24 Jul Interview with Kurt Farrugia, CEO of Malta Enterprise
Malta Enterprise is a prominent economic development agency that plays a crucial role in shaping Malta’s business landscape and fostering sustainable economic growth. To start the interview, could you provide an overview of Malta Enterprise, its mission and goals, and how it contributes to the economic development of Malta?
Malta Enterprise is the economic development agency part of the government of Malta. We have various roles being a small island economic development agency. First, we assist companies in setting up and expanding their operations in Malta through several support measures. We operate a large budget for businesses incentives specifically. Secondly, as an investment promotion agency, we also support FDI that comes into Malta, and we do our own investment promotion efforts. Thirdly, we take care of the local businesses and act as the single point of contact for businesses, both the ones that come from outside of Malta but also local businesses. We act as the one stop shop for businesses. We have various initiatives across each of the sectors. As Malta Enterprise, we also operate the Business Incubation Center and the Life Sciences Park, which are both spaces where we offer help to businesses who want to set up either a start-up or something that is related to life sciences.
Our vision as an agency changes from time to time according to the economic landscape or economic environment of the time. Right now, and for the past few years, Malta has been experiencing huge economic growth (to the tune of 6-7 percent annually, not including the Covid years of course). In line with that, our strategy for the past two years, and going forward for the next five years, is to change the focus from attracting companies with a large employment base to attracting smaller companies that pay higher wages and that operate in preferential sectors such as biotechnology, medical technology, research and development, green and blue economy, and anything related to technology. That means that we are shifting the model from a traditionally lower wage country (as Malta was back in the 1960s) to a higher wage country; less labor intensive, but with high value-added jobs. In particular, we have been making a push to attract start-ups in these various sectors. We want to attract small companies that bring innovation and open new opportunities in Malta in new sectors, that transfer knowledge to Malta, and share knowledge with Maltese education institutions, including our universities and our technical institute.
This requires a very important effort in terms of building an ecosystem. For example, we need to build the infrastructure for medical technology, we need to build the infrastructure for life sciences, and so on and so forth for the various sectors. In the blue economy, we have the sea, but we need to be prepared with all the legal framework to ensure that whenever you allocate resources for an enterprise that would like to use the sea for clean technology, for example, you have all the requirements in place. Those are some of the promises of Malta Enterprise.
All countries today are competing to attract businesses and investors. How would you summarize the unique selling points of Malta, as well as the key strategies that Malta Enterprise deploys to attract international businesses?
Our unique position as a Mediterranean island state, part of the European Union, closest to Africa, close to the Middle East, and with very good relations with these countries, is all due to our geographical location. We are a gateway to the European Union with very strong links to Africa; and not just North Africa because of the very immediate proximity but also West and East Africa. We have fantastic relations with Ghana, for example, and Ethiopia, among others. We also have very good links with the Middle East. That is why, in terms of geography, we can be the gateway to Europe. Countries outside the EU can use Malta as a stepping stone to the EU, and vice versa for European countries that would like to access markets such as Africa, the U.S. and the Middle East. We always try and ensure that Malta serves as a small base for them in Europe and vice-versa. We are not seen as a threat, but we are usually seen as partners to ensure that we can develop the potential of companies coming from wherever they are coming from. So, the core location strategy which we have been discussing with several partners outside of the Europe, but also within Europe, is to ensure that we can serve as a hub for companies from the north of Europe to use Malta to access the southern part of the Mediterranean, as well as companies coming from the south that need to get to Europe. I think that we are in a unique position.
Second, I believe that we have great talent. Being a small island without many natural resources, one of our country’s most important assets and resources is our people. Our education system has been creating a lot of talent who are now working in all our industries. The industries are quite varied here in Malta. We have aviation, pharmaceuticals, car components, microchips, advanced manufacturing, as well as robotics and precision engineering. The feedback from these companies is that the amount of talent they are finding in Malta through our education system is impressive. Additionally, since we are quite an attractive destination in terms of living and quality of life, we are managing to attract quite a number of employees from other countries, particularly outside of Europe. That is something that is helping with our competitiveness.
