Economy Turns Upward; Sales Prospects Are Good

Lacking natural resources and a solid agricultural base, Malta's economy is heavily dependent on its neighbors. During the early 1980s, the effects of the economic slowdown in Europe, which buys three-quarters of Malta's exports and furnishes about 90 percent of the tourists coming to Malta, were magnified in Malta, which experienced some of its highest unemployment levels in recent memory. In 1985 and 1986, the Maltese economy showed some improvement over 1984.

National income and GDP, calculated in Maltese liri, rose by 1.1 and 1.9 percent, respectively, during 1985. Trading, ship repair, and tourism are, by necessity, the major components of Malta's economy, which is also dependent on foreign investment and assistance. As a result of continued government enforcement of a 1981 universal import licensing system, the increase in imports has been controlled. Traditionally, Malta has experienced an ever-increasing trade deficit, resulting mainly from the relatively slower growth in domestic exports.

However, comparisons of the January through September periods for 1985 and 1986 show an improvement in Malta's trading position. The trade deficit had reached a record level of $258.2 million in 1985, but improved by 7 percent in 1986 (in terms of Maltese liri), to $240.2 million, as a result of a fall in imports. The improvement in merchandise transactions, together with higher foreign exchange earnings resulting from ship-repair activities and tourism, were the main contributors. As a result, Malta's current-account balance showed a surplus in 1986, compared with a deficit in 1985. The overall balance of payments in 1985, for the first time since the mid-1960s, registered a deficit, but showed a small surplus in 1986. The tourist industry continued to improve in 1986, with tourist arrivals increasing by 11 percent from 490,950 in January-November 1985 to 544,160 in January-November 1986.

There are a number of distinguishing factors in Malta's economy which might be of interest to U.S. besiness people. High business inventories (by U.S. standards) are often the norm in Malta. The government holds enough foreign exchange reserves to pay for 16 months of imports at current levels. The public sector is pervasive. Government expenditures amount to over 45 percent of Malta's gross national product. The government, with over $90 million invested in more than 60 companies, accounts for over one-quarter of total employment.

The latest available annual trade statistics are for 1985. Of Malta's total imports ($757.3 million), 47 percent consisted of industrial supplies, 16 percent capital goods, 22 percent consumer goods, and 12 percent fuel. The largest import category was machinery, which accounted for 20.2 percent of total imports, followed by food and live animals (12.8 percent), and yarn, fabric, and textile articles (12.8 percent). Discounting petroleum, the United Kingdom in 1985 was Malta's main supplier, followed by the Federal Republic of Germany, Italy, the United States, and the U.S.S.R. In 1985, the United States retained its role as one of Malta's main sources of food grains and supplied 20 percent of Malta's imports of nonelectric machinery. Denim imports from the United States remained significant in 1985. Most U.S. products, especially consumer goods, have remained uncompetitive because of high freight costs and infrequent direct shipping services. The dollar's depreciation vis-a-vis other European currencies helped the United States retain its share of the Maltese market.

The following product areas have the best prospects for increased sales in Malta:

Information handling. The government has, until recently, discouraged installation of information-handling systems because of the possible negative impact on employment. Now government and private concerns are increasing their purchases of sophisticated computer systems. The demand is increasing for computer systems for home use. Malta should continue to be a small but growing market for U.S. suppliers of computer hardware and software.

Restaurant, hotel, and catering equipment. Tourism is a major source of income for Malta. The local tourist industry has been depressed since the fall of 1981, but has somewhat recovered in the last two years, especially during the last half of 1986. The demand for this equipment should increase substantially in the next several years. A potential market also exists for fast food equipment and supplies.

Capital goods and materials. Malta's important textile/clothing/footwear industries offer significant opportunities for U.S. suppliers of piece goods, woven fabric, and textile machinery. In 1985 Malta imported about $86 million of fabric and yarns. West Germany continues to be the primary textile supplier. However, the United States is one of Malta's top suppliers of denim cloth. Other U.S. textiles are also competitive. The government's determination to promote development of the light engineering and metals industry should offer significant opportunities for capital goods and materials sales.

Water/energy systems. Malta's continued water shortage and total lack of domestic energy sources offer particularly good opportunities to U.S. manufacturers of desalination, water treatment, and alternative energy systems. The government is giving the national water problem high priority. Major hotels and large industrial users continue to purchase and install individual treatment systems. The government actively encourages utilization of the latest technologies in solar and wind energy.

Foods. The United States supplies a large part of Malta's imports of cereals/ feed grains, and large amounts of other foods. U.S. suppliers of processed food have penetrated the local market via European subsidiaries. The government welcomes U.S. offers for the 50 essential commodities that are directly imported.

Do-it-yourself equipment (including power hand-tools) and supplies. The U.S. Embassy continues to receiver inquiries for these products. Leading U.S. power hand-tools manufacturers are already represented.

Food and deverage processing equipment. There are over 60 soft drink and alcoholic beverage bottlers, and food processors in Malta. The majority of food products manufactured locally are exported to North Africa and the Middle East. The increase in the tourist industry should provide suppliers of food and beverage processing equipment substantial prospects for sales.

Malta also plans to undertake several projects that may generate substantial export opportunities for U.S. firms:

Development of a large transshipment port at Marsaxlokk. According to senior Marsaxlokk container terminal (Maconte) officials, negotiations should be completed soon with the government of Saudi Arabia for financing of port-handling equipment to be purchased. Maconte officials plan to issue tenders upon completion of these negotiations.

Development of a major tourist center on Mandel Island. The center will include a deluxe hotel with 355 beds and a two-building, six-floor business center, which will include a bank, cafeteria, security center, post office, and two reception halls. The upper floors will be used for offices, administration quarters, staff apartments, a three-floor sports center, and a casino. Plans are expected to be completed and approved by the government by mid-1987.

Conversion in Sliema Creek into a modern yacht marina. This project and further development of the Marsa shipbuilding yard will continue to offer prospects for sale of secondhand port-handling and harbor construction equipment.

The continued modernization of Malta's telephone system and the construction of a new air terminal also should offer good export opportunities.

For additional information on Malta, call (202) 377-3478.

COPYRIGHT 1987 U.S. Government Printing Office

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