While it was Italy’s recent signing of a Belt & Road MoU with China that attracted media attention, the first EU member state to have done so was in fact Malta.
One of the EU’s smallest members in terms of population (430,000) the island lies just 80 km south-east off the coast of Sicily and just another 1000 km from Libya in North Africa.
While much of what had been a robust trade route between Malta and Tripoli has been destroyed in the ousting of Colonel Gaddafi and the ongoing civil war, many wealthy Libyans invested in Malta in the late 2000’s to establish a safe haven for their families and look at rebuilding ties with Europe. Consequently, Malta possesses an influential and wealthy Libyan trade diaspora with connections throughout North Africa and beyond.
Malta itself, with Sicily just to the north, has long had significant trade ties with Italy. As all three countries are members of China’s Belt & Road Initiative, the opportunities for Malta to develop trade ties with China and Africa are profound.
Malta is re-positioning itself as an EU trade gateway to North Africa and further south. It is also a quasi offshore financial centre, meaning that Chinese funds could be channelled through Malta and into Libya, a huge help in reconstruction efforts now being carried out in the country.
However, much still needs to be done by the Maltese government and its trade representatives, who have tended to be reactive rather than proactive.
For example, Malta has a Double Tax Treaty with China although this dates back 26 years to 1993 and is in dire need of updating, not least to include greater provisions on financial services and IT, both areas that Malta has been developing.
Malta’s trade with China is also relatively low. Malta sells to China about US$50 million worth of goods, importing about US$250 million (last available trade figures, 2016).
That is in contrast to other small European nations, such as Iceland, who manage to sell just under US$100 million of goods to China but with a population 100,000 lower, Luxembourg (US225 million) and only just beats out nearby Gibraltar, who despite having a population of just 76,000 still manage to sell US$40 million worth of products to the Chinese. Clearly, Malta needs a new export agency approach.
This is also in contrast to Italy, where China’s Suning Group announced earlier this year that they would spend US$2.9 billion on sponsoring a “Made in Italy” program back in China with the Italian Trade Agency. and look at boosting Italian exports to China to the 100 million euros mark.
Granted, Italy is a far larger economy than Malta, but the Maltese trade initiatives have not been that dynamic either, and especially in examining the Belt & Road potential or agreeing on deals with Chinese investors to support Malta. It is a missed opportunity, and one that needs a change of attitude, attention to trade detail, and investment.
While the Libyan conflict has still to be properly resolved, that hasn’t stopped China from developing trade ties.
The country is a major oil and gas nation, with the 10th largest oil reserves globally. Libya is also a member of the Asian Infrastructure Investment Bank (AIIB ), a Beijing backed financial institution that as its name suggests, assists with infrastructure development, primarily in Eurasia, and is also a member of the China-Arab States Cooperation Forum.
Malta is also a member of the AIIB.
In Libya however, China is treading warily, concerned about investing money into the country yet to have violence return and destroy their efforts. Consequently, it is also very much engaged in peace talks between the different Libyan factions, which are divided along tribal lines yet supported by different interests, including those of the United States.
As and when a peace deal can be brokered, Chinese investment into Libya is likely to take off.
Malta should be poised for this, being able to offer low tax rates, financial services, and logistics support.
These can be added to Italy’s own longer-term strategic interests in Libya, which are also significant. Meanwhile, Malta itself is going through changes.
The population is, despite the somewhat hard-line approach of its Government towards its critics, growing more wealthy, and it is now not uncommon to see black Africans now engaged in the services industry waiters, bus drivers and so on.
Malta is engaged in an increasing amount of trade with Ghana, also a Belt & Road member, in addition to perennial trade ties with its North African and Eastern Mediterranean neighbours of Algeria, Tunisia, Egypt, Israel, Greece, Cyprus, Jordan, Lebanon, Syria and Turkey all of which are in the same Belt & Road club.
The African members of the Belt & Road have also just agreed on a pan-African Free Trade deal AfCFTA which eliminates cross-border tariffs on 90% on African goods from the 1st June.
In some cases, trade with China, which already has significant business interests on the ground in countries such as Egypt, is expected to rise 50% over the next 12 months. Malta (and the EU) should also be taking advantage of this, yet they appear ill-equipped and unprepared in terms of African trade.