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Robust financial sector attracts global attention

Article - January 15, 2015

Malta has just won for the second consecutive year the title of “Most favoured domicile in Europe” at the Hedge Fund Awards. This is a tangible sign of the financial sector’s robust fundamentals and a strong suggestion of more good things to come.

These are boom times for Malta’s growing financial sector as the island’s economy becomes more international, an influx of foreign banks open their doors, financial services expand, the Malta Stock Exchange (MSE) creates new markets and the government works to ensure the tiny country remains a welcoming environment while adhering to international regulator standards.

“One of our top priorities at the moment is our emphasis on continuing with fiscal, economic and financial stability,” says Minister of Finance Prof Edward Scicluna, pointing to Malta’s escape from the financial meltdown that devastated other southern European economies as proof that the island nation is doing things right.

“It was an achievement that we got out of that mess in a healthy way. Our banks didn’t need any bail out and the European Central Bank’s latest results are confirming this state of affairs.”

Malta’s financial authorities are justifiably proud of the country’s banking sector for other reasons as well, noting that the Malta Financial Services Authority’s (MFSA) high regulatory standards copy European Union legislation, but at the same time are flexible enough for banks to operate in a modern financial environment.

And for international banks, the country offers qualified professionals in accounting, taxation, IT and law, English as an official language and competitive operating costs.

“Our country has always been seen as a hub and today this image is evolving into one where Malta is seen as a safe and stable base located in a difficult and unstable region,” the finance minister explains. “International companies notice this and so we are now entering into sectors such as operations and logistics with a new service industry based on location, stability and trust.”

And, along with the rest of the economy, the financial sector is clearly poised for greater glories, predicts MFSA Chairman Joseph Bannister.

“The financial sector is distinguishing itself as a pillar driving growth and is now as important to Malta as the established economic drivers like manufacturing, tourism, construction and the services industry,” he says.

Malta is an attractive and strategic location for companies around the world looking for the ideal spot to base their regional operations thanks to the many factors already mentioned. And the Maltese are proud of the fact that these alone are enough to lure outside interest without having to dangle additional carrots as is done by some financial centres.

“There are no financial incentives for the financial sector,” the chairman says. “Companies today weigh decisions on entering new markets after observing how the regulator is operating. The MFSA is proactive and we have a policy called ‘Innovation through Regulation’ in which we review legislation and propose new programmes. This is a new initiative to make things work.”

Indeed, the MSE is rapidly expanding its operations both domestically and internationally to continue the spectacular growth it has enjoyed since its founding in 1990.

“When we started there was no equity and fewer than eight government stocks with something like 8,000 account holders,” recalls MSE Chair Paul J. Spiteri. “Today we have 23 equities quoted, 44 corporate ones, more than 50 government stocks with close to 80,000 individual investors holding listed securities, or approximately 50 per cent of the Maltese adult population.”

Acknowledging that Malta is a small country with a limited growth rate if the MSE remains active only domestically, the exchange’s board has worked to boost its ability to become an international player.

“The last few years have been dedicated to preparing all the necessary groundwork to be able to take on international business and last year the MSE approved its first international member,” explains the MSE’s CEO, Eileen Muscat. “International investors are attracted to doing business with us because of Malta’s reputation as a highly regulated and reputable financial centre, its stable economy and especially the banking sector.”

Along with its international efforts, the bourse is working on creating a market for SME’s with an emphasis on disclosure and supported by IT solutions that provide quick and efficient processing.

“SME’s are the backbone of many European Union economies and the MSE is a natural home for these companies because our business model is not based on attracting huge trading volumes but on providing a whole range of services from which potential users may pick and chose,” Ms Muscat says.

“There are thousands of these companies looking for an opportunity to raise capital on a market and we are seeing a lot of interest. The idea is that by the end of the year we will have the framework ready and launch the market within 12 months,” Ms Muscat says.

One Maltese company tapping into the bond market so it can take full advantage of the new opportunities presenting themselves is Halmann Vella Group plc, says the firm’s Director of Finance Joseph Tabone.

“This will allow refinancing of our existing facilities as well as making strong investments in our manufacturing facilities and demonstrates our group’s clear commitment to the Maltese industrial sectors,” he explains.

“We’ll be spending between 3 and 5 million euros in machinery and new state-of-the-art equipment, and besides investing in technology, we will also continue investing in our human capital resources.”

Celebrating its 60th anniversary this year, the group has long been a leader in the manufacture and sale of terrazo tiles, especially marble and natural stone with the United Kingdom as its principal market.

But now, with Malta’s new emphasis on internationalisation, Halmann Vella is seeking to further expand to foreign markets with innovative products and services the group has developed itself.

The company has worked on such prestigious projects as the London Underground, London City Hall, the Sorrento Luxury Apartments in Hong Kong, as well as many upscale developments in Malta.

Along with the marble, stone and other materials, the Halmann Vella Group provides clients with the whole package, which includes its teams of top builders, architects and engineers, giving the company a unique advantage over its competitors.

And the group’s next step? Diversifying its activities with a new retail outlet in Malta for the prestigious American men’s apparel brand, Brooks Brothers, and the hospitality sector where it already operates two hotels and a chic bistro.

In wrapping up the company’s philosophy, and one which could be applied to the country as a whole, Managing Director Martin Vella says, “In Malta, being small, we have to be multidimensional and take a multidisciplinary approach. This will see us through to success.”