PLM Issue 6 by Adrian Friggieri

STA SP TE ECI OF AL TH ED E E ITI CO ON NO MY

PROPERTY & LIFE MAGAZINE Property, Business, Investments & Lifestyles

Issue 06

COVER STORY

SPECIAL INTERVIEW

FOCUS

FEATURE

06 - Networking the PLM Way

10 - Addressing Economic Challenges

28 - Malta as an Insurance Domicile

34 - State of the Economy

A unique photo journey of the successful VFM B2B Networking Event

New finance minister Prof Edward Scicluna outlines his budgetary plan

Romina Soler, Partner and Insurance Practice Leader at PwC Malta writes about the insurance business in Malta

An exceptional statistical and graphic presentation on Maltaâ&#x20AC;&#x2122;s economy

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Contents EDITOR’S NOTE

The Wall Street Journal recently presented surprising data estimates from Bridgewater Associates that reflect increased growth in countries like US, Canada and Japan and a slowdown in emerging powers like Brazil, China and India. If such trends endure, this means advanced economies are contributing more to global growth than developing ones for the first time since 2007.

Therefore, the global outlook for 2014 is very positive and this is attributed mainly to the fact that the US economy will continue to grow, with interest rates remaining historically low, China will continue scouring the globe in search of energy, raw materials and agricultural assets and the telecom sector will remain active in the US and Europe. This is the third consecutive year we are providing a comprehensive review of our economy entitled ‘State of the Economy’, a culmination of over four months work gathering statistical information, high profile articles with views from major opinion leaders, politicians, financiers, bankers, entrepreneurs, policy and decision makers, who share their views and give us their evaluation and forecasts of the Maltese economy. What is most significant from all the reports and articles is that there is a sign of change of attitudes. Occasionally, I write critical topical reviews. I am not always right, but sometimes I locate news items that are not up to par, or are downright mistaken. I try to back up my findings

Contents 6

with facts, and in this special edition we present you first-hand up-to-date facts on our economy, a full Global Competitive Report, statistics and interesting information from the NSO, contribution from the Malta Business Bureau and we also feature exclusive interview with the Finance Minister Prof Edward Scicluna, who is offering a fresh view on presentation of the budget 2104. We also have valued contributions by the Minister of the Economy, Investments and Small Business, another from the Parliamentary Secretary for Competitiveness and Economic Growth, an interview with EASO Director Dr Robert Visser, emerging market index by HSBC, a viewpoint from Dr Ann Fenech and a feature on insurance and real estate. As I see it, there is an asymmetry in the economic outlook, and it comes down to concentration of interests. Though I have a bigger voice than many reviewers because of my readership here, I present a factual review of the State of the Economy, with balanced surveys and impartial outlooks. Our cover story focuses on the success achieved with the VFM B2B Networking Event held at Xara Lodge on 27th September. I will try not to care about my reviewer rank, but in Malta we need to tweak our system — so that we all work toward consolidating our economic growth and achieve that elusive budget deficit below three percent. Martin Vella Editor

Marcelle D’Argy Smith

Publication Manager Martin Vella

Art Director Ian Farrugia

Content

Martin Vella

Print Production

Union Print Co. Ltd.

Telephone: (+356) 99260162

We take our readers on a photo journey of the unforgettable and successful VFM B2B Networking Event.

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SPECIAL INTERVIEW

9926 0162; 9940 6743 email: propertylife2013@gmail.com

Special thanks to our Contributors

New finance minister Prof Edward Scicluna outlines his budgetary plan and talks about a sustainable expenditure and economic stability.

EXCLUSIVE INTERVIEWS 16 A Greater Purpose

We sit down with Dr Robert Visser, Executive Director and architect behind EASO’S asylum support system. A unique contribution regarding the challenges and opportunities facing the Maltese Economy by Dr. Christian Cardona, Minister for the Economy, Investment and Small Business

26 Malta’s Maritime Vocation

Dr Ann Fenech, Managing Partner of Fenech and Fenech Advocates discusses the issues of Malta’s Maritime Vocation.

FOCUS

28 Malta as an Insurance Domicile

Romina Soler,Partner and Insurance Practice Leader at PwC Malta writes about the state of affairs of the insurance business in Malta.

FEATURE

34 State of the Economy

Technical Adviser

Telephone:

06 Networking the PLM Way

20 Innovating and Developing

Martin Vella

North Quay Apartments, Fl 4, St Paul’s Street, St Paul’s Bay

10 Addressing Economic Challenges

Publisher

Offices:

COVER STORY

PROPERTY&LIFE MAGAZINE

An exceptional statistical and graphic design double page spread providing update on Malta’s economic overview.

50 Allocation of EU Funds in Aid of Private Enterprise

Our editorial team investigates the 2014-2020 programming period, Malta has been allocated €776 million worth of EU funds for Cohesion Policy purposes.

60 Europe’s Strong Response

By Neil Portelli Executive – EU Policy and Legislation with MEUSAC gives us his perspectives of EU policy response to the challenges posed by the financial and banking crisis.

Attard Bros Group; George Bonnici; BOV; George Carol; Christian Cardona; Ernst & Young; Ann Fenech; Chiara Leone Ganado; Richard Geres; HSBC; Finance Malta; Ministry of Finance; Ministry for the Economy, Investments and Small Business; NSO; Neil Portelli; Pricewaterhouse Coopers; Edward Scicluna; Romina Soler; Trilogy Ltd; David Walsh; World Economic Forum Global Competitiveness Report; Edward Zammit Lewis

Disclaimer

All rights reserved. No part of this work covered by the copyright may be reproduced or copied and reproduction in whole or part is strictly prohibited without written permission of the publisher. All content material available on this publication is duly protected by Maltese and International Law. No person, organisation, publication or party should rely, or on any way act upon any part of the contents of this publication, whether that information is sourced from the website, magazine or related product without first obtaining consent from the editor. The opinions expressed in the Property & Life Magazine are those of the authors, and are not necessarily those of the editor or publisher.

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THE VFM B2B Networking Event

Thanks to our sponsors: Valletta Fund Management, Apex Lifts, Bajada Solar, Berocca, Defort Designwear, DHL Express, Dical Foods, Dmax, RS Gypsum, Servgroup, Modelle International, The Xara Lodge, Ministry for the Economy, Investment and Small Business, Parliamentary Secretariat for Competitiveness and Economic Growth

exclusive interview

ew finance minister Prof Edward Scicluna outlined his budgetary plan to surpass the excessive deficit procedure and cut red tape. On the eve of the Budget 2014 we talk with the Minister of Finance who also discusses his quest toward a sustainable expenditure and consolidating economic stability. PLM: Fitch forecasts a deficit of 3.6% of GDP, compared with 2.7% in the original 2013 budget. The European Commission has re-opened the excessive deficit procedure, with the deadline for correcting the excessive deficit set for 2014. Why is the deficit still so bad when the EC is saying that the deficit and debt problems are not the result of economic downturn in general? ES: What the EC said was referring to 2012 – we were not in government. 2012 finished up as 3.3%. We argued with the EC that, since it was a one-time slip and we foresaw that it would be corrected this year, could they see it as temporary? But they could not accept this, as there was no recession in 2012. So they said, ‘an election doesn’t count. If there is an election, if you lose revenue – it’s not in the books. So, sorry, we are going to put you in the deficit procedure.’ However, we managed to get something out of this. According to the new rules, they should have presented us with budget cuts, there and then. ‘You’ve exceeded, now undertake this,’ as they did with other countries. We told them ‘Because the economy is growing, because unemployment and inflation is low - let us do it, and just monitor us, and we will tell you what we are doing.’ And that’s what we did on the 1st October – we told them what we did with the clients, with the revenue and expenditure, and showed them that by the end of the year, we will be, as promised, under the 3%. And we are doing it our own way, rather than giving a shock to the economy, which wasn’t required. We know what is happening in Greece, Spain and Portugal: when you give a shock, the GDP falls and debts and deficits increase. We didn’t want to go this way, since the problem wasn’t that big.

PLM: Concerning the second phase of the foregone income tax revenue planned by the previous government – do you intend to go ahead with this?

weigh on matters such as expenditure, whether it is dangerous to cut expenditure, and is there a growth factor in what he is doing with you?

ES: First of all, we promise to keep it. The only problem with that decision is that it came while it was announced that we were put back into the excessive deficit procedure. Whatever you do, it’s a measure. If you look at any country’s budget: ours, Ireland’s, the UK’s – you will have measures which are expiatory (which gives money to the people) and consolidating (which removes money.) This one gives money, and is one measure. The important point is that you must be cutting the deficit. It cannot be expiatory. But a measure can be; it is allowed. We are doing this by shifting revenues from direct taxation to indirect taxation, rather than taxing work, initiatives and entrepreneurship. Incomes are earned from work, so we are incentivising work by lowering income tax – at the same time, we are getting the same amount by consumption. So, overall, we cannot be expiatory.

ES: He is doing it in a very subtle way, by training. By training ministries how they can approach. Each ministry is given an envelope and they will have to do the reduction of certain activities which are no longer productive, and increase their plans for the future. At the moment they are all relying on the Ministry of Finance. What they do is take what they are spending today as non-discretionary – they have no control over the expenditure they have at the moment, and they ask for more. And then they say there is nothing to distribute, because nondiscretionary is as close to the revenue as we get. So if you want to get more, you have to reduce certain expenditures and the best way is to do it themselves. In order for it to arrive next year for this expenditure review process, this needs a lot of changes in the budgetary process. Professor Mullard is helping this budgetary process, but he is not doing the cutting or intervening in the accounts. We have reduced 20 million Euros worth of expenditure this year which we thought was not productive. And we didn’t put it in a box – we spent them. Because then you have other ministries like Health and Education and Social Security, and if there are mistakes and they have to spend more, we have to give them money. And that money went to ministries which have more pressure on their expenditure and deserving causes.

“We know what is happening in Greece, Spain and Portugal: when you give a shock, the GDP falls and debts and deficits increase.” PLM: So, do you think that it will make expenditure sustainable? ES: Yes, because when you have deficit, expenditure exceeds revenue. When you say a lower deficit, you’re going to have expenditure exceeding revenue, but in a lower way. You are reducing the difference, and this means you do not have the space, the maneuver, to do many things. So whatever new expenditure measures we wish to implement, we have to finance them through new revenue measures. PLM: You have a respected British economist specialising in budgetary measures, Maurice Mallard, working with you. How does his hand

PLM: The early opposition reaction to the pre-budget document given by former longservicing finance minister Tonio Fenech is that the document lacks jobs-creation vision and measure. Is this correct? ES: I must take it as either he really doesn’t know how the economy creates jobs, or he is pretending not to know. We are talking about increasing productive capacity. But what does that mean? As an example, he speaks of getting and not getting more tourists, but does not do anything about the airline’s capacity to

exclusive interview

bring tourists to Malta. What effects are there? None, because they cannot come. Now let’s say he doesn’t talk about tourists, but arranges with the airline to increase its capacity to bring more passengers. Do you need to talk about tourism? First, you do that, and then you expect tourism to come. In the prebudget, we completely talk about the lack or limited productive capacity of this country, and we know what mechanics of increasing that capacity is: increasing female participation, increasing the skills of labour force, fixing the enormous energy problem, doing something about pensions. All these are part of the increasing productive capacity. Once we increase it, we can fill the jobs up, just as tourists fill up the seats of the airline. We are comforted from the fact that all these measures I have discussed at the IMF with the World Bank and all the rating agencies, and we are walking together, and telling the story of what we are doing. PLM: Fitch say that although your government has committed to fiscal consolidation and pledged to exit EDP by 2014, as of yet there has been no clarity around the fiscal measures underpinning adjustment, is this correct? ES: I have met with them, and this is how they explained it. Unlike in Moodies, they don’t make any reference to the deal with China. That was a correction which they should have done before the elections. They waited till the elections, and saw that we were keeping the budget. Before the budget we were in a pigeon hole: two rating agencies put us there. They said, ‘we don’t deserve to be’ and put us down. Fitch didn’t. They waited till after the election so the budget didn’t change, and then decided to rate us down. They didn’t mention the China deal, so that goes to show that they had closed the date when they did the review early in the year, and published it. We will see that, in fact, these have upgraded our outlook from negative to stable. I see why they did so. They put us in the same pigeon hole which Moodies had done before the election. They did not put us down worse than we were – we were in the same box. PLM: Let’s talk about pensions and the pension system, which is the main long-term threat to the public finances – will you be introducing third pillar pensions? There has not been any concrete policy announcement in this area… ES: Yes we are. We could have waited another year, but I wanted to do so this year to show the outside world that we want to keep the momentum. With pension, you know you have a problem, but people say that now is not the time to do something about it, because you are talking about 30 or 40 years from now. But the way I explain it is, do you want your children’s children to be poor when they retire? Surely not. So, why don’t we do something about it today? If we have a problem, we have to address it. My Ministry of

Social Security has set up a working group – we have taken on board the model and report we had before, and the comments from the stakeholders. From there we will want to know the next step, but before waiting for that result, we have decided that for this budget we will show that we are doing something. And that third pillar that we don’t have but should, will be introduced as a voluntary scheme.

“We have reduced 20 million Euros worth of expenditure this year which we thought was not productive. And we didn’t put it in a box – we spent them” PLM: There is concern that there is no long-term plan regarding pension and health care system. ES: There are many measures you can take. The easiest would be to raise the retirement age. Why both parties are against it in the near future is because we have not yet executed and implemented the reform which raises it to 65. Let’s wait till that comes – in other words, for people to feel it is normal to retire at 65. There are other measures, and the third pillar is one of those. PLM: Let’s say the 2014 budget does not reach its target and fails to deliver a credible medium-term consolidation plan consistent with the objective to stabilize the debt ratio. Could this trigger a negative rating or investment action? Are you confident with your action plan? ES: Nobody would want to have such a scenario. That is why we enjoy our job, why we are working hard – so that we can see the results. The first results we saw when we met with Holly Wren on a very friendly basis, also with the rating agencies, and promised that we mean business, that if we are talking about standards of governance in the parliament, we want to keep it here. That is why I was shocked to be told ‘you should have fiddled somehow, and got it under three’, and they wouldn’t have minded. I wouldn’t even dream of it. The commission has to see that you are clean, positive and also moderate. These are the external institutions which see you objectively for what you are. Here you either have a friend or an opposition - either someone friendly, or someone who criticizes because that’s his obligation. But an outsider is not one of them, and what he says, you had better listen, whether you like it or not. And when you see them it’s very encouraging, like when we told them about this Chinese deal and the cruise liner and other measures to stimulate the economy, at the same time keeping track of the budget. I think it is very encouraging and gives me the courage to

believe that we will move on and, at this speed, we will be there. Our objective is to grow beyond 2%. Of course, we have to grow the capacity, but we hope we will reach 3% by the end of this legislature. PLM: How has the transition from an MEP been for you? ES: Interesting. Yesterday, in the EU Parliament, on the way down, I had a strange feeling, as if I never left. Luckily, I met with President of the Socialist group, who said, ‘we’ve given three of our members – the Prime Minister, the Deputy Prime Minister and the Finance Minister – to this government, like a gift’ because he wanted us there. He could sacrifice them in order to have a good socialist government in Malta. The advantage is that issues in the parliament are the same issues as in the council. For example, my report on statistics is currently being negotiated between the parliament and the council. Those issues are Malta’s issues because we are in the same family – the European family. PLM: What are your priorities for 2014? ES: As I have said – stability. It has become an important resource for Malta. Before we used to say we don’t have minerals, haven’t found oil, etc. In the past we use to say we have a strategic location, but that wasn’t enough. Now we can say we have a strategic location with a strategic resource – which is stability. The US is recognising this by setting up its institute to be situated in Malta, the Chinese are discovering it and want is as a distribution centre, and the Libyans are also recognising how important stability is, and want to set up an Education and Health institution; things they could have done there, but is too unstable. So stability is to our advantage and can make our economy grow.

Prof Edward Scicluna has successfully acted as Professor and Head of the Department of Economics at the University of Malta; Chairman of the Malta Council of Economic and Social Development (MCESD), Chairman of the Malta Financial Services Authority (MFSA), Electoral Commissioner, Central Bank Director, MIB Ltd director, Chairman of Political Discussion Programmes organised by the Malta Broadcasting Authority (MBA), Chairman of the HSBC’s Malta Funds Sicav plc and Structured Funds Sicav plc, Chairman of CWG plc, director at San Antonio Hotel and Spa, and board member of the National Euro Change-over Committee (NECC). He graduated from the University of Oxford with a Diploma with distinction in politics and economics; from the University of Malta with a First Class Honours BA degree in Economics, and the University of Toronto with a Masters and Doctorate in Economics. Internationally he carried out consultancy work for the EU Commission, UNESCO, the United Nations Environmental Programme (UNEP), and served on the Council of Europe Development Bank Auditing Committee. He acts as economic advisor to the IMF delegation and the following Rating Agencies – FitchIbca, Standard & Poor’s, and Moody’s. Two years ago he was appointed as a Euro expert by the EU Commission. Professor Scicluna is Minister for Finance in the Labour Government of Joseph Muscat and a Member of the Maltese House of Representatives.

