22 May Interview with Kurt Farrugia, CEO of Malta Enterprise
BF: Malta’s economy is one of only four EU countries with projected growth rates of about 1% in 2023. The country is now banking on new knowledge-based sectors as part of its long-term development goals. I’d like to look at an overview of the country’s economy. What key factors have led to Malta’s fast economic rebound in the last few years, and why is it outpacing other nations in the EU?
Kurt Farrugia: There are two main factors for the good economic performance of the island. Historically, and throughout the past years, the economy has diversified in a very healthy way. There’s a misconception that Malta’s economy is made from tourism and gaming; it’s not the reality. In fact, financial services are a big part, but then again, you have manufacturing, you have ICT. Of course, you have the traditional sectors such as tourism, but we also have life sciences, we have aviation. The economy itself is extremely diverse.
Over the last few years, if one sector has a bit of a dip, then there are other sectors in the Maltese economy that are making up it, and that is why, both in terms of economic performance but also in terms of employment, we have remained a very stable jurisdiction. We have a pharmaceuticals industry, which is another very important sector, then we have the new economy with all the digital aspects: we’re going into AI in a big way, as well as new technologies like biotechnology and medical technologies.
Secondly, being a small island and having a government that prioritizes stabilizing businesses helped a lot throughout the pandemic. Our larger companies here have found that we have an extremely stable jurisdiction, because throughout the pandemic we assisted heavily in keeping all employees at work. Our factories never closed. We’ve helped them to put in place safe measures within their factories to be able to continue running their operations. We’ve helped companies with assisting their employees. Malta Enterprise was administering the wage supplement scheme, which was giving a wage to employees within companies that were affected by the pandemic. We were, I believe, the first in Europe to roll out the wage supplement scheme to keep companies afloat throughout the pandemic, when people were working from home and things slowed down almost to a halt. The government was helping with a wage supplement and with other forms of assistance as business needed.
The fact that we’re small enabled us to keep a personal relationship with all the companies. All the manufacturing companies that are our core clients, as well as other companies that are our clients, came to us to seek help when the going was tough. Once again, as soon as we got out of the pandemic, we had the energy crisis. Instead of putting prices up and letting the market dictate the rate of energy prices, the government is helping families and businesses by keeping the prices stable. We did not have a rise in gas, electricity, or water prices; utilities were stable.
That has, first, ensured that Malta remained a stable jurisdiction in which to do business. Secondly, in our discussions with the companies, when they saw how we managed the downside, the difficult aspects of the pandemic, and now, with all that is happening with the energy crisis and inflation, they are looking at the way they should do their business. They’re coming back to us, and they’re telling us: from our headquarters, our CEOs are deciding to expand in Malta, because of the stability that you provided throughout these various crises that we had in the past years.
In terms of economic rebound, the fact that government and entities like ours stepped in to help business remain stable throughout very unstable periods, making it possible for us to be in a position to rebound very quickly. Those are the main two points that I could extrapolate from our experience in the past years: first, our diverse economy, and secondly, the fact that government steps in whenever there is a situation of instability, and in that way, they will create an environmental stability for business.
Tourism, financial services, manufacturing, education, life sciences, these are all part of the sectors of our economy. They’re all split almost evenly. There’s not one big predominant economic sector that, if we have a crisis in that, then everything gets the adverse effects from the fallout. In the past, having large manufacturing companies was important, and it still is. And we have pharma companies, robotics, microchips, and currency printing. Two of the top five currency companies worldwide have an operational base in Malta. We have De La Rue and Crane Currency, which is a U.S. company. Those are companies that are not only staying in Malta but growing. From the microchip companies to the currency printers to the pharmaceutical companies, they’re all approaching us to expand here, and they come to us because we assist companies throughout the various schemes that we have as Malta Enterprise.
However, despite the fact that we have had huge growth rates over the past eight to 10 years, the situation now is that we need to continue to diversify the economy. Our strategy as Malta Enterprise, the economic development agency, is, instead of looking at large companies to set up here, we’re looking at technology-based companies that employ fewer people but are more specialized. We’re looking at attracting the high-end companies in the various sectors that we have: game development, the film industry, post-production work, biotechnology, and pharmaceuticals. Our focus now is to attract more of these types of companies. Our vision is to continue to diversify in such areas. That is where we link the medium companies to the small companies and startups to grow.
One sector that we’re also targeting is clean technology but also, given our heritage, the blue economy. We’re targeting companies that have important solutions for our seas. For instance, we have a company that is conducting spatial planning and spatial scanning of the seabed. They’re doing it out of Malta, constructing their robots to be deployed in all the oceans in the world. They started operations and they will have their first products by March or April. It’s a U.S. company. In AI, we have another US-English company focusing on digital identity solutions, and they’re developing products from Malta; they have a base in the U.S. and another in the UK. But from the company in Malta, they’re also expanding in Africa. These are American companies that were looking at setting up in Europe, they found Malta, they set up in Malta, and now they’re internationalizing out of Malta to Africa and the Middle East. In the current economic scenario, we’re looking at such companies that are high-tech and high growth. We’re linking them also to our universities and to our institutions to ensure that the transfer of knowledge from such companies is going to our universities, to our students, and to Malta’s population.
Linked to that, we’ve developed, in the past few years, a very healthy and organic startup ecosystem. We were in the situation where we were getting startups here, but no one was really taking care of the needs of the startup. Throughout the past few years, we’ve managed to create a home for our startup ecosystem (www.startinmalta.com). We’ve developed, through Malta Enterprise, several incentives and schemes targeted at the highly innovative startups that would do research here, that would develop their products in Malta. We give a repayable advance; it’s not exactly a loan, because companies start paying back only when they start making a profit. We give for the highly innovative companies up to €800,000 in an advance; linked to that would also be a grant of €200,000 to relocate to Malta.
