Malta October 2017 Thinking without the box: disruption ... · EY’s Malta Attractiveness Survey...

EY’s Attractiveness SurveyMalta October 2017

Thinking without the box: disruption, technology and FDI

Contents

4Welcome

6Numbers at a glance

8Malta in context

10Chapter 1: FDI — facts at a glance

18Chapter 2: Perception

27Chapter 3: Future

32Chapter 4: EY’s bolt-on surveys

34Methodology

36Publications

35EY member firms in Malta

EY’s attractiveness surveysEY’s attractiveness surveys are widely recognized by our clients, the media and major public stakeholders as a key source of insight into foreign direct investment (FDI). Examining the attractiveness of a particular region or country as an investment destination, the surveys are designed to help businesses to make sound financial decisions, and governments to remove barriers to future growth. A two-step methodology analyzes both the reality and perception of FDI in the respective country or region. Findings are based on the views of representative panels of international and local opinion leaders and decision-makers.

For more information, please visit ey.com/attractiveness.

This year’s survey, conducted in March, shows that Malta continues to be attractive to foreign investors and remains a

success story. Almost 80% of the current investors we surveyed believe that Malta is attractive. Admittedly, this ranking is lower than the 2016 peak. At the same time, more than half of those surveyed believe that Malta will remain attractive in three years' time, and only 4% think that it will not remain so. The wider arc is more reassuring. Of current investors, 78% say that they will still be here in 10 years' time. In addition, 61% predict that they will be expanding their business, a healthy increase of 8% over last year. Clearly, overall optimism about the future remains robust and is becoming more so. So where’s the action coming from? Tourism, iGaming and construction are still the main economic drivers. However, FinTech, payments, and digital media and games are gaining more visibility. This is the promising general picture. Nevertheless, a closer look reveals a more nuanced state of play, which should be paid equal attention.Our tax regime, telecoms infrastructure and the stability of our social climate continue to be the strongest foreign investment pullers.

Confidence in Malta as a start-up location is growing — largely in iGaming, FinTech and digital business. Indeed, more and more innovative incentives for start-ups would seem to be particularly smart at this juncture.On the other hand, R&D, transport and logistics remain our weakest links. Significantly, the perception of logistics as a driver has gone down.Stability and transparency of our political, legal and regulatory environment were once among our flagships. Regrettably, they now rank toward the lower end of the scale. Malta’s ability to keep pace with global regulatory changes — and it is still ranked positively by investors — seems to be losing some of its momentum. The exception is iGaming.Our workforce has now become a limiting factor; ironically, as a consequence of success. With rampant economic growth, the capacity to find the required skills locally is now less than 40%, causing inevitable bottlenecks and missed opportunities. To address this key challenge in the long term, four out of five of current investors recommend the introduction of skill sets for the new economy in schools, such as coding and robotics. In the short term, a bolder move is required: it is high time that, as a nation, we acknowledge that systematically and intelligently attracting foreign workers is the only way to sustain current economic growth.

While the need to develop education and skills remains the absolute priority, it is closely followed by the need to invest in infrastructure. Indeed, current investors rate the latter as the most pressing of their needs.And finally, technology. In our 2015 and 2016 conference, we spoke about the impact of blockchain and FinTech. It is very encouraging to observe the Government's take-up of the former and its increasing interest in the latter. But we need to act faster, as other jurisdictions are cottoning on to the idea. We need to think without the box, not only to implement changes in legislation rapidly but to do so in anticipation of the impact of technological advances. Let’s face it, Malta could have been a FinTech capital by now. We could do so much more on pilot projects, using the island as a test bed, always recognizing and overcoming our limitations. In sum, we can look forward to the future with optimism. But only if we have the courage, foresight and political will to move along with a changing world. We have already proven that we can forge ahead of others, to punch way above our weight — in gaming and financial services, for instance. If we think without the box and bank on our strengths, we can do the same in other sectors. Again, and again.

Ronald A. AttardManaging Partner, Ernst & Young Limited

Welcome Again, and again

EY’s Malta Attractiveness Survey 20174

ey.com/attractiveness

EY’s Malta Attractiveness Survey 2017 5

Malta

Comino

Gozo

€8.8bGDP

5.2%

GDP growth in 20163

1.9mInbound tourism4

Imports6

Exports

€6,015m€3,306.5m18%

VAT rate

1 Malta National Statistics Office (NSO), 2016.2 Eurostat, 2016.

Area 316km1

3 NSO statistics, 2016.4 NSO statistics, January–December 2016.

5 NSO statistics, December 2016.6 NSO statistics, January–November 2016.

Population 436,9472

Official languagesMaltese and English

1964

2004

2008

Commonwealth membership

EU membership

Euro currency

Leading industries• Financial services• Tourism• Manufacturing• iGaming

Unemployment rate5

1.9%


Numbers at a glance

Malta's most attractive FDI parameters

Note: very attractive and attractive responses.

Note: very attractive and attractive responses.

–3%

–6%

+4%

Corporate taxation

Stability of social climate

88%

82%

73%

1

2

3

Malta's areas for improvement¹

-9%

+3%

-2%

Telecommunications infrastructure

Flexibility of labor legislation

Transport and logistics infrastructure

R&D and innovation environment

49%

32%

29%

% changeover 2016

% changeover 2016

Current attractiveness Future attractiveness

78%54%

Attractiveness

Skills

1

Regulatory2

3

Keeping pace with regulatory changes

Offers an international advantage

Yes No Can’t say Yes No Can’t say

19%18%

2017 2016

64% −7%

+8% 33%

18%

50%

2017 2016

−1%

+1%

+4%

Managing to retainspecialized personnel

Managing to find and recruit the required specialized skills in the local labor market

38%82%

Managing to retainspecialized personnel

Managing to find and recruit the required specialized skills in the local labor market

38%82%

The shifting international economic landscape, coupled with Malta’s adaptability, has continued to make Malta attractive to investors.

An attractive fiscal regime and access to the EU market, together with a pro-business culture, cost competitiveness and a skilled, English-speaking workforce, continue to make Malta attractive to investors.

Malta has a history of stimulating FDI through the development of innovative regulatory frameworks. The Maltese Government's intention to develop a regulatory framework for blockchain and FinTech, and a revised iGaming regulatory framework, aims to keep it ahead of the curve.

The flip side of Malta’s thriving economy is that the country must undertake further measures to increase the availability of specialized skills and build a strong pipeline of future talent.

Demand for certain specialized skills is higher than supply and many respondents are filling these positions with foreign workers.

1 Due to Malta's small size, the FDI attractiveness parameter "domestic or regional market" has not been included in areas for improvement.



Workforce 75%

Business model 71%

Need for capital investment 50%

Supply chain 43%

27%Need for mergers, acquisitions, and strategic partnerships and alliances

Impact of technological developments on business

Technology

Future

4

International5

6 61%2017

2016

up 8%

Expansion plans over the next yearIn 10 years’ time: presence in Malta

78%

18%

5%

Yes No Maybe

International risks affecting companies located in Malta

Economic and political instability in the EU (excluding Brexit)

Talent shortage

Competition from emerging markets

Global and regional geopolitical instability

Slowdown in global trade flows

41%

40%

29%

21%

21%

Effects on business since Brexit referendum

Improved

12%

Stayed the same

83%

Deteriorated

5%


55%33% 29%

Computing advancements Process automation Business model innovation

63%

Right skills in place to keep up with technology

Global economies are constantly being reshaped by waves of disruptive technology, and innovation is happening at a relentless pace. Respondents expect their workforce and business model to be the areas most impacted.

