Europe & Central Asia
Malta risk report
Corruption does not represent a significant challenge for businesses operating in Malta, except for most notably the public procurement sector. This is attributed to the country’s transparent administration and economy, low levels of official impunity, and small room for arbitrary spending of public funds. Inefficient government bureaucracy and the country's shadow economy, which constitutes nearly a quarter of the entire economy, are the largest obstacles to business. Connections between the local elite and political figures also threaten fair competition. The Maltese Criminal Code criminalizes active and passive bribery, abuse of office, extortion and embezzlement, among other corruption-related offenses, and the law is effectively enforced. Businesses report bribery is rare in Malta, and the legal framework criminalizes facilitation payments and giving and receiving gifts.
Judicial system Very low risk
The Maltese judiciary carries a low corruption risk for companies. The courts are perceived as independent (HRR 2016) and the public generally believes that the courts are free from corruption (GRECO 2015). Businesses report that bribes in return for favorable court decisions are generally rare (GCR 2015-2016). Despite nearly half of citizens believing bribery and abuse of office are widespread among judicial officials, almost none report to have paid a bribe to the institution (European Commission, Feb. 2014). Contractual and property rights are adequately enforced by the judiciary (ICS 2017). While companies express general trust in the judiciary's independence, they do not consider the judiciary to be adequately efficient in settling disputes or in challenging government regulations (GCR 2016-2017). Enforcing a contract takes 505 days on average, which is less than the regional average (DB 2017). There have been no major recent investment disputes in Malta.
Malta is a signatory to the New York Convention 1958 and the International Centre for the Settlement of Investment Disputes (ICSID).
Police Very low risk
The Maltese police do not pose a significant corruption risk for business. Over one-third of citizens believe bribery and abuse of office are widespread among police officials, but the percentage has fallen markedly compared to previous years, indicating an improvement in the level of trust in the police (European Commission, Feb. 2014). Malta's authorities maintain effective mechanisms to investigate police abuse of functions and corruption, and there were no reports of police impunity during 2016 (HRR 2016). Businesses report confidence in the ability of the police to protect companies from crime and uphold the rule of law (GCR 2016-2017).
Public services Very low risk
The public services sector carries a low corruption risk for businesses operating in Malta. Companies perceive Malta's regulatory environment as generally transparent and effective, and irregular payments are not common practice (GCR 2016-2017). Despite that more than two-thirds of businesses perceive bribery and the use of connections as the easiest way to obtain certain public services, the bribery of public officials is described as a minor challenge for companies investing in the country (European Commission, Dec. 2015, ICS 2017). Inefficient government bureaucracy is ranked by companies as the second most problematic factor to doing business (GCR 2016-2017). Starting a business is more time-consuming and more costly on average compared to other OECD countries (DB 2017). Obtaining an electrical connection requires the same number of steps as the regional average, but the process is significantly slower (DB 2017).
In 2016, an employee of the Health Ministry named Neville Gafa was accused of abusing a medical visa scheme established under an agreement between Libya and Malta (The Independent, May 2017). Gafa was accused of charging EUR 2,600 per week from Libyans in return for visas, part of which he allegedly embezzled himself; a Libyan middleman involved in the case has instituted court proceedings against Gafa (The Independent, May 2017). The Libyan middleman is facing charges of extortion and fraud in relation to the case; it is unclear whether these charges are a result of a criminal counter-complaint by Gafa (The Independent, Jul. 2017).
In one high-level case, Prime Minister Muscat's chief of staff, Schembri, is facing allegations that he accepted bribes from wealthy Russians in return for Maltese passports (The Guardian, May 2017). No further information on the case was available at the time of review.
Land administration Moderate risk
Malta's land administration suffers from moderate risks of corruption. More than fifty percent of citizens believe bribery and abuse of office are widespread among officials issuing building permits (European Commission, Feb. 2014). Property rights are generally well-defined and well-protected under Maltese law and in practice (ICS 2017; GCR 2016-2017). Appropriate laws for expropriation are in place, but no cases of property expropriation have occurred in the past decade (ICS 2017). Dealing with construction permits is more time-consuming yet less costly than the regional average, and registering property is less time-consuming but takes more procedures than the regional average (DB 2017).
Questions have been raised about the sale of prime beachfront public lands to a private developer for a mere EUR 15 million: a price that is far below market rates (Times of Malta, Mar. 2017). It is furthermore alleged that proper tendering procedures were not followed in the land sale (Times of Malta, Mar. 2017).
Tax administration Moderate risk
The tax administration carries a moderate corruption risk for companies investing in Malta. Tax regulations and tax rates are not perceived as an obstacle to investors, representing a competitive advantage for the country. Almost half of businesses believe tax fraud is pervasive (European Commission, Dec. 2015), while almost one-third of citizens believe abuse and bribery are widespread among tax officials (European Commission, Feb. 2014). Businesses in Malta face only half the number of payments per year and spend significantly less time on doing taxes compared to the regional average (DB 2017). Malta has been accused of acting as a tax haven for multinationals; between 2012 and 2015 companies have allegedly evaded EUR 14 billion in taxes (The Guardian, Jan. 2017). A quarter of Malta's economy is informal, in part due to ineffective tax evasion controls (SGI 2016). Malta’s exchange of information standards concerning taxation matters are in-line with international standards of transparency (EOTIP, 2013).
