Malta
Geert Claes

Guest post: Can Malta become Europe's Silicon Island?

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This is a guest post by Geert Claes, a Business Improvement consultant, Information Architect, User Experience Designer and Business Analyst with extensive international experience. He’s lived and worked in Australia for most of the last 10 years but in August last year moved back to Europe to the tiny Mediterranean island of Malta.

If Europe is still looking for its Silicon Valley, Malta could well be it.

Malta is a little Mediterranean Island south of Italy, somewhere between Sicily and North Africa. The current Maltese IT scene is, as one might expect with a total population of about 410k, fairly small. Malta does have a healthy number of IT companies and Malta’s taxation system to attract foreign investment has also resulted in a more than average (unhealthy?) number of online gambling or iGaming companies.

However, SmartCity Malta is a €275 million business park that could truly make Malta a contestant to become a hub for European IT talent and tech start-ups. SmartCity Malta is a joint venture between the Maltese government and Dubai based TECOM Investments to construct a technology park with offices, hotels, apartments and even retail outlets. Why this rather big investment for this tiny island you wonder? Well, Malta does have some excellent drawing cards:

  • Member of the European Union, making it easy for any EU citizen to live and work in Malta;
  • Part of the Euro zone, eliminating currency conversion hassles for most EU citizens;
  • English is (next to Maltese) an official language;
  • Central European Time zone;
  • Regular direct flight connections to Europe, North Africa and the Middle East;
  • High speed Internet connections and excellent mobile phone coverage;
  • Mediterranean Climate;
  • Excellent health care system;
  • High standard of education;
  • Taxation encouraging foreign investment.

As with most things, Malta is not all sunshine and roses either. There are a number factors working against Malta too:

  • Small domestic economy, given the global aspect of ICT this may actually not be a real issue at all;
  • Small local talent pool: initiatives are underway to boost the local IT talent pool and it will not be that hard to convince people to move to Malta so this may not be a big issue either;
  • Electricity & Gas; Malta has no connections with the European power grid and no gas pipelines. Data centers and IT in general tend to prefer stable and cheap electricity. Malta often suffers from electricity blackouts, yet electricity is expensive because all power is generated using imported fossil fuels;
  • Water; half of the water supply depends on electrically powered desalination plants and the cost of electricity has a roll-on effect on drinking water as well;
  • Cars and roads; traffic in Malta is left-hand-drive, which by itself is not a problem at all, but it prevents buying (cheaper) cars from mainland Europe. The Maltese roads are also generally known to be in a very bad condition and Malta has a high number of car accidents;
  • Banking, opening a bank account and getting a personal loan in Malta as a non-Maltese citizen is known to be a huge PITA. Malta will need to make relocating to the island as smooth as possible;
  • Real Estate market is broken; the otherwise universal rule of supply-and-demand for housing simply doesn’t work in Malta. Malta has a massive oversupply of housing with a third of Malta’s residential dwellings permanently vacant, yet the cost of housing does not go down and is very high compared to the average wage (negative effect of the quality of life), mainly because there is no property tax.

SmartCity Malta recently made news headlines for the wrong reasons when they were accused of trying to pressure local Maltese IT companies to relocate to the new SmartCity Malta office buildings. It will be very hard though to convince local Maltese IT companies to relocate to an area that will remain a construction site for the next 11 years, at a much higher price compared to of their current office space cost without providing the promised added value of it being an IT technology hub.

A real IT technology hub is based around tech start-ups. SmartCity Malta is well underway to provide some nice office space, but creating a fertile ground for tech start-ups will be the hardest challenge. Founders of successful start-ups are smart people with innovative business ideas. Attracting these clever people will require angel investors and/or venture capitalists that are willing to invest in these ideas, because successful start-ups are a major contributor to job creation and overall success of a technology hub.

If SmartCity Malta really wants to promote itself as being a technology hub, they probably should actually have started by building SmartCity’s residential buildings rather than the office buildings. Tech start-ups don’t really need fancy office space, at least not to begin with. What SmartCity Malta really needs are people willing to invest in start-ups in Malta. SmartCity Malta and the Maltese government probably need to partner with angel investors and venture capitalists to attract these start-ups, so that they can use a part of the SmartCity Malta complex as their start-up “garage”. Attending and sponsoring European start-up events like Plugg, LeWeb, TechCrunch Europe’s GeeknRolla or the upcoming SnitzelConf would give Malta exposure to aspiring entrepreneurs and investors.

Looking at all the pros and cons, one has to agree that Malta really does have a lot going for it. Most (Northern) Europeans would simply love to be able to live on a sunny Mediterranean island and passionately work on their start-up idea. The big question is whether Malta will be able to attract tech start-up investors, because they are the one main missing ingredient for Malta to become Europe’s Silicon Valley.

Or perhaps that should be Silicon Island.

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