The legacy of China’s first-ever investment in Malta looms large to this day. Back in 1972, Malta had spent just eight years as an independent nation while China was looking to forge diplomatic relations in a suspicious Western world. The two countries established formal ties, and seven years later Red China Dock opened.
The dock, which remains the biggest dock on the island, delivered an ability to handle large vessels that was crucial to the development of Malta’s shipbuilding industry at the time. The breakwater that came as part of the investment package still shelters the transshipment hub on the south of the island. Seven lines run eight weekly services between Malta Freeport and 10 Chinese ports.
Sino-Maltese relations continue to be warm – Chinese visitors to Malta in the last 15 years include former Premier Li Peng and current Vice President Xi Jinping – although the nature of investment has changed somewhat. Recent government gifts include a Chinese garden and a Chinese cultural center, while a steady flow of Chinese students are coming to Malta for postgraduate education.
The Maltese government is keen to develop commercial investment from Chinese companies. "Relations between the two countries are good, but we need to keep finding the best fit. The two markets are very different in terms of scope and scale," said Alan Camilleri, chairman of Malta Enterprise, which promotes foreign investment and industrial development in the country.
The most notable recent Chinese involvement came from King Long, the Chinese bus and coach manufacturer, which will supply 200 buses to Malta in partnership with UK-based Arriva. King Long is one of few Chinese automakers to have made an impact in Europe, having first entered the market five years ago, and it is looking to the likes of Malta to help it establish a regional foothold.
However, the main target for Chinese investment remains textiles. Chinese firm Leisure Clothing employs 250 people in Malta, and it’s expanding, using the country as a staging point for accessing Europe into which it supplies garments to the likes of Boss and Pierre Cardin.
"In recent years we have seen an increase in commercial activities between China and Malta," said Dr Maria Chetcuti-Cauchi, co-founding partner of the law firm CC-Advocates. "Malta plays a very important role due to its strategic geographical location as an ideal gateway to the rest of Europe. This was further evidenced by the fact that Malta was the only euro zone country to increase trade with China last year."
Commercial ties
Overall, Chinese trade with Malta has grown substantially in recent years. Malta is heavily dependent on imports, and so there is little surprise that shipments from China have ballooned from US$301.1 million in 2005 to US$1.26 billion in 2009. Exports have seen a smaller but steady ascent, reaching US$400.2 million last year from US$237.9 million in 2005.
Malta has much to recommend it as an investment location, having been awarded fourth place globally for inward investment performance in UNCTAD’s World Investment Report 2008. Investment flows reached US$635.9 million for the first three quarters of 2009, up from US$482.7 million year-on-year.
The country’s economy is built on services – tourism, real estate, financial intermediation and business services – which contribute 75% to GDP. Malta has worked hard to climb the value chain and has emerged as a fully fledged knowledge-based economy. It now attracts companies focused on software development, pharmaceuticals, aviation, precision manufacturing, information technology and financial services.
This industrial transition continues to be complemented by substantial infrastructure investment. Dubai Tecom Investments is building a US$300 million IT village known as SmartCity, while Lufthansa Technik is spending US$83.5 million on a new aircraft maintenance facility. The government is also heavily involved, having committed US$27.8 million to a bio-technology park scheduled for completion in 2013. This comes in the wake of sizeable investment in the information and communication technologies industry as well as education, producing a highly skilled, English-speaking workforce.
Then there is the simple fact that joining the EU in 2004, which required a complete overhaul of the country’s business regulation, saw the potential market that can be accessed through Malta rise 1,000-fold to 500 million people. Adopting the euro in 2008 has allowed investors to minimize their foreign exchange costs.
In addition to these factors, Malta can rely on comparatively low costs, political and social stability, and a business-friendly environment with regard to taxation and regulation.
Into Africa
From a long-term perspective, the country’s ties to North Africa, and Libya in particular, may be of particular interest to potential Chinese investors; certainly, it is a competitive advantage that few can replicate. Malta has become the de facto operational hub for much of Libya’s oil and gas industry. The industry’s telecom infrastructure was developed and is run through Malta, as are all medical evacuation services and aircraft leasing, as well as a lot of recruitment operations.
Malta also has reasonably strong commercial relations with Tunisia and Algeria, but Chetcuti-Cauchi believes the country could do more to establish itself as a bridge between Europe, North Africa and the Middle East, securing even stronger investment flows in the process.
"Malta should present itself as a mediator in differences and as the promoter of relationships between such countries," she said. "It is one of few countries with double taxation treaties and strong relationships throughout Europe, the Mediterranean, the Middle East and Africa."
Inbound Opportunities
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