Speech by Parliamentary Secretary Tonio Fenech at the conference on investment opportunities in eastern Europe organised by Volksbank Malta Limited
On behalf of the Government of Malta, our financial industry and Volksbank Malta, I would like to welcome our guests and our foreign counterparts to today’s conference.
For decades our banking sector has played a support role as a provider of services to other sectors of the economy. Until relatively recent times, however, the market for banking services was predominantly a domestic one. Serious efforts to bring about change in the Maltese financial system commenced at the beginning of 1994. Through reforms, between 1994 and 2004, the number of banks and financial institutions operating in Malta increase to 27. It is an encouraging factor that an internationally acclaimed bank such as Volksbank that was represented in Malta with an offshore licence since 1995, has divested itself, to function as a commercial bank. It has since then offered the full range of financial services in Maltese Lira and in foreign currencies.
The introduction of the Investment Services Act created a whole new business in financial intermediation, accounting for some 100 licensed investment services providers, while the amount of investment funds under management topped the Euro 1 billion mark. Financial legislation in Malta today provides a most interesting framework for the registration of companies by foreign entrepreneurs who want to do international business through Malta.
Malta today has a relatively diversified economy. About a fifth of the economy is contributed by manufacturing and about another fifth by tourism. The remaining portions are contributed mainly by other services, including financial services, transport and communication the public sector and other services. Committed to its standards and swift in dealing with change, Malta is seeing a new kind of business that is looking at seamless operational platforms to be able to internationalise and grow.
Malta’s internationally recognised standards, easy access to markets and excellent business support have now attracted the attention of marketing, management and administration companies both in the investment and in the insurance business and the potential spin offs from some recently established companies are many and varied.
In line with Volksbank’s strategy to inter-relate its vast European branch network, this conference will discuss Malta and its access to extensive European business opportunities. By targeting the development of cross-border trade between Malta, Sicily and the Central and Eastern European Countries, we should define new opportunities for investment. There are cultural differences and similarities between these countries, and it is opportune to identify new prospects as well as seek new ways of overcoming and facilitating stumbling blocks.
I shall first outline some accessible prospects and the built synergy brought on by the vicinity of Malta and Sicily. Malta always held a close relationship with Italy and this has played an important role in assisting Malta both in financial and political terms.
On the political front, successive Italian Governments have always played an important role in supporting Malta’s European Union membership bid. Italy has also assisted in Malta’s development also in financial terms through a series of financial protocols that have financed a considerable number of infrastructural and educational programmes. Furthermore a considerable number of Italian companies have set up shop in Malta particularly in the manufacturing field.
Now that Malta is an EU member, we should see further cooperation between Malta and Sicily in the areas of education, culture, manufacturing and tourism. Both Sicily and Malta have attracted a considerable amount of tourists and both islands are facing stiff competition from near and far destinations. The strengthening of the air and sea links between our islands and joint working groups between Maltese and Sicilian tourist operators may be a most favourable venture.
In a few days time we will commemorate the first anniversary of Malta’s accession to the EU, together with Cyrus and the eight Central & East European countries. These included the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Slovak Republic and Slovenia. Sharing markets and resources is a building block of the European Union. For a single market to work there needs to be a fair playing field to ensure fair competition. Thus eliminating barriers to trade between members, eliminating frontiers, agreeing on common standards is a natural progression.
In order to join the Union, the candidate countries need to fulfill the economic and political conditions known as the 'Copenhagen criteria', according to which a prospective member must: have a functioning market economy as well as the capacity to cope with competitive pressure and market forces within the Union; be a stable democracy, respecting human rights, the rule of law, and the protection of minorities; adopt and enforce the common rules, standards and policies that make up the body of EU law.
Bulgaria and Romania are slated for membership by 2007, in 2004 Croatia was accepted as a candidate country, and the Former Yugoslav Republic of Macedonia applied for EU membership. These countries’ strategic decision to change course provides a new environment where businesses can succeed. Economic liberalisation requires a milieu where the laws and regulations governing the economy are clear and stable and the necessary institutions are in place to enforce them.
In a short period of time, some central and eastern European countries have succeeded in building new comparative advantages. Most remarkable changes took place in engineering industries in which Central European countries have achieved high export growth. The involvement of foreign capital in manufacturing industry has reached high levels and has been an important element underlying export performance.
CEE countries have invested in tourism projects and eventually aim to develop the industry in the same manner as major European countries. There is construction of top-class hotels as well as those to be catered for the mass market. There is massive scope for tourism development and I am happy to say that the Maltese are already taking the opportunity to participate in this promising sector.
When looking at the Eastern European market, during 2003, foreign investors advanced 2 billion Euros into East European real estate markets, a 100% increase on the previous year. And in the 1st quarter of 2004 alone, investment levels had already reached 1.2 billion Euros.
In Malta, on the construction side, the past two years have continued to see a very busy property market. Through Government's bold commitment to consolidate its European path, the level of investment and production in the building industry retained encouraging levels during the course of recent years. Malta is ushering in an era where engineering ingenuity and design flair that are renowned overseas are taking a major lead on the local front.
It would be interesting prospect for Maltese developers to consider these facts and to be aware of the political and economic developments in the CEE such as privatisation, development of new legal frameworks and economic reforms that influence the dynamics of the real estate market. What are the main risks for investors and developers, what is the impact to date on real estate markets and what are the prospects for the future?
Malta is most interested in a changing Europe because it is a part of Europe. Malta sees itself as an ideal base to offer its services because of the professional quality of Malta’s services. Malta as an EU member state has more to offer – its economic, social and political stability, double taxation treaties, its quality of life and English and Italian speaking capability of the Maltese. The challenges now as we further enlarge the Union are even greater.
This conference covers the essential questions that are being asked and the number of distinguished speakers participating today should provide for a most interesting debate. How can the Maltese business benefit from other European countries and which prospects are opportune for investment? How can foreign entrepreneurs benefit from financial services offered through Malta?
We need to strengthen the commercial and business ties between our business communities, our Chambers of Commerce and Industrial Federations. All these entities have an important part to play. I thank Volksbank for its initiative in ushering this event and augur that the seminar commences on a long-term value creation and delivery process to the benefit of all.