The majority of survey respondents highlight that Brexit has had little impact on their businesses up until this point, despite Malta’s strong trading and political ties with the UK. Political instability in the EU and talent shortages were the two areas most highlighted as international risks affecting companies in Malta.

The majority of foreign companies plan to stay in Malta for the long term. Expansion plans are high on the agenda of many companies, with an 8% increase noted compared with the prior year.

Source: all 2017 respondents.

8 EY’s Malta Attractiveness Survey 2017

Malta in context

Due to our lack of natural resources, Malta has no option but to think without the box. As a

nation, we have adopted a core skill: adaptability. We have the ability to adapt to new situations and, as a result of our size, we can do so quickly. We have the minds to strategize and the knowledge and skills of Maltese workers, this has proved to be the winning formula for Malta to attract investors.Our focus is on ensuring that our workforce can adapt, re-skill and up-skill when necessary – because a country’s economy is only as successful as those who labor to make it. And our success story is relatively simple: take care of your workforce while creating a solid link between investors, government and employees.Once that link was created, our experience has shown that we can move mountains, putting Malta at the forefront of Europe despite our size and limited resources.The concerns for many are clear: Malta’s attractiveness depends mostly on its EU membership and geographic location. Yet we remain positive. Our relationship with the EU has not been one of dependency but one of mutual benefit. We have striven and succeeded to be as relevant and significant to the EU as any other Member State.

That we passed the test of carrying the burden of the presidency with flying colors should be enough to illustrate this point. Our next challenge will be to find a sustainable solution to traffic and transport. Our first face-off is a major face-lift to our infrastructure— a seven-year plan to resurface all of Malta and Gozo’s roads. We have already seen improvements, and the progress made on the Kappara Junction project augurs well for other projects commencing soon.We must also continue to address reforms in employment policies and labor market institutions to improve accessibility to employment and meet the exigencies of both demand and supply. This can only be guaranteed if we address the gaps in employability skills, and we have already embarked on this road by embracing work placements and apprenticeships, and introducing vocational studies to ease the school-to-work transition.I am convinced the introduction of coding lessons to young students, and taking the leap to lead in disruptive technologies, will open more doors for Malta. Indeed, we are already the first nation to introduce blockchain educational certificates and we are determined to remain at the forefront of further innovation through regulation.We aim to turn Malta into a hub for innovation where entrepreneurship and innovation will become synonymous with our education system.

We must embrace new technologies that will ultimately improve the quality, as well as the quantity of our productivity.Now is the time to make the leap to disruptive technologies. We have the highest job creation rate in Europe, the fastest-growing economy, and a workforce praised for its willingness to learn and adapt. Yet we need to make sure this message resonates across the globe. We also need to invest in our ambassadors who will continue to ensure that Malta garners success in directing investment to its shores.To think without the box means to become one of the best investors in thinkers – our people.

Honourable Joseph Muscat Prime Minister of Malta

Viewpoint: Investors in people


9EY’s Malta Attractiveness Survey 2017

GDP identity from the production (output) side by sector2011 2012 2013 2014 2015 2016

Gross value added (GVA) (%) 5,949,747 6,268,867 6,705,378 7,408,495 8,153,247 8,690,868

Agriculture, forestry and fishing 2 1 1 1 1 1

Mining and quarrying; manufacturing; electricity, gas, steam and air conditioning supply; water supply; sewerage, waste management and remediation activities

15 13 13 12 11 11

Construction 5 4 4 4 4 4

Wholesale and retail trade; transportation and storage; accommodation and food service activities

22 22 23 22 22 21

Information and communication 6 6 6 6 7 7

Financial and insurance activities 8 8 8 7 7 7

Real estate activities 6 6 6 5 5 5

Professional, scientific and technical activities; administrative and support service activities

10 10 11 12 12 13

Public administration and defense; compulsory social security; education; human health and social work activities

19 19 19 18 18 18

Arts, entertainment and recreation, repair of household goods and other services

9 9 10 13 13 14

Source: NSO statistics, 2016.

Main features of country forecast: Malta2015 Annual percentage change

Current prices (¤m)

% GDP 1997–2012

2013 2014 2015 2016 2017 2018

GDP 9250.3 100 2.7 4.6 8.4 7.4 4 3.7 3.7

Private consumption 4665 50.4 2.2 2.2 2.6 5.5 3.6 2.8 2.7

Public consumption 1696.3 18.3 1.9 0.1 7 4.7 3.2 7.5 6.2

Gross fixed capital formation 2307.1 24.9 1.4 –1.7 8.8 49.8 –2 2 3.1

of which: equipment 1255.8 13.6 – –5 15.1 121.3 – – –

Exports (goods and services) 13264.6 143.4 5.7 1 5.1 4.3 1.5 3.7 3.9

Imports (goods and services) 12538.4 135.5 4.9 –0.2 1.5 7.7 0.5 3.6 3.7

GNI (GDP deflator) 8865.1 95.8 2.4 3.8 8.6 8 4.3 4 4

Contribution to GDP growth: Domestic demand 2.1 1 4.3 12.4 2 3.3 3.3

Inventories –0.2 1.5 –1.5 –0.8 0.5 0 0

Net exports 0.8 1.9 5.6 –4.2 1.5 0.4 0.5

Employment 1 3.7 5.1 3.5 3 2.8 2.6

Unemployment rate (a) 6.8 6.4 5.8 5.4 4.8 4.9 4.9

Compensation of employees per head 3.8 2 1.4 3.8 3 2.9 2.8

Unit labor cost whole economy 2.1 1.2 –1.6 0 2 2 1.7

Real unit labor cost –0.2 –0.7 –3.4 –2.1 0.3 –0.1 –0.6

Saving rate of households (b) – – – – – – –

GDP deflator 2.4 1.9 1.9 2.2 1.7 2.1 2.4

Harmonized index of consumer prices 2.7 1 0.8 1.2 0.9 1.6 1.8

Terms of trade of goods 0.2 1.7 6.6 1.1 1.4 –0.1 0

Trade balance (goods) (c) –16.2 –13.4 –12.3 –19.3 –18.0 –18.6 –18.7

Current account balance (c) –3.9 3.1 9.6 5.2 5 5.3 6

Net lending (+) or borrowing (–) compared with Rest of the World (ROW) (c)

–2.8 4.9 11.2 7 6.7 6.9 7.4

General government balance (c) –4.9 –2.6 –2 –1.3 –0.7 –0.6 –0.6

Cyclically adjusted budget balance (d) –4.8 –1.8 –2.9 –2.8 –1.6 –0.9 –0.5

Structural budget balance (d) – –1.9 –3.4 –2.9 –1.4 –0.7 –0.5

General government gross debt (c) 64 68.7 64.3 60.8 59.6 58 55.6

(a) as % of total labor force. (b) gross saving divided by gross disposable income. (c) as a % of GDP. (d) as a % of potential GDP. Source: European Commission, Winter 2017 Economic Forecast.



Chapter 1: FDI — facts at a glance



Maintaining momentum

Malta Enterprise’s (ME) successful attraction of inward investment in recent years has been one of the pillars of Malta’s robust economic growth. During 2016, ME’s efforts continued to bear fruit, with the approval of 11 foreign greenfield projects and 15 expansions by foreign companies.ME has been successful in attracting new greenfield initiatives in security printing, logistics, life sciences, advanced manufacturing, software development and digital media, originating primarily from Germany, Italy, the US, Switzerland and other non-EU countries.

The expansion of Malta-based FDI has also occurred across all major high value-added sectors, such as aviation, electronics, advanced manufacturing and life sciences. The Safi Aviation Park, Life Sciences Park and the Digital Hub continue to grow and are evolving further into important clusters for the Maltese economy.

