About the CBI

September 2005
 Background Note: Malta

Flag of Malta is two equal vertical bands of white (hoist side) and red; in
the upper hoist-side corner is a representation of the George Cross, edged in
red.

PROFILE

Official Name:
Republic of Malta

Geography
Area: 316 sq. km. (122 sq. mi.); about one-tenth the size of Rhode Island.
Major cities: Valletta (capital), Sliema.
Terrain: Low hills.
Climate: Subtropical summer; other seasons temperate. Mediterranean: hot dry
summers, cool wet winters.

People
Nationality: Noun and adjective--Maltese.
Population (2003): 399,867.
Annual growth rate (2003 est.): 0.65%.
Ethnic divisions: Mixture of Arab, Sicilian, Norman, Spanish, Italian,
English.
Religion (2003): Roman Catholic, 98%.
Languages: Maltese, English.
Education (2003): Years compulsory--until age 16. Attendance--96%.
Literacy--93%.
Health (2003): Infant mortality rate (per 1,000 live births)--5.9. Life
expectancy at birth--Males 76.4, Females 80.4.
Labor force (1st quarter 2004): 160,183; Public sector 27.1%; Services 43.3%;
Manufacturing 19.4%; Construction & Quarrying 7.5%; Agriculture and fisheries
2.7%.

Government
Type: Republic.
Independence: September 1964.
Constitution: 1964; revised 1974; revised 1987.
Branches: Executive--president (chief of state), prime minister (head of
government), cabinet. Legislative--unicameral House of Representatives.
Judicial--Constitutional Court.
Administrative subdivisions: 13 electoral districts.
Political parties: Nationalist Party, Malta Labor Party, Alternattiva
Demokratika (Green Party).
Suffrage: Universal at 18.

Economy
GDP (2003): $4.85 billion.
Annual growth rate (2003): 1.6%.
Per capita income: $12,173.
National resources: Limestone, salt.
GDP composition by sector, 2002: Services (74.6% of GDP). Industry (22.9% of
GDP); Types--clothing, semiconductors, shipbuilding and repair, furniture,
leather, rubber and plastic products, footwear, spectacle frames, toys,
jewelry, food, beverages, tobacco products. Agriculture (2.5% GDP);
Products--fodder crops, potatoes, onions, Mediterranean fruits and
vegetables.
Trade (2003): Exports--$2.63 billion. Types--Machinery and transport
equipment, semi-conductors, clothing, furniture, leather, rubber and plastic
products, footwear, bunker fuel. Major markets--U.S., Germany, France, U.K.,
Italy. Imports--$3.62 billion: finished and semi-finished goods, food and
beverages, industrial supplies, petroleum and related products. Major
suppliers--Italy, France, U.S., U.K., Germany.
Trade balance (2003): $990 million.
Budget (2003): revenues $2.47 billion; expenditures $2.42 billion, including
capital expenditures of $224.3 million.
Average exchange rate (2003): $1 = Lm 0.434 (rate fluctuates)

PEOPLE
Malta is one of the most densely populated countries in the world, with about
1,160 inhabitants per square kilometer (3,000 per sq. mi.). This compares
with about 21 per square kilometer (55 per sq. mi.) for the United States.
Inhabited since prehistoric times, Malta was first colonized by the
Phoenicians. Subsequently, Romans, Arabs, Normans, the Knights Hospitallers
of St. John of Jerusalem, and the British have influenced Maltese life and
culture to varying degrees. Most of the foreign community in Malta,
predominantly active or retired British nationals and their dependents,
centers around Sliema and surrounding modern suburbs. There is also a growing
North African Muslim community of about 3,000 (2003), many of whom are
married to Maltese nationals. There have also been a number of Maltese
nationals converting to Islam. Roman Catholicism is established by law as the
religion of Malta; however, full liberty of conscience and freedom of worship
is guaranteed, and a number of faiths have places of worship on the island.
Malta has two official languages--Maltese (a Semitic-based language) and
English. The literacy rate has reached 93%, compared to 63% in 1946.
Schooling is compulsory until age 16.