To add to that, and this is particularly important for the U.S. individuals who are possibly being laid off from their jobs in the tech sector, if they’re looking at Europe and they want to set up their business here in Malta, we’ve developed the startup residency program, and the nomad program for individuals and companies, founders and co-founders, and their employees, to set up their operations in Malta, find the assistance of government entities such as Malta Enterprise through grants and various loan schemes, and also live here in Malta and be granted an eight-year residency program (three years to set up and another five years to live here). It’s not just for the founder and co-founder, but also for their employees, and their families. Just to make a bit of a distinction, the co-workers would be three plus three years, so six years, the founders and co-founders three plus five, so eight years, and they would be able to also bring over their families.
Rather than just offering financial incentives, what we can offer as a small island in the Mediterranean Sea, is a lifestyle. We are focusing also on selling a good lifestyle in Malta, starting from our excellent healthcare services to our education system, which is becoming richer and richer as we move forward, and also through our super good infrastructure, internet infrastructure and IT infrastructure that is second to none in the whole of Europe,
What we are trying to create is a good place in which to live, do business and work. That’s one of the most important aspects of the products that we have been developing at Malta Enterprise. We speak English; we have our own national language, but equally as important is the English language. For U.S. citizens, Malta is probably the easiest to relocate if they want to come to Europe before any of the other countries. The UK are now out of the EU, so as companies are looking at setting up in a market of 500 million people, then probably Malta is the easiest for U.S. citizens to relocate and live due to our UK heritage (it was a colony for 200 years until 1964). All in all, what we’ve been trying to do is create a good place where people can work, do their business, and live with their families.
BF: Under the 2023 budget, Malta Enterprise’s Smart and Sustainable Investment grant is doubling the financial assistance it provides to companies that invest in energy-saving equipment. How has the rise in green funds changed the paradigm for investment and business in Malta, and what is Malta Enterprise doing to help lower the country’s carbon footprint and create more circular economies?
Kurt Farrugia: One of the very important advantages that we have in Malta is that we’re small and we can act quicker than other larger countries. In terms of legislating, we tend to be very quick: from consultations to cabinet discussion, parliamentary scrutiny of any specific legislation, unless it’s something that needs more time, is usually passed within six to eight months.
In terms of where the whole world is going, starting from the Inflation Reduction Act that Joe Biden just passed through the legislative process in the U.S., but also the way the current discussion in the EU is going, is basically to make sure that sustainable materials and sustainable products are manufactured closer to home. The U.S. is attracting companies manufacturing and doing standard products so that they can be done in the U.S., and Europe now is following suit and going toward that line. In fact, the EU is talking about the Green Deal Industrial Plan. We want to ensure that we attract the best ideas for a sustainable future and sustainable industry and link them both.
That’s what we’re doing through our various schemes, starting from this Smart and Sustainable Investment grant, but also through other schemes that we have, like the Investment Aid on Energy Efficiency. We want our industries to invest their own money to make their factories less reliant on carbon. We have companies that benefited very heavily and are now on the path to zero carbon footprint factories. We want companies who operate in manufacturing, creating, and inventing clean technology and sustainable technologies. That is one of the areas that we’re targeting.
I mentioned already the blue economy and it’s something that we’re looking at very heavily; particularly, I mentioned the robotics aspect, but we’re also targeting companies that have solutions for our seas. One of the initiatives that we will be having in the coming months will be a scheme for startups that operate in the blue economy. They will be able to use our seas for testing their products, which would help improve the quality of the sea. We’re using our seas to attract larger projects that would have products in hydrogen, production storage, wind energy, and solar energy, on a large scale and out at sea. Wind farms will be indeed quite productive here. Those are technologies that we’re looking at as an island. Those are the areas that we’re looking at in terms of sustainability. We’re discussing a very big project with a company that is developing new technology in wind energy. Another area that we’re exploring, but it’s even more in its infancy than wind energy, would be wave energy. Those are sectors that we’d be willing to assist heavily if we have companies that come up with solutions on getting energy from alternative sources.
BF: Despite the COVID-19 pandemic and other macroeconomic challenges, FDI in Malta rose to $3.9 billion in 2021. How significant is the U.S. in Malta’s FDI intake, and what kind of new opportunities are we seeing in the market that could be of interest to U.S. and foreign investors?
Kurt Farrugia: U.S. companies that are looking at Europe would do very well to look at Malta because of our strategic location in terms of being to the south of Europe, to the north of Africa and to the east of the Levant and Middle East. In terms of strategic location, Malta is possibly the best country to be in, to manufacture in and create products that would go to the rest of the world. You’d get, of course, the benefit of being in the European Union as well.
We’ve been seeing a lot of interest from U.S. companies as it’s easier to do business in Malta because of the language situation, but also because we offer a good home for such companies. We’ve mentioned some U.S. companies. Methode is another company that does data components for cars, from car switches to lighting in cars, and their products go all over the world. ST is a very important company in Malta. They are predominantly French and Italian, but also have a footprint all over the world; they are in the U.S. and Asia. They do microchips for everything that carries microchips, from mobile phones to cars to space technology. The back end of these products is manufactured in Malta and goes in all the products that use microchips.
BF: Do you have any final message for the readers of USA Today?
Kurt Farrugia: My message would be to learn more about the island and what we could offer in terms of lifestyle and what we can offer as a business destination for U.S. companies. If you look at the way the island is composed in terms of business, from the traditional manufacturing to the super high-end microchips and super high-end biotechnology that is being developed in Malta, the U.S. citizens would do well to have a look at what we have on offer.