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2012 Investment Climate Statement - Malta


2012 Investment Climate Statement
Bureau of Economic and Business Affairs
June 2012
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Openness to Foreign Investment

Malta, a member of the European Union since 2004, actively seeks foreign direct investment to increase its rate of economic growth. Malta provides incentives to attract investment in manufacturing, transshipment and servicing industries especially pharmaceuticals manufacturing, information and computer technology (ICT); R&D; aviation maintenance; registration of ships and aircrafts; electronics and financial services. Malta's advantages for foreign investors include access to European markets with no additional regulatory or customs requirements due to EU membership, competitive wage rates (compared to other EU states) a highly skilled English-speaking labor force, access to European and North African markets, a supportive business environment, excellent telecommunications and transport connections as well as several financial, tax and other investment incentives.

Foreign investment plays an integral part in the Government of Malta's policies to reduce the role of the state in the economy and increase private sector activity; in part this strategy was to qualify for the European Monetary Union and use of the euro from January 1, 2008.

Malta is a politically stable parliamentary republic with a free press and active political parties. Malta is well regarded as a safe and secure place to do business. Malta still enjoys an ‘A/A-1’ Sovereign Credit Rating by Standard's and Poor's whereby Malta's economy was considered to have weathered the global economic crisis relatively well. Moody also reaffirmed the 'A/A-1' long- and short-term sovereign credit ratings. Both agencies rate Malta's outlook as stable and cited Malta’s economic recovery since the recession and prospects for continued growth. However Moody's downgraded the foreign and local currency government bond ratings from A1 to A2 and revised the outlook to negative. Fitch Ratings has reaffirmed their assessment of Malta's short term Issuer Default Ratings (IDRs) at 'F1' and Country Ceiling at ‘AAA’, which is common County Ceiling for the euro zone. The European Union recently terminated an excess deficit procedure in respect to Malta, noting effective deficit reduction measures in Malta’s national budget.The government organization Malta Enterprise, established to promote foreign direct investment in Malta, provides information to prospective investors, processes applications for government investment incentives and serves as liaison between investors and other government entities.

Malta Enterprise offers an attractive investment package for American and other investors (see section entitled "Performance Requirements/Incentives').

The following are the most important laws that govern foreign investment in Malta:

- The Income Tax Act of 1948 (as amended) establishes a single rate of taxation of 35 percent on income for limited liability companies in Malta. In certain qualifying cases, this rate is effectively reduced to 5 percent for companies which export the majority of their product or services outside of Malta.

- The Business Promotion Act, which authorizes the government to allocate fiscal and other incentives to companies engaged in manufacturing (including software development), repair or maintenance activities.

- The Malta Enterprise Act of 2003 provides for the development and administration of incentives, schemes and other forms of support and to enable the Corporation Malta Enterprise with powers to rationalize and update the relevant legislation in the sector. This act will eventually incorporate the incentives granted under the Business Promotion Act.

- The Companies Act of 1995 regulates the creation of limited liability companies. The Companies Act provides for the establishment of investment companies with variable share capital (SICAVS) and companies with share capital denominated in a foreign currency.

- The Malta Financial Services Authority Act of 1989 established the Malta Financial Services Authority, the agency responsible for the regulation of banking and investment services in Malta.

- The Investment Services Act of 1994 contains a package regulating investment services, including banking and insurance.

Virtually all manufacturing sectors are open to investors so long as they plan to export their products from Malta (as most manufacturers do). There are no legal prohibitions for investments oriented toward sales in the small Malta domestic market, but the government carefully screens such proposals from foreign companies. Certain sectors dominated by the state, such as the generation of electrical energy and distribution of fuels, are being liberalized in response to EU requirements. Electrical distribution currently remains in the hands of the parastatal company Enemalta. In February 2009 the privatization of Enemalta's gas division took place.

In its efforts to attract investment, the government gives priority to companies operating in the following fields:

· Information and Communications Technology, including electronic components;

· Health, Medical Equipment and Pharmaceuticals;

· Back Office and regional support operations including call centers;

· Knowledge-based services, including aviation repair, education and training; and research and development;

· Logistics-based services, including maritime, warehousing, and oil and gas services;

· Film Industry

· Education and Training

Private foreign investors are free to make equity arrangements as they wish - from joint ventures to full equity ownership.

The Maltese government has in recent years privatized a number of state-controlled firms, including its shares in the country's largest bank, postal service, the shipyard and its remaining 60% of the share in the wireless telecommunications services company. Currently in process, pending European Commission approval, is the restructuring process of Airmalta, the national airline which is owned by government. The government welcomes private investors, Maltese and non-Maltese, to participate in privatization projects. It affords foreign investors equal treatment to that given to domestic investors and sets few limitations on their operations. There are currently no performance requirements other than those linked to the goals stated by the investors at the time of application for assistance. Foreign investors have the right to repatriate or reinvest profits without restriction and can take disputes before the International Center for Investment Disputes.