HISTORY
Malta was an important cultic center for earth-mother worship in the 4th
millennium B.C. Recent archeological work shows a developed religious center
there long before those of Sumer and Egypt. Malta's written history began
well before the Christian era. Originally the Phoenicians, and later the
Carthaginians, established ports and trading settlements on the island.
During the second Punic War (218 B.C.), Malta became part of the Roman
Empire. During Roman rule, in A.D. 60, Saint Paul was shipwrecked on Malta at
a place now called St. Paul's Bay.

In 533 A.D. Malta became part of the Byzantine Empire and in 870 came under
Arab control. Arab occupation and rule left a strong imprint on Maltese life,
customs, and language. The Arabs were driven out in 1090 by a band of Norman
adventurers under Count Roger of Normandy, who had established a
kingdom in southern Italy and Sicily. Malta thus became an appendage of
Sicily for 440 years. During this period, Malta was sold and resold to
various feudal lords and barons and was dominated successively by the rulers
of Swabia, Aquitaine, Aragon, Castile, and Spain.

In 1522 Suleiman II drove the Knights of St. John out of Rhodes. They
dispersed to their commanderies in Europe and after repeated requests for
territory to Charles V, in 1530 the Knights were given sovereignty of Malta
under the suzerainty of the Kings of Sicily. In 1523, a key date in Maltese
history, the islands were ceded by Charles V of Spain to the Order of the
Knights of St. John of Jerusalem. For the next 275 years, these famous
"Knights of Malta" made the island their domain. They built towns, palaces,
churches, gardens, and fortifications and embellished the island with
numerous works of art and enhanced cultural heritage. In 1565 Suleiman the
Magnificent laid siege to Malta. After several months the strength of the
Knights and the Maltese population prevailed and the Turks were defeated.
Over the years, the power of the Knights declined, however, and their rule of
Malta ended with their peaceful surrender to Napoleon in 1798.

The people of Malta rose against French rule, which lasted two years, and
with the help of the British evicted them in 1800. In 1814, Malta voluntarily
became part of the British Empire. Under the United Kingdom, the island
became a military and naval fortress, the headquarters of the British
Mediterranean fleet. During World War II, Malta survived relentless raids
from German and Italian military forces (1940-43). In recognition, King
George VI in 1942 awarded the George Cross "to the island fortress of
Malta--its people and defenders." President Franklin Roosevelt, describing
the wartime period, called Malta "one tiny bright flame in the darkness."
Malta obtained independence on September 21, 1964, became a Republic on
December 13, 1974, and a member of the European Union on May 1, 2004. The
last British forces left in March 1979.

GOVERNMENT
Under its 1964 constitution, Malta became a parliamentary democracy within
the Commonwealth. Queen Elizabeth II was sovereign of Malta, and a governor
general exercised executive authority on her behalf, while the actual
direction and control of the government and the nation's affairs were in the
hands of the cabinet under the leadership of a Maltese prime minister.

On December 13, 1974, the constitution was revised, and Malta became a
republic within the Commonwealth, with executive authority vested in a
Maltese president. The president is appointed by parliament. In turn, he
appoints as prime minister the leader of the party with a majority of seats
in the unicameral House of Representatives.

The president also nominally appoints, upon recommendation of the prime
minister, the individual ministers to head each of the government
departments. The cabinet is selected from among the members of the House of
Representatives, which consists of between 65 and 69 members elected on the
basis of proportional representation. Elections must be held at least every
five years. Candidates for any vacancies are determined by the majority of
votes obtained by a candidate during the previous elections.

Malta's judiciary is independent. The chief justice and sixteen judges are
appointed by the president on the advice of the prime minister. Their
mandatory retirement age is 65. There is a civil court, a commercial court, a
family court, and a criminal court. In the latter, the presiding judge sits
with a jury of nine. The court of appeal hears appeals from decisions of the
civil court and of the commercial court. The court of criminal appeal hears
appeals from judgments of conviction by the criminal court. The highest
court, the Constitutional Court, hears appeals in cases involving violations
of human rights, interpretation of the constitution, and invalidity of laws.
It also has jurisdiction in cases concerning disputed parliamentary elections
and electoral corrupt practices. There also are inferior courts presided over
by a magistrate.

