Already boasting more than 150 foreign-owned manufacturing plants and numerous other service operations on the islands, the government of Malta is actively seeking and encouraging additional foreign direct investment.

The major source of foreign investment in Malta has been the United Kingdom, but the largest private employer is an American firm. Today, U.S. investment in Malta is estimated at $80 million (book value). Five manufacturing or repair activities, a major hotel, and two service companies, employing about 2,000 workers, have partial or total U.S. ownership.

American firms planning to expand overseas should take a closer look at the incentives and advantages offered by Malta. To assist firms in doing this, the Overseas Private Investment Corporation (OPIC) and the Maltese-American Business Council (MABC) will jointly sponsor a U.S. investment mission to Malta June 23-28, 1985.

The archipelago nation of Malta consists of three islands--Malta, Gozo and Comino--and is situated in the center of the Mediterranean, midway between Gibraltar and the Suez and just off the coast of Sicily. Malta gained independence from the British in 1964, and is a democratic, English-speaking country. The country's systems of government and law are based on the British models.

Following independence, one of the major goals of government policy was to build a more self-reliant economy. Malta today has completed the transition from dependence on providing services to foreign (i.e., British) armed forces to a more broadly-based economy featuring manufacturing, tourism, and other services. By 1982, economic expansion had raised GNP to $1.25 billion. Malta's total trade in goods and services that year was nearly one and one-half times greater than the gross national product figure. Although Malta registers a perennial trade deficit, receipts from tourism, foreign aid and revenues from Central Bank investments in foreign currency enable Malta to show consistent balance-of-payment surpluses.

Malta's economic fate is heavily tied to Wester European sources for trade, tourism and investment. If the current European recovery is sustained, increased activity will translate into greater Maltese exports, more European tourists, and a greater likelihood of direct European investments. While the Maltese economy remains fundamentally healthy, it still faces a challenge of switching from an inexpensive labor economy to that of a semi-industrialized nation.

Prosperity is slowly pricing Maltese labor out of its advantageous position. In recent years, new manufacturing jobs have not compensated for the loss of old ones. In addition, a substantial part of the country's industry continues to have excess capacity and personnel. To combat this problem, Malta is making a concerted effort to upgrade the skills of its workers and technologies of its industry to enter the competition for higher technology production. This structural change in Malta's economy will be difficult and costly.

With much of the country's economic growth of the recent past attributable to expansion of its textile and tourism industries, the government of Malta wants to expand and upgrade the country's technology and managerial and marketing skills by attracting foreign direct investment. Except for the well-developed textile and clothing and tourism industries, virtually all other industrial sectors and service activities are theoretically open to export-oriented investors. The government asserts it has adopted a new pragmatic attitude toward foreign private investment and also states that it is actively seeking foreign investment and especially desires to attract U.S. companies. Policymakers stress that the private sector will continue to play a major role in the economy and that prospective investors should consider Malta a safe place in which to invest. Some legal, regulatory, and political obstacles are present, however, and tend to make such investment problematic. Potential investors should undertake a thoroughly detailed analysis of the advantages and disadvantages of investing in the country.

Malta is keenly interested in projects that create new jobs and offer advanced technology, higher value-added, and marketing expertise. Particular emphasis and preferential treatment have been established for investments in light metals, machinery and related industries. Private foreign investors can set up equity arrangements that vary from joint ventures to full equity ownership. There are no formal stipulations regarding the use of local management, although the government encourages firms to gradually replace their foreign managers with Maltese managers. All investment proposals are reviewed by the Malta Development Corporation (MDC), the government agency responsible for promoting industrial activity, and must be approved by the Central Bank.

To attract foreign investment, Malta offers certain explicit incentives such as tax benefits, duty-free entry for investment goods and materials, and rental of factories at concessional rates. Incentives are open to negotiation and can be enhanced on an ad hoc basis. There are at present no performance requirements.

Malta's infrastructure is well developed and recent projects have improved water and power generating capabilities. Already, substantial port facilities are being expanded and modernized and a new port is being constructed. The country's most important resource, and a major attraction to investors, is its labor force, which is characterized by moderate wage levels, relatively high productivity, and a very low strike rate, and is highly regarded by foreign companies operating in Malta.

American companies may also wish to consider Malta as a favorable location for a warehouse/servising base for operations in the Mediterranean area, for technical training institutes, or for a "housing base," where the families of employees working in inhospitable locations in the Middle East/North Africa can reside. Malta offers a pleasant environment, moderate cost of living, and the availability of a kindergarten through 12th grade school featuring the American curriculum.

With a population of about 330,000, Malta's domestic market is too small and too well protected by the government to support investments oriented principally to internal sales. The island's geographic location and natural trade links with North Africa, the Middle East and Europe provide ready access and acceptance for Maltese exports in the markets of all three regions. The European Community, in fact, grants preferential treatment for most exports from Malta except for certain textile products.

The OPIC-MABC Investment Mission to Malta in June is concentrating attention on 15 specific investment opportunities in Malta, ranging from telecommunications to machine tools to architectural hardware, that have been identified by the MABC in Malta. American firms wishing to learn more about participating a sa member of the investment mission, or about these and other specific investment opportunities in Malta, should contact the Investment Missions Office of OPIC, 1129 20th St., NW., Washington, D.C. 20527, tel. (202) 653-2913.

Depending on the type of venture contemplated, foreign investment in Malta may offer advantages. The principal ones as noted above, are the availability of relatively low-cost but productive labor, certain financial and other government incentives, and favorable access to Western European and Arab markets. Both the U.S. Department of Commerce and the U.S. Embassy in Malta encourage prospective investors to consider Malta as an investment site and offer them information and appropriate assistance in assessing the advantages and disadvantages for their company. The Embassy regularly reports on all the facets of Malta's investment climate. For a copy fo the Embassy's most recent Investment Climate Statement and a detailed report on the economy of Malta, or for additional information on marketing and investing there, interested firms may contact the U.S. Department of Commerce, Malta Desk, (202) 377-5401.

U.S. Aerospace Mission

Will Visit Southeast Asia

The Commerce Department is inviting U.S. suppliers of avionics, ground support equipment and services to participate in a seminar/trade mission to Southeast Asia in September 1985.

The U.S. aerospace industry has led sales of avionics and ground support equipment in these markets during the past few years and U.S. products and services will be in increasing demand.

Participation in this mission will be limited. For further information, phone Claudette Sarsfield, U.S. Department of Commerce, on (202) 377-2835, or write her at Room 1012, Office of Aerospace, U.S. Department of Commerce, Washington, D.C. 20230.

COPYRIGHT 1985 U.S. Government Printing Office

COPYRIGHT 2004 Gale Group