Third Party Indicators:


Measure

Year

Index/Ranking

TI Corruption Index

2009

45 (out of 180)

Heritage Economic Freedom

2010

48 (out of 183)

World Bank Doing Business

2010

n/a (out of 183)

Conversion and Transfer Policies

The government routinely approves repatriation of profits, dividends, and capital. There are no limitations on the inflow or outflow of funds for remittances of profits, debt service, capital, capital gains, returns on intellectual property or imported raw materials as long as investors present the appropriate documents to the Central Bank of Malta. There are no significant delays in converting investment returns after presentation of the necessary documents. Maltese regulations and practices affecting remittances of investment capital and earnings have been improved as several foreign exchange controls were relaxed to conform to EU directives. Malta joined the eurozone in January 2008.

Expropriation and Compensation

Private property may be expropriated for public purposes, in a non-discriminatory manner, and in accordance with established principles of international law. Investors and lenders of expropriated property are guaranteed adequate compensation by law. There have not been any expropriations in the last decade. The government does not discriminate against U.S. or any other foreign investments in expropriation. There are no particular sectors at risk for expropriation or similar actions, nor are there any laws that force local ownership.

Dispute Settlement

There have been no significant investment disputes over the past few years involving U.S. or other foreign investors or contractors in Malta.

The Maltese Parliament is the highest law-making institution. Its members are elected every five years by proportional representation. The number of members of parliament is normally 65, but may be adjusted according to the constitution to provide a governing majority to the party winning the popular vote in a general election. Currently there are 69 members, with the governing Nationalist Party having 35 seats and the opposition Labour Party holding 34. Government functions through a cabinet of ministers, headed by the Prime Minister. The judiciary is independent and courts are divided into Superior Courts, presided over by judges, and Inferior Courts presided over by magistrates. The jurisdiction of the Inferior Courts is restricted to minor offenses of a criminal nature and to small civil matters. Traditionally, the judiciary functions through the Criminal, Civil and Constitutional courts. Cases of a commercial nature are adjudicated by the First Hall of the Civil Court. There is one Court of Appeal for all jurisdictions. The Constitutional Court has jurisdiction to hear and determine questions and appeals on constitutional issues. There are also a number of administrative tribunals, such as the Industrial Tribunal, the Rent Regulation Board and the Board of Special Commissioners for income tax purposes.

In 1987 Malta adopted the European Convention of Human Rights as part of Malta's domestic law.

The Maltese judiciary has a long tradition of independence. Once appointed to the bench, judges and magistrates have fixed salaries, which do not require annual approval, and they cannot be dismissed except for a proven inability to exercise their function properly or proven misbehavior, following a two-thirds vote in the House of Representatives. The Constitution guarantees the separation of powers between the executive and the judiciary. Fair trial is also recognized as an enforceable human right under the Maltese Constitution. Decisions of Maltese courts may be appealed to the European Court of Human Rights under appropriate circumstances and Maltese courts and governmental agencies are bound by the decisions of the European Court of Justice.

Malta has a distinct Commercial Code. Commercial activities are regulated by the Commercial Code and related legislation, such as the Banking Act, the Central Bank of Malta Act, etc. Bankruptcy is covered in the Commercial Code. The court appoints a curator to liquidate the assets of the bankrupt company, organization or individual and distributes the proceeds among the creditors.

In 2002, Malta signed the Convention on the Settlement of Investment Disputes. It is also a member of the New York Convention of 1958 on the recognition and enforcement of foreign arbitration awards. Modes of settlement of disputes are also provided in bilateral investment guarantee agreements, which Malta has with several countries. (See "Bilateral Investment Guarantee Agreements).

Performance Requirements and Incentives

The government offers several generous fiscal and other incentives for investment in industrial projects to complement Malta’s salient location advantages (strategic geographic location, multilingual skilled labor, access to EU etc) to attract FDI. Some of the more important incentive schemes for companies considering an investment in Malta or Gozo are the following:

· Investment Tax Credits: Target sector companies are entitled to a tax credit which is calculated either:

o As a percentage of qualifying expenditure (i.e. expenditure of a capital nature, which is 30% in the case of a large enterprise; 40% in the case of an SME and 50% in the case of a micro enterprise; or A percentage (again, 30%, 40% or 50%) of the wage cost for the first 24 months of the newly created job

· Access to Finance: This is available mainly in the form of:

o Loan Guarantees: Malta Enterprise can guarantee bank loans taken by a company to finance acquisition of additional assets to be employed in the company’s business.

o Loan Interest Subsidies: Malta Enterprise may subsidise the rate of interest payable on bank loans. Loan interest subsidies are not additional to loan guarantees and applicable to loans provided by banks or other financial institutions

· Employment & Training:

o These incentives are administered by the Employment and Training Corporation. Enterprises are supported in recruiting new employees and training their staff

· SME Development:

o Grants targeting the creation and development of innovative start-ups and the development of forward looking small and medium-sized firms

· Enterprise Support:

o Assistance to business to support them in developing their international competitiveness, improving their processes and networking with other businesses

· Research & Development:

o A package of incentives to encourage enterprises to engaged in industrial research and experimental development

· Allocation of Factory Space for manufacturing companies:

o Availability of factory space built to specification with a number of attractive financing options to choose from.

o Rental rates charged are very competitive.

