Alaco

21.12.2015 | Libyan newcomers bring Malta mixed blessings

The small Mediterranean archipelago nation of Malta has long attracted sun-seekers from northern climes. Since joining the EU in 2004, it has also been positioning itself as a financial centre with liberal tax and regulatory policies. Besides the British and German tourists, well-heeled Arab and Russian businessmen can be seen in the baroque capital of Valetta and in the hotels of the nearby coastal towns. But the Arabic-speakers in Malta are not wealthy Gulf tourists that one would see in upscale Mediterranean destinations like France’s Cote d’Azur. They are mostly from Libya, the strife-torn state 180 miles south of Malta.

Malta has long maintained close economic and cultural ties with its oil-rich neighbour.  Throughout Libya’s international isolation under Colonel Qaddafi’s decades-long rule, the island was an economic lung for the Libyan elite.  In the 1980s relations were so close that Arabic became a compulsory subject in Maltese secondary schools and Qaddafi even proposed a union between the two countries.  Although unification never materialised, following Qaddafi’s overthrow in 2011 and the subsequent security breakdown, Libyans have sought residence in Malta in significant numbers.  The flow of Libyan nationals to Malta increased further in the summer of 2014, when Tripoli International Airport was attacked and destroyed.

Many of the arrivals are wealthy Libyans who have relocated their businesses due to the chaos in much of Libya since it fractured into two administrations: the rump of the dissolved Islamist-dominated General National Congress based in the capital Tripoli, and the internationally-recognised House of Representatives, based in Tobruk, in the far east of the country.  Several state-owned enterprises, particularly those affiliated with Tobruk, are now run from Malta.

In contrast to the strain poorer migrants put on government services elsewhere in Europe, the Libyan influx to Malta has been a boon to sectors such as real estate, private medical and education services as well as retail, banking and professional services.  It has been estimated that Malta-based Libyan households spend tens of thousands of euros a year on such services, far more than the traditional package holiday visitors contribute to the economy.

But the Libyan visitors are not all good news for the Maltese or the wider EU economy.  Earlier this year, Joseph Sammut, a prominent local accountant and auditor catering to the Libyan business community, was charged with running a scam whereby he registered companies for Libyan nationals with fake stock declarations, on the strength of which residency permits were issued.  Hundreds of visas for Libyans are believed to have been processed through this scheme.  Several government employees are facing charges related to facilitating the production of such permits.

The number of new residence permits issued to non-EU nationals in 2014 reached 13,798, more than double the corresponding figure in 2012.  The biggest proportion – nearly 3,500 – were issued to Libyans, an increase of 444% over 2012, with Russian citizens in second place with 1,493 permits. Maltese residency permits give recipients access to travel across the EU zone.

The visas-for-bribes revelations have underscored the darker side of Malta’s openness.  The island has also faced criticism that it has become a haven for ill-gotten Libyan money.   In the course of recent litigation it emerged that one of Qaddafi’s now deceased sons, Mutassim Qaddafi, was a major customer of Bank of Valletta, the island’s largest lender, which is partly owned by the Maltese government.  Libya has been seeking to recover millions of dollars embezzled from the state by Qaddafi’s cronies through international courts.  It accuses Bank of Valletta of ignoring rules designed to prevent Western banks from doing business with corrupt officials or facilitate money laundering.  Libya alleges that Bank of Valletta violated know-your-customer rules that should have prevented it from opening an account for Mutassim Qaddafi, who amassed $60 million in his Maltese accounts despite having a modest civil servant’s salary.

The raft of recent scandals has raised questions over Malta's credibility as a financial centre.  The EU has criticised Malta and its banks for inadequate reporting of suspicious transactions, especially involving politically exposed individuals.  The opposition to the incumbent Labour party has described the visas-for-bribes case as "institutionalised corruption".  With the Libyan crisis showing no sign of resolution, Libyan business will continue to pour into Malta and many are sceptical that the Maltese authorities will change old habits.