| Until 1800, Malta's main economic activities were based around agriculture and ship-related services, the latter being provided from the natural harbours around which the island’s oldest cities, including the capital city Valletta, are built. The dockyard was later used by the British for military purposes. In times of war, Malta's economy prospered due to its strategic location in the middle of the Mediterranean and at the crossroads of Southern Europe, North Africa and the Middle East.
In 1869, the opening of the Suez Canal benefited Malta's economy greatly due to the huge increase in the level of shipping entering the port with Malta becoming one of the principal coaling station for steamers bound for India and East Asia. In 1988, the Malta Freeport was established and it is now one of the key players, within the Mediterranean region, in maritime trans-shipment logistics.
Nowadays, Malta's major resources are it's favourable geographic location, and a highly productive, educated labour force. The country's economy is predominantly driven by service-based industries, including prospects of foreign direct investment in Information and Communication Technologies. The agricultural sector is small, with potatoes being the only major export commodity. Although Malta is an island, the fishing industry is also relatively insignificant. Malta produces only about 20% of its food needs, has limited freshwater supplies, and has no domestic energy sources. The economy is dependent on foreign trade (serving as a freight trans-shipment point), manufacturing (especially semi-conductors and electronics) tourism and financial services. The tourism infrastructure has increased dramatically over the years and a number of quality hotels, including international brands like Radisson SAS, Hilton and InterContinental have now become established on the island. Tourism now accounts for over a quarter of Malta's foreign exchange earnings.
Following the overhaul of Malta's financial legislation, which was undertaken in earnest in the early 1990s, Malta has obtained international recognition as a stable financial services centre of repute. Today, Malta's regulatory framework for financial services is fully consolidated and aligned to internationally recognized standards. Its onshore regime provides a seamless framework that supports both domestic and international economic activity. The Malta Financial Services Authority (MFSA) is Malta's single regulator for banking, investment services, insurance and other financial services activity. The regulator's accessibility and its pro-active approach to addressing market developments, balanced against the rigorous application of international financial regulatory standards, have proved to be a highly successful formula.
The Maltese financial services industry has witnessed a rapid growth over the last decade, with over 6,000 people presently employed within the financial services sector (excluding law firms, corporate services providers and accountancy firms) which contributes a significant 12% to the country's GDP. The Maltese Government continues to evaluate and update relevant legislation and regulations, keeping abreast of developments in the industry with a view to maintaining Malta’s competitiveness in this sector.
Malta was part of the EU enlargement in 2004, along with nine other countries. Several state-controlled corporations have been privatised and markets have been liberalised in anticipation of Malta's EU membership, and the Government’s remaining participations in the private sector continue to be privatised. The Maltese government entered the ERM II framework in May 2005, and is intending to adopt the Euro as the country's currency on 1 January 2008. Malta is also currently on course to adopt regulations implementing the Schengen Treaty provisions.
The Government of Malta is additionally undertaking a strategic plan intended to bring Malta to the forefront of the information technology and telecommunications industries in Europe. In keeping with this ambition, an agreement has been signed between the Government and a Dubai-based company to set up a “SmartCity” in Malta. This is projected to include a new fully-fledged ICT and Media Smart City, modelled on the basis of the “ Dubai Internet City” developed by the same group in Dubai, and a similar “ Smart City” being undertaken in Kerala, India. The project is expected to generate a substantial demand for knowledge-based jobs, particularly in the ICT sector.
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