Third, I would point to Malta as a destination in itself with the digital nomad craze, where people work from outside an office. Malta is a very attractive destination for companies or people who want to keep working but from another location, and, therefore, we have been promoting the digital nomad aspect, including through our start-up visa and start-up residence program. The residence program is a program which would give founders and cofounders, their families, and their core employees a residence permit for a three-year period which would be extended by a five-year period; so, effectively, it’s an eight-year residence program. We’re doing that as part of our push as a jurisdiction to try and attract the best talent there is. Of course, that would also help the larger companies and the corporates that are in Malta by allowing them to access a larger talent pool coming from abroad. Basically, we are looking at the geographical location which is ideal.
Despite the recent challenges of the COVID-19 pandemic and the war in Ukraine, Malta has demonstrated steady growth and positive indicators. The island’s gross domestic product growth (GDP) is set to be the second highest in the EU, right after Ireland, with 3.9 percent forecast for this year and 4.1 percent in 2024, according to the EU commission. How does the country rank in terms of ease of doing business?
In addition to our unique selling points, Malta also offers incredible ease of doing business, being a small island very connected with its industry and businesses. At Malta Enterprise, as the single point of contact or one-stop-shop for business, we know all our clients and we ensure that wherever they encounter a difficult administrative situation, we intervene as government institution to smoothen the process. So, when it comes to obtaining visas, obtaining work permits, when it comes to planning and when it comes to the regulatory part—involving the Medicines Authority, the Financial Services Authority, the Communications Board or the Competitions Authority—we always try and smoothen the process. We have great relations with all government entities and authorities. As a matter of fact, we recently had a pharma company which opened a huge manufacturing plant in Malta because of the valuable links which they have directly with the Medicines Authority. That is something unique in terms of what we can offer as a jurisdiction: the fact that you can reach practically anyone to ensure that you do business in a smooth way. You wouldn’t find in any other large country. Regulatory authorities are usually very stiff in other countries. We usually act as a conduit to the various authorities. When a company gets approval from Malta Enterprise, all other authorities will know that they have been through a thorough evaluation from Malta Enterprise, that we have seen their business case and done the due diligence and run the technical expertise to make sure that whatever they are proposing is feasible. Once they came to Malta Enterprise, then it is easy to get through to the Medicine Authority and other relevant regulatory authorities. Our digital agency, the Malta Digital Innovation Authority, and our Finance Malta agency are all institutions that in other countries are very difficult to reach.
We ensure that there is always a support structure available for businesses along the way. That has been very successful, even for companies which had difficulties dealing with regulatory authorities in other countries. In Malta, we abide by the highest standards when it comes to regulation and regulation enforcement while providing easy access to the authorities to ensure that the business is done in a smooth way.
You mentioned the Malta Startup Residence Program inviting non-EU entrepreneurs to launch their new ventures in this beautiful island. How does Malta Enterprise contribute to the growth of the local start-up ecosystem and attract foreign start-ups to establish in Malta?
To be successful with start-ups, you must flexible and willing to take risks to ensure that start-ups, which typically have no capital but have great ideas, find an easy, soft-landing spot when they come to do business. Since we operate public funds, there is no safer way to support these start-ups. We can give up to $1.2 million in capital for the most innovative start-ups, but then we need to ensure there is proper compliance. But the main thing that we have been trying to do as Malta Enterprise in the past year is to create an ecosystem where companies don’t come here only to collect the grant but also get acquainted with the other start-ups. We make links between the various start-ups which can potentially become partners in an operation or product. We have a holistic approach, implementing the right incentives, the right taxation system, the right environment to attract people, as well as building a whole environment for start-ups to meet and to do business together.
In the past few months we have been working toward a legal framework specifically for start-ups that covers each and every aspect of start-up development, making it easier for them to launch their business under one legal framework. That framework will include fiscal incentives, taxation incentives, grants, rights to start-ups and obligations for them to be able to flourish in Malta.
We are very good at assisting companies in obtaining the funding they need to start up. We need to ensure that there is enough capital for them to scale up. This is something we want to include in our new legal framework. I believe that we have some of the most innovative start-ups in Europe, which, with the right environment, can become huge companies in Europe. I am specifically thinking about at least three to five start-ups in the medical field, analytics field and AI field that have huge potential if they can be well funded.