Structural Funds for companies are also available through European Union funding for the period 2007-2013. Support in the form of aid schemes provide assistance and cash grants for projects focusing in any one of the following themes: International Competitiveness; Small Start-Up; Innovation; Environment; E-Business; and Research & Development. Twenty million euros has been allocated for this kind of support. Another 10 million euros have been made available for Industry Energy Grant Scheme projects. The government offers generous incentives to trading and financial companies registered with the Malta Financial Services Authority. Legislative changes in 1994 removed the distinction between offshore and onshore companies with the result that all companies in Malta are subject to a 35% tax rate on profits. However, a system of refunds due to non-resident shareholders substantially reduces the effective tax rate for international investors.

Companies operating within the Malta Freeport, a customs-free zone, benefit from two main incentives: namely, reduced rates of taxation and investment tax credits. In effect, tax credits may offset the tax payable for a number of years or reduce it substantially.

In 2011, a double taxation agreement between the U.S. and Malta took effect. Malta has also double taxation agreements with: Albania, Australia, Austria, Barbados, Bahrain ,Belgium, Bulgaria, Canada, China, Croatia, Cyprus, Czech Republic, Denmark, Egypt, Estonia, Finland, France, Germany, Georgia, Greece, Hungary, Iceland, India, Ireland, Isle of Man, Israel, Italy, Jersey, Jordon, Korea (Rep. Of), Kuwait, Latvia, Lebanon, Libya, Lithuania, Luxembourg, Malaysia, Montenegro, Morocco, Netherlands, Norway, Pakistan, Poland, Portugal, Romania, San Marino, Serbia, Singapore, Slovakia, Slovenia, South Africa, Spain, Sweden, Switzerland, Syria, Thailand, Tunisia, Turkey, Qatar, Ukraine, United Arab Emirates, the United Kingdom and Uruguay.

All investment incentives are specified by law and not made available in an ad hoc manner. Treatment of domestic and non-Maltese investors is identical. Non-Maltese investors do not receive favored treatment.

There are currently no performance requirements other than those linked to the goals stated by the investor at the time of application for assistance to Malta Enterprise. There are no stated requirements that a foreign investor should reduce his shareholding interest over time, transfer his technology, or employ Maltese nationals. These factors might, however, influence Malta Enterprise's decision regarding a firm's application for assistance.

Malta Enterprise monitors compliance with any conditions set by the government as a condition of government assistance. Investors are not required to disclose proprietary information.

Right to Private Ownership and Establishment

The GOM recognizes the right to private ownership in theory and in practice. Private entities are free to establish, acquire and dispose of interests in business enterprises and engage in all forms of remunerative activity.

Many U.S. firms sell their products or services in Malta through licensing, franchise or similar arrangements. The GOM would normally allow foreign companies to operate in merchandising areas especially if they operate a licensing, franchising or similar agreement through a local representative.

It is the government's stated policy not to allow public enterprises to operate at the expense of private entities. Some sectors, such as the generation of electrical energy, are now also open to the private sector participation. Private enterprises are given the same opportunities as public enterprises for access to markets and other business operations.

Protection of Property Rights

Property and contractual rights are enforced by means of (a) legal warning; (b) warrants of seizure; (c) warrants of prohibitory injunction; (d) warrants of impediments of departures (if proceedings fall within the jurisdiction of the Criminal Court); and, (e) sale of property by court auction. Procedures for registering and enforcing judgments of foreign courts are laid out in the Code of Organization and Civil Procedures.

Rights in and secured interests over immovable property must be registered at the public registry in order to be enforceable. The GOM has occasionally been a party to international arbitrations and has abided by their decision. There is no regulation which prohibits the government from accepting binding international arbitration.

Acquisition and disposition of intellectual property rights is adequately protected and facilitated in the Maltese legal system. In 2000, Malta implemented the pertinent provisions of the WTO Trade-Related Aspects on Intellectual Property Rights (TRIPS). It has now fully implemented the EU and WTO rules into national law.

Additional information on EU-wide provisions on copyright, patents, and trademarks and designs is obtainable from the following sites:

- http://www.europa.eu /comm/internal_market/copyright/news/news_en.htm
- http://www.europa.eu/comm/internal_market/indprop/index_en.htm

Malta is a member of the World Intellectual Property Organization (WIPO); the Paris Convention for the Protection of Industrial Property; the Bern Convention for the Protection of Literary and Artistic Works, the Universal Copyright Convention (UCC); and the World Trade Organization (WTO) Agreement.

The Association against Copyright Theft claims that the minimum local laws do not contemplate high enough minimum fines to deter vendors from selling pirated material. The Ministry for Competitiveness and Communications has assured the Embassy that the GOM will take the necessary steps to remedy the situation.

Transparency of Regulatory System

Malta has transparent and effective policies and regulations to foster competition. It has revised labor, safety, health and other laws in general to conform to EU standards.