FDI project applications approved by ME 2006–16New FDI Foreign expansions

Year Projects approved

Average investment

per application (€m)

Average employment

per application

Average investment per employee (€)

Projects approved

Average investment

per application (€m)

Average employment

per application

Average investment per employee (€)

2006 24 1.19 51 23,284 17 2.43 43 56,653

2007 25 1.84 39 46,843 11 1.00 31 32,544

2008 13 1.67 40 41,892 9 0.83 16 53,571

2009 12 4.79 54 88,598 6 4.48 50 90,572

2010 2 0.16 58 2,783 2 4.10 73 56,552

2011 9 14.43 44 325,564 6 3.48 43 81,323

2012 2 1.05 19 55,263 10 2.37 22 106,757

2013 36 1.78 33 53,461 15 2.83 22 127,246

2014 28 1.33 37 35,369 15 3.66 39 92,749

2015 20 0.78 29 26,587 10 2.04 24 84,651

2016 11 12.7 48 261,910 15 3.82 41 94,243

Source: ME 2017.



Malta’s stock position The National Statistics Office (NSO) showed that Malta’s FDI stock position¹ (outward FDI) was estimated at €161.4 billion as at December 2016. The total amount attributable to financial and insurance activities (including special purpose entities²) was €158.2 billion, which is similar to previous years, contributing 98% of the total.

This amounts to an increase of €9.5 billion compared with the corresponding period in the previous year.

FDI in Malta – stock position: economic activities

FDI flows in Malta

Jun 13 Dec 13 Jun 14 Dec 14 Jun 15 Dec 15 Jun 16 Dec 16

€m €m €m €m €m €m €m €m

Manufacturing 876 882 885 961 1,032 1,123 1,172 1,202

Transportation, accommodation and real estate activities 1,120 1,104 1,112 1,132 1,150 1,252 1,265 1,319

Financial and insurance activities 127,308 130,984 133,797 140,150 143,996 148,998 153,719 158,211

Information and communication 21 8 15 12 57 73 113 130

Professional, scientific and technical activities 386 65 143 39 128 48 136 134

Other activities 329 240 244 480 288 373 290 363

Total 130,040 133,283 136,195 142,774 146,650 151,867 156, 695 161,358

Source: NSO News Release 28/2017 and NSO News Release 134/2017.

2012 2013 2014 2015 2016

€m €m €m €m €m

Manufacturing −82 101 45 138 48

Transportation, accommodation and real estate activities 50 41 32 69 78

Financial and insurance activities 11,128 8,839 8,457 3,892 3,218

Information and communication 1 −7 4 63 34

Professional, scientific and technical activities −8 −6 −6 2 6

Other activities −49 72 16 20 15

Total 11,039 9,041 8,548 4,896 3,399

Source: NSO News Release 134/2017.

¹ The stock position refers to the balance sheet position of FDI-related items at the end of the period. The position incorporates exchange rate changes, valuation changes and other changes apart from the transactions carried out during the period.

² Special purpose entities are companies that, although set up in a specific country, have little or no operations in the country, and have no, or a small number of, employees. However, since they are registered in the country, they are regarded as resident units.



Malta — an iGaming hubMalta was the first EU Member State to regulate the remote gaming market in 2004, and has since established itself as a significant gaming hub with global relevance. Since 2004, the gaming industry in Malta has grown significantly. Both the land-based and remote gaming segments continued to grow in 2016.

According to NSO statistics for 2016, the sector directly accounts for 13% of Malta’s gross value added(GVA). The gaming industry is estimated to have generated a little more than €1 billion in terms of GVA in 2016. In 2016, the Malta Gaming Authority (MGA) issued a total of 91 new remote gaming licenses.

Class 1 Class 1 on 4 Class 4Class 2 Class 2 on 4 Class 3 Class 3 on 4

Number of licenses issued by MGA

2016 2015 2014

16 2521

89 9188

277

222246

28 3731 30 30 32

6259 53

14 12 9

Source: MGA Annual Report, 2016.

Technology impacts all aspects of our lives and pushes the boundaries of our businesses.

As we all seek to take advantage of opportunities offered by the 21st century, we need to move away from archaic means of transaction.We could look forward to FinTech as a way to make our economy more efficient, but we also have excellent tools available right now that will help us move away from cash and cheques.

HSBC Commercial Banking Malta is committed to offering our customers the convenience and speed of the latest digital methods of transaction. At present, they already enjoy the benefit of HSBCnet – a powerful 24/7 portal – which provides real-time account access and automated payments in a secure environment. A mobile app then brings this up-to-the-minute information to the fingertips of customers. All this, together with Get Rate and the newly launched Business Card Package, offers efficiency and peace of mind.HSBC continues to invest in this area, and we shall imminently be offering a way to access the mobile app through your fingerprints.

This is our commitment to support the paradigm shift that will see us move away from cash and cheques toward safer methods of payment, preferably electronic systems such as internet banking platforms, as well as increased use of debit and credit cards.The nature of technology is progressive, and it is important for our nation to join the global economy and make the move toward increased use of electronic payments. Michel Cordina Head of Commercial Banking, HSBC Bank Malta plc

Viewpoint: Moving toward electronic payments



Financial services in MaltaIn 2016, financial services in Malta continued to experience growth levels similar to those recorded in previous years. There was an increase in licenses, and authorizations to carry out various types of activities were registered in the investment services, trusts, pensions and insurance business sectors. According to the Malta Financial Services Authority (MFSA), 40 companies were granted a financial institution license under the Financial Institutions Act last year.At the end of the year, 60 insurance undertakings held an authorization to carry on insurance and reinsurance activities under the Insurance Business Act (Chapter 403). This represents a net increase of two undertakings from the previous year.Investment services registered high levels of growth in 2016, with 156 companies licensed to provide investment services under the Investment Services Act, 7 more than in the previous year. The MFSA licensed 113 new funds (including sub-funds) in 2016, of which 19 were licensed as Alternative Investment Funds (AIFs), 71 as Professional Investment Funds (PIFs) and 23 as Undertakings for Collective Investment in Transferable Securities (UCITS) funds.

Moreover, two funds were included in the list of notified AIFs. The MFSA also accepted the surrender of 73 fund licenses (including sub-funds), made up of 51 PIF licenses, eight AIF licenses, and 14 UCITS licenses. Over the course of 2016, the MFSA issued 12 new authorizations under the Trusts and Trustees Act, while two companies surrendered their authorization. This brings the number of authorizations at the end of the year to 158, 9 more than the previous year. In addition, the MFSA issued acknowledgments under Article 18 of the Securitisation Act to 16 companies, of which 8 were securitization cell companies. Moreover, 12 digits were issued with an acknowledgment under Regulation 22 of the Securitisation Cell Companies Regulations. At the end of 2016, there were 34 notified securitization vehicles, of which 10 were securitization cell companies.

Over the course of the period under review, Malta’s financial services industry has continued to register

sustained growth across its three key sectors — asset servicing, insurance and private wealth. A number of key success factors proved to be pivotal to the industry's growth, and remain relevant going forward. However, there are other, equally important, strategic and operational factors that can further strengthen Malta's value proposition.

With this in mind, the recent launch of various initiatives addressing a number of strategic and operational issues are highly welcomed. For example, the consultation document aimed at strengthening the MFSA, the review of current procedures to expedite the process of granting work permits and visas to non-EU workers seeking employment in Malta, the setting up of a Brexit task force, as well as other initiatives in progress related to blockchain and FinTech, should enable the industry to reach new heights.