Aviation outlook

Industry leaders to gather for strategic high-level networking event By Chris Cauchi

s the organiser, the Airnews MALTA BUREAU is gearing up to host the biggest aviation networking event on the island next year. Top leaders from airlines, charter operators and flights schools will once again be gathering at Bank of Valletta’s head office for the BOV Aviation Outlook. Going into its fourth edition, the upcoming BOV Aviation Outlook 2014 is a half-day event that focuses on the key issues affecting those involved in the aviation industry in Malta. This is especially timely as commercial aviation will be marking its first one hundred years in 2014.

“The BOV Aviation Outlook will also serve as a platform to launch the fourth edition of the MALTA SPECIAL, which is literally jam packed with all the latest aviation news from the island.” Government, AOC holders, MRO providers and flights schools will convene at the bank’s head office in Santa Venera to examine the effects of counterproductive regulations on the industry and address the need to strike a new balance on how the industry is regulated while exploring the opportunities that are abound. The BOV Aviation Outlook is a unique event that brings together policy makers, regulators, airlines, airport management and air navigation service providers for frank discussions on the issues affecting the industry. 12

During past editions, the BOV Aviation Outlook had amongst its list of esteemed guest speakers legal expert Dr. Michael Borg Costanzi, well known banker Noel Scerri, Flight Inspector Nigel Dunkerley, AOPA-Malta President Pierre Travers Tauss and Joe Schembri from Malta Enterprise (Safi Aviation Park). The event has grown since its inception way back in 2011, when World Airnews published its first ever MALTA SPECIAL insert in the May issue of the magazine. The BOV Aviation Outlook will also serve as a platform to launch the fourth edition of the MALTA SPECIAL, which is literally jam packed with all the latest aviation news from the island. The 10-page insert will take a snap-shot at the latest developments. Delegates attending the BOV Aviation Outlook will also get a complimentary copy of JP4 Aeronautica, which is the largest selling aviation magazine in Italy. The publication, edited by Marco Iarossi will be dedicating a whole centrespread to the local aviation scene, highlighting what Malta has to offer to prospective investors. The Airnews MALTA BUREAU will also be giving due recognition to a number of people who have distinguished themselves in the local aviation industry. Every insider knows that if there is one thing anyone in aviation will ever tell you, is that things are not becoming easier with the passage of time. High oil prices, a slowing world economy, regulatory intransigence and natural disasters all contrived to deal heavy blows to an already bruised industry in the Mediterranean. Despite the challenges, the local aviation industry has continued

to expand and at least four new operators have been granted an AOC (Air Operator’s Certificate) in the past twelve months. The committee presiding over the nominations of the THIRD Annual World Airnews Aviation Awards, is chaired by top aviation lawyer Dr Francesca Galea, with Captain Sinclair Portelli and university lecturer Riccardo Flask as members of the Select Committee. World Airnews is proud to recognize these standout performers in its 3rd Annual World Airnews Aviation Awards. The three categories are :- Aviator of the Year; Leader of the Year and Lifetime Achievement Award. Past winners have included Aviation Museum’s Director Ray Polidano, Air Malta’s Captain Philip Apap Bologna and veteran aviation journalist Richard J Caruana. Attendance to the event is strictly by invitation only. If you would like to request an invitation, please send an email to stefan.abela@bov. com - Requests for invitations will be reviewed by the organising committee.

HSBC EMI report

Source: HSBC?BPC

HSBC EMI report

Source: HSBC?BPC

ASYLUM & ILLEGAL IMMIGRATION

PLM: You are known to be a very observant person, one capable of forging relationships and building consensus. How do you see your role as Executive Director here, and how do you fit into this role – when you are caught between the fire and the fireman? RV: Well, support the fireman to put out the fire. You correctly said that I am someone of consensus. I think that consensus is the central building block in society and certainly in the EU context. I come from a country where, for ages, consensus has been the central element in society. And I think that it is the glue for society. Being Head of an agency like this makes that an interesting challenge. I have a management board where all twenty eight member states, the Commission and even United Nations High Commission for Refugees are represented. So, a very diverse group. Besides that, I have direct relations with the European Commission, and the Council of Ministers; I have to be accountable to the European Parliament; manage daily relations with ministers; national services; and there is also very high attention from civil society, from NGOs and other stakeholders that follow our work very closely. Even in Malta, there is an organisation that monitors EASO permanently. There is a wide range of stakeholders and key actors to keep in line. That’s a full day and full week’s work, but it’s challenging and fulfilling work. It’s dynamic, and there is never a dull moment.

“I think that consensus is the central building block in society” PLM: What is the EASO’s contribution to the current debate on the possible establishment of an intra-EU relocation scheme, and on the possible design of an EU system for the joint processing of asylum claims? And what may be the right conditions under which this can become a reality, especially in Malta? RV: Relocation is, especially in Malta, a high topical subject. Malta has been successful in putting it on the European agenda. That in itself is already worth noting. There have been two phases of the European pilot project on relocation (EUREMA 1 and EUREMA 2). Besides that, there have been a fair number of bilateral relocation activities from Malta to different European countries. That was the situation when I started as an agency. What we have been doing is first to make a real analysis, facts and figures, of those three situations. Because, before you take next steps, you better take a moment to think and to see what lessons you can learn. And there are two main lessons, two different directions to learn. One is that relocation is workable. That is 16

interesting to note, because before EUREMA there was a lot of debate, on whether it works, or that it is a pull factor, or that it is the solution for everything. It is not. It is just a tool. It might be, in situations, a very important tool, but it is certainly not the only tool in the toolbox. But it can work. We also found there are substantial improvements possible if you want to have more relocation initiatives at EU level. That was the state of play. Then it was the term for the politicians to discuss. They did not agree on a relocation scheme right away. But just recently, on an initiative of the Commission in Brussels, we had what you call a

Relocation Forum, where I presented the results of relocation practises, and tried to frame relocation more precisely. Relocation is not primarily about asylum seekers, it is about people who have been given international protection by a member state and who, for all sorts of reasons, should be transferred to other parts of Europe. It’s good to keep that in mind, for the public in general, these two things are mixed. But it’s technically very important to distinguish between them. PLM: EASO is actively participating in the full evaluation of the Pilot Project for intraEU Relocation from Malta (EUREMA). What Pg 18 >

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ASYLUM & ILLEGAL IMMIGRATION

progress have you registered here, and what would you have done that should have been avoided? RV: The progress is, as I said before, that we have now real experience. That it is not a theoretical discussion any more, that we have results. Pluses and minuses, but results we can build on. That in itself is an important contribution. What could be done better? Being very precise about what relocation is. Don’t define it as the only and ultimate solution for everything because it is not. Migration is much too complicated to think that there is just a magic box where you can find solutions. Two, it is a two sided affair. There are sending and receiving member states and there are beneficiaries of international protection; and they should have, from all sides the trust and understanding to make it work. If you just say “go”, that doesn’t work, if you don’t know where you are going. This was, in a number of cases during EUREMA, one of the problems. People got the message that they were to be relocated, but did not have an exact idea of what that was, what their future was. Migration is about human beings, so we should be much more careful than we might have been in those projects. It’s a very important lesson. At least as important is that, once you start, it should not be an endless process. The process should not be too bureaucratic or administrative. It should be an effective process, organised in a professional way. In the end, as is said, it is about the future of human beings, so, it is also about integration of beneficiaries of international protection. It is about forming part of a society, be it in one country or the other, but keeping in mind that integration, being part of society, is eventually the goal.

“Relocation is not primarily about asylum seekers, it is about people who have been admitted to a member states and that, for all sorts of reasons, should be re-divided to other parts of Europe.” PLM: In relation to this subject, do you think there is enough cooperation, solidarity, mutual trust and responsibility so that there is a well functioning Common European Asylum System? Do you think that the countries are following their own agenda, or do you think they are honest and sincere in negotiation; that they take a holistic look at the whole picture, rather than trying to push forward their own agenda? 18

RV: Europe is a dynamic process, and we should not underestimate that. Is has dynamics that are much stronger than many people realise. If you see what, in only a limited of number of ten to twelve years, has been realised from zero – where migration was a subject that was no way to be European, to a European framework that is of a high quality, that is setting standards, that is organising, and working together – then I would say that yes, absolutely, there is a big and important development so far. Twelve years ago it would have been unthinkable to have an EU regulatory agency to support the implementation of a Common European Asylum System. Are we at the end of the process? No, we are not, and probably never will be. Like national processes are never ending, European processes will not as well. We will always have new demands, new views and new experiences, where we have to adapt. But if I look at the level of solidarity that we have now for example EASO is, for two years already, active in supporting Greece in setting up their asylum system. That was a deficient system, and with EASO support, and EASO is supported by the member states (as we can use the national experts from member states to be deployed in Greece) we have moved a long way forward. With Greece, we have set-up a substantial programme of measures running already for over two years. I just signed with Italy a quite important support programme for dedicated support to the Italian system. These are ust two examples, there are many more, of how Europe invests in solidarity. PLM: There have been cases where illegal immigrants have been found to belong to terrorist or criminal organisations and the current screening system didn’t detect this. There are loopholes in the system. What do you think about this? RV: I think it is important not to confuse two different things: the asylum requests at this moment, in the development that we have, are a national, and not a European affair. Europe sets certain standards, but it is the national authorities that make the decisions, that decide the level of screening and the time that they take for it. The EU legal framework here is clear. The individual treatment is the pure and only responsibility of member states. In the EASO regulation, it’s the one point where I have no competence at all, in this individual decision, because the member states want to keep that responsibility. So if a member states does not, in the case you mentioned, screen well enough, and could have found a terrorist but didn’t, you can’t blame it on the rules that are not there –

because the rules are flexible enough to do this. I know from my previous experience, because in my previous job I was responsible for individual decisions, that there are very good ways of screening, and such a way that you can detect terrorists. Such systems have proved to be very effective. But that’s not because there are lengthy procedures on the European level, but because of the quality of the national system. Maybe we should go to more European requirements here; maybe the point is the other way around, that on certain elements, we might have to go a step further to prevent that some decisions are taken in a way that, in retrospect, we say, “we should not have done this, because we now have someone that turns out to be a terrorist.” There are quite famous cases about this.

Dr Robert K. Visser is the Executive Director of EASO. Dr. Visser has more than twenty years of profound professional experience in asylum and immigration matters both at national and international level. He has held high-level senior management positions within the Dutch government. As DirectorGeneral for Legislation, International Affairs and Immigration (2003-2011), Dr. Visser was responsible for policymaking in the field of immigration, for several executive agencies, including the Immigration and Naturalisation Service, the Central agency for the Reception of Asylum Seekers, and the Repatriation and Departure Service. Before that, he has held the post of Deputy Secretary-general (1998-2003) and Senior Adviser to the Prime Minister (19862003), Assistant to the Council of Ministers (1983-1986), and he served as a Diplomat at the Royal Netherlands Embassy in Madrid (19811983). Dr Robert K. Visser, born in 1954, is a Dutch national. He holds a PhD in law from Leiden University and a Masters degree in both law as well as History from the University of Groningen.

Economy

INNOVATING AND

DEVELOPING By Dr. Christian Cardona, Minister for the Economy, Investment and Small Business

e live in a competitive world. New challenges and new opportunities are always around the corner, and if we in Malta don’t meet and seize them others will. Nothing should be taken for granted. We have many successful businesses in various sectors in Malta but all good businessmen and women know that resting on your laurels is a recipe for disaster.

The government is and shall continue doing its utmost to promote enterprise. Malta has a regulatory framework that is both robust and flexible. There is international recognition that the Maltese framework provides a secure and stable structure for business, with prudent supervision, consumer protection, market surveillance and prevention of money laundering. We have sound banks and continuity in public policy. This is the bedrock for responsible, sustainable enterprise. But it is also important that those who wish to innovate and develop have the space to do so. That is where the flexibility comes in. We should never stifle innovation because the evidence is that the competitiveness of an economy is dependant on excellent innovation and a strong institutional environment. This also emerged in ‘The Global Competitiveness Report 2013-2014’ (Figure 1).

“We should never stifle innovation because the evidence is that the competitiveness of an economy is dependant on excellent innovation and a strong institutional environment.” 20

The United States continues to be a world leader in bringing innovative products and services to market. Its rise in the ranking is down to a perceived improvement in the country’s financial market as well as greater confidence in its public institutions. However, serious concerns persist over its macroeconomic stability, which ranks 117 out of 148 economies. In Europe, efforts to tackle public debt and avoid a break-up of the euro have taken the focus off addressing deeper competitiveness issues. Southern European economies such as Spain (35th), Italy (49th), Portugal (51st) and notably Greece (91st)

all need to continue addressing weaknesses in the functioning and efficiency of their markets, boost innovation and improve access to finance in order to help bridge the region’s competitiveness divide. Some of the world’s largest emerging market economies must also engage business, government and civil society to implement long-overdue reforms. Of the five BRICS (Brazil, Russia, India, China and South Africa), the People’s Republic of China (29th) continues to lead the group, followed by South Africa (53rd), Brazil (56th) India (60th) and Russia (64th). Among the BRICS, only Russia improves its

Figure 1: The report’s Global Competitiveness Index (GCI) top 10 ranking: Ranking

Country

Switzerland

Switzerland has held the top rank for the 5th year running

Singapore

Same ranking as in previous year

Finland

Same ranking as in previous year

Germany

Germany climbed up 2 places from the previous year

United States

Sweden

Hong Kong SAR

Netherlands

Japan

United Kingdom

Comments

The United States climbed up 2 places from the previous year Moved down from previous years Moved up from previous years Moved down from previous years Moved up from previous years Moved down from previous years

Economy

ranking, climbing three places, while Brazil drops eight places. Among the Asian economies, Indonesia jumps to 38th, making it the most improved of the G20 economies. This year marks Malta’s 10th consecutive participation in the report. In 2013 Malta ranked 41st out of 148 countries. This represents an improvement in ranking from the 47th position achieved in 2012. The ranking of Malta’s technological readiness currently stands at 16/148, this coupled with the 34/148 ranking for financial market sophistication have led to a better overall competitiveness ranking this year. However, a number of factors contribute to Malta’s competitive disadvantage vis-à-vis other countries surveyed. These include labour market efficiency (43/148), market size (127/148), Macroeconomic stability (74/148).

“People who come to Malta to do business also find it is a great place to live.”

has shown the way in recent years by developing aircraft engineering courses that lead to work at the Safi Aviation Park. Hundreds of jobs now exist in this sector, as Malta services aircraft from around the world. We will take this further with our Jobs Plus initiative, equipping individuals with the skills to match jobs.

These findings clearly indicate that Malta is rising to the challenge and that it has in-built structures that are aiding the overall level of competitiveness. The government is also committed to cutting red tape and reducing bureaucracy, these being two elements which stifle competitiveness.

Great things are happening at Malta University too where an enterprise laboratory helps to turn good ideas into viable business propositions. And this government has greatly increased support for those undertaking Master’s and Doctorate degrees. We may not reap the benefits immediately but we should never be afraid of thinking long term.

In the few months we have been in government we have offered tax incentives through a Global Residency Programme to attract foreign investment and boost the property market, we have put the wheels in motion for a maritime hub to serve the lucrative maritime and marine business with the aim of creating many new blue jobs, and we have invited businesses to come forward with ideas for land reclamation. Tariffs charged by the Malta Environment and Planning Authority (MEPA) have been reduced, new projects undertaken in Grand Harbour, and plans drawn up for two new casinos, one in Malta and one in Gozo.

We are living through a technological revolution. Any business that sells to its neighbours has the potential to sell across the globe. In fact, the phenomenal growth of the financial services and online gaming sectors in Malta is all down to this revolution. The Malta Information Technology Agency (MITA) will soon be establishing its presence at Smart City through an international innovation office, providing dedicated support, consulting, training and brokerage services to local ICT entrepreneurs, university students, angel investors and research project consortia, because one thing we are sure about is the need to stay ahead of the game.

