INTERVIEW | Mario Galea: Investing in Malta... the challenges and the benefits

After a career of almost 40 years at Malta Enterprise - the last six years as CEO - Mario Galea’s tenure comes to an end at the end of the month. Business Today caught up with him to discuss the challenges Maltese and foreign business face when setting up shop in Malta, as well as Brexit, the labour force and Malta Enterprise’s role in the future

Mario Galea
Mario Galea

How has the role of Malta Enterprise evolved since you were appointed CEO in 2016?

Malta Enterprise is geared to support all types of business in Malta - from the largest to the smallest. It supports around 70% of economic players on the island.

Traditionally, Malta Enterprise was more associated with big business, such as Playmobil, Farsons and Foster Clark. But, as our role evolved, we started increasingly offering incentives to help smaller businesses, which are crucial for the economy.

As small businesses grew, so did the demand for the services and products they offered. Had small business not grown, Malta could have faced an economic vacuum as it failed to meet the demands of an ever-growing labour force. This could have led to inflation. Incentives ME offered to small businesses have contributed towards the  growth of the Maltese economy.
What are the main goals of Malta Enterprise today?

ME’s goals are principally split into three.

The first is to strengthen existing businesses, both local and foreign. There might have been times in the past when the Malta Development Corporation or ME might have placed more emphasis on attracting new businesses than on maintaining the ones we already have. But strengthening the businesses we already have is crucial esppecially since  their growth rate is often much higher than that of new businesses.

One of ME’s achievements over the past six years is that almost all the large foreign direct investments in Malta have expanded their operations; a sure sign of the country’s increased competitiveness.

The second aim is to attract more businesses of a similar type to that which already exists locally. For example, having Lufthansa Technik in Malta was very important when it came to attracting SR Techics, and is also leading to other companies involved in airplane maintenance, repair and overhaul to consider Malta. Similarily, having De La Rue operating here had a role in attracting Crane Currency.

Our third remit is to bring new business to Malta: creating new niches in existing or new sectors. Medical cannabis, for instance, is a niche in the life sciences sector.

We are also attracting new business in life sciences, data sciences, logistics, advanced engineering, and ITC, among others.
Malta Enterprise offers a number of schemes and incentives for SMEs. What is the take-up for these incentives like?

Money for incentives granted  comes from people’s taxes so the focus has to be on what economic growth is being created from these incentives.

It’s not only a matter of take-up, although a lot of our incentives generate extremely strong feedback. But one must take into account the economic and social benefit of the measures.

Last year, for example, we launched an incentive for industry players to pool resources when transporting employees to and from the workplace, allowing employees from different firms to travel together and reduce the number of vehicles on the road. That creates a social benefit, and the incentive had a good take-up.

More than take-up, therefore, I prefer to look at the incentives’ effect on the economy, and I think that when one considers everything - economic growth, manufacturing growth, exports growth, employment growth, clustering growth, better sustainability and higher salaries - it is apparent that ME’s incentives are providing a positive economic effect.
What do you find are the major concerns of SMEs today? And what can Malta Enterprise do to help SMEs overcome those obstacles?

Let’s start with the opportunities first. Small businesses are as important to ME as big industry.

Malta offers an advantage when it comes to small foreign businesses, because our country, due to its size, is able to place significant focus on a relatively small company which would otherwise be lost in a larger country. A foreign company which will employ, for instance, 20 persons, will still receive its due attention in Malta.

The same applies to Maltese companies. I don’t think there have ever been as many incentives offered to local companies as there are right now. Taking just one example, our micro invest scheme for the self-employed is providing €16 million worth of tax credits annually, with €4 million of this going to businesses in Gozo.

As to challenges, I believe small businesses still see bureaucracy as a threat.

We’ve implemented the Business First initiative, which serves as the single point of contact for small businesses, and this received a lot of positive response. But a lot of small businesses still tend to feel slightly overwhelmed when they have to follow rigid bureaucratic processes, and I think we still need to provide more support in this area.

Growth inevitably neccesitates  a bigger labour force and - given Malta’s labour market - training for sustainability in industry is indeed also  a challenge.

Moreover, we should also examine whether Maltese and foreign workers  are being trained in Malta by the industry.

When a Maltese worker is trained locally, the return from any training received will still be translated into a positive input into the local economy, even if they change jobs after being trained,

But when a foreigner is trained in Malta and then leaves the island, that investment in training is lost.

So these are challenges created by this for an increased labour force. The need to seek foreign workers is the result of the growth in the economy and its various sectors, And since it likely to persist, we need to integrate local and foreign workers and consider them a single workforce.

The quality of the labour population in Malta is challenging, as is the matter of how much our workers are being prepared to meet the needs of the Maltese economy in the future.

With rapidly changing technology, do we have enough people who are ready to take on the needs of the industry in the coming years?

The re-engineering of Malta’s industrial zones is another challenge. Most of the land for industry is taken up, so we need to start looking into multi-level industrial buildings which do not increase the footprint of existing industrial zones.

Another major challenge is related to banking and the opening of corporate accounts for foreigners. I must say that, on the whole, when foreign businesses are guided by ME, they do not encounter significant obstacles with the banks.

Banks are usually business-friendly, but international rules are making banking transactions more complex worldwide.

