I think when we mention innovation, most of the time we think of a tech laboratory where scientists devise some new ideas, which is the case. 

But innovation is also possible in regulation and we have experienced this not only in financial services but also in the regulation of our pharmaceutical sector here in Malta. We have experienced situations where through innovative regulation we have created markets and this is, I think, one of the strong points of our economy.

Having said that, in financial services the regulations we’re seeing right now are the direct result, maybe a knee-jerk reaction, to the global financial crisis. Maybe now there is a bit too much over-regulation. It can lead, I think, if one looks, say, at MiFID and the rest of them, to smaller investors being cut out of the market. 

So, I’m one who is all for regulation but sensible regulation and I’m a bit wary that sometimes we can be just overdoing it at European level, having regulation for regulation’s sake and overburdening it in such a way that some of the players will not see it profitable to entertain the smaller stakeholders in the market. 

Edward Scicluna We have the advantage, as a small country, that when we have an idea, we can run with it, get it through parliament and get the regulations in a much shorter time. So, a lot of people with big ideas tend to get attracted to Malta and they can meet with the prime minister, something in some countries they won’t be able to do so easily, to get their ideas across. If they are able to sell their idea, we’ll go all the way to get the proper regulation and therefore get this product on the market.

PWM: Prime minister, is there a definitive ‘Brand Malta’, which you can communicate to international investors and what does that brand signify?

Joseph Muscat I think we stand for being a country where doing business is relatively easy compared to other comparable and similar jurisdictions. I do believe that we always need to stress our location. So, we are, I would say, at the same time both in the European market, which is the biggest single market in the world, and on the doorstep of the African market, which is the biggest market to come and I do believe that when international corporations seek to relocate not only their head offices but also their logistical centres, this is a very, very important point. 

Secondly, I would mention once again our regulatory nimbleness, the fact that there can be a bottom-up approach to regulation, that the distance between the policymakers and the policy-takers is relatively short and the decisions can be taken in a much shorter period of time. 

So, from the inception of an idea, of a regulation, of legislation to the actual implementation of the legislation, that can be done in, say, four to six months which is an astonishingly short period of time for a Western European country. But we can get it done because our state structure is relatively lean. 

PWM: Where do costs and availability of labour come on that shopping list for those interested in investing in ‘Brand Malta’?

Christian Cardona Well, our unemployment rate is one of the lowest ever achieved in this country. So, of course our labour challenge is to have the right people for the right jobs. Due to our size, we can also have employment forecasts which we do together with the university, with the council, with the Malta College for Science and Technology and with private industry, to guide our students to those studies, to those faculties which will lead them eventually into the workforce. So in a way we forecast what will be created by industry and by economic corporations in the next five to 10 years. 

On the other hand, we have also introduced a number of social measures. One of them is universal free childcare which has helped a huge number of women to return to the workforce. 

Edward Scicluna At the same time, Malta is and will remain an open economy. So, we are open to 

increasing the labour supply, which is very elastic from the European Union, and that is what keeps the economy growing at 6 to 7 per cent, otherwise the local population would not be able to sustain that. And we’re also open to ideas from investors. So, this is our life, this is our history and we hope it will remain so.

PWM: And, prime minister, if you can sum up the strategy for the future growth, prosperity and international compliance of Malta in just one sentence, please can you share your vision for the future with us?

Joseph Muscat We do it better and faster.