Rising Costs and Labour Strain Threaten Maltas FDI Appeal Amid Housing Crisis

October 24 2024 07:51:59 by PCLMedia

Investors are increasingly concerned about Malta’s rising cost of living and labour market strain, which threaten the country's attractiveness for foreign direct investment (FDI). According to a recent study, 54% of existing FDI investors still find Malta appealing, but this marks a 5% decrease from the previous year and remains below pre-2019 confidence levels. Although Malta’s strategic advantages are acknowledged, issues such as escalating living costs and challenges in the labour market are seen as obstacles to sustaining long-term growth.

FDI Attractiveness and Concerns

Malta's corporate taxation continues to be a key driver of its FDI appeal, with 75% of respondents citing it as an essential factor. Additionally, 63% recognize Malta’s robust telecommunications infrastructure, a significant asset for key sectors like finance, gaming, and technology. However, only 39% and 32% of respondents view Malta’s labour costs and skill availability as attractive. Concerns around transport, logistics infrastructure, and research and development (R&D) also persist, with only 16% and 26% of respondents viewing these areas positively.

The evolving global tax landscape and scarcity of skilled labour stand out as the top risks, flagged by 50% of respondents each. Reputational risks, increasingly significant, are seen as a threat by 42% of investors, underscoring the importance of transparency and governance to maintaining investor confidence. Moreover, 34% and 29% of respondents are worried about cost competitiveness and the state of national infrastructure.

Labour Market and Housing Challenges

A pressing issue for foreign businesses in Malta is the high cost of living, especially housing. In a recent survey of 134 foreign direct investment companies, 51% identified the cost of living as the top barrier to recruiting and retaining overseas talent. The property market, particularly, is a “significant challenge” for expatriates and local workers alike, hindering the country’s ability to fill essential positions. Additionally, 41% of respondents cited the cost and difficulty of bringing in third-country nationals, while 35% pointed to challenges in establishing long-term prospects for expatriates in Malta.

Infrastructure and Future Competitiveness

A significant majority (70%) of respondents believe that Malta’s infrastructure is inadequate for its growing population, highlighting an urgent need for development. Key areas for improvement identified by investors include transportation, infrastructure, education, and skills development. Forty-six percent of investors see these as priorities for Malta’s long-term competitiveness. Strategic economic planning is also critical, with 37% stressing the importance of sustainable policies to navigate global market complexities.

Malta’s progress in sustainability is gaining traction, with 62% of investors recognizing green infrastructure as crucial to long-term investment strategies. This represents a 5% increase from the previous year, reflecting a growing trend among businesses to align with environmentally friendly practices.

Technological Innovation and AI

On the technology front, Malta is seen as competitive within Europe, with 46% of respondents rating its IT capabilities on par with other European nations. However, 28% believe Malta lags behind, signaling room for improvement. Artificial Intelligence (AI) and intelligent automation are areas of growing interest, with 45% of respondents viewing AI as a critical component of their future investment plans.

Long-Term Outlook

Despite these challenges, the investment community remains resilient, with 70% of FDI companies confirming plans to maintain their presence in Malta over the next decade. Moreover, 38% of companies are planning to expand their operations, although this is a slight decline compared to the post-pandemic period. Investors emphasize that while Malta’s business environment remains positive, addressing issues like infrastructure, housing, and labour market strain is vital to sustaining long-term growth.