The sunny island of Malta is working hard to grow its financial services industry and provide a hub in the Mediterranean, linking Europe with Africa and Arabia. Angele Spiteri Paris reports from the FinanceMalta conference...
The nascent jurisdiction of Malta is small but tenacious. After a long history of being conquered by almost every empire that crossed the Mediterranean, the island can now exploit its geography and make the most of its coveted position in the middle of the Mediterranean Sea.
Having emerged from the financial crisis relatively unscathed, the island is pulling together all its resources to make the most of its opportunity to grow while other fund centres have been somewhat subdued. Nevertheless, it faces a number of challenges.
Malta’s financial services sector has slowly but surely been growing. “The financial services industry in Malta grew by 22% last year,” said Prime Minister Lawrence Gonzi at the third annual FinanceMalta conference, held in April this year. “The statistics speak for themselves. We’re on the right path to achieving our ambitions for the sector.”
And just what are Malta’s ambitions? The government wants the island’s financial services sector to increase its contribution to GDP to 25% by 2015. The aim is also for Malta to become the leading regional centre of excellence in financial services by this time.
Although the government has since announced it will be revisiting its vision for 2015 in the coming months, the plan is still to grow the island’s financial services industry.
According to players in the market, the time is right to give the government goal more momentum.
Kenneth Farrugia, chairman of FinanceMalta, said: “The financial services sector in Malta is resilient. Over 2009, the contribution to GDP increased by 22% to 6% in terms of direct financial intermediation while it is estimated that an additional 6-7% was generated by way of indirect contribution over this period. Moreover, increased activity was also noted in terms of new fund management as well as fund administration operations being set up in Malta.”
Something that helps make Malta’s time ripe is the fact that other European fund centres have been struggling. Farrugia said that in 2009, 105 funds were authorised in Malta, while in other European financial jurisdictions, one could evidently witness a contraction.
Gonzi said: “For once in our long, chequered history, small is beautiful. It used to be our weak point but in the current environment is has become an asset. We have turned our disadvantage into an advantage.”
Another testament to the growing importance of financial services in Malta is that in 2009 the island saw a 50% increase in the number of licences issued for investment services.
Throughout its history, Malta’s strategic position in the middle of the Mediterranean made it a highly desirable conquest. Now, the island can use its geography to its advantage.
As economic power shifts from West to East, Malta can potentially be a bridge between Europe and places like Africa.
Angelos Angelou, founder of consultancy AngelouEconomics, said: “Malta is in a unique position to become a gateway for North African and Middle Eastern markets. The greatest opportunity for Malta’s financial services industry is to create these links effectively.”
Finance minister Tonio Fenech said: “Malta can be seen to have a strategic position for doing business in the Middle East. There is a certain trust between the Maltese and Arabic communities. Therefore it follows that if organisations in these countries are looking to do something in Europe, they would consider Malta as their stepping stone.”
Flexibility of regulation is one of the pivots on which a fund centre’s success rests and the Malta Financial Services Authority (MFSA) has done its utmost to foster a close relationship with the industry.
According to Farrugia, of FinanceMalta, this rapport between the regulator and the industry is one of the reasons for the success Malta has experienced in recent times. “Malta is responsive, flexible and nimble and we need to maintain this. Dialogue between the public sector and the industry is very important.”
Joe Bannister, chairman of the MFSA, said: “One of the things financial services firms like about Malta is that the regulator is in contact with the industry. They appreciate this accessibility. We believe that this gives companies comfort because they feel they can have this open discussion.”
Bannister explained that the next step Malta’s industry needs to make is in innovation. He said: “Malta is a diversified financial centre but we need to see more innovation. The regulator has been innovative in creating fund structures, but now we need to see innovation coming from the industry.”
Farrugia points out that Maltese regulation allows for funds registered in Malta to appoint overseas administrators, but in a further nod to the growing confidence in the services offered there, 47% of funds are administered on the island itself.
But not all is rosy for this fledgling Mediterranean hub. Human resources remain a challenge. For an island with a population of around 400,000, this is
Both Farrugia and Gonzi stressed the importance of making a career in financial services more visible to students.
The people already working in the Maltese financial services industry are highly qualified and well trained, but going forward, the difficulty is keeping those numbers up to meet the demands of the industry itself.
In addition to enticing the younger generation to go into finance, the island needs to attract foreigners to move there, but this is hardly a difficult sell – beautiful weather, good food and a burgeoning industry, what’s not to like?
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