Foreign direct investment discussed in Bank of Valletta seminar

Edwin Calleja, Director General of the Malta Federation of Industry, recently addressed Bank of Valletta’s management team on the development of foreign direct investment in Malta. The presentation discussed Malta’s past, present and future situations with regards to foreign investment and the evolving of Malta’s economy. The seminar, held at BOV’s Head Office, was organised by the Bank’s Economics Unit.

Mr Calleja described how reports drawn in the fifties concluded that there was no future viability for Malta’s manufacturing industry. Due to a lack of work and new opportunities, the Maltese workforce started emigrating to Australia, Canada and the United States thus, hindering the start of an appropriate industrialisation process. It was only in 1959 with the issue of an Ordinance for assisting the development of industry that incentives such as grants and loans to attract foreign investment started being introduced.

"The sixties saw the start of an influx of foreign investment in the country such as textile companies and the assembly of American and British cars for the Libyan and local markets. Local Investment on the other hand was directed towards the creation of a tourist industry with new hotels and restaurants to cater for the British tourists" said Mr. Calleja.

The speaker stated that today’s foreign investment still lies in the manufacturing industry. A number of factors account for the growth of foreign direct investment in this sector such as a more solid infrastructure, an improved water and energy supply, a sound telecommunications system, adequately equipped ports to handle imports and exports and advantageous agreements with the EU. Other factors include a decreased exchange control, more support from the banking sector, fiscal incentives, extensive education and training opportunities and assistance to small businesses that wish to expand their operations.

When speaking about the future of Malta’s economy, Mr Calleja said "we are facing a highly competitive world where much larger countries have a wider market and can afford to develop a much bigger industry than ours where workers are requested to have more qualifications."

Referring to Malta’s potential membership of the European Union, Mr Calleja pointed out that this is a big challenge for Malta which, if handled correctly, can reap rewards. In fact, European Union membership will give Malta more export opportunities, more training opportunities for Malta’s workforce, higher standards in products, services and environment which are in line with that of the EU as well as the solution of certain local problems with the help of the EU.

Mr Calleja concluded, "In this regard, due to a certain amount of investment which will need to be undertaken in order to conform with EU policies, a proper assessment of the economic impact brought about by membership will have to be carried out. We will also need to adapt the Business Promotion Act in order to conform with the regulations governing competition policies as well as eliminate economic inefficiencies such as Government monopolies, inefficient corporations, deficit, national debt, inflation and generate more work. Only this will ensure a steady growth of foreign investment in Malta."