These initiatives, and their timely implementation, are critical innovation catalysts. They will ensure that Malta is competitively positioned as a domicile of choice for international financial services business. Kenneth Farrugia Chairman Finance Malta

Viewpoint: Financial services — sustaining growth



The financial services industry is facing a number of digital and technological challenges that,

if seen through the proper lens, may turn out to be opportunities. Digitization in the financial services industry is allowing banks to reassess internal processes and client touch points, enabling them to develop a closer relationship with their customers. The cooperation between Bank of Valletta and Oracle to develop its new core banking system is one such example.

Partnerships between banks and technology firms are allowing banks to launch new financial services in the market, thus providing strong win-win solutions for both the service providers and consumers. Through such collaboration, banks are in a position to develop new ways to service existing and future client demands. For the technology firm as much as for the start-up, the bank acts as a platform to develop innovative financial services in a regulated environment.The future of the digital financial services offer will depend on how local regulators develop and evolve their regime.

Malta’s unique size and its growing start-up community, together with the right regulatory environment, could offer financial services providers and technology start-ups a unique test bed environment to pilot new offerings. Developing a robust yet flexible regulatory environment that facilitates innovation can help to make Malta an FDI hotspot for digital financial services. Mario Mallia Chief Executive Officer, Bank of Valletta plc

Viewpoint: Technology linked to FDI

The development of today’s economic scenario has irreversibly changed the

way we conduct business. Previously unheard-of technologies that have emerged in the past decade or so have not only provided our businesses with an array of tools that facilitate their operation, but have also disrupted age-old practices. Simultaneously, they have accelerated the evolution of business models at an unprecedented rate.It is clearly evident that the capability of businesses to completely absorb and ride the technological revolution is increasingly determining which companies create or lose value. In its Economic Vision for Malta 2014–20, the Malta Chamber of

Commerce, Enterprise and Industry proposes that, for businesses to keep up with this rhythm and to remain competitive, they must be in a position to raise their levels of productivity. In terms of deliverables, we believe that the Government should increase assistance to businesses to identify innovative business models, processes, technologies, research, benchmarking and other initiatives that would be instrumental in improving productivity. It should primarily achieve this through the setting up of a Government University of Malta Business and Enterprise center that would conduct applied research on productivity and innovation for enterprise to tap into. Areas of focus would be growth markets and the emergence of disruptive technologies, such as 3-D printing and sectors that unless

operators increase their productivity, are likely to relocate or close down.We are also of the firm opinion that Malta has the right environment to become a regional, if not global, leading “living lab” for businesses to conceptualize, co-create, test-bed and commercialize future-ready solutions. We should build on this position to become a trusted location to develop as the reference nation for regional solutions. It is about time that we took the plunge, and performed the next big step in our economy. Let’s not only think outside of the box, let’s break that box. Frank V. Farrugia President of the Malta Chamber of Commerce, Enterprise and Industry

Viewpoint: Let’s break that box!



Redomiciliation of companiesIn 2016, 99 companies transferred their domicile to Malta through the Continuation of Companies Regulations under the Companies Act, 25% of them from other EU countries.

Source: MFSA Annual Report, 2016.

Total redomiciled companies (2013–16)

2016 2015 2014 2013

99 92111

85

Redomiciled companies in 2016 came from the following categories:

Category Betting, gambling and gaming 2

General trading 5

Holding 68

Insurance 1

IT activities 4

Marketing, promotion and consultancy 5

Property activities 2

Real estate 2

Securities 3

Transportation 1

Trust management 1

Other 5

Total 99


The past year has been another challenging one for ME. In view of Brexit, currency

fluctuations and elections in the US and in Europe, ME had to intensify its efforts to sustain the influx of foreign investment in Malta in recent years. Yet ME has been successful in attracting and supporting new greenfield initiatives. We have also overseen the expansion of Malta–based FDI across all major sectors, including aviation, electronics, advanced manufacturing and life sciences.

In 2016, the productive sectors contributed positively to Malta’s staggering economic growth rate (+5.0%). It is also worth noting that, in the same period, the manufacturing sector grew at the rate of 3.1%.ME has been dynamic in its investment promotion efforts,using traditional channels as well as new strategies. Investment has been attracted equally from inside and outside the EU. While traditional manufacturing has kept pace with economic growth levels, Malta has seen a surge in ICT and media-related activities.

It is also worth noting that the life sciences sector has become our number one contributor to exports.ME strives to give excellent service across the board, from the largest FDIs, such as Crane Currency and Playmobil, to the smallest B-start applicant. While we wrestle with competing countries for investment, we make every effort to support clients already here and appreciate their role in acting as showcases for Malta’s success. Mario Galea Chief Executive Officer, Malta Enterprise

Viewpoint: Sustaining growth



In 2016, the MFSA received the following notification for new entities applying to passport into Malta from their home country regulator.

Number of new notifications

European credit institutions 33

European financial institutions 84

European insurance undertakings 46

European insurance intermediaries 177

Investment services 172

UCITS schemes (including sub-funds) 10

EU AIFMs marketing in Malta

AIFMs 8

Relevant number of AIFs 10

Sub-AIFs 2

EU AIFMs managing AIFs or providing ancillary activities in Malta

AIFMs 16

Relevant number of AIFs 6

European Venture Capital Fund (EuVECAs) marketing in Malta

EuVECA managers 4

EuVECA funds 4



Chapter 2: Perception



Attractiveness

86% 88%

79%84%

87%

78%

3%

11% 9%

15%

6%11%

6%

7%11%

11%

Percentage of foreign direct investors that think Malta is currently attractive

Source: all 2012–17 respondents.

0

30

40

50

60

70

80

90

20

20132012 2014 2015 2016 2017

3% 5%10

Yes No Don't know

Malta remains attractive but investors need reassuranceSeventy-eight percent of foreign direct investors believe that Malta is an attractive destination for FDI, a 9% decrease over 2016 and similar to the 2014 result. The increase over the previous year occurred in both “don’t know” and “no” replies. This shows that, although Malta overall remains an attractive FDI destination, investors seem to be slightly more wary than before. We point out that the survey was undertaken in the midst of a highly contested electoral campaign.

Analyzing the FDI attractiveness results by sector, banking and insurance respondents have replied the most positively. All banking respondents indicated "yes" to Malta being currently attractive. Manufacturing has remained relatively stable with 78%. The remaining sectors posted similar results.

Investment decisions


Note: very attractive and attractive responses.Source: all 2017 respondents.

–3%

–6%

+4%

Corporate taxation


88%

82%

73%

1

2

3

–9%

+3%

-2%





49%

32%

29%


% changeover 2016

Malta's areas for improvement¹ % changeover 2016



–3%

–6%

+4%

Corporate taxation


88%

82%

73%

1

2

3

–9%

+3%

-2%





49%

32%

29%


% changeover 2016

Malta's areas for improvement¹ % changeover 2016

1 Due to Malta's small size, the FDI attractiveness parameter "domestic or 'regional' market" has not been included in areas for improvement.



The scoreboard below rates the attractiveness parameters in order of interest.

Corporate taxation and the stability of social climate remained constant and at the top of Malta’s highest-ranked FDI parameters. Telecommunications infrastructure has improved its relative attractiveness, rising from fifth place in 2016 to third place in 2017. This bodes well for Malta’s ambition to focus more on digital business. The stability and transparency of the political, legal and regulatory environment parameter registered a sharp decrease in attractiveness compared with previous years. In the past, this parameter was ranked third. This may have been impacted by the hotly contested 2017 electoral campaign. The parameter’s attractiveness decreased by a total of 12% and is now in seventh place at 58%.