In the coming months we will greatly reduce the price of electricity, lowering costs for business and putting more spending euros into the pockets of families. We are also working on a plan to provide free childcare for parents in full time work making it easier for companies to retain the talented female staff they’ve invested in.

While seizing new opportunities is always important it gives me great pleasure when I see traditional industries thrive. We are drawing up a Family Business Act to recognise the role they play in Maltese life and to help family businesses prosper in the future. This is innovative legislation not seen anywhere else in the European Union.

We are investing in education too, to improve the life chances of younger people and to equip Malta with a skilled workforce in the future. The Malta College of Arts, Science and Technology (MCAST)

And it is worth celebrating the fact that tourism is at record numbers. More than half a million passenger movements were recorded at Malta International Airport (MIA) in the month of

August, far outstripping the country’s population. Malta is a place people want to come to, for a holiday or to do business. There are some things that are hard to put a price on. People who come to Malta to do business also find it is a great place to live. Malta can be additive. Not only does the sun shine and the sea beckon but the character of the Maltese people, the safe streets and the ease of communicating add to its attractiveness. As we near the 50th anniversary of independence we can be proud of how far we have progressed. And we can also look to the future with optimism. The best is yet to come.

Hon. Dr. Christian Cardona graduated as a Notary Public and Doctor of Law from the University of Malta. He furthered his studies at IMO International Maritime Institute where he obtained his Master’s Degree in International Maritime Law. Dr. Cardona is the author of the thesis entitled ‘United Nations Commission on International Trade Law – A Maltese Perspective’. Christian Cardona was first elected to Parliament in 1996 and was re-elected in the 1998, 2003, 2008 and 2013 general elections. In 2008, he contested the post of Deputy Leader for Parliamentary Affairs of the Labour Party. During the 2008 – 2013 legislature he served as the Labour Party Main Spokesperson for the Industry, Self Employed and Foreign Investment. In previous legislatures he even served as the Labour Party Spokesperson for Competition, Communication and IT. Dr. Cardona served also as member in Malta EU Parliamentary Committee during the negotiation process of Malta’s application to join the European Union as full member. Prior to his appointment as Minister for the Economy, Investment and Small Business, Dr. Christian Cardona was a Senior Partner at CV Advocates, a legal firm recognized as one of Malta’s leading law firms.

CSR Focus

Promoting Social Responsibility by George Carol

SV Life p.l.c. (MSV) is the leading provider of life protection, long-term savings and retirement planning in Malta. MSV has always felt that it has a duty to be engaged, even though in a relatively modest way, in making a contribution to the benefit of society of which it forms part. Since its inception in 1994, MSV has regularly extended a helping hand to a number of NGOs and other institutions engaged in initiatives and activities in such areas as charity, rehabilitation, natural heritage, culture, arts, sports and the environment, all of which add value to and promote the well-being of the society and community in which it operates. MSV believes that its Corporate Social Responsibility (CSR) policy is an integral part of its business philosophy which puts the customer first, values its employees, seeks excellence in its operations and contributes to make the community and society at large better places in which to live, work and grow. Norman Mifsud, Chief Officer HR & Corporate Services at MSV states “we look upon CSR as a multi-stakeholder approach which incorporates social values in our corporate strategy. Through such an approach our CSR policy can be to the benefit of all our stakeholders, i.e. our shareholders, our people, our customers and our society and environment.” Mr. Mifsud adds “as the leading provider of life protection, long-term savings and retirement planning in Malta the nature of our business places us at the heart of community life. We recognize that our corporate actions and decisions have a significant impact on the society in which we operate and we are committed to managing this impact in a very responsible manner.

“To contribute more value, the challenge is to move from efficient execution into rethinking the value that execution generates – by striking a better balance with strategy.” Above and beyond our role as a provider of financial protection and financial services we participate actively in community life by supporting various cultural, environmental and charitable initiatives. We regard these 22

initiatives as a natural extension of our business.” MSV is very conscious of the fact that success, financial results and growth in the delicate life insurance and investment business depends entirely on the trust of customers and prospective customers. MSV has earned that trust through responsible governance, effective management, rigorous legal compliance and a corporate and social conscience. David G. Curmi, Chief Executive Officer of MSV states “the main focus of our CSR policy is our own people, our employees. Our employees are our success. Their technical competence and attitudes, under the policy guidance of the Board of Directors, have earned the trust of shareholders and customers and have made the company a paragon of responsible business. Their performance has made it possible for MSV to go beyond mere profitability concerns and to develop a corporate social conscience which, though relatively modest in financial terms, stands in good stead to various societal initiatives.” Motivated by the company’s values, business philosophy and favourable working conditions, employees often engage in voluntary maintenance work in aid of deserving institutes or causes. No doubt, the CSR policy which provides such an auspicious working environment adds significant value to both shareholders and customers. MSV also takes particular pride in having been a strong believer in and promoter of equal opportunity employment and has consistently employed persons with developmental disabilities through a collaborative scheme with Inspire (formerly Eden Foundation). Through this scheme MSV provides employment to a number of persons (currently 14 young adults), assisted by trained facilitators, on equal terms as other company employees. MSV strongly believes that overcoming inequality and

creating a society to which we all contribute is not an act of charity, but an act of justice. A recent CSR initiative undertaken by the Malta Chamber of Commerce, Enterprise and Industry in conjunction with Bank of Valletta p.l.c. concluded that responsible entrepreneurship creates a win-win situation for the business and its stakeholders. Members of the Malta Chamber who participated in this initiative were of the view that CSR should remain voluntary, should not be regulated and should remain business-driven. Members believed that the tone from the top invariably plays a key role in the attitude of a company towards CSR. The study also revealed that the benefits of CSR include a higher level of customer satisfaction and loyalty, improved

csr Focus

company brand and product reputation, more motivated and productive employees and increased cost savings. Responsible entrepreneurship is a corporate state of mind and the corporate winners will ultimately be those that are governed properly, and those which act responsibly. CSR is equivalent to responsible entrepreneurship. It is also a form of corporate self-regulation integrated into a business model. It should function as a built-in, self-regulating mechanism whereby a business would monitor and ensure its adherence to the law, ethical standards and international norms. CSR should be viewed as a company’s strategy to define and meet its obligations towards society. CSR is a fundamental pre-requisite for every business irrespective of its size – it should be regarded as a corporate state of mind that weaves itself into the fabric of everything the company does.

“Our company is determined to set and maintain the highest professional and ethical standards in our business” Mr. Curmi is confident in his belief that companies that perform best over time are those that build a social purpose into their operations that is as important as their economic purpose. MSV Life p.l.c. is authorised by the Malta Financial Services Authority to carry on long term business under the Insurance Business Act 1998. COM 121113

Corporate Governance Guidelines for Public Interest Companies

Compulsory for Regulated Insurance Providers which on their balance sheet date exceed the limits of two of the following three criteria: a) Balance Sheet Value of €2,500,000; b) Turnover of €5,000,000; c) Average Number of employees during the period – 50. MSV Life’s Coporate Social Responsibility model is founded on institutional and business principles same as those of MAPFRE, the group it belongs to, as well as its self-regulatory rules set out in its Code of Good Governance. This model integrates the way in which MSV Life engages in its business activities and carries out its social commitment, as well as its foundational activity: MSV Life plc is authorised by the Malta Financial Services Authority to carry on long term business under the Insurance Business Act 1998. COM 230413

Economy watch

Economic Review by George Carol

he Governing Council of the European Central Bank (ECB) left key interest rates unchanged during the last quarter of 2012 and for the first four months of this year. On 2 May the Council cut interest rates, lowering the rate on the main refinancing operations (MRO) by 25 basis points to 0.50%. The interest rate on the marginal lending facility was lowered by 50 basis points to 1.00%, while that on the deposit facility was kept unchanged at 0.00%. This decision was taken in view of expectations of low underlying price pressures over the medium term and the continuing recessionary environment in the euro area. At the same time, money and credit dynamics remained subdued, while economic sentiment was weak. Throughout the period reviewed, the Eurosystem continued to implement non-standard monetary policy measures, which were mainly aimed at strengthening the monetary policy transmission mechanism. The Eurosystem also extended the conduct of MROs and special-term refinancing operations with a maturity of one maintenance period as fixed rate tender procedures with full allotment. Similar procedures for the three-month longer-term refinancing operations (LTRO) allotted in 2013 and in the first half of 2014 were also extended. During the final quarter of 2012, economic activity in the euro area contracted by 0.9% on a year earlier. This contraction was driven by domestic demand, which offset the positive contribution of net exports. All domestic demand components went down on their year-ago levels, with investment showing the sharpest contraction. The euro area-wide inflation rate continued to moderate during the first four months of 2013, reaching 1.2% in April. According to the ECB staff projections published in March 2013, the euro area economy is set to contract this year, with real gross domestic product (GDP) growth expected to range between -0.9% and -0.1%. Growth should recover in 2014, to stand within a range of 0.0% and 2.0%. The euro area average inflation rate is expected to ease from 2.5% in 2012 to between 1.2% and 2.0% in 2013, and between 0.6% and 2.0% in 2014. On the domestic front, economic expansion continued in the last quarter of 2012, although at a slower pace compared with the previous quarter. The annual GDP growth rate stood at 1.1%, with net exports being the driver of growth. In contrast, domestic demand declined, reflecting lower investment and inventories, while private and government consumption increased on a year

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earlier. HICP inflation in Malta moderated further during the fourth quarter of 2012, with the annual rate edging down to 2.8% in December from 2.9% in September. This deceleration was due to price developments in services and energy, which offset increased price pressures in non-energy industrial goods. Inflation continued to fall during the first three months of 2013, with the annual rate dropping to 1.4% in March. Employment figures based on the Labour Force Survey showed an annual increase of 3.4% in the December quarter. As a result the unemployment rate dropped to 6.5% from 6.6% in the same period of the previous year. Competitiveness indicators continued to show mixed developments during the last three months of 2012. Meanwhile, the current account of the balance of payments recorded a smaller surplus compared with the last quarter of 2011. This was mainly due to net outflows on the income account and a larger deficit on the merchandise trade account. As a proportion of GDP, the current account balance, expressed as a four-quarter moving sum, stood at 0.4% compared with 0.5% in the previous quarter, and -0.2% in 2011. The contribution of resident monetary financial institutions to the euro area broad money stock, which approximates the broad money aggregate (M3) in Malta, continued to expand in the fourth quarter of 2012. The annual growth rate accelerated to 8.7% in December from 6.3% three months earlier. Deposits held by Maltese residents also grew at a faster pace when compared with the September quarter, while credit granted to the private sector slowed down. Meanwhile, yields on three-month Treasury bills fell in both the primary and secondary market, with the secondary market rate ending the year at 1.00%. Yields on ten-year government bonds also declined, standing at 3.83% in December. Yields continued to decline in the first quarter of 2013, with the three-month and ten-year rates standing at 0.78% and 3.47% respectively at the end of March. With regard to fiscal developments, the general government deficit reached 3.3% of GDP in 2012, after it had dropped below 3% in 2011. This widening occurred as expenditure outpaced revenue. Expenditure growth partly reflected the impact of public sector wage increases, as well as strong growth in intermediate consumption and social benefit payments. Revenue was boosted by buoyant corporate tax receipts, as indirect tax revenue grew at a slower pace. General government

debt increased, with the debt-to-GDP ratio rising from 70.3% in 2011 to 72.1% in 2012. In its latest projection exercise concluded in May, the Bank expects real GDP growth to accelerate from 0.8% in 2012 to 1.4% in 2013 and 1.9% in 2014. The Bank expects domestic demand to be the main driver of economic growth during these two years, with private consumption expected to accelerate over the projection horizon. Investment is also set to contribute to economic expansion, particularly in 2014, when government investment is expected to accelerate and investment in the energy sector gathers momentum. Net exports are projected to add to GDP growth in 2013, but are set to have a negative impact in 2014 as imports outpace exports. With regard to prices, HICP inflation is set to moderate to 1.4% in 2013, partly under the impact of lower energy prices. The inflation rate is projected to remain at that level in 2014. From a policy perspective, following the breach of the 3% threshold in 2012, a key priority is to implement measures that would bring the general government deficit back down to below the limit this year. The fiscal consolidation effort should continue thereafter to make progress towards the medium-term objective of a balanced budget and a sustainable reduction in the debt ratio. The domestic fiscal framework also needs to be strengthened as soon as possible, through the introduction of a balanced-budget requirement in the Constitution, the setting up of an independent fiscal council and the establishment of an effective medium-term budgetary framework. Sustainable economic growth also requires that Malta safeguards its external competitiveness, through moderation in wage increases and improvements in productivity. With regard to financial stability, banks in Malta remain profitable, liquid and well capitalised, with the core domestic banks characterised by a strong deposit base and little reliance on wholesale funding. However, these banks are exposed to risks stemming from the local property market, which has been undergoing a correction, and from an increase in non-performing loans. This calls for additional provisioning in the short run, with complementary policies aimed at diversifying lending portfolios over the medium term. Banks should also strengthen their capital buffers and further lengthen the maturity of their liabilities to more closely match that of their assets. Source: CENTRAL BANK OF MALTA Quarterly Review 2013:1

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Maritime industry

Malta’s maritime vocation goes back to time immemorial and has historically always been one of the island’s economic pillars from the days of shipbuilding during the time of the Knights of St John, to Malta’s strategic position as an important trading post in the Med in the 18th and 19th centuries to the heyday of the Naval docks. The complete absence of any raw materials has been compensated by its geographical location constituting the foundation stone of its maritime vocation. Equidistant from the Straits of Gibraltar and the Suez Canal and from the shores of North Africa and Sicily it flanks one of the busiest shipping lanes in the world. Its geographical location, the deepest natural harbour in the Mediterranean and its dry docks have provided Malta with a “head start” in the international maritime world. Our legal system based on the Roman civil law model with the incorporation of British maritime and admiralty laws promulgated in Britain throughout the period of British rule in Malta between 1801 and 1964, and post-independence legislation providing the necessary updating including the incorporation of important international maritime legal instruments, has provided the solid legal base which gives international maritime players a great deal of comfort when considering Malta.

“Malta’s continuous growth of its international maritime presence also needs to be seen in the context of how Europe has over the past 25 years witnessed a changing maritime scenario” Malta’s continuous growth of its international maritime presence also needs to be seen in the context of how Europe has over the past 25 years witnessed a changing maritime scenario where ship building and ship repair have progressively moved eastwards with Asian shipyards now entrusted with the building and /or repairing of the lion’s share of the world’s fleet; Malta has therefore had to adapt to this changing international scenario and has done so very successfully turning challenges into opportunities. Our maritime presence today is as diverse as the entire maritime industry itself providing various new sources of income to our country. Starting with the major amendments to our Merchant Shipping Act in the eighties, it was these amendments which catapulted our maritime flag 26

into the modern day international maritime arena. Today we have the largest flag in Europe, a maritime flag flown by some of the world’s most sophisticated tankers, gas carriers, container ships, cruise liners and super yachts alike. I stress that there are several reason behind the growth and success of our flag. Our robust legal system offers a huge degree of protection to either the ship yards or the financiers of vessels who would have registered mortgages against the vessels; we have an intelligent tonnage tax regime which entitles ship owners to pay a tonnage tax instead of tax on earnings from the carriage of goods and passengers; unlike most other European countries, English is an official language which means that documents, certificates and deeds, normally in English to start with, do not need any tedious and time consuming translations; our merchant shipping registry is open on a 24 /7 basis which offers financiers peace of mind when

they need to register their mortgages during their working day and therefore during Europe’s night time; apart from this, thanks to the fact that we are members of the European Union, the Maltese maritime flag is a European Maritime flag. Prior to membership many pessimists had expressed the view that Malta’s membership of the European Union would be the death knell of our flag. It’s been quite the opposite and as a direct result of Malta’s membership of the European Union our flag has grown in tonnage, stature and reputation! Numerous high end owners want to fly a European flag and as a result, Malta’s membership of the EU together with its other advantages which all offer added value have made our flag the largest flag in Europe! However Maritime Malta is not only about ship registration; Maritime Malta is also all about

Maritime industry

providing the backup for the shipping industry. Malta answered the maritime revolution that has seen the transformation in the manner in which cargo is carried all over the world by means of containers by developing a very successful Freeport. Our Freeport offers international shipping lines the flexibility of discharging their containers from mother vessels coming from the Far East for onward carriage and transportation on board feeder vessels to Europe. Malta also boasts of the presence of entire fleets of various service vessels and supply boats which supply and assist energy companies and their rigs located off shore all over the central Mediterranean. Maritime Malta also encompasses numerous off shore towage and salvage operators strategically positioned to reach casualties both in the western and eastern Mediterranean. The strength of Malta’s position in this sector is evidenced by the fact that the Tug Malta privatisation was such a huge success. All of the above has a direct impact on our economy as do other areas of activity synonymous with the maritime sector such as bunkering. Again due to our geographical location bang in the middle of the Med, this means that vessels do not have to deviate off their contractual route as they traverse the Mediterranean west to east or east to west for the purposes of picking up bunkers since Malta is bang on the rum line between Gibraltar and Suez. Our various ship repair yards, whilst suffering like the rest of Europe as a result of the eastern migration referred to above have diversified and entered niche markets offering a first class service to vessel owners who do not want to take their ships to Asia. Maltese ship yards are versatile with an exceptionally talented workforce and very diverse assets. This in real terms has meant that they have attracted and continue to attract a variety of work from repairs on tankers, gas carriers, cruise liners, oil rigs, container ships and super yachts.