The Local Councils Act, 1993 (Act XV of 1993) was published on 30 June 1993
subdividing Malta into 54 local councils and 14 in the small island of Gozo.
Councils are elected every three years by inhabitants who are registered as
voters in the Electoral Register. Elections are held by means of the system
of proportional representation using the single transferable vote. The Mayor
is the head of the Local Council and the representative of the Council for
all effects under the Act. The Executive Secretary, who is appointed by the
Council, is the executive, administrative, and financial head of the Council.
All decisions are taken collectively with the other members of the Council.
Local Councils are responsible for the general upkeep and embellishment of
the locality, local wardens, and refuse collection; they carry out general
administrative duties for the Central Government, such as collection of
Government rents and funds and answering Government-related public inquiries.

Principal Government Officials
President--Eddie Fenech Adami
Prime Minister--Lawrence Gonzi
Minister of Foreign Affairs--Michael Frendo
Ambassador to the United States--John Lowell
Ambassador to the United Nations--Victor Camilleri

Malta maintains an embassy in the United States at 2017 Connecticut Avenue
NW, Washington, DC 20008 (202-462-3611).

POLITICAL CONDITIONS
Two parties dominate Malta's polarized and evenly divided politics--the
Nationalist Party, led by Prime Minister Lawrence Gonzi, and the Malta Labor
Party, led by Alfred Sant. Elections invariably generate a widespread voter
turnout exceeding 96%. The margin between the two parties is so narrow that a
52% share of the votes can still be considered a "landslide" for the winning
party. Alternattiva Demokratika (Green Party) is the smallest political
party. It has not managed to secure a parliamentary seat since its inception
in 1989.

A 2003 referendum resulted in a 54% majority popular vote in favor of
membership in the European Union. The Prime Minister called an early election
in April 2003 for a definite mandate from the electorate. The Nationalists
returned to power with 51.8% and 35 seats for a second term, and EU
membership was confirmed. The Labor party earned 47.5% and 30 seats,
Alternattiva Demokratika had 0.7%, and independent candidates were
negligible. Voter turnout was 97%.

On February 10, 2004, the prime minister and long-time leader of the
Nationalist Party, Eddie Fenech Adami, resigned. Following his election as
Nationalist Party leader, Lawrence Gonzi officially became the Prime Minister
of Malta on March 22, 2004. Eddie Fenech Adami assumed the Presidency of
Malta on April 4, 2004. The next general elections must take place before
October 2008 at the latest. The first elections of European Parliament MPs
were held on June 12, 2004 and resulted in the election of two candidates
from the governing Nationalist Party and three from the Opposition Malta
Labor Party. In 1987, the Maltese constitution was amended to ensure that the
party that obtained more than 50% of the popular vote would have a majority
of seats in parliament and would thereby form the government. Other
amendments made at that time stipulate Malta's neutrality status and policy
of nonalignment and prohibit foreign interference in Malta's elections.

ECONOMY
Possessing few indigenous raw materials and a very small domestic market,
Malta has based its economic development on the promotion of tourism,
accounting for roughly 30% of GDP, and exports of manufactured goods, mainly
semi-conductors, which account for some 75% of total Maltese exports. Since
the beginning of the 1990s, expansion in these activities has been the
principal engine for strong growth in the Maltese economy.

Tourist arrivals and foreign exchange earnings derived from tourism have
steadily increased since the late 1970s. Following the September 11 attacks,
the tourist industry has suffered some setbacks worldwide. Maltese tourist
arrivals fell by a cumulative 7% during 2001 and 2002. At the same time, the
bursting of the high tech bubble dampened exports and private investments.

Despite these adverse developments, the relatively flexible labor markets
kept unemployment fairly steady at 7.2% (Labor Force Survey Jan - March
2004). Following a decline in GDP in 2001, a modest recovery began in 2002,
with some improvements in the tourist sector in the second half of the year.
Employment growth, however, remained weak.