Efficient Capital Markets and Portfolio Investment

Capital is available from both public and private sources. Both foreign and local companies can avail themselves of local lending facilities. Commercial banks and their subsidiaries can provide loans at the commercial interest rate. New investors can negotiate soft loans from the government covering up to 75 percent of the projected capital outlay.

Local commercial banks have in recent years expanded the scope of their lending portfolios. The Maltese banking system is considered extremely sound.

Malta's Stock Exchange was set up in 1993. In 2002, the Financial Markets Act effectively replaced the Malta Stock Exchange Act of 1990 as the law regulating the operations and setup of the Malta Stock Exchange. This legislation divested the Malta Stock Exchange of its regulatory functions and transferred these functions to the Malta Financial Services Authority (MFSA). The Financial Markets Act also set up a Listing Authority, which is responsible for granting "Admissibility to Listing" to companies seeking to have their securities listed on the Exchange.

The small numbers of companies publicly listed on the Malta Stock Exchange have not been concerned with the possibility of hostile takeovers.

There are no laws or regulations authorizing firms to adopt articles of incorporation/association that would limit foreign investment, participation or control. Legal, regulatory and accounting systems are transparent and consistent with international norms. Several U.S. auditing firms have local correspondents.

Competition from State-Owned Enterprises (SOEs)

The Maltese government traditionally was deeply involved in the nation's economy. Due to several major infrastructure projects, the government was forced to borrow to finance the resulting deficit with loans to support unprofitable government-owned businesses such as the Malta Dry-docks, which cost the government millions to cover operating shortfalls until its closure last year.

The Malta Investment Management Company Limited (MIMCOL) was set up and registered in 1988 as a limited liability company with the main objectives to manage, restructure and selectively divest from the portfolio of state-held investments; as well as to promote private sector, cost-effective business practices across various government owned companies and entities. MIMCOL’s creation resulted from a shift in government policy towards a more liberalized and market-oriented economy that encourages competition and minimizes state participation in as many sectors of the economy as possible. As a natural consequence of this shift in outlook together with EU requirements for membership, government embarked on a mission to divest itself of the large number of companies in which it held a direct investment at the time. These investments, which were concentrated in the manufacturing and services industries and often operated in competition with private interests, were mostly loss-making and were responsible for a considerable drain of state funds.

MIMCOL created the portfolio-management strategies for government which progressively led to the dissolution and liquidation of non-viable companies with no commercial prospects and the profitable divestment of non-strategic investments with commercial potential. Following this phase, MIMCOL’s focus turned to remaining companies, most of them deemed of strategic national value but whose inefficient operations were reflective of monopolistic environments free of competitive pressures. These investments were deemed unripe for privatization at that juncture and remained under MIMCOL’s responsibility undergoing extensive reorganization and restructuring with the aim of improving performance, service delivery and organizational effectiveness.

Over the years, most of these entities were groomed for privatization and sold off, and today the list of Maltese Government investments under MIMCOL’s close scrutiny has gone down to 11 (excluding companies falling under the responsibility of other ministries and investments held directly by government).

MIMCOL falls under the responsibility of the Ministry of Finance, the Economy and Investment. Today it supports the Ministry in its efforts to ensure that all public entities within its authority operate within a sustainable and cost-efficient environment, enhance service delivery and improve organizational effectiveness together with generally promoting private sector business practices across remaining state-owned companies and in Government entities. Its sister company, Malta Government Investments Limited (MGI), holds a portfolio of equity and debt investments as agent of the Government of Malta.

The portfolio of state-owned enterprises that falls under MIMCOL’s scrutiny is not well-defined. Ownership of these entities is not concentrated under one umbrella. Most Government investments are held by either the Board of Trustees within the Ministry of Finance, the Economy and Investment, or by MGI as agent for the Government of Malta. However, there are other state entities which themselves hold shares in companies which are typically special purpose vehicles set up in furtherance of that entity’s operations.

The following are lists of state-owned entities indicating those with which MIMCOL (and/or MGI) has some form of ownership or stewardship relationship. The list has been prepared by MIMCOL from MIMCOL’s and MGI’s records and from Government’s Financial Estimates for 2008. The list is not necessarily exhaustive as there could be other investments fully owned by Government entities or agencies which have not been captured by the sources mentioned above.