“Our Freeport offers international shipping lines the flexibility of discharging their containers from mother vessels coming from the Far East for onward carriage and transportation on board feeder vessels to Europe” The maritime industry and the wealth and income it generates for our community includes also its recreational side and Malta is excelling even here as well. Thanks to the continuous updating of our

legislation, intelligent government policy and a new yacht code, Malta today attracts in very serious numbers some of the world’s most sophisticated and glamorous super yachts. So what was until 5 years ago a flag predominantly for commercial cargo or passenger vessels has become a flag of choice for persons who want to own a yacht either for their pure pleasure or for their business. In addition to using Maltese service providers to assist them with such structures, the amount of money which these super yachts pump directly into our economy whenever they call at Malta cannot be underestimated. Between berthing fees, agency fees, bunkers, provisioning and the supply of all manner of services, this translates into thousands of Euro spend per yacht when in Malta. This of course is not including the several hundred yachts owned locally by Maltese persons who have taken to yacht ownership like ducks to water and where ownership of a sailing or power boat has become practically a national pass time. It therefore should come as no surprise that the Rolex Middle Sea race just over in its 34th edition is such a tremendously successful event which continues to attract some of the most prestigious and best international names in international yachting circles. These are not just important names, they are persons who come to Malta, like Malta and are very happy to associate themselves with Malta because of Malta’s good reputation and because of Malta’s name. No overview of Malta’s maritime vocation would be complete without giving credit to the International Maritime Law Institute for having educated hundreds of international lawyers in Maritime law. The institute is a centre of excellence set up under the auspices of the International Maritime Organisation which was set up in 1988 with the assistance of the Government of Malta. It has put Malta in a particularly special place because through IMLI not only can Malta pride itself with being technically maritime, geographically maritime and legislatively maritime, it can pride itself also with being academically maritime.

Malta’s presence in the international maritime sector is today substantial. This presence in real terms translates into the pumping of millions of Euro into our economy not only by way of the taxes paid by the industry but also by way of the employment opportunities of persons involved in some way or another in this diverse sector not to mention the fees paid to a variety of service providers, and works and supplies at all levels. In addition, the very public face of this industry worldwide assists in creating an international awareness about Malta encouraging other operators in other sectors to look at Malta as a base from where they can conduct their economic activity. For this reason it is imperative that we continue to work hard, provide a top level service and value for money whilst maintaining the highest ethical standards to safe guard our reputation. If we collectively maintain this modus operandi then there is no reason why Maritime Malta cannot continue to go from strength to strength.

Dr Ann Fenech has been working in the legal maritime sector for the past 26 years. Dr Fenech received the Best in Shipping and Maritime Award at the Euromoney Legal Media Group “European Women in Business Law Awards 2012”. Ann Fenech is the Managing Partner of Fenech and Fenech Advocates, and the Head of the Marine Litigation Department. After qualifying in 1986 she joined the shipping and commercial firm of Holman Fenwick and Willan in London where she stayed until 1991 prior to joining New Orleans firm of Chaffe, McCall, Phillips Toler and Sarpy. She is the President of the Malta Maritime Law Organisation and Council Member of the European Maritime Law Association. 27

INSURANCE

Malta as an insurance domicile By Romina Soler

alta continues to command a firm position on the European insurance map, even through the challenging times presented by the financial crisis, and the uncertainties surrounding EU-driven regulatory changes. Romina Soler, Partner and Insurance Practice Leader at PwC in Malta, writes about doing insurance business in Malta. Political stability, the regulatory environment, the fiscal framework, the quality of support services and cost levels are typical criteria that are evaluated in choosing a domicile for carrying on business of insurance. Malta scores highly on all aspects and its growth as an insurance domicile in all spheres including insurance, reinsurance and captive business, comes as no surprise. The growth, which has accelerated with Malta’s membership to the European Union in 2004, is consistent with the country’s endeavour to become a financial services centre of repute. Passporting rights in the EU One of the main advantages of an insurance company incorporated in Malta, is that of being able to passport directly, either through freedom of establishment, or through freedom of services, to all other member states. This is of particular appeal to licencees interested in passporting to other EU member states.

“Malta scores highly on all aspects and its growth as an insurance domicile in all spheres including insurance, reinsurance and captive business, comes as no surprise” The legislative framework Malta’s legislative framework, whilst being EU compliant, is innovative in that it offers the possibility of different licensing options, such as Protected Cell Companies (“PCC”) and Incorporated Cell Companies (“ICC”). Malta is the only EU member state with full membership to have this legislation. The PCC enables different owners to participate in 28

an existing insurance structure through cells, and appeals to smaller insurers, mainly due to lower regulatory capital requirements at cell level. The ICC builds on the PCC concept, with the principal difference being that, in an ICC, the core and cells are separate legal entities. Regulations governing captives, (referred to as Affiliated Insurance Companies at law), contain specific provisions to address the particularities and needs of captives. Captives are insurance and reinsurance entities that are exclusively set up to write the insurance risks of the group of companies of which they form part. Legislation for the establishment and supervision of Reinsurance Special Purpose Vehicles (RSPVs) is in the pipeline, with draft regulations currently in the consultation phase. Local legislation also includes migration legislation, which facilitates both entrance into and exit from Malta. As an EU Member state, Malta will implement the EU’s Solvency II Directive, which represents a major overhaul in the solvency regime governing European insurance undertakings. Uncertainty in relation to its implementation date continues to prevail. The concept of proportionality will apply to the implementation of Solvency II, so that requirements are proportional to the nature, scale and complexity of the undertaking’s risks. The tax regime Malta avails itself of an attractive tax system, including a network of Double Tax Treaties with over 60 countries, including most EU countries and the US. The availability of a full imputation tax system upon distribution of dividends, (resulting in substantial refunds of tax paid by the company back to the shareholders), and the absence of withholding taxes upon repatriation of interest and royalties to non-Maltese residents are salient and favourable aspects of the Maltese tax regime. An accessible regulator A firm and knowledgeable yet accessible regulator, the MFSA, adds further strength to Malta’s proposition as an insurance domicile. The MFSA encourages open, individual discussion with potential and authorised insurers. Operational pluses Malta is endowed with a skilled, multi-lingual, flexible and adaptable labour force and has a comparatively lower cost base when compared to other EU domiciles. Malta currently has 16 insur-

ance managers, varying from international to local names, who are equipped to assist in the initial set-up stages, as well as the ongoing operations of insurance business. Future outlook The Malta Insurance Management Association’s (MIMA) 2013 Annual Market Survey reported that Malta’s insurance sector collectively hit the €1.7 billion mark in terms of annual gross premiums in 2013, representing an increase of over 439% since 2008. Other indicators, such as the number of insurance undertakings and assets held by these undertakings, also registered exponential growth in the last five years. The outlook on the island remains positive, with efforts and initiatives from all interested fronts directed at ensuring that the trend continues to be a growing one.

INSURANCE

Why Malta? • • • • • • • • •

EU Membership, passporting rights EU compliant, innovative legislation Efficient tax environment Redomiciliation allowed An accessible and efficient regulator, the MFSA Swift application process Availability of quality insurance management/professional services Relatively low cost base The application of International Financial Reporting Standards in the preparation of financial statements

• The use of English as Malta’s business language. Right: “Insurance in Malta. An Industry profile ” is a publication by PwC Malta, the largest professional services organisation on the island.

Romina Soler is a Partner and the Insurance Practice Leader at PwC Malta. She has been a partner since 2006 and is actively involved in the firm’s business assurance division, with a special emphasis in the insurance field. She has led numerous insurance assignments over the years including statutory audits, IFRS conversions and various advisory assignments. She also provides ongoing training support on insurance related matters internally and to the external market and is a member of PwC’s European team of Solvency II experts and co-ordinators. 29

Landscaping

Background Stoneage offer a wide range of natural stone décor for interior decorating and exterior landscaping suitable for residential and commercial projects. Products include colourful pebbles, gravels, garden ornaments, floor tiles (crazy paving, slates, cobbles), mosaics, wash basins, shower trays, marble stone, feature walls/wall cladding and much more. They have just opened their new showroom in Mosta. PLM: I want to start by asking you about Stoneage’s business and the significance of the new showroom in Mosta... MZ: Stoneage has been involved in the concrete business for the past fifteen years. The company boasts a relatively wide portfolio of products and services, ranging from basic concrete flooring for garages and warehouses, industrial concrete floorings with special coatings, roof screeds, imitation rock structures namely artificial rock scaping, concrete stencil and concrete imprinting. The latter two involve the creation of special patterns in concrete so that the finished product resembles other structures such as wood, steel or natural stone paving. Over the last couple of years, we felt the need to diversify and evolve our product range to include a selection of natural stones that would complement our current business model. Increasingly, we felt the need that the ability to 30

offer natural stone together with our concrete products would place us in a better position to serve our clients. The new showroom in Mosta is the culmination of a year of careful research as well as various trips where we identified a strategic supplier with whom we have signed a partnership agreement to distribute their products. The new showroom will serve as a showcase for these natural stones and their possible uses.

“When working with concrete products, out in the open, the things that can go wrong are many, and some do go wrong, but the ability to find solutions has been a key factor in the company’s success.”

PLM: In the showroom I observed you and your wife together examining and working on projects. Was it interesting to combine a perfect match that unites you both and compliments what you do, and how important is it to understand the reaction of someone close to you? MZ: Working together is both fun and challenging at the same time, nonetheless, the work we perform is very different. I spend most of my time out on different sites either supervising my staff, planning work or executing work, while my wife handles the administration side of the business mostly PR, logistics, marketing, accounting and the related documentation needs, and assists clients that turn up the showroom.

PLM: What’s behind the name Stoneage?

PLM: How are you catering for the landscaping market and can you detail some major projects you have worked on in past?

MZ: Hard work, determination, ups and downs, challenges... just to mention a few. When you are in this kind of business, word of mouth is paramount for continuity and we have worked hard to maintain a solid reputation. When working with concrete products, out in the open, the things that can go wrong are many, and some do go wrong, but the ability to find solutions has been a key factor in the company’s success.

MZ: Concrete imprinting, stencil and artificial rock scaping - which have been our backbone for the past fifteen years, are mainly used for landscaping projects. Through these years we garnered substantial experience on what works and what doesn’t, how the environment will impact the project as well as the effects that human and vehicular traffic will have on the finished product. Furthermore, we work with strategic partners who

Landscaping

provide natural stone décor to provide the client with one complete project. The addition of the extensive range of natural stones to our portfolio has only been a natural evolution to enable us be in a better position to offer more options. Major projects that we have been entrusted with include the major refurbishment at Seabank Hotel and recently The National Aquarium at Qawra. We have also worked on foreign projects both in Libya and Tunisia. PLM: How does a well-designed landscape enhances the value of a property? Can you tell us a little bit about that? MZ: Landscape design involves much more than placing trees, shrubs and other plants on the property. It is an art which deals with conscious arrangement or organisation of outdoor space for human satisfaction and enjoyment. In my opinion the major goals must include organising and developing the site for maximum use and pleasure, creating a visual relationship between the house and the site and reducing landscape maintenance to a practical level. Most studies state that landscaping investment may increase up to 15% value to your property. PLM: How do you work with other consultants on jobs, primarily architects? MZ: On all projects where designers and architects are involved, Stoneage is another keg in the wheel and thus we have to ensure that our part is done professionally and in perfect synch with other contractors. This is critical as it guarantees a smooth execution of the overall project. Having been involved in some major projects, we are very much used to working in this way. It is also very important to develop sound relationships with designers, consultants and architects as it is only in this way that we can fully understand the client needs.

“Most studies state that landscaping investment may increase up to 15% value to your property.” PLM: How would a client go out and select a landscape? What are some of the things that they need to look for to make sure that they get good value for what their project is all about? MZ: Clients vary. Some come prepared with their own carefully researched plans whilst others have a very basic idea of they would like. Our job is to suggest ideas and cost

effective solutions. We use our extensive experience gathered over the years to guide the clients accordingly. Nowadays, the internet and some major design sites offer a multitude of ideas for all ones likings. When starting consultation with the client, one needs to determine what are the main uses that the client wants to achieve. Is it simply to create an eye pleasing environment? Is to entertain people? Is it meant for young children (and so additional health and safety concerns come into play), etc.

PLM: In your opinion why would Stoneage be a great opportunity for customers looking for A-Z landscaping in the residential or commercial sector?

PLM: In terms of other trends, have you noticed any clients asking for more ecologicallyfriendly landscape designs?

MZ: Yes certain clients are getting more and more concerned about the planet and the environment these days and they are extending this thinking to the way they design their landscape. PLM: Have you noticed something that your clients are doing that enables them to have a successful project that could help other people listening to this? MZ: Obtaining advice from professional consultants such as designers and architects.

MZ: We have the experience, tools and products to match a wide tangle of possible client needs. Landscaping projects many a time involve working on a site that is already habitable, and thus extreme care has to be taken to minimise disruptions as much as possible. Furthermore, the addition of the natural stones range to our portfolio, now gives clients an endless choice to choose from.

List of projects:

• Seabank Hotel Refurbishment • The Malta National Aquarium • Bird Park Malta • Zebbug, Siggiewi and Luqa Local Council Projects

• Verdala Mansions, Rabat • Parish Church Marsascala • Olive Gardens, Mdina • St Vincent De Paul Hospital • Carthage Land Theme Park at Hammamet, Tunisia

• Race Course, Tripoli, Libya 31

LIVING

The artist and his muse “We love Valletta, it is the perfect gem.” This is something you hear often and any visitor to Malta who does not fall in love with the architecture, grandeur and art of Valletta is usually a bit of a loser, a jilted lover or someone of little taste.

he quote is one of many Alain and Karen Despert readily dish out about Valletta, Malta and the advantages of living on this island when we meet at their beautiful apartment in Portomaso. The Desperts add a quip to that Valletta quote which gives it a marvellous twist. They lived in the city and loved every minute but moved to Portomaso “for the comfort, the amenities and the sheer pleasure of being surrounded by all things that pamper you. We would gladly move back to Valletta if the Portomaso developer manages to move Portomaso to Valletta or build a second one there, far-fetched as that may be.” However, even St Julians, to the Desperts, is a true haven, picturesque and full of advantages. Karen and Alain Despert are two of the most enchanting, courteous and interesting people you could ever meet. While sipping a glass of wine on their balcony, even the grand view of the marina and the sea which usually captivates me completely had a tough time competing with the Desperts’ welcome and ways. Effortless flair oozes out of them. If there is one thing Portomaso can boast of (and believe me there are a lot) this is certainly it—it attracts people who have abundant flair, who love life and love sharing their easy-going ways. With them—and facing that view—I felt as if time and all my worries had stood still and their melodious words wafted in my ears.