The Maltese Prime Minister, Muscat, has called an early election in mid-2017 after his wife, Michelle Muscat, and close members of his staff were hit by corruption allegations, including allegations that Mrs. Muscat held various offshore accounts (DW, May 2017). It has been alleged that a payment of USD 1 million linked to the Azerbaijani first family, in addition to multiple payments of USD 100,000 each, were made to one of Mrs. Muscat's companies registered in Panama (Eurasianet, May 2017).
In another case, opposition leader Simon Busuttil has accused Tourism Minister Konrad Mizzi and the prime minister's Chief of Staff Keith Schembri of money laundering, after leaks in the Panama Papers showed both men had opened accounts requiring at least USD 1 million in deposits at a Panamanian bank for a shell company (Malta Today, Jul. 2017). Mr. Busutill has questioned how the two men would be able to pay these deposits from their government salaries (Times of Malta, Jul. 2017). A magistrate has agreed to initiate an inquiry into the matter; both Schembri and Mizzi have denied all allegations (Malta Today, Jul. 2017).
Customs administration Moderate risk
Corruption risks at Malta's border are moderate. Companies consider Malta's border administration to be transparent but fairly inefficient (GETR 2016). Irregular payments sometimes occur when dealing with exports and imports (GETR 2016). About one-third of citizens believe bribery and abuse of office are widespread among customs officials (European Commission, Feb. 2014). Companies overwhelmingly cite burdensome import procedures as a problem for importing (GETR 2016). Very few companies cite corruption at the border as a problem (GETR 2016). The time, cost and number of procedures needed to trade across borders are lower than regional averages (DB 2017).
Public procurement Very high risk
Malta's public procurement sector carries a high corruption risk for business. Almost half of businesses report that corruption prevented them from winning a public contract in the past three years (European Commission, Dec. 2015). Half of companies believe corruption is pervasive in both tenders managed by national authorities and those managed by local authorities (EUACR, Feb. 2014). When awarding public contracts, businesses report that favoritism by public officials distorts fair competition (GCR 2016-2017), and half of companies find that political funding in exchange for public contracts is widespread (EUACRM, Feb. 2014). Corruption risks in Malta's procurement sector include tailor-made specifications for particular companies, collusive bidding, conflicts of interest and unclear selection or evaluation criteria (EUACRM, Feb. 2014). E-procurement has played an active role in improving transparency and communication between bidders. Malta's corruption regulation states that companies breaching the public procurement regulations or the Employment and Industrial Relations Act could be blacklisted for six months to two years. Malta overhauled its public procurement procedures in 2016 to align with EU directives; among the changes are more decentralization, mandatory tendering procedures for contracts of various values, and an increase in e-procurement (Times of Malta, Oct. 2016).
Companies should be aware of potential conflicts of interests of Maltese officials; in 2015 it emerged that the deputy leader of the ruling Labour party had continued operating his private legal practice alongside his job, in the process gaining several contracts worth almost EUR 100,000 to advise various legal agencies (Transparency International 2017).
Malta’s Environment and Planning Authority (MEPA) has come under scrutiny due to allegations of corruption and other irregularities in its decision-making process (EUACRM, Feb. 2014). In an effort to address corruption within MEPA, the government appointed a Commissioner for Environment and Planning responsible for the investigation of complaints made against MEPA, and replaced the office of Auditor of MEPA (EUACRM, Feb. 2014). MEPA was spun off into two separate agencies in 2016, one focused on the environment and the other focused on planning, following continuing complaints about bureaucracy and inefficiency (The Independent, Apr. 2016).
The state oil company Enemalta has been yet again hit by a corruption case. Customers had allegedly bribed employees in return for tampering with energy meters to avoid paying energy bills (FitW 2015). The government granted customers who admitted involvement with amnesty and brought suits against those who had not responded to the amnesty (FitW 2015). An officer with Enemalta was acquitted of charges of bribery in connection with the case (Times of Malta, Mar 2016). The outcome of these charges could not be verified at the time of review.