At the lower end of the scoreboard, the parameters that require most attention are similar to previous years. Investors again highlight Malta’s need to nurture its R&D and innovation environment, and the transport and logistics infrastructure in order to meet their needs adequately. Moreover, more stimulus needs to be provided to companies and start-ups to ensure their R&D requirements are catered for. Additionally, an upgraded infrastructure is urgently needed to enhance connectivity, especially in transport-related areas. Slightly more than a third of respondents (36%) believe that the current transport and logistics infrastructure is not attractive from an FDI standpoint.

Potential productivity increase for your company

Very attractive and attractive Neither attractive nor not attractive

Not attractive and not attractive at all Not relevant

Attractiveness scoreboard — Malta’s FDI attractiveness


Corporate taxation



Stability and transparency of political,legal and regulatory environment

Local labor skills level

Labor costs




Domestic or regional market

88% 7% 6%

82% 16% 1% 1%

73% 19% 6% 3%

66% 24% 6% 4%

64% 21% 14% 1%

63% 26% 10% 1%

58% 26% 15% 1%

49% 37% 13% 1%

36% 27% 20% 18%

32% 26% 36% 6%

29% 45% 9% 17%



Focus areas to remain globally competitive

2017 2016 Difference

Focus areas to remain globally competitive

Develop education and skills

Support high-tech industries and innovation

Invest in major infrastructure and

urban projects

Support small and medium-sized enterprises

Facilitate access to credit, including

venture capital and other financial tools

Allow regulation to keep pace with

technological and other disruptions

Encourage environmental

policies and attitudes

Reduce taxation

Improve the quality of its products and

the added value of its services

Level of protection of

intellectual property rights

Reduce labor costs

Support struggling industries

Relax competition rules

None of the above

73%- 6%

79%

64%

71%

63%51%

50%62%

40%39%

38%

n/a

29%

33%

28%39%

27%47%

17%15%

16%20%

8%

10%

5%

1%

8%

- 7%

12%

- 12%

1%

n/a

- 4%

- 11%

- 20%

2%

- 4%

- 2%

- 3%

- 1%

Source: all 2017 respondents.Note: respondents could choose more than one area.

In order to remain competitive and overcome certain inherent limitations, such as geographical location and size, respondents highlight key areas to focus on. Once again, a significant proportion is convinced that the emphasis should be on developing Malta’s education and skills (73%). Investors would also like to see more support for high-tech industries and innovation (64%) and increased investment

in major infrastructure and urban projects (63%). These results highlight the increasing importance of technology in all sectors. In order to maximize the opportunities for growth resulting from ongoing technological developments, companies are increasingly prioritizing the levels of education and skills available to them.



RegulatoryMalta’s legislative framework

Keeping pace with regulatory changes Offers an international advantage

Yes No Can’t say

19%18%

2017 2016

64% −7%

+8%

Source: all 2017 respondents. Yes No Can’t say

33%

18%

50%

2017 2016

−1%

+1%

+4%


Keeping pace with regulatory changes Offers an international advantage

Yes No Can’t say

19%18%

2017 2016

64% −7%

+8%

Source: all 2017 respondents. Yes No Can’t say

33%

18%

50%

2017 2016

−1%

+1%

+4%


Over the years, Malta’s legislative framework has been a contributing factor to the relatively high level of FDI. In 2017, 64% of investors believe that Malta is keeping pace with regulatory changes in competing jurisdictions. Although still positive, it is 7% lower than the previous year. For the second year running, all insurance respondents believe Malta is keeping pace. Less convincing replies were registered by manufacturing (56%) and ICT and telecommunications (50%) respondents.

Half of the respondents believe the Maltese legislative framework creates a competitive advantage within European and global markets. These results have remained relatively consistent with the previous year’s results. The sectors with the highest number of affirmative replies are insurance (83%) and iGaming (75%). The sectors that do not agree that the Maltese legislative framework offers them a significant advantage are banking (64%) and ICT and telecommunications (50%). This may be a result of increasingly standard pan-European regulations applicable to these sectors, especially in the case of banking.

The gaming industry in Malta has continued to grow steadily, with its GVA contribution to the country’s

economy and employment figures exceeding expectations throughout 2016 and the first half of 2017. This growth is underpinned by the organic expansion of existing gaming operators, but is also expected to be compounded by new investments and operators establishing themselves in Malta. These achievements are not a coincidence. Malta's success lies in the integrity of our onboarding, supervision and governance

standards, which are underpinned by its experience and knowledge in online gaming regulation. The innovative way that the MGA approaches regulation, including its development and evolution, ensures that the regulator keeps up with sector developments and dynamics, thereby ensuring a high standard of consumer protection and technical standards. In fact, last July, the MGA published its proposals for a regulatory overhaul for consultation. The objective is to future-proof the industry, taking into account global sector developments. The proposals include enhanced consumer protection, quality and technical standards, improvement

in the overall governance and supervision of the industry, the adoption of a risk-based approach to regulation, more powers for the MGA, and other proposals aimed at boosting innovation, particularly in the Business-to-Business (B2B) segment. This strategic repositioning should ensure that the Maltese jurisdiction remains a relevant global player but also establishes itself as a thought leader in regulatory standards and innovation. Joseph Cuschieri Executive Chairman, Malta Gaming Authority

Viewpoint: Toward a new MGA



SkillsDemand continues to outstrip supply



Retain specialized personnel

Find and recruit the required specialized skills inthe local labor market

2016

87%85%

2015

-5%

2017

82%

-7%

2017

38%45%

20162015

47%

In order to safeguard future growth, Malta’s workforce must be aligned with investors’ needs. Over the years, demand for skilled labor has continued to outstrip supply, and this remains the case in 2017. As previously outlined, 73% of respondents believe that developing education and skills is key to Malta remaining attractive in the face of global competition. This significant result reinforces the importance of this parameter in retaining and attracting FDI in Malta. This skills mismatch is again evident from the number of respondents who are able to find the required specialized skills on the local labor market. At 38%, this signifies a 7% decline compared with last year. In this scenario, it is becoming increasingly important for policy-makers to ensure that there is proper alignment between what is being taught in school and what is needed by industries in the new economy. Measures are needed to increase the labor supply where it is needed most, so as to be in tune with the requirements of the higher value-added and knowledge-based sectors. In order to achieve all this, bottlenecks need to be properly identified and acted upon. This can only be done through close cooperation between policy-makers, educational providers and the public sector. Positively, for investors, such tripartite cooperation has a strong history in Malta.Moreover, 82% of respondents are managing to retain their specialized personnel. This shows that, despite the demand for their services being strong, a high level of employee loyalty continues to exist.




Expansion plans dependent upon,or linked to filling these skill gaps

61%

13%

26%

Yes

No

Not applicable

In order to tackle current and future skill shortages, 84% of respondents believe that opportunities for relevant work placements should be widened. Such on-the-job training is actually slightly more popular than the teaching of new skills for the new economy, with 82% agreeing that subjects such as coding and robotics need to be included in school curricula.The urgency with which skill shortages need to be tackled is manifested by the fact that 62% of investors, with plans to expand their operations in the next year, will only proceed if current skills gaps are filled.

