The Report Company: What is the position of Malta and its economy these days?

Joseph Zammit Tabona: Malta's position in Europe is, I would say, fairly strong. Malta has certain advantages. Labour costs are around 50% of what they are in mainland Europe. We have the English language and all our legislation is in English and Maltese. Our social contribution is limited to 10% of wages and there is a cap on €16,500, so for anyone earning in excess of €16,500 the national insurance contribution is only €1,650, so that's an advantage for employers.

We had 3.6% growth in our economy last year, which was mainly attributed to financial services. We've got some 25 banks represented. They've gone through the recent stress tests and came out with flying colours. The percentage of defaulters on mortgages in absolutely minute in relation to the two principal banks, HSBC and Bank of Valletta, which control around 92% of the market.

Manufacturing plays an important role. It is the largest segment in our economy and employs around 26,000 people. On tourism, we had a 12.5% increase in tourists last year, reaching 1.3 million people for the first time ever.

TRC: In a report in January, the IMF said Malta needed to raise productivity, skills and employment rates to catch up with richer European countries. How can it achieve all this?

Zammit Tabona: The government is committed to educating our people to meet the needs of our employers and increase the 'value added' of our employees.

Unemployment is down to 5.8%. Inflation is relatively low – it's under 3%. You've got inward inflation because of oil prices. At each budget speech held around November of each year, the government announces the minimum increase in wages which come into effect in the subsequent year so as to take into account the inflation rate. This is done after consultation with the private sector and unions through the Malta Council for Economic and Social Development.

The Maltese are very eager to learn. The number of university students from 1987 to today has gone up from 1,500 to about 10,000 and besides that there are also technical/vocational institutions. There's a big commitment from the government to meet the demand in the economy and educate the people. Not only are there no fees but we pay students to go to university. The stipends are higher in the sectors in which we want them to get training.

TRC: What investment opportunities are there for international businesses in Malta, particularly for British ones?

Zammit Tabona: We have a lot of international companies in Malta. Lufthansa set up a maintenance base [in 2002] and today they employ 700 people, all Maltese. More recently we've been successful in attracting SR Technics to Malta and Easyjet signed a $1.6bn contract with SR Technics to service all their Airbus planes in Malta for the next 11 years.

Manufacturing is the largest segment of the economy. We've got companies like De La Rue, which has been in Malta since 1974 and more recently set up a new company to manufacture biometric passports. Dedicated Micros, is another UK-owned company which makes security and speed cameras. Toly Products manufactures women's compacts. Playmobil manufactures toys and its Malta plant is its largest outside Germany.

In Malta there are 15 generic pharmaceutical companies. We have the Roche-Bolar exemption, which allows people to carry out research into patented products, manufacture and stockpile them and hit the market the day the patent expires. It's also created clusters, with sophisticated packaging and printing companies attached to the generic pharmaceutical firms.

ICT is another important segment. We have quite a lot of ICT companies based in Malta that service the UK. British Airways uses a Maltese company. Tesco's IT requirements are serviced by Maltese companies.

We are also attracting a lot of hedge funds to Malta. Financial services is an area that we're trying to grow. It represents about 12% of our GDP and the Government is aspiring to double that by 2015, in the financial services sector.

TRC: The banking sector has already grown from assets of €20bn in 2004 to €50bn now. Is that level of growth sustainable?

Zammit Tabona: I think so. Malta has the advantage of being small. It's an open economy so we're subject to all the whims of other economies. For example [the EU bail-out of] Portugal is a problem for us because we have to put up guarantees. That's a force majeure completely beyond our control. That is the downside. The plus side is being a member of the EU has enabled us to attract more business.

Malta has a very good regulator. Our regulator is very hands-on and he insists on meeting all the companies. We're competing with Luxembourg and Ireland. We're not aspiring to become completely dependent on financial services. We want a diversified economy.

TRC: Tourism is the second largest part of the economy. What can you do to persuade more tourists to visit Malta rather than other Mediterranean islands?

Zammit Tabona: It's all a question of price at the end of the day; it's not so much a question of rivalry. People tend to go depending on what they've got available to spend and whether they can get value for money.

We get 1.2 to 1.3 million tourists a year. The average stay is coming down to about 8.6 days, and consequently, in order to keep the same sort of bed occupancy rates we need to increase the numbers to around 1.5 million visitors within the next three years. I think we need to increase the numbers from the UK because they have fallen. We used to get as many as 700,000 visitors a year from the UK, but that's gone down to about 450,000 now.

With tourism, Malta is not on everybody's radar. It has the wrong perception. It's considered to be 'dull and boring' and 'for the elderly' - but that's definitely not the case! We have a rich culture that goes back 7,000 years with prehistoric temples older than the Egyptian pyramids. There is a market in people wanting to learn about our culture and this is where Malta can really excel.

Malta was being sold for sun and sea, but we've got more to offer. We're trying to encourage people to come for weekend breaks for our culture and heritage. Valletta is going to be the European Capital of Culture in 2018.

TRC: Malta is on the frontline in terms of the EU's dealings with Libya. What impact is the political upheaval there having on your country?

Zammit Tabona: Over the past few weeks, Malta has helped more than 16,000 employees to get out of Libya. Most of these were employees working all over the Libyan territory, including oil fields in the desert. More han 100 countries were assisted in having their citizens leaving Libya.

Given that Malta's geohraphical position is close to Libya, Malta has for the past decades carried out business with this country. Unfortunately over the last few days, Malta experienced an influx of illegal immigrants. Malta has asked the EU countries to help with this burden.

Maltese business people have enjoyed doing business with Libyans – like most other EU countries. At the moment, this is all on hold. Around 600 Maltese people are involved in business with Libya. There are Maltese investments related to tourism, health and pharmaceuticals. There is also some Libyan investment in Malta related to the aviation industry.

TRC: How do you see relations with the UK evolving in the future?

Zammit Tabona: Although there is always room to further strengthen ties, at present Malta enjoys excellent relations with the UK. This stems out of a long association between the two countries. There are at least 60,000 people of Maltese origin in the UK and we owe our roots to the UK. We were under British rule from 1800 until 1964 when we became independent. Malta and the UK work together on issues of mutual interest bilaterally, as EU member states and within the Commonwealth.

The future looks very promising if how we worked together during the evacuation from Libya is anything to go by. The Maltese government offered all the assitance to the UK team on the ground in Malta in evacuating UK Nationals from Libya. In fact Prime Minister Cameron wrote to Prime Minister Gonzi to thank him for the 'generous support' and remarked that Malta has 'demonstrated resilience and fortitude'.

Another milestone in our bilateral relations will surely be the forthcoming visit of PM Gonzi to 10 Downing Street at the invitation of PM Cameron.

TRC: How has your previous business career helped you in your current role?

Zammit Tabona: It's helped a great deal. I've been lucky in that I've had a general experience in all sectors or walks of life and I personally try to set myself high targets. There are certain areas I'm not so strong in but my accounting background comes into play and assists me with most subjects – this comes in very useful in my role as High Commissioner.