Our markets are very small, and therefore we encourage start-ups to set up their businesses in Malta and then grow and expand them, selling their services and products outside of Malta. Hence the stress on our important geographic location: from Malta we can reach markets north, south, east, and west. That’s a very important selling point, which is being utilized by our companies here.
Malta Enterprise aims to position Malta as a hub for cutting-edge and knowledge-based industries. What specific initiatives or programs has Malta Enterprise implemented to foster innovation among businesses, and how have these efforts contributed to the growth and competitiveness of the local industries?
We have incentives to jumpstart finance and business development, and we provide investment assistance which is extremely good for setting up new operations. That is where we have been extremely successful in terms of attracting companies, start-ups, but also small companies in the food sector, in nutraceuticals and food supplements, as well as small pharma companies. Then we have a very important incentive, and it is where I believe we need to improve as a jurisdiction. That is why at Malta Enterprises we have a very important incentive which is not even capped; it can go up to millions and can assist R&D projects up to 80 percent of the expenditure on labor costs, on the equipment a company would need to cover R&D.
In line with all the efforts we have been making in the sectors that I have mentioned, I believe that the next pillar should be R&D. Our R&D expenditure ratio to GDP is quite low and needs to improve. We’re quite far away from the three percent that the EU is pushing countries to be. We already have very good R&D being done in Malta, but I think there is a lot more we can do. That will require good infrastructure and important incentives both for the company conducting R&D as well as very good links with our research institutions, universities and other entities, as well as very important personal incentives for researchers who want to do research in Malta. I think along with the traditional manufacturing and technology sector with the start-ups, we also need to develop the R&D sector on the same lines that we have developed the other pillars.
Malta has made significant strides in pursuing sustainability goals to create a greener and more environmentally conscious future. This year, the government, through Malta Enterprise, has doubled its smart and sustainable investment grant to $157,000 for businesses in Malta. Could you explain the Smart and Sustainable Investment grant offered by Malta Enterprise and how it encourages businesses to invest in sustainable technologies and practices?
While we do have quite a few clean tech companies or green investment companies operating Malta, these incentives aim to incentivize our locally operating companies to switch to greener, more efficient, less carbon intensive energy and more environmentally sustainable operations, as well as more digital operations overall. ‘Smart and Sustainable’ and ‘Investment Aid for Energy Efficiency’ are two such measures. We have been dishing out a substantial amount of funds through these programs, but not sufficiently in my opinion, so, in addition, we are reaching out to companies and offering 40 percent or up to 50 percent back on their green investments. For instance, we have several hotels that are very energy intensive: we have been pushing them to change their operations and use more sustainable heating systems, more sustainable air conditioning systems. At the same time, we have also been ensuring that we have the right audit structures to make sure the claims that are being made in decarbonization are being audited. The larger companies are generally the first movers in terms of sustainability, because they are usually more energy intensive. Our incentive system is trying to reach the other 80 percent that form part of the pyramid.
As CEO of Malta Enterprise, how would you summarize your priorities for the organization?
The main priority for the island is to ensure that we keep diversifying the economy and move it toward what I think is a revolution in terms of thinking on the businesses that we want to attract to Malta. We started that by ensuring that we transitioned to a more knowledge-based economy with smaller companies paying higher wages. To do that, we need to keep fostering a pro-business culture and ensure that all the government entities that would make it easier for companies to do business are accessible.
As a small country we have an advantage, and I believe that, through our efforts for decarbonization, we can be one of the cleanest countries in world, not just in terms of land but in terms of our seas. That is where the green and blue economy come in, with a mix of all the innovation and technology that we are fostering here in Malta. I think that the future is very positive since economically, we have been doing very well. The standard of living has been increasing and, at the same time, the government keeps cushioning the price of energy and ensuring that the punches that we have been getting from Covid, the war in Ukraine, inflation, etc. are under control. The fact that there is government intervention where it is needed, sets us apart from other countries which have not been assisting their residents with targeted measures. I think the island is being transformed into a technology and innovation hub and a place where it is very good to live and raise your family.
What would you be your final message to the readers of Newsweek?
Malta is transitioning into a knowledge-based economy that will link business to the various industries of our education system and also reach all the markets around us. We are a good place to do business, offering also a good standard of living for the employees, the founders, cofounders, and their families of businesses to live and work.