Rhein on Energy and Climate

How tiny Malta has weathered the Crisis

Posted by Eberhard Rhein on 09/11/12

Malta is the only peripheral country of the euro-area that has manaoeuvered through the euro-crisis without major bruises. It has been so discreet that few people have noted the country having been part of the EMU for almost five years.

Its economy has continued growing at respectable two percent per year since 2010. Its tourism has reached record numbers in 2012, the number of tourists likely to exceed that of total population of 400.000. Its unemployment rate of 6.4 per cent is one of the lowest among the 27 member states. It remains attractive for foreign direct investment.

Five reasons account for this success:

A stable, conservative government throughout the first decade of the century, which refrained from populist concessions to its voters.
Its budget deficit derailed therefore briefly only to 4.7 per cent of GDP in 2008. As of 2011 it was again well below the 3 percent ceiling authorised under the Maastricht Treaty. Its public debt ratio of 70 per cent is one of the lowest in the EU.
A well trained labour force.
Successive governments have invested heavily in education. Thanks to these efforts, Malta boasts of a multilingual labour force able and flexible to work in modern industrial plants, financial institutions or maritime and tourist business.

A moderate wage policy.
Employers and trade unions did not follow the temptation of other new euro-zone countries to drive up wages beyond the productivity increase . This has kept the country competitive and attractive for foreign investors.
Solid banking supervision.
The banking supervisor has kept a strict eye on banking practices, which prevented the two main main banks from undertaking risky operations abroad and helped Malta preserve its role as a leading European financial service centre, especially for mutual funds.
The tiny size of the country.
Last not least, its high population density of 1300 people/sq km has protected the island from the follies of property bubbles.

Other countries would find it difficult to replicate such performance. Still they might wish to have a closer look at the “Malta experience”.

Eberhard Rhein, Brussels.

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Victoria

Comment by Victoria | 2012/11/09 at 22:25:07

Mr E Rhein:

As I sit here in Italy it appears to me that what you have stated is very good news for Malta.

I have watched the economy there over the past few years from before EU accession until now and indeed it has improved. Naturally one wonders why!

The vexed issues about employment laws and salaries and the mix of the economy is one of these as also is that which you report as being an educated employment base of mixed disciplines. However not all is “quite as simple” as you have reported. (And by no means do I wish to detract from your paper.)

Malta has a mixed economy that does not rely on Services alone and that is good. Compare that to countries like the UK that has all but lost any prowess in manufacturing having now almost tempestuous reliance upon the international financial institutions they call the “Finance Sector”. And selling arms to miscreant countries around the World

Malta, admittedly it does have a large tourist – tourism issue and with its location in the heart of the Mediterranean why not? But so does Cyprus Italy and Spain! What then is the difference thereto? Presumably it is the fact that it is not totally dependent upon this source of revenue, or that it is less than a certain quotient of the economy? Or that it is a Country that does not encourage wanton buying out of its land bank and properties for the “Second-Home Money-baggers” we now are used to see in Spain and Portugal and we are now seeing develop in Bulgaria Czech and now in Romania that is depriving thousands upon thousands of residents (and natural residents to those countries) of the ability to maintain buying their housing stock because of being out-bid by others from within the existing “older-block” of the EU prior to 2004. And when I look at Bulgaria and do my research there it is so obvious that there is a particular niche of persons that are using Religion as the modus operandi to acquire such properties under the falsehood of promoting the New Wave Religions from the USA/UK and thus get around all the labour and house purchasing laws.

And therefore what about the other sectors? Malta has a thriving International base for entrepreneurs and entrepreneurial companies that have grown at a steady rate over the past years and the question is why? Well In know from my researches about Companies around the EU (a task that I do carry out for an Independent Review Journal) that when it comes to the crunch issues of locating businesses those businesses see what is going on within the Country/State/Region/Department/etc. and they look at the real issues of can we fit in without distorting the status of the existing economy. In this therefore I have interviewed some prospective Companies who have declared a willingness to set up in Malta but have decided not to so do because they are too big! Surprising isn’t it? Other Companies though that are smaller view this in a slightly different way and look out for a fit of skills so that they do not denude the existing system needs. In that therefore the advent of the pharmaceutical industry has been an eye-opener there just as much as it was when Playmobil. If you need a good example of steward-ship of a Company that entered Malta before it was an EU Accession state and stayed it is this one. It is commendable that the Company took Malta to heart: it could equally have left: but did not do so! There are obviously others. They do not get as much publicity though but they are there just the same.