Another issue is related to state aid rules imposed by the European Union. Malta is often not only competing with EU countries when it comes to attracting businesses, but also with those outside the EU, such as Turkey, Asian countries and others. These countries are not subject to the same state aid restrictions as us.

What are the biggest challenges foreign investors face when starting or relocating a business to Malta?

ME has a dedicated section which deals with attracting foreign investors. Many a time we approach foreign firms to come to Malta, after we carry out our research - there is a whole process involved in bringing them to Malta.

The way we operate with Maltese businesses is somewhat different, as it is usually they who approach us asking for assistance.

When it comes to implementation, foreign and local businesses have different needs as well. Foreigners have to think about where they will live in Malta, which schools they will send their children to and which professionals, such as accountants, lawyers or architects they will use.

Foreigners require more help from us when it comes to obtaining permits from  local regulatory authorities.

Once the UK announced it was leaving the EU, there was a lot of hype surrounding suggestions that Malta, and another couple of destinations, could benefit a lot from Brexit, with the possible move of UK-based multinational companies here, for passporting accessing to the EU. We have not had much news about the outcome of efforts to promote Malta to such companies, however. Was Malta sufficiently promoted, and have we had any success in attracting companies?

Malta has been successful in attracting business from the UK for quite some time. We enjoy an excellent relationship with the UK at all levels: economic, political, and even within the EU, our two countries have  often worked close. We are getting a good number of leads due to Brexit, with companies in manufacturing, financial services and wealth management expressing interest.

We regret that the UK has decided to leave the EU, because of this close relationship and a certain affinity with Britain. We speak English, have a similar taxation system and several UK companies operate in Malta.

There are several factories around Malta that are not being utilised but cannot be allocated to investors because they are the subject of some lawsuit or litigation that is awaiting judgement. How much such factory space is currently held up because of lawsuits? What needs to be done?

The number of factories which are being misused or are not operational at all is always decreasing. My successor at MIP and I have strongly addressed this issue. In today’s climate of strong economic growth, it is necessary to make the best use of our factories, and we cannot close an eye anymore to disused factories.

But we are aware that there are still some factories which are not being used in the right way. In cases where only a small portion of a previously large factory is being used, we try to take back the disused part of the factory, or we relocate the operation to smaller premises.

It is not always advisable to take legal action take back ownership of an unused factory. When those concerned lose a court sentence, they often appeal, and this process takes a long time. Moreover a factory can significantly deteriorate in this span of time if it is disused.
This said, the problem today has been greatly mitigated. I remember a time when the percentage of unutilised space was significant, but this is no longer the case.

And thanks to direct debit, bad debts is no longer anywhere as big an issue as it used to be.

What would you consider to be Malta Enterprise’s greatest achievement while you have been CEO? And a disappointment?

My ethos always was that ME couldn’t be the most generous organisation in the world, but that we could excel in the quality of service we offer local and foreign industry. And, in this respect, we don’t encounter much criticism. Indeed, our clients are our best-selling story.

Another feather in our cap is that, as I mentioned, all FDI has grown over the last six years. The fact that foreign businesses remain in Malta and expand  their operations is very healthy. It’s important to attract new businesses, but it is essential to take care of what you already have.

From the aspect of investment promotion, I think we’ve done well too. We focus on what we want to achieve instead of using a haphazard approach. We have also invested a lot in due diligence, around €1 million annually.

In terms of a disappointment, I think that if we had more factories which were in a ready-state for businesses to operate within them, our GDP would have grown even more.

Take the medical cannabis sector... had we had factories ready to provide for these firms’ before, the companies could have started operating much earlier. They will likely eventually increase Malta’s exports by around 20%, and had they started operating earlier because our factories were ready, they could have started contributing sooner.
On a personal note... Your tenure as CEO comes to an end at the end of this month. When you were first appointed CEO, did you set yourself any targets? Did you achieve them?

As a CEO I set the Corporations targets. ME’s first target is the number of projects it wants to attract. The second is to be cost-effective and operate within its budget. The third relates to the efficiency of the Corporation, in terms of how long it takes, for example, to implement an incentive.

The most important of these is firstly the number of projects we attract. Normally, we aim to attract 25 good foreign projects every year. But it is the mean in terms number of projects which one must take into consideration, since there are fluctuations across the years. For instance, during an election year, the number of projects might be a bit less. But then this will be made up for by another years, where more than 25 projects were attracted.

It is also essential to attract quality projects. We don’t go for numbers. I prefer to attract 20 good projects than 30 projects of which 15 could be questionable.
As you leave Malta Enterprise, do you think it is still relevant in today’s business environment, with all the other agencies, authorities and entities which might overlap in terms of their remit?

Our roles remain to attract local and foreign businesses and to devise incentives. The first component - attracting businesses - has remained largely the same in importance since we were established. But our second, incentive-based role, is more recent and has increased our relevance within the Maltese economic scenario.
What lies in the future for you now?

I will be keeping an advisory role within ME, and I will remain contributing to Malta’s economic growth. But I do not have any particular plans at the moment.
Could I have a single adjective to describe the following?:

Foreign investment - Competitiveness

Cost of living in Malta - Stability

Setting up a business in Malta - Easier

Bureaucracy - Improvable

Brexit - Opportunities

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