Investments in active companies with a shareholding through MGI or MIMCOL

Entity

Form

Ownership

Responsibility

Casma

Ltd

MGI

MIMCOL/MFEI

Gozo Channel

Ltd

MGI

MIMCOL/MFEI

Gozo Ferries

Ltd

MGI

MIMCOL/MFEI

Gozo Heliport

Ltd

MGI

MIMCOL/MFEI

Grand Harbour Regeneration

plc

MGI

MIMCOL/MITC

Kalaxlokk

Ltd

MGI

MIMCOL/MFEI

Malpro

Ltd

MGI

MIMCOL/MFEI

Malta Air Traffic Services

Ltd

MGI

MIMCOL/MFEI

Malta Govt. Technology Investments

Ltd

MGI

MITC

Malta National Laboratory

Ltd

MGI

Competitiveness Ministry

Malta Marketing

Ltd

MGI

Malta Tourism Authority

Malta Venture Capital

plc

MGI

MIMCOL/MFEI

National Orchestra

Ltd

MGI

MEDC

Wasteserv Malta

Ltd

MGI

Environment Ministry

Libma International Construction

Ltd

MGI 20%

MIMCOL/MFEI

Corporations falling under Investments Ministry’s portfolio


Entity

Form

Ownership

Responsibility

Enemalta

Corp

Government

MIMCOL/MITC

Water Services

Corp

Government

MIMCOL/MITC

Malta Enterprise

Corp

Government

MIMCOL/MIIIT

Other Government direct investments


Entity

Form

Ownership

Responsibility

Air Malta

plc

MFEI 97.9%

MIMCOL/MFEI

Libyan Arab Maltese Holding

Ltd

MFEI 51%

MIIIT/MFEI

Malta Export House

Ltd

MOF 90%

In liquidation

Bank of Valletta

plc

MOF 25.2%

MIIIT/MOF

Malta Dairy Products

Ltd

ME 30%

MIIIT

Malta External Trade Corporation

Ltd

MOF

In liquidation

Malta Freeport Corporation

Ltd

MFEI

MITC

Malta University Sports Complex

Ltd

MOE 49%

 

Mdina Weave

Ltd

MFEI

In liquidation

Medelec Switchgear

Ltd

MFEI 5%

LAMHCO

Mediterranean Power Electric

Ltd

MFEI 5%

LAMHCO

Rotos Zirayia Pumps

Ltd

MFEI 7%

LAMHCO

Viset Malta

plc

MOF 28.6%

 

Abbreviations:

Ltd

Limited Liability company

Plc

Public limited company

Corp

Corporation set up by Act of Parliament

LAMHCO

Libyan Arab Maltese Holding Company Limited

ME

Malta Enterprise

MITC

Ministry of Information Technology and Communications

MITA

Malta Information Technology Agency

MEDC

Ministry of Education, Culture, Youth and Sport

MFEI

Ministry of Finance, the Economy and Investment

MSA

Malta Statistics Authority

MSE

Malta Stock Exchange

OPM

Office of the Prime Minister

WSC

Water Services Corporation

Malta does not have a Sovereign Wealth Fund.

Corporate Social Responsibility (CSR)

Corporate social responsibility has gained credence and substance in recent years; particularly as concerns about current global circumstances such as climate change has become more of a mainstream topic. The social, political and economic changes seen worldwide have led to new questions and the EU has raised expectations regarding corporate social responsibility from its Member States.

An increasing number of companies of all sizes in Malta recognize the importance of their role in society and the real benefits of adopting a proactive approach to corporate social responsibility, all aspects of CSR practices are adopted as part of the entrepreneurs responsibilities including the interaction with customers and business partners in the marketplace, employees at the workplace, the local community and the environment.

The commercial community can be said to conduct business responsibly within Maltese society, with CSR practices being prevalent in Malta.

Political Violence

There have been no recent incidents involving politically motivated damage to projects and/or installations, and there are no signs that civil disturbances may become more likely. Neither are there any signs that U.S. investor properties might become targets in the future.

Corruption

Corruption, including bribery, raises the costs and risks of doing business. Corruption has a corrosive impact on both market opportunities overseas for U.S. companies and the broader business climate. It also deters international investment, stifles economic growth and development, distorts prices, and undermines the rule of law.

It is important for U.S. companies, irrespective of their size, to assess the business climate in the relevant market in which they will be operating or investing, and to have an effective compliance program or measures to prevent and detect corruption, including foreign bribery. U.S. individuals and firms operating or investing in foreign markets should take the time to become familiar with the relevant anticorruption laws of both the foreign country and the United States in order to properly comply with them, and where appropriate, they should seek the advice of legal counsel.

The U.S. Government seeks to level the global playing field for U.S. businesses by encouraging other countries to take steps to criminalize their own companies’ acts of corruption, including bribery of foreign public officials, by requiring them to uphold their obligations under relevant international conventions. A U. S. firm that believes a competitor is seeking to use bribery of a foreign public official to secure a contract should bring this to the attention of appropriate U.S. agencies, as noted below.

U.S. Foreign Corrupt Practices Act: In 1977, the United States enacted the Foreign Corrupt Practices Act (FCPA), which makes it unlawful for a U.S. person, and certain foreign issuers of securities, to make a corrupt payment to foreign public officials for the purpose of obtaining or retaining business for or with, or directing business to, any person. The FCPA also applies to foreign firms and persons who take any act in furtherance of such a corrupt payment while in the United States. For more detailed information on the FCPA, see the FCPA Lay-Person’s Guide at: http://www.justice.gov/criminal/fraud/docs/dojdocb.html.