The recent low economic growth coupled with corporate bond preference by the
private sector has contributed to a weak demand for bank loans. Combined with
the strong growth in deposits in the past couple of years, this has led to a
rapid buildup of liquidity in the banking system and pressures to reduce
interest rates that are fully liberalized. The banking system remains highly
concentrated with two of the four local banks accounting for about 90% of
total loans and deposits.

The Maltese Government has pursued a policy of gradual economic
liberalization, taking some steps to shift the emphasis in trade and
financial policies from reliance on direct government intervention and
control to policy regimes that allow a greater role for market mechanisms.
Malta's accession into the EU will mark the total dismantling of protective
import levies on industrial products, increasing the outward orientation of
the economy. Malta maintains a long-standing exchange rate peg to a basket of
currencies--currently composed of the euro, pound sterling and dollar. The
peg has delivered low inflation and served Malta well, especially during the
period of liberalization.

The fiscal situation remains difficult despite some progress in consolidating
public finances. The budget deficit was brought down from 10.7% of GDP in
1998 to 9.7% of GDP in 2003 (still high by EU standards), mainly through
increases in tax rates and improved collection of taxes due. Current
expenditures were reduced in the late 1990s but have crawled back up. The
public sector wage bill and subsidies to public enterprises were mainly
responsible for this increase. Substantial privatization proceeds have
limited the increase in public debt, which grew from 24% of GDP in 1990 to
almost 72.01% in 2003.

The Maltese Government is expected to shortly announce reforms to the pension
and welfare system and reduce the public sector involvement in the economy as
part of the medium- term fiscal consolidation plan. According to the Maltese
government plans, the fiscal deficit is expected to go down to 3.5% of GDP by
the end of 2005. Economic growth was 1.6% in 2003.

FOREIGN RELATIONS
Malta's diplomatic and consular representation includes accreditation to 88
foreign countries and international organizations. Malta is host to 18
resident diplomatic missions, and 89 countries have non-resident diplomatic
representation.

With its central location in the Mediterranean, Malta has long portrayed
itself as a bridge between Europe and North Africa, particularly Libya, with
whom it has enjoyed positive diplomatic and commercial ties. Malta now
constitutes the southernmost flank of the European Union. Malta continues to
be an active participant in the United Nations, the Commonwealth (in 2005
Malta will host the Commonwealth Heads of Government Meeting), the Council of
Europe, OSCE, the Non-Aligned Movement, and various other international
organizations. In these fora, Malta has frequently expressed its concern for
the peace and economic development of the Mediterranean region. The
Nationalist Party government is continuing a policy of neutrality and
nonalignment but in a Western context. The government desires close relations
with the United States, with an emphasis on increased trade and private
investment. U.S. Navy ships resumed liberty calls in 1992 and currently visit
on a regular basis.

U.S.-MALTESE RELATIONS
Malta and the United States established full diplomatic relations upon
Malta's independence in 1964; overall relations are currently active and
cordial. The United States has been sympathetic to Malta's campaign to
attract private investment, and some firms operating in Malta have U.S.
ownership or investment. These include major hotels, manufacturing and repair
facilities, and some offices servicing local and regional operations.

Principal U.S. Embassy Officials
Ambassador--Molly Bordonaro
Deputy Chief of Mission--William Grant
Consul General--Michael Troje
Public Affairs Officer/Director, The American Center--Jeff Anderson
Political Counselor--Matthew Kurlinski
Economic Counselor--Timothy Briscoe
Information Management Officer--Christian Jones
Management Officer--Jonathan Schools
Regional Security Officer--Richard Ober
General Services Officer--Isobel Miller
Defense Attache--Philip Munaco
Community Liaison Officer--Cindy Belnomi
Customs Officer--Leonard Freedman

The U.S. embassy in Malta is located in Development House, St. Anne Street,
Floriana; tel: (356) 21 235-960; fax: (356) 21 243-229; web page: http://
usembassy.state.gov/malta/