He and Karen lived in a house in Bora Bora perched high on a hill and spanning a 360° spectacular view. Bora Bora is renowned as paradise on earth so to hear the Desperts describe Portomaso as “pure magic” is quite something. He was a most successful hotelier running top hotels in the US and Bora Bora. In his spare time, he dabbled in art, self-taught and inspired by the gorgeous colours and vistas of Bora Bora. He painted for his own satisfaction and to cover the walls at home with what he loved and depicted lovingly and vibrantly. He painted as he knew how—from the heart—and his art had beautiful colours, shapes and sea, sea creatures, anything that reflected his own positive, ebullient self. One day he was approached by one of the leading magazines of the time, Town & Country, and asked to put them in contact with some local artists. However, the editor of the magazine ditched the pieces he saw, despaired, went to Alain’s house for a drink and friendly consolation and found plenty of it: Alain’s art was the editor’s answer to his need and his search. It was used for the magazine spread about Bora Bora, which was a great success. The editor then suggested that Alain ditch hotels as a career and become a full-time

Alain is a world-renowned artist who gave us one of the most iconic pictures connected to vodka: his painting of an

Absolut Vodka bottle bobbing in the sea moving towards the island of Bora Bora is part not just of vodka legend and lore but also of advertising history. The ad campaign which featured a number of artists is still, long years after it was launched, discussed and hailed as one of the industry greats. Alain’s story of how he became an acclaimed artist is incredible and sounds straight out of a fairy tale.

artist. The rest is history, as Alain then dedicated his life to art. And thank the gods, divine intervention or whatever these strokes of luck proceed from. He then met Karen who had been very successful in the advertising world and would then become Alain’s art manager, publicist and incomparable muse. That such success can happen and happen in this most fortuitous ways is unbelievable. Even coming to Malta was a stroke of luck. They wanted to leave Bora Bora but wanted to replace it with a beautiful and accommodating home that could still give Alain inspiration and Karen a good place to work. They came to Malta for a holiday, attracted by a Maltese couple who live here and spoke enthusiastically about our tiny island. The Desperts came, fell in love with this island of history, architecture and all things nice and beautiful, socialised and became part of the Malta scene which they love. After living in Valletta they moved to Portomaso—a move that, according to them, “made our life and Alain’s painting complete.” They love feeling “secure, sitting on the balcony and having a choice of restaurants that are not just good but magnificent.” From Bora Bora to Monaco or Monte Carlo was what some friends advised. The Desperts chose to be more adventurous and different and opted for Malta and now Portomaso—which to them beats everywhere else in the world. The Desperts tell me “Malta has everything going for it and is safe and beautiful. What more can we ask for? And Portomaso, besides all its other attributes, has security and landscaping which is world-class.” See some of Alain Despert’s art by popping over to the Art Gallery located in the Hilton Hotel lobby. His depictions of seahorses, turtles and fish are just wonderful. As wonderful as the Desperts themselves.

Christmas Packages

THE PALACE Slimming Club 2137 0208

THE PALACE Spa 2262 3421

FGURA Zabbar Road 2189 6545

RADISSON BLU St. Julians Anti Aging Spa 2375 1932

malta economic review statistics in graphics

1.3%

6.9bn

GDP Growth (Constant Prices, National Currency)

-0.9%

GDP (Current Prices, National Currency)

Output Gap, Percent of Potential GDP

GDP Deflator

122.315 (Index, Base Year as per country’s accounts = 100)

US$ 11.5bn

0.013%

0.6

GDP (PPP), US Dollars

GDP Share of World Total (PPP)

Implied PPP Conversion Rate

12.6% Investment (% of GDP)

VALUE OF OIL IMPORTS

13.1% Gross National Savings (% of GDP)

Inflation, Average Consumer Prices (Indexed to Year 2000)

120.396 (Index, Base Year 2000 = 100) Inflation, End of Year (Indexed to Year 2000) Import Volume of All Items Including Goods and Services (Percent Change) Export Volume of All Items Including Goods and Services (Percent Change)

US$ 0.852bn

2.373% Inflation (Average Consumer Price Change %)

2.404%

151.7M Forecasting deficit for 2014

government

This w

Rate of inflation is being projected to increase to

Income from

2.3% in 2014

€3.49

per week

The Cost of Living Adjustment for 2014

Capit

32% 29%

Top tax rate on income not exceeding €60,000

Inflation (End of Year Change %)

2.3% 2.6%

Sources: Finance Malta; NSO; Central Bank; Times of Malta; World Economic Forum Global Competitiveness Report

The Maltese economy continued to gr real terms being projected for this ye deficit of €191.3 million by the end of 2 Gross Domestic Product. As anticipated been included the European Commissi

Recurre

Inflation

121.73 (Index, Base Year 2000 = 100)

Budget 2014 - On the economic front

Labour force

6.4 %

0.17

Employment Unemployment Rate (% of Labour Force)

malta economic review statistics in graphics

row in 2013, with a growth of 1.2% in ear. The Government is projecting a 2013, which will represent 2.7% of the d in the last budget for 2013, Malta has ion’s excessive deficit procedure.

General government revenue (National Currency)

2.805bn

40.2%

43.1%

General government revenue (% of GDP)

General government total expenditure (% of GDP)

ernment

DP of €7.35bn

will lower the deficit to GDP ratio to 2.1%.

m direct and indirect taxation is expected to be

€2.81bn

rent expenditure is expected to increase by

€131.5M

over the revised 2013 forecast, to

€2.96bn

tal expenditure is expected to incease to

€452.8M from

€405.5M

an increase of €47.3 million or 11.7%.

74M

mployment

General government total expenditure (National Currency)

3.009bn

Total Government Net Lending/ Borrowing

-0.205bn

(National Currency) government

-2.937 %

Total Government Net Lending/ Borrowing (% of GDP)

0.5%

-0.188bn

Current Account Balance (% GDP)

-2.636 %

Fiscal Year Gross Domestic Product, Current Prices

General Government Structural Balance (National Currency)

General Government Structural Balance (% Potential GDP)

population

5.105bn

Total Government Gross Debt (National Currency)

417,617

73.261 %

Total Government Gross Debt (% of GDP)

6.968bn

0.047bn Current Account Balance (US Dollars)

Global Competitiveness Report 2012-13 2.1: Country/Economy Profiles

Malta Key indicators, 2011

GDP (PPP) per capita (int’l $), 1990–2011

Population (millions) .......................................... 0.4 GDP (US$ billions) ............................................ 8.9 GDP per capita (US$) ................................. 21,028 GDP (PPP) as share (%) of world total ............ 0.01

Malta

40,000

Advanced economies

35,000 30,000 25,000 20,000 15,000

1991

1993

1995

1997

1999

2001

2003

2005

2007

2009

2011

The Global Competitiveness Index Rank (out of 144)

Stage of development

Score (1–7)

GCI 2012–2013 ...................................................... 47 ..... 4.4

Transition 1–2

GCI 2011–2012 (out of 142) ..................................... 51 ......4.3 GCI 2010–2011 (out of 139) ..................................... 50 ......4.3

Factor driven

Transition 2–3

Efficiency driven

Basic requirements (20.0%) .......................................34 ......5.1

Innovation driven

Institutions

Institutions ................................................................ 37 ......4.6 Infrastructure ............................................................ 34 ......4.9 Macroeconomic environment ................................... 71 ......4.6 Health and primary education ................................... 19 ......6.3

Innovation

Infrastructure

6 5

Business sophistication

Macroeconomic environment

4 3

Efficiency enhancers (50.0%) .....................................40 ......4.5

Higher education and training ................................... 35 ......4.9 Goods market efficiency .......................................... 34 ......4.6 Labor market efficiency ............................................ 92 ......4.1 Financial market development .................................. 15 ......5.1 Technological readiness ............................................ 21 ......5.6 Market size ............................................................. 125 ......2.4

Market size

Health and primary education

Higher education and training

Technological readiness Financial market development

Innovation and sophistication factors (30.0%) ...........46 ......3.9

Goods market efficiency Labor market efficiency

Business sophistication ........................................... 43 ......4.3 Innovation ................................................................. 48 ......3.4

Malta

Innovation-driven economies

The most problematic factors for doing business Inefficient government bureaucracy ...................................18.1 Access to financing ...........................................................13.3 Insufficient capacity to innovate .........................................10.0 Inadequate supply of infrastructure ......................................9.4 Tax rates..............................................................................7.9 Inflation ................................................................................7.2 Restrictive labor regulations .................................................6.8 Inadequately educated workforce ........................................6.4 Corruption ...........................................................................5.3 Government instability/coups ..............................................4.4 Policy instability ...................................................................3.5 Poor work ethic in national labor force ................................3.5 Tax regulations ....................................................................2.9 Foreign currency regulations ................................................1.1 Crime and theft ...................................................................0.4 Poor public health ...............................................................0.0 0

Percent of responses Note:

From the list of factors above, respondents were asked to select the five most problematic for doing business in their country and to rank them between 1 (most problematic) and 5. The bars in the figure show the responses weighted according to their rankings.

250 | World The Global Competitiveness Report 2012–2013 Sources: Economic Forum Global Competitiveness Report

Global Competitiveness Report 2012-13 2.1: Country/Economy Profiles

Malta The Global Competitiveness Index in detail INDICATOR

VALUE RANK/144

INDICATOR

1st pillar: Institutions 1.01 1.02 1.03 1.04 1.05 1.06 1.07 1.08 1.09 1.10 1.11 1.12 1.13 1.14 1.15 1.16 1.17 1.18 1.19 1.20 1.21 1.22

Property rights ....................................................... 5.6 ............ 21 Intellectual property protection ............................... 4.7 ............ 35 Diversion of public funds ........................................ 4.1 ............ 43 Public trust in politicians ......................................... 3.2 ............ 49 Irregular payments and bribes ................................ 4.5 ............ 49 Judicial independence............................................ 5.0 ............ 35 Favoritism in decisions of government officials ....... 3.0 ............ 76 Wastefulness of government spending ................... 3.6 ............ 44 Burden of government regulation ........................... 3.0 .......... 104 Efficiency of legal framework in settling disputes .... 3.9 ............ 58 Efficiency of legal framework in challenging regs. ... 3.7 ............ 68 Transparency of government policymaking............. 4.4 ............ 57 Gov’t services for improved business performance 4.1 ............ 39 Business costs of terrorism .................................... 5.9 ............ 51 Business costs of crime and violence..................... 5.9 ............ 14 Organized crime ..................................................... 6.4 ............ 15 Reliability of police services .................................... 5.0 ............ 42 Ethical behavior of firms ......................................... 4.5 ............ 42 Strength of auditing and reporting standards ......... 5.8 ............ 16 Efficacy of corporate boards .................................. 4.4 ............ 84 Protection of minority shareholders’ interests ......... 5.2 ............ 17 Strength of investor protection, 0–10 (best)* .......... n/a ........... n/a

2.01 2.02 2.03 2.04 2.05 2.06 2.07 2.08 2.09

Quality of overall infrastructure ............................... 5.2 ............ 35 Quality of roads ...................................................... 3.1 .......... 105 Quality of railroad infrastructure ........................ n/appl. ........... n/a Quality of port infrastructure ................................... 5.7 ............ 15 Quality of air transport infrastructure....................... 5.9 ............ 25 Available airline seat kms/week, millions* ............. 65.9 ............ 88 Quality of electricity supply ..................................... 4.8 ............ 72 Mobile telephone subscriptions/100 pop.* ......... 124.9 ............ 39 Fixed telephone lines/100 pop.* ........................... 54.9 .............. 8

3.01 3.02 3.03 3.04 3.05

Government budget balance, % GDP* ..................-3.0 ............ 72 Gross national savings, % GDP* ............................ 9.3 .......... 127 Inflation, annual % change* .................................... 2.4 .............. 1 General government debt, % GDP* ..................... 70.9 .......... 116 Country credit rating, 0–100 (best)* ...................... 73.3 ............ 31

4.01 4.02 4.03 4.04 4.05 4.06 4.07 4.08 4.09 4.10

Business impact of malaria .............................. n/appl. .............. 1 Malaria cases/100,000 pop.* ................................(NE) .............. 1 Business impact of tuberculosis ............................. 5.7 ............ 51 Tuberculosis cases/100,000 pop.* ....................... 12.0 ............ 30 Business impact of HIV/AIDS ................................. 5.5 ............ 53 HIV prevalence, % adult pop.* ............................... 0.1 ............ 12 Infant mortality, deaths/1,000 live births* ................ 5.2 ............ 32 Life expectancy, years* ......................................... 80.9 ............ 13 Quality of primary education ................................... 5.3 ............ 17 Primary education enrollment, net %* .................. 93.8 ............ 65

5.01 5.02 5.03 5.04 5.05 5.06 5.07 5.08

Secondary education enrollment, gross %* ........ 100.9 ............ 27 Tertiary education enrollment, gross %*................ 35.3 ............ 71 Quality of the educational system ........................... 5.0 ............ 16 Quality of math and science education .................. 5.2 ............ 15 Quality of management schools ............................. 5.0 ............ 28 Internet access in schools ...................................... 5.9 ............ 18 Availability of research and training services ........... 4.5 ............ 45 Extent of staff training ............................................ 4.1 ............ 50

2nd pillar: Infrastructure

3rd pillar: Macroeconomic environment

4th pillar: Health and primary education

5th pillar: Higher education and training

VALUE RANK/144

6th pillar: Goods market efficiency 6.01 6.02 6.03 6.04 6.05 6.06 6.07 6.08 6.09 6.10 6.11 6.12 6.13 6.14 6.15 6.16

Intensity of local competition .................................. 5.8 ............ 10 Extent of market dominance .................................. 3.8 ............ 60 Effectiveness of anti-monopoly policy ..................... 4.6 ............ 36 Extent and effect of taxation................................... 3.7 ............ 53 Total tax rate, % profits* ......................................... n/a ........... n/a No. procedures to start a business* ....................... n/a ........... n/a No. days to start a business* ................................. n/a ........... n/a Agricultural policy costs.......................................... 4.4 ............ 26 Prevalence of trade barriers ................................... 5.2 ............ 18 Trade tariffs, % duty* .............................................. 0.9 .............. 6 Prevalence of foreign ownership............................. 4.7 ............ 70 Business impact of rules on FDI ............................. 5.4 ............ 16 Burden of customs procedures .............................. 4.9 ............ 26 Imports as a percentage of GDP* ........................ 98.4 .............. 7 Degree of customer orientation .............................. 4.5 ............ 79 Buyer sophistication ............................................... 3.6 ............ 60

7.01 7.02 7.03 7.04 7.05 7.06 7.07 7.08

Cooperation in labor-employer relations ................. 4.8 ............ 33 Flexibility of wage determination ............................. 4.9 ............ 83 Hiring and firing practices ....................................... 3.6 ............ 92 Redundancy costs, weeks of salary* ...................... n/a ........... n/a Pay and productivity............................................... 4.2 ............ 51 Reliance on professional management ................... 4.0 ............ 88 Brain drain ............................................................. 4.1 ............ 37 Women in labor force, ratio to men* ..................... 0.55 .......... 123

8.01 8.02 8.03 8.04 8.05 8.06 8.07 8.08

Availability of financial services ............................... 5.3 ............ 34 Affordability of financial services ............................. 4.9 ............ 32 Financing through local equity market .................... 4.4 ............ 24 Ease of access to loans ......................................... 3.9 ............ 17 Venture capital availability ....................................... 3.1 ............ 36 Soundness of banks .............................................. 6.2 ............ 13 Regulation of securities exchanges ........................ 5.6 ............ 12 Legal rights index, 0–10 (best)* .............................. n/a ........... n/a

9.01 9.02 9.03 9.04 9.05 9.06 9.07

Availability of latest technologies ............................ 6.2 ............ 21 Firm-level technology absorption ............................ 5.5 ............ 32 FDI and technology transfer ................................... 5.2 ............ 21 Individuals using Internet, %* ............................... 69.2 ............ 36 Broadband Internet subscriptions/100 pop.* ........ 30.0 ............ 15 Int’l Internet bandwidth, kb/s per user* ................ 47.8 ............ 32 Mobile broadband subscriptions/100 pop.*.......... 32.6 ............ 34

10.01 10.02

Domestic market size index, 1–7 (best)*................. 2.0 .......... 129 Foreign market size index, 1–7 (best)* .................... 3.5 .......... 102

11.01 11.02 11.03 11.04 11.05 11.06 11.07 11.08 11.09

Local supplier quantity ........................................... 5.1 ............ 31 Local supplier quality .............................................. 4.7 ............ 54 State of cluster development.................................. 3.6 ............ 73 Nature of competitive advantage ............................ 4.2 ............ 31 Value chain breadth................................................ 4.0 ............ 43 Control of international distribution ......................... 4.5 ............ 30 Production process sophistication.......................... 4.3 ............ 39 Extent of marketing ................................................ 4.4 ............ 46 Willingness to delegate authority ............................ 3.6 ............ 81

12.01 12.02 12.03 12.04 12.05 12.06 12.07

Capacity for innovation ........................................... 3.2 ............ 70 Quality of scientific research institutions ................. 3.7 ............ 63 Company spending on R&D................................... 3.3 ............ 50 University-industry collaboration in R&D ................. 3.7 ............ 64 Gov’t procurement of advanced tech products ...... 3.9 ............ 44 Availability of scientists and engineers .................... 4.1 ............ 67 PCT patents, applications/million pop.* ................ 12.9 ............ 29

7th pillar: Labor market efficiency

8th pillar: Financial market development

9th pillar: Technological readiness

10th pillar: Market size

11th pillar: Business sophistication

12th pillar: Innovation

Notes: Values are on a 1-to-7 scale unless otherwise annotated with an asterisk (*). For further details and explanation, please refer to the section “How to Read the Country/Economy Profiles” on page 83.