Other Instruments: It is U.S. Government policy to promote good governance, including host country implementation and enforcement of anti-corruption laws and policies pursuant to their obligations under international agreements. Since enactment of the FCPA, the United States has been instrumental to the expansion of the international framework to fight corruption. Several significant components of this framework are the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions (OECD Antibribery Convention), the United Nations Convention against Corruption (UN Convention), the Inter-American Convention against Corruption (OAS Convention), the Council of Europe Criminal and Civil Law Conventions, and a growing list of U.S. free trade agreements. This country is party to [add instrument to which this country is party], but generally all countries prohibit the bribery and solicitation of their public officials.

OECD Antibribery Convention: The OECD Antibribery Convention entered into force in February 1999. As of December 2009, there are 38 parties to the Convention including the United States (see http://www.oecd.org/dataoecd/59/13/40272933.pdf). Major exporters China, India, and Russia are not parties, although the U.S. Government strongly endorses their eventual accession to the Convention. The Convention obligates the Parties to criminalize bribery of foreign public officials in the conduct of international business. The United States meets its international obligations under the OECD Antibribery Convention through the U.S. FCPA. Malta is not a party to the OECD Convention.

UN Convention: The UN Anticorruption Convention entered into force on December 14, 2005, and there are 143 parties to it as of December 2009 (see http://www.unodc.org/unodc/en/treaties/CAC/signatories.html). The UN Convention is the first global comprehensive international anticorruption agreement. The UN Convention requires countries to establish criminal and other offences to cover a wide range of acts of corruption. The UN Convention goes beyond previous anticorruption instruments, covering a broad range of issues ranging from basic forms of corruption such as bribery and solicitation, embezzlement, trading in influence to the concealment and laundering of the proceeds of corruption. The Convention contains transnational business bribery provisions that are functionally similar to those in the OECD Antibribery Convention and contains provisions on private sector auditing and books and records requirements. Other provisions address matters such as prevention, international cooperation, and asset recovery. Malta is a party to the UN Convention.

OAS Convention: In 1996, the Member States of the Organization of American States (OAS) adopted the first international anticorruption legal instrument, the Inter-American Convention against Corruption (OAS Convention), which entered into force in March 1997. The OAS Convention, among other things, establishes a set of preventive measures against corruption, provides for the criminalization of certain acts of corruption, including transnational bribery and illicit enrichment, and contains a series of provisions to strengthen the cooperation between its States Parties in areas such as mutual legal assistance and technical cooperation. As of December 2009, the OAS Convention has 33 parties (see http://www.oas.org/juridico/english/Sigs/b-58.html). Malta is not a party to the OAS Convention.

Council of Europe Criminal Law and Civil Law Conventions: Many European countries are parties to either the Council of Europe (CoE) Criminal Law Convention on Corruption, the Civil Law Convention, or both. The Criminal Law Convention requires criminalization of a wide range of national and transnational conduct, including bribery, money-laundering, and account offenses. It also incorporates provisions on liability of legal persons and witness protection. The Civil Law Convention includes provisions on compensation for damage relating to corrupt acts, whistleblower protection, and validity of contracts, inter alia. The Group of States against Corruption (GRECO) was established in 1999 by the CoE to monitor compliance with these and related anti-corruption standards. Currently, GRECO comprises 46 member States (45 European countries and the United States). As of December 2009, the Criminal Law Convention has 42 parties and the Civil Law Convention has 34 (see http://www.coe.int/t/dghl/monitoring/greco/documents/instruments_en.asp). Malta is a party to both the Council of Europe Criminal and Civil Law Conventions.

Free Trade Agreements: While it is U.S. Government policy to include anticorruption provisions in free trade agreements (FTAs) that it negotiates with its trading partners, the anticorruption provisions have evolved over time. The most recent FTAs negotiated now require trading partners to criminalize “active bribery” of public officials (offering bribes to any public official must be made a criminal offense, both domestically and trans-nationally) as well as domestic “passive bribery” (solicitation of a bribe by a domestic official). All U.S. FTAs may be found at the U.S. Trade Representative Website: http://www.ustr.gov/trade-agreements/free-trade-agreements/. Malta does not have an FTA with the United States.

Local Laws: U.S. firms should familiarize themselves with local anticorruption laws, and, where appropriate, seek legal counsel. While the U.S. Department of Commerce cannot provide legal advice on local laws, the Department’s U.S. and Foreign Commercial Service can provide assistance with navigating the host country’s legal system and obtaining a list of local legal counsel.

Assistance for U.S. Businesses: The U.S. Department of Commerce offers several services to aid U.S. businesses seeking to address business-related corruption issues. For example, the U.S. and Foreign Commercial Service can provide services that may assist U.S. companies in conducting their due diligence as part of the company’s overarching compliance program when choosing business partners or agents overseas. The U.S. Foreign and Commercial Service can be reached directly through its offices in every major U.S. and foreign city, or through its Website at www.trade.gov/cs.

The Departments of Commerce and State provide worldwide support for qualified U.S. companies bidding on foreign government contracts through the Commerce Department’s Advocacy Center and State’s Office of Commercial and Business Affairs. Problems, including alleged corruption by foreign governments or competitors, encountered by U.S. companies in seeking such foreign business opportunities can be brought to the attention of appropriate U.S. government officials, including local embassy personnel and through the Department of Commerce Trade Compliance Center “Report A Trade Barrier” Website at http://tcc.export.gov/Report_a_Barrier/index.asp.