The government generally implements anti-corruption laws effectively (HRR 2016). Malta's Criminal Code criminalizes active and passive bribery, extortion, embezzlement, trading in influence, abuse of office, and receiving and offering gifts. The penalty for bribery, whether in the private or public sector, can reach eight years' imprisonment. Malta removed the statute of limitations on corruption charges for public officials (ICS 2015). Money laundering is criminalized under the Prevention of Money Laundering Act, which stipulates procedures for the investigation and prosecution of money laundering and establishes the Prevention of Money Laundering and Funding of Terrorism Regulations. The Act imposes a number of procedures, including the designation of a reporting officer responsible for investigating suspicious transactions, carrying out customer due diligence, internal and external reporting and safeguarding transaction records for at least five years (CSB Advocates). The Code of Principles of Good Corporate Governance requires public companies to detail the extent of their compliance in their annual reports. Whistleblowers are protected under the Protection of the Whistleblower Act. All government officials are subject to asset disclosure laws. The government has been criticized for not addressing conflicts of interest, particularly public officials’ roles in the private sector (EUACR, Feb. 2014). Reportedly, alleged corruption at the senior levels of government is a problem in Malta, fuelled by a constitution that places nearly every institution under its control (HRR 2016, The Economist, May 2017). Limitations in Malta’s anti-corruption framework also include the country’s anti-corruption commission, which is alarmingly understaffed. Malta has adopted the Financing of Political Parties Act, allowing for more transparency by subjecting political financing to regular auditing and monitoring (GRECO, June 2015). Procurement is regulated by the Public Procurement Regulations, and Public Procurement of Entities Operating in the Water, Energy, Transport and Postal Services Sectors Regulations are issued under the Financial Administration and Audit Act. Malta has signed and ratified the UN Convention Against Corruption, the Criminal law Convention on Corruption, the Civil Law Convention on Corruption and the Additional Protocol to the Criminal Law Convention on Corruption. Malta is also a member of the Council of Europe Group of States against Corruption (GRECO).
Freedom of speech is protected by law, and the government generally respects these rights (HRR 2016). Malta's legislation criminalizes defamation, and journalists can be prosecuted for libel (HRR 2016). Senior government figures sometimes file libel suits in response to reporting (HRR 2016). Information can be withheld if it relates to public interest, security or ongoing court procedures; in appeals over information requests, the courts frequently side with the government (HRR 2016). Internet freedom is unrestricted (HRR 2016). Malta's press environment is considered 'free' (FotP 2017).
The right to association is guaranteed by law and is unrestricted in practice (HRR 2016). The government respects freedom of association and is generally receptive towards criticism from NGOs (HRR 2016). The National Federation of NGOs (NFNM) seeks to strengthen the role and impact of NGOs by offering assistance and enabling communication between NGOs; NFNM is also charged with monitoring the framework within which NGOs operate. Malta is the only EU member without a local chapter of Transparency International.
- World Bank: Doing Business 2017.
- Freedom House: Freedom of the Press 2017.
- US Department of State: Investment Climate Statement 2017.
- Malta Today: "Magistrate to Kick-Start Panama Papers Inquiry Into Keith Schembri and Konrad Mizzi", 26 July 2017.
- The Independent: "Libyan Whistleblower Faces Criminal Charges Over Claims on Medical Visa Racket and Neville Gafa", 17 July 2017.
- Times of Malta: "I Will Keep Fighting for Panama Papers Justice, Says Simon Busuttil", 16 July 2017.
- The Economist: "Corruption Allegations Trouble Tiny Malta", 11 May 2017.
- Eurasianet: "Azerbaijan's First Family Accused in Maltese Corruption Scandal", 1 May 2017.
- The Guardian: "Malta's Prime Minister Under Pressure From MEPs over Corruption Claims", 9 May 2017.
- The Independent: "Medical Visas: Libyan Whistleblower Sues Neville Gafa over EUR 36,675 in Unreturned Money", 7 May 2017.
- DW: "Malta PM Calls Early Elections Amid Wife's Offshore Account Scandal", 1 May 2017.
- Times of Malta: "ITS Deal: A Series of Frists and a Whole Lot of Questions", 12 March 2017.
- The Guardian: "Malta Accused of Being Tax Haven as it Takes EU Presidency", 11 January 2017.
- World Economic Forum: Global Competitiveness Report 2016-2017.
- World Economic Forum: The Global Enabling Trade Report 2016.
- Bertelsmann Foundation: Bertelsmann Transformation Index 2016.
- Bertelsmann Foundation: Sustainable Governance Indicators 2016.
- Transparency International: Malta Overview of Corruption and Anti-Corruption 2017.
- US Department of State: Human Rights Practice Report 2016.
- Times of Malta: "Public Procurement to be Decentralised - New Procedures Announced", 13 October 2016.
- The Independent: "MEPA Demerger Comes into Force Today as Planning Authority is Officially Launched", 4 April 2016.
- Times of Malta: "Court Confirms Acquittal of Former Enemalta Official Charged in Connection With Oil Procurement Scandal", 17 March 2016.
- World Economic Forum: Global Competitiveness Report 2015-2016.
- US Department of State: Investment Climate Statement 2015.
- GRECO: Fourth Evaluation Round - Malta 2015.
- Freedom House: Freedom in the World - Malta 2015.
- European Commission: Business Attitudes Towards Corruption in the EU, December 2015.
- Times of Malta: 'Updated - Project Officer not guilty in soil scandal case - court does not believe George Farrugia, 21 May 2015.
- Eurobarometer: Special Eurobarometer 397 – Corruption Report, 2014.
- European Commission: EU Anti-Corruption Report: Annex 18, Malta 2014.
- OECD: Global Forum on Transparency and Exchange of Information for Tax Purposes 2013.
- European Commission: Identifying and Reducing Corruption in Public Procurement in the EU 2013.
- Malta Today: 'Revealed - Kickbacks paid for Enemalta oil purchases to procurement official', 20 January 2013.