Edward Scicluna, Minister of Finance, Malta
Malta and the EU
Malta, 6 April 2017
Distinguished guests, it is with great pleasure that I welcome you to Malta, and to the Eurofi conference in particular, where we are holding this gala dinner. I take the opportunity to thank the organisers – Didier, David, and the whole team – for their impeccable organisation. Today, the country that holds the Council’s presidency is the smallest member state of the European Union, and the Eurozone as well, lying on the most southern border nearest to the African continent. According to the centre periphery theory of development, it is the most disadvantaged country, being an island and lacking any natural resources to boot.
Malta’s only resource is its location, lying smack in the middle of the Mediterranean Sea, coupled with the impressive deep natural harbours, giving real and effective protection to maritime vessels plying along the major shipping lanes a few miles off from our island. Early man – I am talking about 5,500 years ago – chose Malta to build several temples of worship, Stonehenge like circular structures with megalithic stones, which carbon dating discovered as having predated the ones in the UK – there you are. Sorry, David. However, they were the same builders; they moved on further north. It is true. This is history. There are six such temples in Malta, for those who are interested, and two in Gozo.
The importance of Malta’s strategic location varied throughout the island’s history, but increased phenomenally during the time of war, starting with the Second Punic War between Rome and Hannibal, that famous war strategist from Carthage. Brave and wise as he was, unfortunately for him, he was defeated. The Maltese were luckier; they sided with the Romans, so they became Roman citizens rather than slaves. Malta played home to several wars and battles, during the Knights of St John of Jerusalem’s stay in Malta, and more recently, we had other types of wars – I am referring to the two World Wars during the British stay on the island. Incidentally, according to our history books, the Maltese had no democratic say as to who ruled them, whether they were Romans, Arabs, Normans, and even the knights. It was decided by other rulers, although the same books say that the British came at our own invitation, and stayed.
In any case, our economic history is marked by a series of business cycles; unfortunately, the business of war, with the harbour region and the whole island booming during the war years and in recession – and even depression – during the inter war years. Brexit from Malta – a mini one, perhaps, by today’s standards – happened on 31 March 1979. That is when the last sails left Malta. As agreed, seven years before that date, the UK decided to stop paying its subscription of about $36 million – by today’s standards, quite a high sum – for the lease of the military base on the island. We said, ‘Goodbye’, and our friendship grew stronger after that date. Yes, there was a hint there.
Tired of wars and bad experiences of past superpowers, Malta opted for neutrality and peaceful economic activity based on manufacturing and tourism for its economic survival. Both activities were oriented towards the European market, and both flourished in view of our association agreement with the EU – at the time, the Common Market – which goes back to 1971. At the same time, Malta continued to do what it knows best: Mediterranean maritime commerce in its dockyards and free ports which, due to its trans shipment, is the 11th busiest port in Europe; its cruise liner hub, its super yachting centre, and the shipping register as well.
Since the early 1990s, two new sectors were born, and have now reached adulthood: financial services and iGaming. Together, they are estimated to contribute about 15% to 20% of our GDP. New sectors are now coming on stream: logistics, with new economic free zones elsewhere on the island, and the health service and tertiary education, providing services to outsiders, not to the Maltese but especially to the MENA region and elsewhere. Today, the Maltese economy is experiencing the highest growth in the EU. The same can be said for the rate of employment growth, while the unemployment rate – obviously being adversely related – is, at present, the lowest one in the EU.
That applies to our young people. I think it is the lowest, or second lowest to Germany. This is thanks to the various structural reforms, mostly aimed at the labour market, seriously aiming to make work pay.
As a result, like Germany, Malta now depends on migration inflows – mostly European – to sustain its economic growth. This growth is externally driven, not by pumping up our debt. In fact, in four years, we switched from an excessive deficit position to a fiscal surplus at the end of last year. Debt, in percentage terms, has been pushed down from a high 73% in 2012 to 59% last year.
So what makes Malta that attractive? A politically and economically stable EU member state, eager to do business, and with a strong work ethic, lying very close to a continent – I am talking of the southern continent – which holds so much promise, but where it is so difficult to operate at present. The labour force has an abandoned[?] number of highly qualified persons, especially in the areas of accountancy and auditing, law, and IT. They can support companies dealing with international business effortlessly and efficiently from the island, to do business further south.
The island has two official languages: English and Maltese. The first is the business world’s international language; the latter is essentially Arabic, the language used throughout the whole MENA region and beyond. Regulators have also always been keen to keep to high standards and guard the island’s reputation. As I said at the start of my speech, our particular geographical position has made us a natural bridge between the north and south of the Mediterranean. As such, we are very interested in the EIB’s External Lending Mandate and its effect on the development of the MENA region.
We also want the G20’s current Host Countries Initiative with Africa to succeed for the same reason. Unlike the refugee problem, economic migration will continue for as long as big income differences remain between the continent to the north and the enormous continent to the south of Malta. That is why, on the margins of this meeting, this very morning, we invited over five neighbours within the Maghreb region for a so called ‘five plus five’ meeting with their European and Mediterranean counterparts, because we truly want them to succeed – for their sake, and ours.
Overall, Malta’s experience as an EU member has been positive. Both as with regards to the future of Europe and in the face of current or future adversarial events, the EU will find Malta as a small but strong member which tries – and often succeeds – to punch above its weight. Thank you. Enjoy your meal.