Guidance on the U.S. FCPA: The Department of Justice’s (DOJ) FCPA Opinion Procedure enables U.S. firms and individuals to request a statement of the Justice Department’s present enforcement intentions under the antibribery provisions of the FCPA regarding any proposed business conduct. The details of the opinion procedure are available on DOJ’s Fraud Section Website at http://www.justice.gov/criminal/fraud/fcpa. Although the Department of Commerce has no enforcement role with respect to the FCPA, it supplies general guidance to U.S. exporters who have questions about the FCPA and about international developments concerning the FCPA. For further information, see the Office of the Chief Counsel for International Counsel, U.S. Department of Commerce, Website, at http://www.ogc.doc.gov/trans_anti_bribery.html. More general information on the FCPA is available at the Websites listed below.

Exporters and investors should be aware that generally all countries prohibit the bribery of their public officials, and prohibit their officials from soliciting bribes under domestic laws. Most countries are required to criminalize such bribery and other acts of corruption by virtue of being parties to various international conventions discussed above.

Public sector corruption, including bribery of public officials, is a minor challenge for U.S. firms operating in Malta. According to a report released by GRECO in January 2005, “de facto instances of corruption within the public administration are rare.” GRECO also noted that: “Malta promotes international and coordinated actions to prevent and fight corruption, organized crime and money laundering and takes account of the link between these crimes. It has taken several initiatives to adopt the legal provisions concerning the seizure and forfeiture of proceeds of crime as well as the criminal and civil liability of legal persons with a view of implementing the Criminal Law Convention on Corruption. Minor adaptations are still required. It also adapted in 1995 a Code of Ethics for employees in the public sector and subsequently several other code of ethics.”

GRECO cautioned, however, that: "Malta still lacks a comprehensive anti-corruption strategy and appropriate coordination for implementing and monitoring such a strategy in the public sector and in specific areas of law." For additional details, please see the following site:
http://www.coe.int/t/dg1/greco/evaluations/round2/GrecoEval2(2004)14_Malta_EN.pdf

Since the 2004 GRECO report, Malta has passed legislation to conform Maltese law to EU requirements, including the Prevention of Money Laundering and Funding of Terrorism Regulations of July 2008 [which conforms to the European Union legislation under Directive 2005/60/EC (the Third Directive) and Directive 2006/70/EC (the Implementation Directive)].

A 2008 report been published by the Committee of Experts on the Evaluation of anti-money laundering measures and the financing of terrorism (MONEYVAL) confirms that Maltese Authorities have taken measures to ensure that the AML/CFT (anti-money laundering - combating the financing of terrorism) regime in Malta will be consistent with recognized international standards and practices. The MONEVAL report is available at: http://www.fiumalta.org/pdfs/MONEYVAL(2008)41ProgRep-MLT_en.pdf. Additionally, a Financial Intelligence Analysis Unit has been set up to support domestic and international law enforcement investigative efforts.

In 2011, Transparency International ranked Malta 37th in its corruption rankings of the world’s economies, with a Corruption Perception Index (CPI) of 5.6, behind several EU member states, such as Cyprus, Estonia and Portugal whereby it placed 20th out of the 30 countries that included EU Member states, Switzerland, Norway and Iceland. Anti-Corruption Resources

Some useful resources for individuals and companies regarding combating corruption in global markets include the following:

· Information about the U.S. Foreign Corrupt Practices Act (FCPA), including a “Lay-Person’s Guide to the FCPA” is available at the U.S. Department of Justice’s Website at: http://www.justice.gov/criminal/fraud/fcpa.

· Information about the OECD Antibribery Convention including links to national implementing legislation and country monitoring reports is available at: http://www.oecd.org/department/0,3355,en_2649_34859_1_1_1_1_1,00.html. See also new Antibribery Recommendation and Good Practice Guidance Annex for companies: http://www.oecd.org/dataoecd/11/40/44176910.pdf

· General information about anticorruption initiatives, such as the OECD Convention and the FCPA, including translations of the statute into several languages, is available at the Department of Commerce Office of the Chief Counsel for International Commerce Website: http://www.ogc.doc.gov/trans_anti_bribery.html.

· Transparency International (TI) publishes an annual Corruption Perceptions Index (CPI). The CPI measures the perceived level of public-sector corruption in 180 countries and territories around the world. The CPI is available at: http://www.transparency.org/policy_research/surveys_indices/cpi/2009. TI also publishes an annual Global Corruption Report which provides a systematic evaluation of the state of corruption around the world. It includes an in-depth analysis of a focal theme, a series of country reports that document major corruption related events and developments from all continents and an overview of the latest research findings on anti-corruption diagnostics and tools. See http://www.transparency.org/publications/gcr.