As we look to the future, technology will continue to revolutionize the way we live, work

and interact with each other. The dramatic increases in processing power, and our strengthened ability to manage and transfer data, are opening up a new world full of opportunities and challenges. This combined power of processing and connectivity will mean that many more of the devices at our disposal will be connected to the internet, able to share and manage data, and also act autonomously based on that data. Change can

always bring uncertainty, even fear, but our role as drivers and enablers in the community is to embrace this change and to ensure that we use it for the benefit of all. We can already see some of the amazing opportunities this new world might offer: from blockchain technology ensuring transparency and security of information, to driverless cars able to avoid accidents, and the delivery of remote medical assistance.Malta is well placed to make the most of the opportunities ahead. GO has always been committed to providing the communications services Malta needs to compete and succeed in the modern world. This commitment, and our clear vision of the future, has led us to invest more

than €100 million in Malta’s fixed and mobile internet infrastructure in the last five years. Through fiber, this infrastructure is being future-proofed for exponentially increasing demand. We have also invested in BMIT, Malta’s leading data center and cloud services provider – as well as Kinetix, an ICT services and solutions provider. Through these subsidiaries, GO is able to offer the business community a 360-degree suite of all the communications, data and ICT services it needs, and thus be a key enabler for entrepreneurs, and a driver of the Maltese economy. Attila Keszeg Chief Executive Officer, GO

Viewpoint: Technology and disruption — the two go hand in hand

Very important and important Neutral Very unimportant and unimportant Uncertain

Policy actions to address current and future skills shortages

Source: all 2016 survey respondents.

Widen opportunities for relevant work placements as part of higher education syllabuses

Develop national frameworks to encourage international internships orwork placements for Maltese nationals

Introduce a skills gap monitoring board

12%84% 4%

Introduce skill sets for the new economy in schools (coding, robotics, etc.)

Use targeted international marketing campaigns to highlight Malta as a great place to work

64% 26% 8% 2%

68% 24% 2%6%

1%82% 14% 3%

82% 17% 1%



International — BrexitInternational developments and effects on business

Investors were asked to select the international risks with the largest impact on their next investment decisions in Malta. Topping the list, with 41%, is the political and economic instability in the EU (excluding Brexit), which is more than twice the 20% that fear the impact of Brexit on their businesses. Close behind, investors view talent shortage (40%) and the competition from emerging markets (29%) as potentially troublesome for their investments in Malta.

It is interesting to compare these responses with those recorded in EY’s European Attractiveness Survey 2017, which collates the views of 254 Europe-based companies. High volatility in currencies, commodities and capital markets were the biggest sources of concern, highlighted by 37% of these respondents. Economic and political instability within the EU was their next-biggest worry (32%).

Source: all Malta Attractiveness Survey and European Attractiveness Survey 2017 respondents.

International risks affecting companies located in Malta and Europe

Malta attractiveness

respondents

European attractiveness

respondents

Difference

Economic and political instability in the EU (excluding Brexit)

Talent shortage

Competition from emerging markets

Global and regional geopolitical instability (including terrorism, border and territorial disputes)

Slowdown in global trade flows (including economic nationalism, protectionism and industrial policy)

Impact of Brexit

Rise in populist or protectionist feelings among politicians and populations

Weak innovation capacity

High volatility in currencies, commodities and other capital markets

Lack of capital

Unexpected rapid slowing of growth in China

None of the above

41%

40%

29%

21%

21%

20%

16%

16%

15%

9%

5%

5%

32%

10%

19%

20%

27%

28%

12%

5%

37%

11%

11%

15%

9%

30%

10%

1%

−6%

−8%

4%

11%

−22%

−2%

−6%

−10%


Effects on business since Brexit referendum

Improved significantly

Improved slightly

Stayed the same

Deteriorated slightly

Deteriorated significantly

10% 12%

83%

2%

2017

4%1%

In EY's Malta Attractiveness Survey 2016, prior to the Brexit referendum, respondents indicated that Brexit was their biggest international concern for their Maltese operations. This year, businesses were asked to indicate how Brexit impacted their operations, even though negotiations had not yet formally commenced. A large majority (83%) said Brexit has had no effect as yet on their business. Twelve percent of respondents said that it improved their business, while just 5% indicated that their business had deteriorated. From a sectoral standpoint, companies in insurance, financial services and ICT and telecoms generally saw improvements, while banking, manufacturing and iGaming were mostly unaffected. A few financial services and iGaming respondents indicated that Brexit has already had a negative effect on their business.

Brexit remains an uncertain challenge



Decision-makers were also asked what steps they envisage taking should the UK leave the European single market as a result of Brexit. Respondents indicated scanning for new business opportunities or improving their operating efficiency as top priorities (31%). Another key action would be ensuring employee retention and access to talent (21%).

When looking at the European Attractiveness Survey to compare results, it is noted that Europe-based companies view mitigating the impact of possible increases in export costs as the most urgent action needed (32%). This is followed by assessing the impact on their suppliers’ contracts and supply chain, including outsourcing (27%).

Source: all Malta Attractiveness Survey and European Attractiveness Survey 2017 respondents.

Action plan should the UK leave the European single market

Maltaattractiveness

respondents

Difference

Scan for opportunities to capture new business or improve operating efficiency

Ensure employee retention and access to talent

Assess customer-related impact (contracts and customer outlook)

Assess trade and customs impacts

Assess impact to supplier contracts and supply chain, including outsourcing

Reorganize accounting, tax functions, shareholder relations or governance

Plan for securing financing (banking relationships, working capital and R&D grants)

Analyze the risk of competitors trying to poach business or disrupt relationships, and have plansto manage this

Assess investment and M&A plans for the next few years

Mitigate the impact of possible increases in import costs

Relocate operations to another country

None of the above

31%

21%

17%

11%

9%

7%

7%

7%

5%

3%

2%

36%

European attractiveness

respondents

26%

20%

23%

26%

27%

16%

14%

18%

12%

32%

10%

14%

5%

1%

−6%

−15%

−18%

−9%

−7%

−11%

−7%

−29%

−8%

22%

The Maltese capital market, led by the Malta Stock Exchange, is striving to service both the domestic and

international markets.

This new international dimension will be made possible through greater use of technology, better processes, increased efficiency and professionalism – the combination of which will be the drivers for a new era.

Joseph Portelli Chairman, Malta Stock Exchange

Viewpoint: A new era



Chapter 3: Future


Chapter 3: Future

PresenceIn three years’ time

Looking to the future, the number of companies indicating that Malta will be attractive in the next three years has remained relatively constant. A slightly higher number of respondents indicated that they do not know, but positively and similar to previous results, only 4% believe it will not be.

Once again, sectoral responses vary. Financial services, banking and insurance demonstrate higher levels of confidence in future prospects.

59%

71%

79%

Source: all 2014—17 respondents.

Presence in Malta in 10 years’ time

2014

2015

2016 2017

78%

Source: all 2016−17 respondents.

78%

18%

5%

78%

-1%

-2%

4%

Yes

NoMaybe

Differencefrom 2016

Investors remain committed to Malta

Seventy-eight percent of companies believe they will still be operating in Malta in 10 years’ time, similar to last year.

Nevertheless, although the negative replies remain few at 5%, this is a 4% increase on 2016, and comes mostly from the iGaming and financial services sector respondents.

58%63%

52%56%

58%54%

8%

34% 35%

44%

4%

41%

4%

38%

4%

42%

Malta's FDI attractiveness in three years’ time


0

30

40

50

60

70

20

20132012 2014 2015 2016 2017

2% 3%10

Yes No Can’t say



iGaming 76%

Tourism and leisure 61%

Other financial services 45%

Real estate, infrastructure and construction 43%

Professional services (legal, accounting, research, consulting, advertising and communication and affiliates)

42%

Payments and FinTech 40%

Digital media and games 38%

Fund administration 38%

Aviation 35%

Insurance 31%

ICT and telecoms 29%

Asset management 26%

Banking 21%

Maritime (including shipping, servicing, maintenance and construction and ancillary services)

21%

Pensions 18%

Pharmaceuticals andbiotechnology 18%

Source: all 2017 respondents.Note: respondents could choose more than one area; total number of mentions 710.