Sources: World Economic Forum Global Competitiveness Report

The Global Competitiveness Report 2012–2013 | 251

SME FinancE

Maltese SMEs

and access to finance

o sustain the contribution provided by SMEs to the Maltese economy and enable them to achieve their growth potential, SMEs need to be assisted since they are known to often face significant difficulties in meeting their financing needs. Moreover, the smaller the business and the “younger” it is within its lifecycle, the more problematic it is to obtain the much needed credit lines. In Malta, the main sources of finance available to SMEs relate primarily to traditional sources such as bank overdrafts/ loans and trade credit, apart from personal savings and financing obtained from family or friends. Most companies are also eligible for assistance through national/ EU funds. To date it has been only the larger companies that have been able to deviate from the traditional sources of finance and tap the bond and equity markets, investor funds and informal venture capital/ private equity funds.

• The pre-seed and seed stage: since the product or service is still at an embryonic stage, the initial financing needs typically involve small amounts necessary to develop the initial product. In Malta, the initial seed financing would be sourced through the use of personal savings, where available, as well as funds from family and/ or friends. The founders can also tap certain start-up grant schemes, even though these schemes are generally available only for selected industries with higher growth/ value added potential. Commercial banks in Malta are unlikely to provide assistance at this stage since the risk is still high and the idea still uncertain.

Firm lifecycle Different firm lifecycle stages (as shown in the figure below) affect the level of access to finance and could be the difference between a firm expanding or not. The following list describes the main stages of the Maltese SMEs’ lifecycle and their related access to finance difficulties.

• Start-up stage: In Malta, apart from the initial seed funding, SMEs in the start-up phase might again be eligible for grant assistance designed for start-ups. Though less risky and uncertain than in the earlier seed stage, commercial banks in Malta might still deem SMEs in this start-up stage as “non-bankable clients”. By definition, start-ups have an above average risk profile – this is added to potentially low collateral coverage which renders them less attractive for credit granting by banks.

“In Malta, the main sources of finance available to SMEs relate primarily to traditional sources such as bank overdrafts/ loans and trade credit, apart from personal savings and financing obtained from family or friends” 38

Likewise, there are no formal venture capital funds or other risk-based financial instruments which are currently targeted at seed companies in Malta.

The MicroCredit/ JEREMIE initiative was designed with the aim of filling this gap by providing a safety cushion for the commercial bank implementing the JEREMIE scheme in the form of an EIF-backed guarantee. As a result, the bank is more likely to extend loan financing to start-ups which it might not have done under normal commercial conditions. As a result, as at December 2012, around

40% of JEREMIE’s successful applicants had initiated operations within a period of less than 24 months. In terms of local private equity funding, there currently still exists a gap for start-ups in Malta as previous attempts to set up venture capital funds for technologydriven ideas have had limited success to date. Stakeholders consulted in this exercise have highlighted that the possible reasons for the previous limited success of these past venture capital initiatives could have included the low quality sales pitches by potential startups, lack of willingness to dilute ownership, potential past experiences of failed local mergers, entrepreneurs’ high expectations, administrative difficulties and the small size of Malta facilitating informal approaches to venture capital over the more formal ones.

Figure 1: Business Life Cycle

SME FinancE

• Emerging-growth stage: Though the firm could be seeing its first profits at this stage, it is also probably also dealing with increased demand for its products/ services and new competition. Hence management may begin looking for a new round of funding should profits and the initial funds not be adequate when it comes to covering internal growth. In Malta, this need for additional funding might lead to the SME’s first attempt at securing bank financing through loans, potentially facilitated by local schemes providing soft loans or interest rate subsidy schemes from Malta Enterprise or guarantee-backed schemes such as the JEREMIE scheme. Certain sectors, such as enterprises engaged in manufacturing, industrial services, ICT, biotechnology, or in other innovative or high value adding operations, are better positioned to attract such financing. The Employment & Training Corporation has also administered a number of national/ EU funds addressed at training needs of local SMEs. While formal Malta-based private equity remains inexistent in this firm lifecycle stage, informal venture capital might be successfully secured through local entrepreneurs and businessmen who are often seeking investment and further diversification opportunities. • Development-growth stage: In this stage the firm relies on profits and existing funds for finances, and may also rely on government/ EU schemes and banks for further financing. In Malta, with the availability of financial statements and customer demand/ contracts, such a firm is more likely to be able to prove its viability and attractiveness and secure further financing. This financing might also enable the firm to release its initial financial backers, including family and friends. At this stage, any informal investors would also start looking at an exit strategy.

“Certain sectors, such as enterprises engaged in manufacturing, industrial services, ICT, biotechnology, or in other innovative or high value adding operations, are better positioned to attract such financing” • Expansion-growth stage: Locally, the firm may share the cost of new projects by entering into joint ventures with other companies or directly from banks, but may also get funds from private investors (through informal approaches), partners, and licensing. A firm in this stage and

with a potentially successful track record in its core product/ service might also be able to start looking at institutional investors. In Malta, organisations which pool large sums of money and invest those sums in securities, real property and other investment assets are the investment fund managers, insurance companies, pension schemes and banks’ investment arms. Some banks have also invested equity directly in local companies, even though this practice is not common locally due

to local banks’ cautious approach to investment and lending, increasingly stringent regulatory capital adequacy requirements and the current financial and economic crisis. Only the largest local companies would be able to list their bonds or shares – generally the listing requirements and related costs are too exorbitant for SMEs. The figure below combines the above discussion related to the stage.

Source: Ernst & Young (2012), Funding the future – access to finance for entrepreneurs in the G20

Summit Importers and Distributers Limited Address: Tal-Balal Road, Tax-Xwieki, Limits of Gharghur, IKL 9013, Malta Web: www.summit.com.mt Email: m.sammut@summit.com.mt Tel: +356 21411206 Fax: +356 21411206 Mobile: +356 79990111

SummitMalta

property investment

by David Walsh

he old adage still remains as true today as it ever did; it is the quality of your bathrooms and kitchen that will make all the difference when it comes to sell your home. In fact 70% of buyers consider a good bathroom very important in making their decision to buy

Finishing Touches: No Clutter: Make sure you build in adequate storage, there should be very little on show, other than a few high end branded bottles and soaps Matching Linen: Why spend thousands and then scrimp on poor quality towels? They should all match and be good quality, throw out the old when remodeling. Chrome: Rails, holders, shelves or other accessories should be chrome where possible. It lasts and matches any design and doesn’t date Water Softener: If you live in an area with hard water, make sure you clean regularly and reduce lime-scale quickly, or fit a water softener at the source I wish I had known… • Always design your bathroom around the waste pipe, otherwise it can be costly to move or ugly to disguise • Always draw out the bathroom to scale and check the layout works, in some countries building regulations insist on minimum distances from toilet to wall for example

a property and in certain property markets a good bathroom can add upwards of €10,000 to the asking price. A well-designed and maintained bathroom should last at least 15 years and if you choose the design elements carefully, it shouldn’t age. The clever use of accessories with a reasonably ‘plain’ bathroom suite can often ensure a longer lifespan. Glamour on a budget: Whatever budget you have, there are some practical ways in which to improve the look of your bathroom for very little money and bring it bang up to date. What’s hot in bathroom trends? Built-in shelving: When building or remodeling, try to create ‘natural’ storage shelving within the brick or plaster work. LED lighting: LEDs are on trend anywhere within the home, with bathroom mirrors and shelving units now on the market with them built-in Vertical Borders: Horizontal borders are now passé, look to create ‘zoning’ in your bathroom with vertical borders above sinks and baths Wall hung units: Create a more contemporary bathroom look with the use of wall hung units as opposed to pedestal (very 80s/90s) or floor vanity units (00s). How to get the look for less: White Tiles: Mix expensive colour mosaic tiles with much cheaper high gloss white to create a modern look without breaking the bank.

Mirrors: Mirrored glass often costs less per square meter than many tiles, so use mirrors to increase the feeling of space and as a cheaper alternative to tile. Vinyl Floor: Linoleum is no longer always a poor quality choice. Today contemporary designs can keep the wow factor in your bathroom. Use Wood: A €75 toilet can be made to look expensive simply by swapping cheap plastic seating for a more luxurious wood. Down-lighting: Practical and similar to hotel bathrooms, simply have your electrician wire in down-lighters as opposed to spotlights. Towel Rails: Electric or hot water system, a chrome towel rail will cost around €120 to buy and around €150 to fit, but adds year round utility to the room.

David Walsh is a hobby developer, buying primarily in London and the UK. He started developing in 2010 with his first purchase at auction and has now built an 8-property portfolio. David is also the Director of two large developments in London, ensuring their smooth day-to-day running. In his professional life David is a Chief Marketing Officer who has worked at some of the world’s largest online companies including eBay and PayPal.

property Newsmaker

Dr Edward Zammit-Lewis with US Ambassador Ms Gina Abercrombie-Winstanley

The Global Residence Programme more than strengthening the local property sector

hortly after the General Election, the Prime Minister Hon Joseph Muscat assigned me the task of revamping the schemes in existence to develop a new programme that meets industry’s needs and strengthens our jurisdiction. This was the result of pre-election consultation with the stakeholders and part of the PL’s electoral manifesto.

dependents. Simultaneously, we worked with the Department of Citizenship and Expatriate Affairs in order that the renewal of the Uniform Residence Permit (Schengen Visa) shall be as efficient as possible. We insisted on health cover not only for the period of application but also for future periods in which the Uniform Residence Permit shall apply.

Shortly after being appointed Parliamentary Secretary I formed a committee with the task of establishing a new programme. I commenced a consultation process with all the stakeholders and we looked into each and every proposal, suggestion, remark or advice. We listened to everyone and considered everything. The decision was that we first start from the non-EU market as this was the hardest hit when the Residence Scheme was suspended and eventually replaced by the HNWI Rules.

We knew the potential pitfalls and anticipated them. We were smart in that whilst protecting as much as we could, no applicants shall be a burden on the State but rather contributors and we took measures that all incentives shall be withdrawn if this arises or could potentially arise.

The end result was the best balance that we could achieve. We lowered the property requirements to make them more realistic. We did this by looking into the average prices that foreigners were purchasing in Malta. We incentivised Gozo and the South of Malta through lower parameters that in effect reflected market realities. We maintained the flat 15% rate of tax but lowered the minimum to €15,000 which minimum does not increase with the number of 42

As an initiative to the South of Malta and Gozo, the fee being applied was reduced. This is another promise delivered b the New Government in a very short period of time. The Government is doing this because it believes in Economic Growth and because it believes in the potential that our country offers. This programme reflects the fact that prices of property in Gozo and the South are relatively lower when compared to Malta. Non-Maltese citizens seeking to buy high value property in Gozo, will benefit from reduced application fees and lower property value thresholds.

We are doing our utmost in establishing Malta a destination of excellence in the private wealth sector and we shall be complementing this by looking into related services like yachting facilities. We created a balanced, attractive programme and we are now entering the phase into raising its awareness. Together with Finance Malta we shall be participating at the Citizenship by Investment & International Residence Conference in London. Other promotional initiatives will be taken in the short term, hand in hand with the private enterprises. Government firmly believes that the Global Residence Programme shall successful and initial reactions support this statement. Government has introduced a tool to spurn economic growth. The partnership with the private sectors that we promoted into formulating this Programme is what we believe is the way forward - working hand in hand with stakeholders concerned for the economic benefit of Malta. The Hon Dr Edward Zammit Lewis is Parliamentary Secretary for Competitiveness and Economic Growth

We Serve You Better. Energy Efficient Apertures.

Servgroup Limited | Aluserv Building | Triq in- Negozju Industrial Estate Mriehel BKR 3000 Tel: 2144 9878 | Fax: 2144 9877 Email: info@servgroupmalta.com

Keep the temperature just the way you need it.

Ta’ Kris Restaurant A Mediterranean Gastronomical Treat Hidden in a narrow serene alleyway from the hustle and bustle of the Bisazza Street shops, Ta’ Kris restaurant offers an intimate eatery with a friendly culinary service. Set in a former bakery, with the old oven still in place, the atmosphere is warm and homely, and the food is fresh and traditional with superb value for money.

lovers may indulge themselves to the house speciality of prime prime cuts of beef like Rib-eye or an exquisitely prepared Rump steak. Dessert options include cassatella, banoffee pie and even rich Maltese trifle made by Kris’ own mother (although this must be ordered in advance).

Specialising in Maltese and Mediterranean cuisine, with fresh fish available daily, Chef Patron Kris Cassar cooks popular traditional dishes like rabbit, bragioli, beef stew, and specials that change every day. Diners may find medallions of pork loin with ġbejna, Maltese sausage and meat

With a tantalising mix of Mediterranean and Maltese cuisine, one can only expect to be pleasantly intrigued. Ta’ Kris Restaurant Open: Every day for lunch and dinner 12.30pm till 23:00pm.

80, Fawwara Lane, Sliema Tel: 2133 7367 / 9984 7713 Web: www.takrisrestaurant.com

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CSR

Voluntary work with Daughters of the Sacred Heart in Kenya, Africa by Chiara Leone Ganado

juice carton, pretending it was a car. On another occasion, somebody created a makeshift frying pan out of cardboard and a small piece of metal.

enya is one of the top choices for volunteering – Chiara Leone Ganado tells us exactly what it takes to be on a mission in a breathtaking landscape

This is a town covered in mud, with cries of ‘mzungu (the Swahili word for ‘white person’) give me money’ at every corner. Yet these people live in such simplicity that their happiness is inevitable. We live in a world where people are never satisfied, yet many of these children do not know a better way of life than that in which they are already immersed, and so they are happy. In fact, rarely did we ever see any of the children cry. Their endurance and resilience is something which also impressed us. One of the boys once fell over a rock and ended up with a deep gash on his foot. There was blood and dirt everywhere. We urged him to come inside so we could clean up and wrap the wound, but he refused, shrugged it off, and told us he was used to it; within five minutes he was back to playing football with his friends.

Kenya is a truly beautiful place. It’s known for its savannahs, its animals, and its rich cultural heritage found in the various tribes - one might even mention the peacefulness bestowed upon a visitor witnessing an African sunset. But beneath all this lies a much darker truth: poverty in Kenya is no secret, and the country is home to hundreds of volunteers all year round.

“Many of these children live on the streets, in makeshift houses made out of cardboard and sheets of metal, from as young as 4 years old”

Overall the experience was truly an eye-opener. We became aware of how fortunate we are, and how much more we should appreciate what we have. Although we had the opportunity to observe the awe-inspiring landscapes of Kenya, nothing was more satisfying than the work with these kids. More than anything else, their happiness left us truly humbled.

This year, we were fortunate enough to spend three weeks working in Ruiru, with the Daughters of the Sacred Heart. The work we did varied from manual work such as painting the compound; helping with the feeding programme run by one of the nuns; to just being with the kids and trying to make them smile. What we soon discovered, however, was that these children were already smiling – it was they who, in turn, filled us with so much joy for three weeks. Many of these children live on the streets, in makeshift houses made out of cardboard and sheets of metal, from as young as 4 years old. They fend for themselves in every way possible: their dinner is often bits of food that they manage to scrape off boxes and cartons which they find in the rubbish, and it was something we regularly witnessed.

Editors’s Note Chaira Leone Ganado, together with Laura Paris, Philippa Paris and Gerald Gambin formed part of a group of students, who setoff to Ruiru, Kenya in August, spending their holidays in a missionary compound run by The Daughters of the Sacred Heart, caring for some 145 children. The money raised for the compound in Ruiru (which was our main project) was used to buy paint for the convent and school, medicines, food, school uniforms and some small treats for the children. Any leftover money was given to an orphanage in Nakuru which is run by faces (a Maltese organisation). They used the money on school uniforms, food and shoes.

