When money manager Simone Chelini left his Milan job last year to seek a hedge fund-friendly country, he rejected some obvious locations. “Luxembourg? Grey, flights are expensive. Ireland? Always rains.”
Instead, Chelini and his colleague Pietropaolo Rinaldi followed scores of Italians who’ve moved to Malta, lured by lower taxes, less bureaucracy and a Mediterranean climate. The number of Italian residents in Malta rose 30 percent in the five years through 2009 to 1,539. That doesn’t count temporary workers on the island, located about 80 kilometers (51 miles) from Sicily, or Italians without resident registrations.
“It’s close to Italy, it’s business friendly, we have a sea view from our office,” said Chelini. He and his colleague joined a unit of Swiss wealth management firm GWM in March 2009 and, in June, opened the 7H Absolute hedge fund from an office in Malta’s tallest building, the Portomaso tower.
Malta, the smallest economy in the European Union, is enticing Italians from fund managers to tile dealers. The country’s annual economic growth rate averaged 2.3 percent in the last five years, compared with an average contraction of 0.4 percent for its bigger neighbor. The jobless rate is 6.7 percent, less than half the level in southern Italian regions such as Sicily, a 90-minute ferry ride away. Italy’s government forecasts the unemployment rate in Europe’s fourth-largest economy will climb to a nine-year high of 8.7 percent this year.
“It’s easy for Italians to get jobs in Malta,” said Vito Calianno, 39, who deals in marble and stone tiles and first visited Malta from his home in Italy’s Puglia region 19 months ago. He plans to move next month after finding “a cheaper way of doing business.” Calianno will open an Internet dealership in Malta for his company, where he says the start-up costs of 1,500 euros ($2,000) are about 10 times cheaper than at home.
Tourist arrivals to Malta from Italy have doubled to 160,000 a year since Malta joined the European Union in 2004 and they surged 28 percent during the first six months of this year. A Facebook group called “Italians who want to move to Malta,” has attracted 155 members in two years.
Malta, with a population of 413,000, is about the size of Florence, Italy’s eighth-largest city and its gross domestic product is less than 1 percent of Italy’s. The island’s main trading partners are Italy, Germany and the U.K. The market capitalization of the Malta Stock Exchange index is the equivalent of about 3.6 billion dollars, compared with 320 billion dollars at the Milan exchange’s FTSE MIB index.
Italian was one of the two official languages in Malta until 1934. The Maltese language is a mix of ancient Arabic and Sicilian, with 40 percent of its words having Latin origin. About two thirds of Maltese speak some Italian, while 54 percent speak it fluently. About 2 percent of Malta’s residents call Italian their mother tongue.
The country, which adopted the euro in 2008, is attracting investment funds, gaming and import-export companies because of lower taxes, wages and rents. “Our legislation is transparent and we have a quicker authorization process,” Joe Bannister, chairman of the Malta Financial Services Authority, said in an interview.
Malta offers rebates that can trim its fixed corporate-income tax rate to as low as 5 percent from 35 percent, while investment funds are exempt from the levy. The number of registered mutual funds in the country rose by one-third last year to 400.
“The fiscal regime has been one of the main drivers in creating an attractive environment for foreign investors,” Alan Camilleri, head of Malta Enterprise, which advises foreign investors to Malta, said in an interview. Labor costs are 40 percent lower in Malta than Italy, he said. An office in a business center can be rented for 600 euros ($784) a month, according to instantoffices.com. That compares with Milan costs of at least 1,000 euros a month.
“Malta is the perfect location in terms of set-up costs and bureaucracy and the local regulator is much quicker,” said Chelini, who managed Unifortune Asset Management SGR’s Albatross fund with Rinaldi in Milan until January 2009. Albatross won the award of best-performing long-short Italian hedge fund in 2007 from Italian investment magazine Mondo Hedge.
Inquiries from Italian companies about moving to Malta have increased, said Reuben Buttigieg, a director of the Malta Institute of Management. Of the 51 companies that moved their headquarters to Malta last year, 16 were Italian, data from Malta’s Financial Services Commission show.
The global financial crisis “has not affected the Maltese economy,” said Tiziana Carboni, 31, who came to Malta in May to work with the Maltese Italian Chamber of Commerce and may extend her stay. She handles at least three requests per day from Italian companies wanting to do business in Malta.
About one fourth of Italians working in Malta find jobs at restaurants, hotels or casinos, according to Malta employment data. Casinos such as the Portomaso and the Dragonara and online gaming companies are currently recruiting Italian staff. About a third of Portomaso Casino’s 200 employees are Italian, General Manager Gianfranco Scordato said. The company increased its personnel by 10 percent last year, with half of them Italian nationals and the rest Italian speakers.
Gianluca Lorefice, 37, owner and chef at the Tana del Lupo restaurant in Paceville, Malta, has seven Italians on his staff of 10. He moved with his family from Sicily to Malta after a holiday in 1996.
“Malta is much smaller in size than Sicily, but much bigger in opportunity,” Lorefice said. “It’s easier to do business here. Compared to Italy, you pay fewer taxes and credit is more easily available. In Italy there is so much bureaucracy, it stifles you.”