Over the past decade, Malta’s foreign direct investment (FDI) attractiveness has shown a notable shift, particularly in areas concerning the recruitment and retention of skilled talent.

As businesses navigate an increasingly competitive local labour market, they face growing challenges that are reflected in the latest figures.

In 2014, the attractiveness of local labour skills was rated at 68 per cent, but this has plummeted to just 32 per cent in 2024.

Labour costs, which were considered a key strength at 65 per cent a decade ago, have similarly dropped to 39 per cent this year.

Finding new specialised personnel has proven more difficult. In 2014, 57 per cent of businesses reported success in hiring skilled professionals locally. By 2019, this figure had dropped to 27 per cent, and in 2024, it remains low at 31 per cent.

Despite these challenges, retention rates for specialised personnel have remained relatively strong, consistently surpassing 78 per cent over the last ten years. In fact, retention peaked at 96 per cent in 2020 during the COVID-19 pandemic. However, even this figure has declined, now standing at 81 per cent.

Beyond the human capital concerns, other factors contributing to the drop in Malta’s foreign direct investment (FDI) attractiveness have emerged. One of the most significant is the perceived weakening of Malta’s political and regulatory stability.

Once a major selling point, with 85 per cent of respondents citing it as a key strength in 2015, it has steadily declined to just 29 per cent in 2024. This was particularly evident in 2021, when the country faced the repercussions of being greylisted.

Malta’s research and development (R&D) and innovation environment also remains an area of concern for investors. Over the past decade, the country’s R&D attractiveness has fluctuated but consistently ranks among the lowest FDI parameters. In 2024, it stands at 26 per cent, a slight drop from its highest point of 37 per cent in 2018.

Transport and logistics have also been a persistent issue, representing the least attractive FDI parameter for the country. Starting at 25 per cent in 2014, it has seen a gradual decline, with only 16 per cent of respondents in 2024 considering it a strength. This highlights the ongoing challenges Malta faces in infrastructure development, particularly for international investors relying on efficient logistics and supply chain networks.

Despite these concerns, investor confidence in Malta’s long-term prospects remains intact. 70 per cent of respondents in 2024 believe their long-term future is secure in Malta, a figure that has fluctuated over the last ten years.

Furthermore, while expansion plans have cooled since their peak during Malta’s economic boom in 2017 and 2018, there has been a slight uptick in 2024 following a dip to 36 per cent in 2023.

Corporate taxation continues to be one of Malta’s most attractive FDI features, despite some fluctuations. It peaked at 91 per cent in 2016, remaining relatively stable throughout the decade. Even with a slight dip in 2021 to 67 per cent, it remains a consistent draw for foreign investors.

On the telecommunications front, Malta has maintained a relatively high level of attractiveness, thanks to a solid regulatory framework and ongoing private investment in the sector. This consistency in telecommunications has provided a stable foundation for foreign investors, despite rapid developments and regulatory changes within the industry over the past decade.

However, the social climate, once a key factor in Malta’s FDI attractiveness, has seen a gradual decline. In 2014, it was among the top three FDI parameters, but in 2024, it has dropped considerably, from 90 per cent to 62 per cent. This reflects the changes in population growth and broader societal shifts.

Overall, while Malta remains an attractive destination for FDI in certain sectors, particularly telecommunications and corporate taxation, key areas such as labour skills, political stability, and infrastructure have seen significant declines.

As the country moves forward, addressing these concerns will be critical to maintaining its competitiveness on the global stage.

Related

Nick Spiteri Paris

Front-facing industries have seen a complete shift away from local employees, notes Bigbon CEO

7 February 2025
by Nicole Zammit

Malta’s labour market has undergone a significant transformation over the past decade.

How to create the most productive work environment

7 February 2025
by Nicole Zammit

A well-organised, distraction-free, and employee-friendly environment fosters not just productivity but also a more positive and enjoyable work culture.

PwC Malta AI business survey reveals strategic gaps in AI Implementation

7 February 2025
by Nicole Zammit

A survey assessed the state of AI adoption in Malta, shedding light on key drivers, barriers, and organisational maturity in ...

Klikk Finance appoints Sandro Gauci Non-Executive Director

7 February 2025
by Nicole Zammit

He currently oversees GO plc’s consumer sales channels, including retail, resellers, telesales, and online operations.