They do not only scavenge for food: we once observed a young boy playing with our thrown-away

Air Conditioning • •

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Supply Installation

• •

Servicing Repairs

EU funds

An opportunity to stimulate economic growth by George Vella

he EU’s Cohesion Policy aims to reduce regional disparities in terms of Gross Domestic Product (GDP) per head by promoting growth, job creation and competitiveness, through investment supported by the European Regional Development Fund (ERDF), the Cohesion Fund and the European Social Fund (ESF). George Vella reports on the Malta Business Bureau’s most recent study ‘The allocation of EU Funds in aid of private enterprise: programming period 2014-2020’. The ERDF aims to provide support for investment in SMEs to create sustainable jobs, infrastructure linked to innovation, energy and transport, financial instruments to support local development, as well as technical assistance. On the other hand, the aim of the ESF is to improve employment by promoting training, education and life-long learning, enhancing social inclusion for job-seekers, and combating poverty. Finally, the Cohesion Fund finances activities related to Trans-European Transport Networks and the environment. Cohesion Policy is implemented through programmes which run for the duration of the EU seven-year budget cycle. The current programming period ends in 2013 while the new one starts in 2014 and stretches to 2020. The most significant idea put forward by the European Commission for the new programming period is that of linking the allocation of funds to the Europe 2020 objectives. Malta received a total financial package of €776million from the EU Budget for Cohesion Policy. Within this context, the MBB conducted a report with two major objectives. The first was to identify whether the private sector is a better alternative to the public sector to make use of EU Structural Funds to meet the country’s thematic objectives. The second objective of the report was to put forward recommendations for more efficient use of Structural Funds within a system that facilitates the take-up of EU funds by the private sector. During the 2007-2013 programming period the largest financial instruments benefiting the private sector were the ERDF funds managed by Malta Enterprise. Businesses benefit from grants for startups, innovation actions, e-business development, research and development, energy and international competitiveness. Other ERDF funds tapped by the private sector included grants for child care facilities and sustainable tourism projects which were managed by the Department of Social Welfare Standards and the Tourism Sustainable Development Unit respectively. Over and above these, private enterprises could benefit from the JEREMIE initiative in the form of a loan guarantee scheme. At the same time, ESF aid schemes offered

private enterprise the opportunity to tap funds for the training of staff as well as the employment of disadvantaged persons. Together, the schemes allocated for direct use by private enterprise amounted to around €70 million, accounting for around 8% of the total EU Cohesion Policy funds allocated for Malta for the current programming period.

The loss of ‘Objective 1’ status and the categorisation of Malta as a transition region adds to pressure on the Maltese Government to revise its strategy to concentrate future EU spending on priority areas to maximise the positive impact of such spending on the country’s economic development. It is widely accepted that public investment can create favourable conditions for private investment. In fact, some studies show that the impact of business incentives would be weak in the absence of preconditions for exploiting the entire potential of such support. Therefore, investment in infrastructure, the upgrading of industrial parks and the expansion of educational institutions (particularly MCAST and the University of Malta) amongst other projects carried out during the current programming period are all welcomed by the private sector as these may improve the productivity of private investment and ultimately result in economic growth. However, at the same time, there are a number of reasons that lead us to believe that there are aspects related to the allocation of funds that could and should be improved such that funds are most beneficial to the private sector. For instance the small market constraint of the Maltese economy necessitates that economic growth is mostly export-led. Such export-led growth can only be the result of further investment in/by the private sector. Another reason is that investment in the private sector yields high rates of economic growth. Finally, boosting private investment when the economy is in distress is likely to have a significant and permanent positive impact on the country’s potential growth. The way forward therefore is to enable the private sector to drive Malta’s growth, job creation and competitiveness. In this respect, the MBB report presents a number of recommendations. First and foremost, Government needs to ensure an efficient and sufficient allocation of Structural Funds that target areas which best meet the private sector’s investment needs. Estimates suggested in the report indicate that in the 2014-2020 programming period around €180-200 million should be allocated for direct use by the private sector. This figure is estimated on the assumption that the level of Maltese private sector investment as a percentage of GDP should converge with that of the EU-27. On average, between 2007 and 2012, Maltese private sector investment as a percentage of GDP was around 3.2% lower than that of the EU average. This figure should provide the right balance between

reducing the gap with the EU average and ensuring sufficient demand from the private sector for the allocated funds. Such an allocation would avoid having to turn down eligible project proposals by private enterprise because they are outcompeted by other applicants. A second recommendation is for continued public sector investment that enhances the country’s absorptive capacity without crowding-out private investment and with due consideration to PublicPrivate Partnership (PPP) opportunities. This would ensure greater involvement by the private sector which typically leads to faster project completion rates, higher return on investment and enables risk sharing between the private and the public sector. In addition, PPPs offer a unique opportunity for government to cut down its budget deficit amid the challenges that it is currently facing. The third recommendation calls to ensure adequate access to finance. Malta’s only Financial Engineering Instrument (FEI) to date was the JEREMIE scheme, used for purposes of investments and capital expenditures undertaken by a wide spectrum of industries. This proved to be a big success in terms of take-up, effectiveness and efficiency. On the basis of this success there is potential scope to allocate more funds to support FEIs. Preliminary estimates suggest that as much as €20-25 million of ERDF funds would be necessary to meet the demand over the next programming period. Other recommendations call for Government to entrust private sector non-profit intermediaries with the implementation and management of part of the Structural Funds allocated to Malta, also referred to as ‘global grants’; increased support for businesses with export potential to tap foreign markets; investor readiness programmes; improved institutional quality, elimination of bottlenecks and reduction in delays of reimbursements. The MBB report was recently presented to Government as part of the public consultation that was launched with stakeholders in view of the 2014-2020 programming period. The full report ‘Allocation of EU Funds in Aid of Private Enterprise: Programming Period 2014-2020’ can be downloaded from www.mbb.org.mt

George Vella is the President of the Malta Business Bureau and Heads the Advisory Services at Grant Thornton. The MBB is the EUbusiness advisory and support office for the Malta Chamber of Commerce, Enterprise & Industry, and the Malta Hotels and Restaurants Association. Mr Vella can be contacted on president@mbb.org.mt

current affairs

State of the

Economy by David Walsh

he global economy has not yet recovered from the effects of the international financial crisis that started in 2007 and the subsequent economic recession. Indeed, the incipient recovery weakened significantly towards the end of 2011 and the first six months of 2012. Amid this sluggish economic performance, the Maltese economy went through a challenging period during the last quarter of 2011 and the first quarter of 2012. However, the Maltese economy returned to positive growth of 0.9 per cent in the second quarter of 2012 largely propelled by positive performance in the external sector. Emerging services sectors continued to register positive growth rates during the fi rst half of 2012. Further increases were also registered in more traditional services sectors. Tourist earnings and the number of tourists visiting Malta were also encouraging even when compared to the notable performance of last year and in spite of a weak start in the first quarter of 2012. Nevertheless, growth in gross value added stalled in construction, manufacturing, agriculture and in the utilities sectors.

weak and largely bolstered by public investment. The ratio of gross fixed capital formation to GDP has remained low for the last three years. The General Government deficit in Malta declined below 3 per cent of GDP in 2011. Nevertheless, the shortfall between Government recurrent revenue and expenditure in the Consolidated Fund increased in the fi rst nine months of 2012. This deterioration was primarily the result of higher recurrent expenditure. In addition, higher capital expenditure, lower indirect tax revenue and higher interest on public debt contributed further to the rise in the defi cit. These were only in part offset by increases recorded in direct tax revenue and non-tax revenue.

“The impact of the international economic recession on public finances in Malta was less significant than that observed in many other Member States of the EU or third countries”

The labour market continued to show signs of resilience. Despite the rise in labour force participation, the unemployment rate remained relatively unchanged whilst employment levels rose. The inflation rate, as measured by the twelve-month moving average of the Retail Price Index, decreased gradually during the twelve months to September 2012 to 2.3 per cent, down from 2.7 per cent recorded in September 2011.

Local Scene - Economic Growth The contraction in real GDP recorded in the first half of 2012 was driven mainly by domestic demand that contributed to a negative 1.2 percentage points with private consumption acting as the main drag towards growth alongside gross fixed capital formation. On the other hand, the external sector continued with its positive performance as net exports contributed 6.4 percentage points towards growth in the first half of 2012. On the other hand, changes in inventories contributed negatively to growth.

Short-term deposits were on the rise whilst interest rate margins remained elevated. Credit growth remains slow particularly when one excludes mortgages and credit to General Government. Net inward foreign direct investment has also registered a reversal in the first half of 2012. Investment activity remains

Economic Growth The world economy, which continues to suffer from the fallout of the financial crisis, has not been able to return to the growth conditions that prevailed during the preceding decade. Some of the main economies in the Euro-Area continue to register growth below their potential in an

economic environment conditioned by internal imbalances and related debt overhangs. The global economy weakened significantly towards the end of 2012 and continued to be rather sluggish in the first half of 2013 despite some encouraging results from the USA, and to a certain extent, from some emerging economies. Against this background, the Maltese economy gradually lost momentum in the second half of 2011. Domestic consumption contracted as households reduced final consumption in the first half of 2012 as consumers became more guarded in their spending partly in view of unfolding uncertainty in the international environment. Lower consumer confidence, as confirmed by the Business and Consumers Surveys published by the EU Directorate-General for Economic and Financial Affairs (DG ECFIN), also contributed to the decline in private consumption. This development together with a decline in investment dampened domestic demand which led to negative growth in real Gross Domestic Product (GDP) during the last quarter of 2011 and the first quarter of 2012. The latest figures suggest that Malta’s economy has returned to positive growth, with real GDP registering an increase of 0.9 per cent in the second quarter of 2012. It is to be noted that data presented in this Chapter is based on national accounts data compiled according to the European Systems of Accounts (ESA95) methodology. This accounting framework enables comparability with EU Member States and allows a systematic and detailed description of the economy and its core components. Gross Domestic Product at current market prices is estimated by the National Statistics Office (NSO) from the production side, involving the aggregation of the output of various productive sectors net of the cost of intermediate inputs. A reconciliation of the production side with estimates of expenditure on output produced is then carried out. Source: Economic Survey November 2012

Ms. Zvetlana Galea

Store of the month: Tommy Hilfiger, Valletta Rated as one of the nicest stores in Europe for the brand, Tommy Hilfiger at Ferreria Palace, Republic street, Valletta is indeed magnificent.

Set on three floors, the Men’s, Tailored and Children’s are at ground floor level, women’s at the first floor and a fantastically converted basement houses the Hilfiger Denim collection. A garden is also located at the back of the store adjacent to the Children’s section.

Ms. Zvetlana Galea, the group Retail Manager, reminds us that as temperatures get cooler, layers are a girl’s best friend. The Class of 2013 take prep back to its Ivy-League roots with preppy feminine tops and pants in a myriad of prints. Colours range from burnt orange to army green, followed by the classic and ever favourite Tommy red, white & blue. An exclusive New York line is also available. For the men, the inspiration is college and prep. Favourites are the classic coloured chinos, shirts with nice details and lambs wool pullovers. This season look out for the colour mustard and enjoy quality at its best in our range of fine tailored jackets.

Tommy Hilfiger, Valletta is open Monday to Saturday between 9am-7pm and Sunday’s 10am- 1pm. Other Tommy Hilfiger stores are located at Baystreet, St. Julians, The Point in Tigne and also at Arkadia, Gozo.

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Allocations of EU funds

Allocation of EU Funds in Aid of Private Enterprise Programming Period 2014-2020

uring the current programming period, private enterprise and the Maltese economy in general, have benefited greatly from EU Structural and Cohesion Funds. However, it is also apparent that further effort is needed to improve on the achievements of the recent past. In particular, it is noted that the improvement in Malta’s GDP per head from 2008 onwards may be temporary rather than permanent. It is believed that further improvements can only be achieved if funds are allocated more efficiently and if more funds are allocated to the private sector. Indeed, studies have shown that allocations which have favoured the private sector yield higher rates of economic growth. This is even more important when considering that investment (as a % of GDP) by the Maltese private sector has followed a downward trend in recent years and is well below that of the EU average. At the same time, the small country constraint necessitates that Malta’s growth is mostly export-led. This can only be achieved through investment by the private sector.

“For the 2014-2020 programming period, Malta has been allocated €776 million worth of EU funds for Cohesion Policy purposes” For the 2014-2020 programming period, Malta has been allocated €776 million worth of EU funds for Cohesion Policy purposes. These funds are to be used to co-finance projects undertaken by the public and private sector, with programme management and project selection taking place at the national level. However, the European Commission has requested that each Member State is subject to a Partnership Contract for the next programming period. This contract sets out an assessment of national development needs that, in turn, provide the basis for an agreement between the European Commission and the Member States regarding the use of EU funds. In addition, Malta is subject to a number of changes relating to the criteria for allocating EU funds 50

when compared to the current programming period. Specifically, Malta has been allocated less Cohesion Policy funds and is subject to lower permissible state aid intensities. Partnership Contract negotiations between the Maltese government and the European Commission are on-going. On the basis of the arguments raised in Section 4, this report put forward a number of recommendations for consideration by the managing authority in their on-going negotiations: 1. Ensure efficient and sufficient allocation of Structural Funds that target areas which best meet the private sector’s investment needs. Initial estimates suggest that in the 20142020 programming period around €180-200 million should be allocated for direct use by the private sector in the form of grants or FEIs. 2. Continued public sector investment that enhances the country’s absorptive capacity without crowding-out private investment and with due consideration to PPP opportunities. Specifically, the managing authority should avoid using EU funds to support public sector projects that are close substitutes to private capital. To overcome such situations, the Maltese government may (in some cases) consider the possibility of PPPs which, in turn, offer a unique opportunity for government to cut down its budget deficit amid the challenges that it is currently facing. 3. Ensure adequate access to finance: it is suggested that as much as €20-25 million of ERDF funds would be necessary to meet the demand over the next programming period. These should be used to extend the scope of the current JEREMIE loan guarantee scheme, to introduce loan-based FEIs and to introduce equity-based FEIs. An additional €10 million from ESF should be used to create similar instruments. 4. Government (in agreement with the European Commission) should entrust business intermediaries with the implementation and management of part of the assistance. In Malta,

this role can be fulfilled by MBB through a global grant. This would be used to assist small companies for the improvement of operations and people development, and to offer technical assistance to SMEs in developing and submitting applications for grants by intermediate bodies. The latter can take the shape of a PPP with private consultancy services providers. As a first step, the managing authority can support an educational visit abroad for both public and private stakeholders. 5. Increased support for businesses with export potential to tap foreign markets. This may take the form of export credit guarantees or coaching vouchers that give enterprises easier access to high-level experts on internationalisation.

Allocations of EU funds

6. Improved institutional quality, the elimination of bottlenecks and the reduction of delays in reimbursements. This can be achieved by auditing regulations and procedures related to the 20072013 programming period as well as the introduction of tacit approval rules. 7. Ensure investor readiness by re-launching the successful programmes carried out in the current programming period. 8. Continue lobbying the European Commission to ensure the highest possible level of regional aid intensities to private enterprise. 9. Encourage blend facilities (i.e. a combination

of grants with financial instruments) to capture the synergies between assistance and the revolving nature of FEIs. 10. Consider setting a minimum grant and loan values to avoid disproportionately large administrative burdens.

“Ensure adequate access to finance: it is suggested that as much as €20-25 million of ERDF funds would be necessary to meet the demand over the next programming period”

Finally, it should be noted that the weight attributed to some of these recommendations is highly dependent on the outcome of the on-going negotiations between the Maltese government and the European Commission. For example, if the maximum permissible state aid intensities are significantly reduced, then one would expect the recommendation to allocate more funds to FEIs to gain in importance when compared to recommendations relating to the allocation for grants. In addition, it should also be noted that the Partnership Contract is only an agreement which sets the stage for discussions on Malta’s OP. This would outline in more concrete terms Malta’s priorities for the programming period 2014-2020. 51

INsurance

Insurance in Malta

ver recent years, Malta has built up a reputation for innovative financial services and products. Building on the country’s EU membership and a carefully crafted programme of legislative and regulatory reform, the country has proven attractive for companies that want to selfinsure or reinsure through captives or cells of Protected Cell Companies.