Leading business sectors in the next five years

A total of 61% of the FDI companies surveyed have some form of expansion plans over the coming year, an increase of 8% since 2016. The most common type of expansion includes back-office operations (31%), closely followed by sales and marketing office (29%), headquarters (25%) and manufacturing (23%).

The key sectors envisaged to drive Malta’s growth in the next five years include iGaming (76%), tourism and leisure (61%) and other financial services (45%).

Real estate, infrastructure and construction has gained importance according to investors, with 43% believing it is a leading sector, up 14% compared with the 2016 results.

Expansion plans

Leading business sectors in the next five years

61%2017

2016

up 8%


Expansion plans over the next year


Chapter 3: Future

TechnologyBusiness is preparing for further technological developments



Yes No Maybe

69%

Board level

23%

7%

69%

Management level

26%

5%

50%

Staff level

36%

9%

15%

Total skills at levels combined

63%

28%



Yes No Maybe

69%

Board level

23%

7%

69%

Management level

26%

5%

50%

Staff level

36%

9%

15%

Total skills at levels combined

63%

28%

Technological developments impact almost every part of our lives and have dramatically altered the ways in which we do business. Technology is advancing at an unrelenting pace, requiring companies to adapt quickly. Furthermore, it is clear from responses that digital will continue to be a key pillar of Malta’s economy going forward.

In fact, 75% of respondents expect new technologies to impact their workforce significantly, and 71% expect them to impact their business model significantly.


Envisaged effects of technological advancements

Very significant Significant Neutral Insignificant Very insignificant

63%

12%

Workforce 5%

21%

24%

47%

Business model

24%

5%

42%

7%

Need for capitalinvestment

37%

8%5%

4%

23%

Need for mergers,acquisitions, and

strategic partnerships and alliances

50%

8%

14%

9%

3%Supply chain

43%

34%

11%





Computing advancements

(including processing power, blockchain, cloud and mobile internet) 55%

Process automation (including artificial intelligence, robotic process automation and machine learning)

33%

Business model innovation

(platform, sharing and gig economies, crowdsourcing, etc.)

29%

Connected devices and wearable technologies (everyday objects that can communicate with each other through networks)

25%

10%

Advanced materials and manufacturing techniques (including 3D printing and renewables)

3%

Autonomous vehicles (self-driving cars, drones, etc.)

22%

None of the above

The technologies expected to have the biggest impact on respondents’ businesses and industries include computing advancements (55%), process automation (33%) and business model innovation (29%).

At all levels of their company, 63% believe they have the right skills in place to keep up with technology. Investors seem to be more confident about the skills presently found in their boards (69%) and management (69%). At staff level, investors are less sure about the skills ability to match technology (50%).

Concluding remarks

EY's Malta Attractiveness Survey 2017 highlights that past performance is no guarantee of future results. The world is in a constant state of flux. International political uncertainties (especially in relation to Brexit) need to be resolved, and technological advancements must be exploited. Today’s businesses and policy-makers must respond to shifts that, just a few years ago, would have seemed unimaginable. In order to unlock Malta’s full potential, focus needs to be placed on increasing talent to drive expansion. Unfortunately, the shortage of skilled workers is a recurrent theme and one that is unlikely to subside in the short term. It is crucial that policy-makers and educators look at future job market needs as well as current ones. If we adapt in time, the job market will continue to thrive. In an environment where innovation is championed, new sectors and niches also have the chance to flourish.

Investors are well aware that technological advancements will significantly affect their workforce and business models, but they will also impact society as a whole. Malta must capitalize on its small size and become a test bed to harness new technologies, in the process attracting the world’s finest entrepreneurs and start-ups, as well as helping those already here.Smart legislation will play a crucial role in encouraging businesses and individuals to our shores. Ensuring that policy and regulations are fair while simultaneously being free from unnecessary burdens is crucial, as they make it easy to do business in Malta. Finally, concerted efforts are needed to make sure that Malta has the “right reputation.” The next few years will have a strong bearing on future generations. Consequently, positioning Malta as a country that is constantly at the cutting edge of innovation is vital.

32 EY’s Malta Attractiveness Survey 2017

Start-ups matterEvery new business needs the right environment in place, which will allow it to develop from an idea into a reality. The crucial role start-ups play in our economy is undeniable, not least because of the innovative way they view the world and how they plan to shape it. It is positive to see that 64% of foreign direct investors believe that Malta is an attractive start-up location, similar to the 2016 result. With respondents able to provide up to three responses, the top three sectors that find Malta attractive as a start-up location are iGaming (49%), FinTech (27%) and software (17%). Over the past few years, efforts have been made in Malta to create an ecosystem that allows start-ups the chance to grow, especially through the provision of both technical and financial support. For a sustainable start-up ecosystem to be in place, respondents highlighted the need for tax incentives (79%), grants (53%), fast-track visas for tech employees (non-EU nationals) (46%), and available facilities and premises. The sectors that investors believe should be mostly targeted by business accelerators include FinTech (36%), digital business (28%) and iGaming (27%).

Chapter 4: EY’s bolt-on surveysSectors in depth

Following the success of the 2016 EY bolt-on surveys, we have once again opened the door to other entities and institutions to make use of our now national benchmark survey, to ask a range of questions that are relevant to certain sectors. The idea is to use this unique opportunity to ask specific cohorts particular questions, in order to gauge the perceptions of investors and the business community. Entities that participated in 2017 include the Malta Investment Management Company Limited (MIMCOL), Malta Industrial Parks and the Malta Freeport Corporation.Accordingly, this section provides a snapshot of the results of EY’s bolt-on survey results.


Malta remains an attractive start-up location

64%Yes

14%No

21%Don’t know

–2%

+1%

+1%

The sectors that find Malta attractive as a start-up location

Source: respondents that indicated “yes, Malta is an attractive start-up location.”

49%iGaming

27%FinTech

17%Software

15%Digital mediaand games

13%Aviation

12%Digitalbusiness

7%Pharmaceuticals and biotechnology

5%E-learning

4%E-tourism andtravel tech

4%Logistics

3%High-techmanufacturing

3%Maritime

3%Renewable energy

1%Big dataand artificial intelligence

1%E-government

1%Robotics

1%Telecoms


33EY’s Malta Attractiveness Survey 2017

Turning Malta into an international logistics hubMalta’s strategically located position, in the center of the Mediterranean, makes it ideal to connect with Southern Europe, North Africa and the Middle East. In recent years, investments and initiatives have aimed to transform the island into an international logistics hub. Malta’s ambition to become a major logistics center faces several challenges, such as the scarcity of land and its cost, and its detachment from mainland Europe. However, with the airport only six kilometers away from the freeport, it is possible to have cargo coming in by ship and leaving by air within a very short time frame. A total of 17% of respondents believe their clients and partners abroad would be interested in using Malta as a distribution hub, while 13% would be interested in using Malta as a hub in a special economic zone. Nine percent of respondents can see Malta acting as a third-party logistics provider, and 7% would consider setting up a common user facility managed by a public-private partnership.Interestingly, the respondents believing in Malta’s potential in logistics emanated from a variety of sectors.

Yes No Not applicable


Malta as an international logistics hub

Malta as a distribution center or hub

66%

Malta as a distribution center or hub in a special economic zone

for value-added operations 70%

Malta as a third-party logistics provider 69%

Malta as a location for a common user facility that is managed

by a public-private partnership 67%

17%17%

17%13%

21%9%

26%7%

Source: all 2017 respondents.Note: respondents could select no more than three responses.

