Tonio Fenech, finance minister, Malta

 Malta's finance minister, Tonio Fenech, explains how the country has expanded its economy beyond its banking sector as part of the country's Vision 2015 plan.

Despite being one of Europe’s most open economies, Malta has managed to navigate successfully through the financial and economic storms that have created so much havoc around the globe since 2008. We are dependent on the economies of our fellow EU states, who provide the bulk of the tourists visiting Malta as well as accounting for a good two-thirds of our exports. Despite this, growth through 2010 reached a very respectable 3.7% and indications are that growth will continue this year. Furthermore, Malta continues to avoid the problems of unemployment and the country’s overall financial health remains robust.

Continuing growth

Malta did not escape the turmoil completely unscathed. Certain sectors were impacted more than others, and some sectors continued to register growth throughout the worst of the storm. Financial services continued to attract new international business and investment not only in 2009, but also through 2010 and the first few months of 2011.

This is no coincidence. Malta’s financial institutions, led by the major banks operating on the local market, continue to abide by sound core banking principles and maintain a strong capital position, laying the ground for a relatively easy recovery. This stability and dedication to core values pervades the entire financial services sector, and contributes to the attraction of the island as a jurisdiction of choice.

Our 2011 budget, while tackling the deficit head on, provides initiatives to encourage job creation across the economy while seeking to guide investment to the sectors that show potential for growth into the future, alongside policies intended to ensure that Malta maintains a workforce with the skills needed to tackle a changing world.

Banking on success

This gives us confidence that the growth of the past year will continue, and the financial services are set to continue to contribute strongly to growth. A few facts will serve to illustrate this.

In 1992, Malta’s banking sector included just four domestic financial institutions; now Malta boasts 25 licensed banks. These banks cover practically the full range of banking services, and include global leaders as well as small, highly specialised banks.

International operators are now competing for domestic retail business alongside established Maltese institutions, helping individuals and businesses achieve their goals through increasingly competitive yet profitable service offerings.

Besides these retail operations, Malta hosts a number of online-only banks, taking advantage of the IT skills available to develop innovative service delivery channels. There are other more focused operations on the island as well: leading trade finance institutions, for example, and others specialising in complex project and structured finance services. There are banks providing custodial services to Malta’s growing collective investment funds business, while others provide wealth management services.

Solid foundation

It bears repeating that this dynamic market is helped by Malta’s robust yet flexible regulatory framework coupled to a sound legal underpinning developed over the past 20 years, which has provided financial services operators with an environment that allows them to conduct business with confidence. This is a foundation that we are determined to continue to build upon through 2011 and indeed, in the years that follow.

We will continue to apply the formula that has yielded success so far. It is a simple one: marrying stringent supervision to an approachable regulator willing to listen to and deal with new directions fairly, and a proactive approach to legislation to ensure it is updated and modified to meet the needs of an ever-evolving industry.

This approach has proved its worth over the years, and has ensured that Malta has been in a position to attract a wide range of business beyond banking to our shores. Captive insurance, investment funds and trust and fiduciary activity have proved as successful on the island as banking.

Indeed, funds domiciled in Malta boasted a net asset value of €8bn at the end of the second quarter of 2010, a growth of 13% from the end of 2009. The bulk of the funds are professional investor funds, which accounted for all 51 new funds licensed during the first half of 2010. This trend has continued unabated in the months since then.

Captive insurance, a business which did not exist at all in Malta before 2004, is now a well-established sector. With 14 insurance management operations, including all the leading international firms, and 40 managed insurers, this is now an industry of substance. It is also one that is changing: the legislation has been updated regularly to take into account the changing demands placed upon it.

Diversified picture

The picture that emerges is one of a dynamic, diversified financial centre underpinned by a legal and regulatory framework that is fully harmonised with EU legislation. This in itself is valuable, allowing firms domiciled and licensed in Malta to passport their services across the EU and European Economic Area. Malta’s tax regime, which has been approved by the EU and the Organisation for Economic Co-operation and Development, is an accessible and flexible regulator and a pool of skilled, experienced professionals continue to add value to organisations choosing to use Malta for their financial services needs.

Our commitment to the sector will continue, and will guide our path forward. Our vision for 2015 and beyond sees the continuation of growth and development of Malta as a financial services centre of excellence, serving a global client base. 


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