Malta’s economy remains one of the fastest-growing in Europe, witnessing strong economic performance, robust job creation, low unemployment, improved public finances and a well-capitalised and liquid banking system. Kenneth Farrugia, Chairman of FinanceMalta, the national promotional body for the financial services industry, discusses Malta’s potential and advantages as an international financial centre.
European Times: What are the main responsibilities of FinanceMalta?
Kenneth Farrugia: FinanceMalta is the public-private initiative set up to promote Malta as an international financial centre and enhance business and networking opportunities for its members by which the industry can sustain its growth traction. Established when Malta entered the Eurozone, FinanceMalta brings together and harnesses the resources of the industry and Government to ensure that the country maintains a modern and effective legal, regulatory and fiscal framework in which the financial services sector can continue to grow and prosper.
European Times: How has EU membership transformed Malta’s financial sector?
Kenneth Farrugia: When Malta joined the European Union in 2004, there was a significant paradigm shift which fostered the transformation of the country from an offshore destination to an onshore destination and a growing regional financial centre. During the decade prior to our EU accession, we focused on implementing the EU framework within our national regulations. Nevertheless, the substantial benefits and opportunities brought by the EU membership spurred the growth of Malta’s financial sector and, adjusting to the ‘game rules’ of the EU, we brought our financial sector to the next level mainly through expanding the diversity of the financial services and the considerable increase in the number of registered companies.
European Times: As a business destination, what are Malta’s competitive advantages?
Kenneth Farrugia: Malta has numerous competitive advantages. With its strategic location in the heart of the Mediterranean, highly skilled, educated, English-speaking workforce with strong work ethics, the wide portfolio of office space at competitive prices, a system based on English rule of law, favourable taxation backed up by more than 70 double taxation agreements, Malta is an excellent choice for investment, where doing business is easy and cost-effective.
Furthermore, Malta has proven itself as a stable market. The financial crisis was a test for every sector, including the financial service industry, which proved to be very stable and resilient, largely thanks to the very conservative attitude of the banks in the country, which are very well capitalized and very conservatively leveraged.
Backed by a robust regulatory framework, accessible financial services regulator, strong operational infrastructure, overall cost competitiveness and skilled labour force, the financial services sector is now a major force in the country’s economy, comprising 11% of Malta’s GDP, more than double compared to several years ago. Nevertheless, the financial services sector does not overshadow other sectors, since all industries have nearly an equal share in the country’s very diverse economy.
European Times: What makes Malta an international financial services centre?
Kenneth Farrugia: Since 2007, Malta has witnessed consecutive economic growth, and the economic boom of the country brought a boom of the financial sector as well. The industry has evolved substantially over these last decade, fuelled by the development of cluster formations in certain sectors particularly in the asset management and insurance business, becoming an important economic driver of growth, taking into consideration its contribution to the country’s GDP and the creation of employment opportunities. There are around 10.000 people with 28 different nationalities working in working across the key and supporting service sectors in the financial services industry, and we are seeking to further attract international talent to come and work in the sector.
Furthermore, investing in Malta’s financial services sector is easy, since everything is processed through a single institution, the Malta Financial Services Authority, which is the single regulator for financial services activities in the country and regulates and supervises credit and financial institutions, investment, trust and insurance business and also houses the country’s Registry of Companies.
Being internationally orientated, Malta’s insurance and asset management sectors have taken the lead in terms of growth traction. Malta is now one of the largest centres for asset management and we have a large number of self-managed funds and new start-up funds. The industry is also experiencing growth in trusts and foundations, wealth management, pension managers and pension funds as well as financial institutions. Numerous well-known financial services operators have established a presence in the country. Currently there are 26 banks, 60 insurance companies and 160 licence holders operating on the island. It is important to recognize Malta’s role as an international finance centre which extends beyond the traditional European shores, given the country’s potential to serve as an important conduit of financial services business to Europe, Africa, and beyond. European markets will remain our key priority, but we plan to extend our reach to other regions including the Gulf, Hong Kong/China and the US.
We are also drivers of innovation – we are flexible and quick to react, and we encourage the financial sector to be the first to implement new products. Currently there are great opportunities within cryptocurrencies and blockchain technologies which could be the new facilitator for transferring money internationally and could revolutionise the industry.
European Times: How is FinanceMalta promoting Malta’s financial services industry?
Kenneth Farrugia: Since its inception, FinanceMalta has primarily focused its initiatives towards organising our own and participating in third-party events, conferences, webinars, podcasts and various other initiatives. These initiatives were aimed at strengthening Malta’s financial services brand and the centre’s international visibility while creating networking opportunities for our member base. Our main event is the annual FinanceMalta conference, which aims for new heights and new markets as it provides financial services practitioners and entities with the opportunity to network among peers and to keep updated with developments taking place in the financial services sector both locally and internationally. The FinanceMalta 11th Annual Conference 2018 will take place in May, and we will welcome 500 people, including many potential foreign investors.