· The World Bank Institute publishes Worldwide Governance Indicators (WGI). These indicators assess six dimensions of governance in 212 countries, including Voice and Accountability, Political Stability and Absence of Violence, Government Effectiveness, Regulatory Quality, Rule of Law and Control of Corruption. See http://info.worldbank.org/governance/wgi/sc_country.asp. The World Bank Business Environment and Enterprise Performance Surveys may also be of interest and are available at: http://go.worldbank.org/RQQXYJ6210.

· The World Economic Forum publishes the Global Enabling Trade Report, which presents the rankings of the Enabling Trade Index, and includes an assessment of the transparency of border administration (focused on bribe payments and corruption) and a separate segment on corruption and the regulatory environment. See http://www.weforum.org/en/initiatives/gcp/GlobalEnablingTradeReport/index.htm.

· Additional country information related to corruption can be found in the U.S. State Department’s annual Human Rights Report available at http://www.state.gov/g/drl/rls/hrrpt/.

Global Integrity, a nonprofit organization, publishes its annual Global Integrity Report, which provides indicators for 92 countries with respect to governance and anti-corruption. The report highlights the strengths and weaknesses of national level anti-corruption systems. The report is available at: http://report.globalintegrity.org/.

Bilateral Investment Agreements

In addition to the investment guarantee agreement with the U.S., Malta has similar accords with Austria, Belgium/Luxembourg Economic Union, Bulgaria, Canada, Croatia, Cyprus, Czech Republic, Egypt, France, Germany, Italy, Kuwait, Libya, Netherlands, Slovak Republic, Slovenia, Sweden, Tunisia, Turkey, and UK. The primary aim of these agreements is to encourage bilateral promotion and protection of investments. These agreements contain guarantees regarding (a) compensation in cases of investment losses due to natural or other causes, and (b) repatriation of capital and dividends. Contracting parties bind themselves not to expropriate each other's investments.

OPIC and Other Investment Insurance Programs

Malta qualifies for OPIC investment guarantee programs. Malta's leading trading partners (U.K., Germany, France and Italy) offer insurance programs similar to OPIC's which cover investments in Malta. Malta is a member of the Multilateral Investment Guarantee Agency (MIGA).

Labor

Malta's labor force currently stands at roughly 181, 684 of whom 65% are males. The country's population is about 417,617, the lowest in the EU. The national minimum monthly wage is USD 907 (685 Euros). The average weekly wage for laborers vary from USD 285 to USD 325, and the average weekly wages for skilled workers are about USD 330 - 646. Up to the third quarter of 2011, the average gross annual salary of employees was estimated at €15,036 (USD 19,894); this amount refers to the basic salary and excludes extra payments such as overtime, bonuses and allowances. On a sectoral basis, the highest average gross annual salary for employees was recorded in the financial , real estate, renting and business activities, whilst the highest average salary by main occupation was recorded among legislators, senior officials and managerial occupations. Annual bonuses amount to USD 1000 and social insurance contributions add an additional 10% to the wage bill. Free or subsidized meals, transport allowances and health insurance memberships are the most common fringe benefits. In addition, employees are entitled to 24 days annual leave and public holidays which fall on a week day. Sick leave entitlement varies according to the industrial sector. There are no formal requirements for local management.

Foreign companies that have invested in Malta have a high regard for the ability, productivity and learning potential of Maltese workers, nearly all of whom speak English. In some industries, labor productivity is comparable to Western European countries and Maltese managers now run most of the foreign firms in Malta. On the labor front, Malta enjoys one of the lowest strike rates in Western Europe, and labor unrest is unlikely in the foreseeable future. The Government strictly adheres to the ILO convention protecting workers' rights.

Foreign-Trade Zones/Free Ports

Malta's Freeport container port offers modern transshipment facilities, storage, assembling and processing operations as well as an oil terminal and bunkering facilities. It is operated by a private company, Malta Freeport Terminals Ltd., under a long term lease. Goods that have been subjected to processing or other transformation in the Freeport are not labeled as having Malta as their country of origin, unless their identity has been substantially transformed. Companies operating within the Freeport area require licensing and bonding as assurances against illegal or negligent operations.

Companies licensed to operate in the Freeport benefit from reduced rates of tax and investment tax credits.

Foreign Direct Investment Statistics

Malta's Financial Accounts (% of GDP)

 

2007

2008

2009

2010

Financial Accounts, excluding Reserves

8.6

4.1

2.3

0.12

Net Foreign Direct Investment

12.2

7.7

9.4

12.6

Net Portfolio Investment Flows

6.7

6.3

-32.7

20.2

         

Net Financial Derivatives

2.2

-5.9

-1.2

0.5

Net Other Investment Flows

-10.6

-3.7

26.6

38.5

Malta’s Gross Fixed Capital Formation (in $ million)

 

2007

2008

2009

2010

Gross Fixed Capital Formation

       

At current market prices

1398.93

1291.89

1152.89

1346.23

At constant prices

1076.1

1011.19

815.80

898.80

Ratio (%) Fixed Investment to GDP at m.p.

19.73

15.70

15.20

14.27

Source: National Statistics Office, Malta.

These figures include the capital inflows of foreign financial institutions that deal exclusively with non-residents.



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