So when we talk about the position of Malta within the EU it is seen as a thriving community and one which encourages new businesses to its shores. It does not have to add anything more than a really pleasant attitude to new businesses except in the fact that it has – obviously – to pitch itself as being a learned location and one that adds to businesses rather than take away. Thus when we see the current new entrepreneurial companies making propositions to the development organisation in Malta and plying for the potential to locate their businesses there it is not surprising that the requests are for the longer term. Thus the advent of environmentally friendly companies – operating their businesses in the “Green Economy” – is a natural. Whether this means innovative renewable fuels programme which it is said will involve a first tranche of investment at around €100 million in a significant development that could produce 140 jobs in its first phase. (I recollect interviewing them around a year ago shortly after it announced its approach, and I was as sceptical as any. They also stated that they had had other visions to bring to Malta in its parallel interests in the new developments in super-efficient energy from wind, the latest developments in ground-source and sea-sourced heat energy transfer technologies and others. Now if Malta wants such industries to be there then the details that Mr Rhein you have mentioned must be worked upon even further. Such developments do not occur by accident, they have arisen in Malta because it has a steadfastly-managed economy that has weathered the storms of recession noted elsewhere across the EU. This interest and retention of attitudes though must be worked upon and retained for as the future arises those countries that remain behind will start to look at Malta and attempt to trounce its position.

So yes here is an example of a country that has been unquestionably a light for the future and a shining example of same. Not therefore so little Malta.
Karel

Comment by Karel | 2012/11/10 at 14:06:15

Mr Rhein gives out a lot of wisdom here particularly in the light of how Cyprus is reacting to the same issues….they need a bail out.

Let us only hope that within the timeframe that this well-managed economy does not rupture in to a farce should there be a change in Government in the next General Election. It would be a pity to see these hard earned gains squandered by a socialist experiment again and repeat what has happened elsewhere in the EU, for if that does watch the escaping companies up-stik and leave.
Paul

Comment by Paul | 2012/11/13 at 14:12:17

It is good to see that Malta has weathered the storm and iniquities of the EU Financial crisis. Whether it is susrtainable in the longer term will probably rest with the General Elections in that country. A change to a Labour Party led Governing Party may be on the horizon as we write but is it?

The worthy note in Mr Rhein’s discussion the noted facts that the economy is watched carefully from within and that although tourism is – and remains – an important feature of its economy, the ability of the quick-rich property- buyers is all but stifled by the local demands. Compare that to Spain and Portugal. Such rules are necessary and real to prevent out-pricing of local people.

Further though. and it is important to mention, Malta has an entrepreneurial base for SMEs which allows inward investment forays to exact a low Corporation Tax of just 5% (it is currently 35% but 6/7ths of that can be refunded to inward investing companies!) This is I believe why the previous writer and others have stated that Malta is an ideal location to place businesses.

Siting is also a brilliant. A confident work-force and an accessible country with happy and harmonious people that are always friendly means that any company that extols the virtues of innovation in Green Technologies is on to a winner for locating their business. I look forward to seeing these exciting developments in renewable fuels and parallel energy there as also reported earlier. This has been around for a year now and it has everything going for it.
Eric

Comment by Eric | 2012/11/24 at 02:31:32

Is it hardly surprising? Note that Malta has all the benefits of the EU and a very capable labour force and willingness to work. What a pity that this could be squandered in one easy mechanism of democratic nonsense by changing thedirection of the government through an inappropriate election of a Labour Party.
Should that happen the Millions and Millions of developments we have seen being paraded afront in the Smart City and other developments could dry up at a stroke. Yes of course expectations are high here but remember . I suggest that the investors will be watching with concern the election early next year.
Steve Engerer

Comment by Steve Engerer | 2013/03/08 at 16:55:50

Tiny Malta has weathered the Euro & World crisis because it had good governance by the present Nationalist administration.

Elections are due on the 9th March 2013, hopefully the people of Malta recognize that change of government just for the sake of change is detrimental for the island’s economy & its people.
Daniela Demicoli

Comment by Daniela Demicoli | 2013/03/08 at 20:03:20

I fully agree with Mr. Engerer. Indeed one unlucky stroke of faith, due to a bad decision taken by us Maltese, could ruin such a successful story for our tiny beloved island.

Malta is a joy to live in thanks to its continuous prosperity, and when we compare ourselves to other European countries, we d be lying to ourselves if we said that we have had to sacrifice a lot. As, indeed, all throughout, the Maltese have continued to enjoy a very good standard of living, notwithstanding the worldwide economic crisis. Yet this was all thanks to a very good government, lead by a careful and wise Prime Minister, who always put the country before his own fame and glory, and who at times risked looking unpopular, in times of adversity. Yet today, any Maltese worthy of being so-called should thank Prime Minister Gonzi for his wisdom.

Tomorrow each and every one of us should think of the needs of our country before our own, and decide whether we want Malta to continue in its story of success, or whether it is worth chancing all this for the sake of trying out something new, with no guarantees whatsoever.

I hope our nation will once more prove how intelligent we are, as there is so much at stake. Good luck to us all and may God enlighten us in our decision!
Eberhard Rhein

Comment by Eberhard Rhein | 2013/03/24 at 12:44:48

Steve and Daniela
You were indeed lucky to have voted for a responsible, wise government taking the right decisions on EU membership and fiscal&monetary policy., including money laundering.
I trust the Labour government will not have much choice but to continue on this path.
Eberhard Rhein

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How tiny Malta has weathered the Crisis

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