This at a time when Malta has already started to graduate from the General System of Preferences (GSP) through which some developed countries grant non-reciprocal preferential trade access to less developing countries. For example, Malta graduated from the GSP scheme of the USA at the end of last year. In addition, pressures are mounting on developed countries in the WTO to extend any preferential treatment accorded to a subset of WTO members to all other members, such that any preferential treatment given to Malta by any country over and above that accorded to other WTO members will be lost in any case. In a non-membership scenario, moreover, the EU-Malta income gap would tend to widen because the other new members will continue with reforms that are conducive to attracting FDI. Indeed a recent study shows that the EU decision to open negotiations with the first-wave of accession countries had by itself reinforced FDI flows into these countries. This has implications for the catching-up process, because countries that absorb the highest amounts of FDI normally continue to attract the bulk of new 14 investment in later years. So that if the scale of FDI flows into Malta fails to keep up with that going to the other candidate countries, Malta could easily fall behind these countries in terms of GDP growth and living standards.
Assets under management of these non-bank investors went from less than 1% of GDP in 1984, to 65% in 2000, and to almost 100% of GDP in 2018. Currently, around 85% of total domestic corporate bonds and around 65% of sovereign bonds are held by institutional investors, as a result of which reliance on banking credit of these corporations has gone from 91% of financial debt in 1986 to around 25% in the recent years. High-level Policy Seminar on Integration or Fragmentation?