Sectors to be targeted by business accelerators

FinTech 36%

Digital business 28%

iGaming 27%

Software 24%

Digital media and games 21%

Aviation 19%

14%

Renewable energy 14%

Pharmaceuticals and biotechnology 13%

E-learning 10%

10%

E-tourism and travel tech

10%

8%

8%

7%

6%

4%

2%

1%

High-tech manufacturing

Logistics

Robotics

Maritime

Telecoms

AdTech (advertising technology)

Avionics

Big data andartificial intelligence

E-governmentSource: all 2017 respondents.Note: respondents could choosemore than one area; total number of mentions 446.

Support measures needed to create a sustainablestart-up ecosystem

Financial tax incentives

Financial grants 53%

79%

Fast-track visas for tech employees

(non-EU nationals) 46%

Facilities and premises 43%

Introduction of skill sets for the new economy at schools 35%

Networking opportunities 32%

Residency visas for entrepreneurs(non-EU nationals)

31%

Co-investment schemes 25%

Business planning support 23%

Marketing support 20%

17% Mentoring

9%Utilities subsidies


Methodology

Methodology

Full-time employees: global

More than 100

Between 50 and 100

Between 10 and 50

Less than 10

61%

6%

21%

13%

Full-time employees: Malta

More than 100

Between 50 and 100

Between 10 and 50

Less than 10

23%

11%

40%

25%

Source: all 2017 survey respondents.

Size of Maltese companies in terms of revenue

Less than €1m20%

Between€1m and €2m

17%

30% Between€2m and €12m

13% Between €12m and €35m

6% More than €150m

Between €35m and €150m

15%

Percentage of revenue exported

0%1%–10%11%–25%26%–50%51%–75%76%–100%

50%

11%

7%

6%4%

22%

Asia

North America

South America

Middle East

Europe

Africa

10%8%

5%

Worldwide

Key target marketsA total of 107 current FDI companies or investors responded to EY’s e-survey, conducted between March and May 2017. The respondents’ cohort profile was very similar to that of previous EY surveys, reflecting a range of sectors and sizes. This creates the opportunity to compare results over time, whenever possible.

83%

14%

21%

9%



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EY member firms in Malta


The Alternative Investment Fund Managers Directive has introduced a pan-European regulated branded investment fund that targets professional and sophisticated investors, which benefits from marketing provisions that had previously only been available to UCITS funds. The Malta Alternative Investment Funds: a technical guide provides an in-depth analysis of the regulations governing the formation and operation of these type of fund structures in Malta, and how they fit within the scope of the directive.

http://www.ey.com/Publication/vwLUAssets/EY_-_The_Malta_Alternative_Investment_Funds/$FILE/ey-the-malta-alternative-investor-funds.pdf

The Malta Alternative Investment Funds

Today, Europe is profoundly uneasy. Consensus about our common future has broken down, politics has fragmented and many things we took for granted are being called into question. Public debate often seems mired in the received ideas of yesteryear. Yet business executives making hard-nosed business decisions about where, how and when to invest have continued to opt for Europe.

http://www.ey.com/Publication/vwLUAssets/ey-beyond-this-economic-horizon/$FILE/ey-beyond-this-economic-horizon.pdf

EY European Attractiveness Survey 2017

The Alternative Investment Fund Managers Directive has introduced new concepts and regulations to the wealth and asset management industry. The Malta Alternative Investment Fund Manager: a technical guide seeks to provide clarity to the myriad of regulations that have been introduced by this directive, how it has impacted the Malta asset manager regime and the regulations governing the formation and operation of asset managers in Malta.

http://www.ey.com/Publication/vwLUAssets/EY_-_The_Malta_Alternative_Investment_Fund_Manager/$FILE/ey-the-malta-alternative-investor-fund-manager.pdf

The Malta Alternative Investment Fund Manager

At the 2015 EY Malta's Attractiveness Event, we brought forward a number of proposals, which were subsequently discussed at length with many private and public stakeholders in each sector. They covered commodity trading, logistics, FinTech, Asian e-commerce and turning regular immigrants from a challenge into an opportunity.

eycompreview.ey.com/Publication/vwLUAssets/ey-beyond-this-economic-horizon/$FILE/ey-beyond-this-economic-horizon.pdf

Beyond this economic horizon

Publications



Emerging as an international domicile of choice for securitization vehicles, Malta provides several highly credited services that have generated significant growth within their respective markets in Malta. Several advantageous elements include:• Tax neutrality, meaning that there is no additional tax burden at any level of securitization• Qualifications and knowledge of workforce• Flexible regulatory environments that can adapt to the needs of structures• Accessibility and responsiveness of the tax and supervisory authorities• Expertise and cost competitiveness of locally based service providers• The ability to outsource, to the extent possible, both within the domicile and cross-border

http://www.ey.com/Publication/vwLUAssets/EY-securitization-the-malta-proposition-2016/$FILE/EY-securitization-the-malta-proposition-2016.pdf

Securitization: the Malta proposition

The greater benefit of the UCITS brand is the high-level protection it offers to investors and its marketability. The Malta UCITS Investment Funds: a technical guide provides an introduction of the UCITS brand and how it fits within the scope of the UCITS Directive. It also provides an overview of Malta as a center for these types of investment funds, and a summary of the regulations governing the formation and operation of UCITS brand investment funds in Malta.

ey.com/publication/vwluassets/ey-the-malta-ucits-investment-funds/$file/ey-the-malta-ucits-investment-funds.pdf

The Malta UCITS Investment Funds

The Malta Professional Investor Funds: a technical guide provides an introduction to one of Malta’s primary investment fund structures. The success of the PIF structure can be judged by on its regulatory efficiency and flexibility, which is extremely beneficial, especially for start-up funds establishing themselves in an EU jurisdiction. Our technical guide provides an introduction to the formation, operation and regulation of such investment fund structures and explains how this structure would fit within the scope of the Alternative Investment Fund Managers Directive.

http://www.ey.com/Publication/vwLUAssets/ey-the-malta-professional-investor-funds/$FILE/ey-the-malta-professional-investor-funds.pdf

The Malta Professional Investor Funds

The Economic Advisory Team at EY in Malta conducts economic research and studies on various economic areas. In connection with this year’s EY economic series event, the team has conducted a study on the Maltese property market.

The study analyzes the latest trends in the market, particularly developments related to property prices by locality. The market has been characterized by rapidly rising property prices, which have shown an average annual growth rate of 4.5% over the last 15 years. The research also provides insights on factors driving the property market, and their effect on the sustainability of this market. Factors such as end-user affordability, vacant property, regulation and government initiatives are analyzed in the research study. With the use of property listing data, it was possible to obtain insights on the property market by region and locality, with diverse trends and characteristics being observed across localities.

For further information, contact: [email protected].

EY economic series

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HighlightsEY’s Annual AttractivenessEvent7 October 2016

60speakers

150companies

500+delegates



EY’s Malta Attractiveness Survey 2016 post-event publication is available from:

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This material has been prepared for general informational purposes only and is not intended to be relied upon as accounting, tax or other professional advice. Please refer to your advisors for specific advice.

The views of third parties set out in this publication are not necessarily the views of the global EY organization or its member firms. Moreover, they should be seen in the context of the time they were made.

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EY | Assurance | Tax | Transactions | Advisory EY contact Simon L BarberiDirector, Ernst & Young Limited Tel: +356 2134 2134 [email protected]

Malta October 2017 Thinking without the box: disruption ... · EY’s Malta Attractiveness Survey...

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