Malta’s insurance industry has seen exorbitant growth in recent years. Insurance business is a licensable activity in Malta. As of September 2012, 57 insurance vehicles were licensed in Malta, of which 11 are captive insurance or affiliated insurance companies, and eight are Protected Cell Companies (PCCs). Only eight insurance companies licensed in Malta are active in the local market, a figure that reflects the international orientation of Malta’s insurance sector. Star Performer Insurance Sector Key Reasons for Malta’s Success The insurance sector is one of the star performers of Malta’s financial services industry. A number of Fortune 100 companies already have captives in Malta, among them multinationals such as BMW, Peugeot, Citroen and Vodafone. The key to Malta’s success in this sector lies in its EU membership, which allows companies licensed in Malta to write business in any of the other member states. The Malta Financial Services Authority Malta’s regulator, the Malta Financial Services Authority, is the single regulator for all financial services in Malta. The regulator is generally described as being open to the needs of insurance businesses but also firm in its approach to the regulation of the industry. The authority is very accessible to insurance professionals and companies that seek a solution to their insurance needs. The MFSA encourages regular consultation sessions throughout the licensing process of a potential insurance business to ensure that both the interests of the business and compliance with all regulatory standards are met. Banking & Financial Services In the aftermath of the financial crisis, Malta stands out as an attractive financial centre. Malta’s banks did not hold so-called toxic assets and followed a conservative approach based

on sound fundamental banking principles. This has brought welcome recognition to the Maltese banking sector, which has also developed products and services designed to meet the unique requirements of insurance companies. International Banking Centre With five retail banks and more than 20 international commercial and trade banks already operating in or from Malta, this sector has become one of the most robust on the island. The country’s banks are able to provide a full range of personal, commercial and trade services to clients. HSBC and Bank of Valletta are the leading retail banks on the island. Smaller banks such as APS, Lombard, Volksbank and Banif Bank help to keep the banking sector competitive and innovative, while Malta is also home to specialists in trade finance such as FIMBank and BAWAG. With the growing number of insurance companies that choose to domicile in Malta, Malta’s banks have also built expertise in the management of insurance companies’ investment portfolios. Banks such as HSBC Global Asset Management assist insurance companies in developing an operational setup during the licensing process with the MFSA. Once a licence is granted, banks in Malta offer insurance companies and captives tailor-made solutions in portfolio and risk management.

Source: FinanceMalta Investor Guide Series – Insurance & Pensions 52

Real Estate Malta offers a wide range of commercial and residential property for rent or outright purchase. One of the advantages of Malta’s small size is that commuting time between Malta International Airport and an office is rarely greater than 20 minutes, and journeys are seldom longer than 40 minutes. Commercial Property Given Malta’s small geographic area, there are few restrictions on where a business setting up in Malta can choose to establish its operations. In effect, the final choice will depend upon preferences and relative cost related to the quality and suitability of the property concerned. Type of Office Space Office space is available in purpose-built office blocks, in converted houses, flats or within some of the new, large mixed-use developments. Malta offers enviable locations with sea views and marinas as well as prestigious landmark office complexes within easy commuting distance of residential areas. Rental Costs Overall, rentals are around two-thirds to half of those charged for comparable commercial spaces in continental Europe.

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FINANCE

Competitiveness

Knowledge Economy -

A credible challenger Malta regularly receives high rankings in benchmarking reports. In 2011, the European Commission viewed the competitiveness of Malta’s economy in terms of labour productivity as above average in an EU-wide comparison, while the country has improved its ranking in the Global Competitiveness Report 2012-2013 of the World Economic Forum, climbing from 54th place to 47th (out of 144 countries).

One of Europe’s top performers In recent years, Malta has been ranked among the strongest EU economies in terms of GDP growth. Services underpin the Maltese economy, accounting for 75 per cent of GDP, while industry accounts for 23 per cent and agriculture for just 2 per cent.

Tier 1 reputation. As an EU and eurozone member, Malta offers a regulatory framework that is fully harmonized with EU and OECD rules, yet offers a sophisticated and flexible platform for the financial services industry. High performance. While global finance centres around the world struggled, Malta’s finance sector not only withstood the effects of the recent economic and financial downturn but posted yearon-year growth. Despite the international turmoil, Malta’s finance sector has expanded between 20 and 30 per cent annually. Low risk environment. Malta is a European Union member and has a longestablished and strong democratic tradition. Economic policies are liberal and the country is committed to an open business environment. Quick start up time. A company can be incorporated in a couple of days. Malta’s regulator, the MFSA, has set timeframes for the approval of licence applications for financial services such as investment funds or insurance vehicles, with the option of fast-track applications for certain vehicles and service providers.

Infrastructure A platform for business Substantial investments in infrastructure and telecoms networkshave created a highly sophisticated business environment. Cutting-edge systems. Malta has overcome its geographical limitations by building up a stateofthe-art telecoms infrastructure. International connectivity is ensured by two satellite stations and four submarine fibre-optic links to mainland Europe.

International Finance Centre

alta, a small island state at the heart of the Mediterranean, has quietly emerged as one of Europe’s most stable and innovative finance domiciles. Malta’s decisions to join the European Union in 2004 and the eurozone in 2008 have proved pivotal to its development as a major finance and business centre. Today, Malta has strong banking, insurance, fund and wealth management sectors that have attracted investment from the world’s leading financial institutions, blue-chip multinationals and high-net-worth individuals.

Finance Centre A fully-fledged domicile Malta’s resilience in the face of financial turmoil, economic recession and debt crisis has strengthened its position as a global financial services centre. Former niche industries have become pillars of the country’s economy.

Recording growth. Unlike many other European countries, Malta has been recording economic growth in the past years. After the economy contracted in 2009, Malta was able to post GDP growth of 3.7 per cent in 2010 and of 2.1 per cent in 2011. The country is expected to end 2012 with a GDP growth of 1.2 percent which is predicted to rise to 1.6 per cent in 2013. At 6.9 percent, Malta has one of the lowest unemployment rates in Europe. Unemployment in the EU stood at 10.7 per cent in November 2012. Aiming for more. The development of the finance sector is part of long-term economic plans to increase its contribution to GDP from the current 12 per cent to 25 per cent in the coming year.

Market Access A region of opportunities Situated within two to three hours direct flight time from Europe’s major cities, EU membership and with it, the subsequent introduction of pass-porting rights, has accelerated growth in all sectors of Malta’s finance centre.

Setting an example. The country’s banking system now consists of Maltese and international banks and is one of the soundest in the world. Bank of Valletta, the largest financial services provider on the island, passed the 2012 EU stress test with a strong capital buffer.

Wide range of market places. Malta offers instant access to an internal market of over 500 million people encompassing the 27 EU economies.

Growing wealth management location. The availability of a wide range of investment vehicles, among them also trusts and foundations, has made Malta a natural hub for wealth management and family offices in the region.

Connected Marketplace. Malta’s excellent air and sea infrastructure and long-standing trade links with major ports in Europe, North Africa and Asia provide for a network of worldwide connections.

International expansion. From 2004, the insurance sector grew from 8 insurance companies servicing the local market to more than 55 insurance companies with business in other countries.

Last in, first out. The country’s economy was one of the least affected by the recent financial crisis and experienced one of the shortest recession periods in the EU.

Prepared for cross-border interaction. The country’s fund industry is booming as more and more fund managers recognise the island’s potential to serve as a springboard into Europe. The Net Asset Value of funds administered in Malta just broke the 10 billion euro mark.

Growing industry cluster. Malta’s finance industry is today made up of about 600 regulated entities, up from 180 at the end of 2004. In addition, around 11,500 other nonregulated entities operate in Malta and service international clients, offering legal and other support services.

A holistic vision. Malta is establishing itself as the number one knowledgebased economy in the Mediterranean region. ICT, life sciences, education and financial services are only some of the areas the country is targeting and which have successfully reshaped Malta’s economic landscape in recent years.

Good relationships. Malta has excellent relationships with its neighbouring Mediterranean countries and due to its geographic location, Malta is also an ideal stepping stone to the emerging markets of North Africa and the Middle East. Post-crisis order. In a changing regulatory landscape with tighter requirements, Malta offers a safe EU location with a firm but flexible regulatory framework. Follow the sun. Malta lies in a convenient time zone for doing business across the world: one hour ahead of GMT, meaning office hours coincide with Asia in the morning, Europe throughout the day and the US in the afternoon.

Source: FinanceMalta Investor Guide Series – Insurance & Pensions

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NSO CENSUS 2013

Index of Industrial Production: January 2013 Provisional seasonally-adjusted data show that industrial production increased by 1.5 per cent in January over the previous month. Industrial production adjusted for working days rose by 9.6 per cent when compared to the corresponding month of 2012. Monthly comparison The industrial production index went up by 1.5 per cent to 112.5 points in January 2013. The production of intermediate goods, energy and consumer goods increased by 2.1, 1.3 and 3.2 per cent respectively while the production of capital goods decreased by 0.7 per cent. Annual comparison When compared to the corresponding month last year, the index of industrial production increased by 9.6 per cent. Increases were registered in all main industrial groupings with notable increases of 7.8 and 16.0 per cent in the production of intermediate and consumer goods respectively.

Source: External Cooperation and Communication Unit, National Statistics Office, Lascaris, Valletta VLT 2000, Malta 56

FINANCE news

Moody’s changes Malta’s rating to stable, highlights strength of banking system

ollowing an extensive review of Malta’s economic and financial position, credit rating Agency Moody’s changed the outlook on Malta’s A3 government bond rating to stable. The key drivers underpinning Moody’s decision included the expectation that debt metrics will stabilise in 2014 given an economic recovery and the country’s commitment to fiscal consolidation; Malta’s lack of funding stress and limited contagion risk from the euro area; the resilience of the Maltese banking system, with banks following a very conservative and traditional banking model that has not presented problems for the sovereign even through the worst of the financial crisis. In its in-depth analysis of Malta’s financial system, Moody’s noted that “the banking system features a relatively clear delineation between international- al and domestic banking activity. Although the system registers assets of 789% of GDP, core domestic banks (providers of credit and deposit services of the local population) represented 218% of GDP.

The report adds that this separation results in almost no spill-over from international activities into Malta’s domestic economy. Moreover, the strength of Malta’s banking system is evident in its solid external asset position, which stands in stark contrast to that of other international banking centres that have been hit by volatility.

“The report adds that this separation results in almost no spill-over from international activities into Malta’s domestic economy.” Moody’s presents a generally positive outlook for the immediate future of the local banking sector, which continues to report favourable indicators: “Although its size and concentration risk are vulnerabilities, the system is very well capitalized and has a very limited reliance on wholesale funding due to its ample liquidity.

High deposit levels (at about 185% of GDP) highlight the amount of domestic wealth available to cover the sovereign’s financing needs and anchor systemic liquidity.” Turning on government’s funding markets, Moody’s notes that the funding difficulties evident in the international financial markets over the last few years have been absent from Maltese financial markets, where all primary and secondarymarket trade in government securities takes place: “although the secondary market is very much underdeveloped, this is a reflection of the primary purchasers’ propensity to buy and hold these securities. The initial purchasers are the domestic banks which then sell a portion of these securities to resident individuals as part of their retail financial products suite and as an attractive complement to deposit accounts.” The report concludes that the retail base gives the market its characteristic stability, given that non-residents hold a very mini- mal portion of government debt securities. Source: MFSA 57

interantional trade

International Trade

reliminary figures show that the visible trade gap widened by €10.7 million in November when compared to the corresponding month in 2011. Provisional data for international trade show that the visible trade gap in November stood at €175.6 million, up by €10.7 million when compared to the corresponding month in 2011. There were decreases in imports and exports of €306.9 million and €317.6 million respectively, as shown in Table 1a. The decrease in the value of imports was primarily due to mineral fuels, lubricants and related materials, with other declines registered for machinery and transport equipment, miscellaneous manufactured articles, semimanufactured goods and crude materials. Mineral fuels, lubricants and related materials accounted for the main decrease in the value of exports when compared to the corresponding month in 2011. Other drops were registered for miscellaneous manufactured articles, and semi-manufactured goods. January-November 2012 In the first eleven months last year, the visible trade gap widened by €382.2 million, to €1,822.4 million. The increase in imports of €758.1 million was mainly due to mineral fuels, lubricants and related materials. Increases were also registered for food, beverages and tobacco, miscellaneous manufactured articles, crude materials, and animal and vegetable oils and fats. The rise in the value of exports of €375.9 million was primarily due to mineral fuels, lubricants and related materials. Other increases were noted for machinery and transport equipment, chemicals, miscellaneous manufactured articles, beverages and tobacco, food, and miscellaneous transactions and commodities. A substantial amount of Malta’s trade flows and consequent trade deficit continued to be directed towards the European Union. Increases were registered in imports from Italy, Spain, the Netherlands, Germany, Belgium, and the United Kingdom while there was a decrease from France. Exports to the euro area increased mainly to the Netherlands, Germany, France, Spain and Belgium. Increases in exports were also recorded for Libya, Turkey, Singapore and the United States of America.

Source: External Cooperation and Communication Unit, National Statistics Office, Lascaris, Valletta VLT 2000, Malta 58

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Economic and Monetary Union

Europe’s strong response By Neil Portelli Executive – EU Policy and Legislation

he economic crisis with all its economic imbalances, credit booms, real estate bubbles and unsustainable public spending is now five years old. Europe has not been inactive throughout this difficult period. Working together, the European Union (EU) Member States have delivered a very strong policy response to the challenges posed by the crisis.

A stricter version of the Stability and Growth Pact, more commonly referred to as the Fiscal Compact has been signed on March 2012 by all Member States of the EU, (with the exception of the United Kingdom and the Czech Republic) and entered into force on January 1, 2013. This reform, which came into force through the so called Six Pack and Two Pack of EU Regulations, brought along with it a number of improvements and important changes to fiscal rules and the way in which they will be enforced. Moreover, the European Central Bank (ECB) has developed a new policy for containing and limiting financial fragmentation in the euro area whilst the most vulnerable euro area Member States have found solace in co-operation with the ECB and the International Monetary Fund (IMF) throughout their battle to overcome the worst of the crisis. These are just some of the measures that the EU took in order to positively re-shape the euro area. What up to some time ago seemed like a decaying reality is gradually coming back towards a positive path. Looking ahead: A Blueprint for the Economic and Monetary Union In its ‘Blueprint for a Deep and Genuine Economic and Monetary Union’, the European Commission has already developed ideas on the framework for the coordination of major reforms to the current policy structures. The new system is intended to address the following issues: • More responsible budgeting: the headlining of both deficit and debt limits, new expenditure benchmarks and the underlying of the governments’ budgetary position are some of the criteria which will feature in this system. • Stepped-up surveillance in the euro area: the crisis has shown that difficulties in one 60

•

euro area Member State can have contagion effects in neighbouring countries. Extra surveillance is warranted to contain problems before they become systemic. Monitoring extended to economic policies: before the crisis, economic policy coordination was mostly voluntary. Member States submit National Reform Programmes (NRPs) each year, setting out the economic reforms they intended to undertake the following year, but there was no binding process in place to monitor and correct the emergence of imbalances in national economies.

Already, the EU has made some significant steps towards accomplishing the objectives of this ‘Blueprint’, amongst which the legislative proposals for a banking union. The EU Economic and Financial Affairs Council, throughout its last meeting on October 15 adopted regulations creating a single supervisory mechanism for the oversight of banks and other credit institutions, thus establishing the first ‘pillar’ of Europe’s banking union. The single supervisory mechanism will be composed of the ECB and the supervisory authorities of the Member States. The ECB will assume its supervisory tasks twelve months after entry into force of the legislation, subject to operational arrangements. The Malta-EU Steering and Action Committee (MEUSAC) has already held discussions in relation to the proposed banking union during its Core Group meeting held on September 27. During this meeting, the proposals were discussed by representatives of Government, the political parties, constituted bodies, civil society representatives.

MEUSAC is also currently involved in implementing another project in relation to the subject, entitled, ‘The Economic Recovery: Overcoming the Crisis Tigether’. The project aims to engage stakeholders to evaluate how the crisis has affected their operations whilst seeking ways of how to contribute to the economic recovery. This project is part of the Management Partnership between MEUSAC and the European Commission.

“Member States have found solace in co-operation with the ECB and the International Monetary Fund (IMF) throughout their battle to overcome the worst of the crisis.” The above-mentioned changes should continue to pave the way for a better Union in the very near future, strengthening confidence in the euro area, supporting Member States’ future challenges, and ultimately boosting the EU economy to create further growth.

Mr Neil Portelli read and graduated in Bachelor of Social Policy at the University of Malta. After his studies he started his professional career at MEUSAC, eventually joining the EU-Policy and Legislation Department as an Executive. Mr Portelli is currently responsible for three of MEUSAC’s nine Sectoral Committees, namely the Economics and Finance, the Agriculture and Fisheries and the General Affairs Committees.

Website: www.rintal.it Mobile: 99476595 e-mail: rim@go.net.mt

COME VISIT PISCOPO GARDENS THIS

CHRISTMAS TIME! PET FOOD PET ACCESSORIES PLANTS FRESH WATER FISH BBQS GARDEN FURNITURE PLANT CARE

Wishing you all a Merry Christmas and a Prosperous New Year from all of us at Piscopo Gardens

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FISHING

Q2/2013

Fish Landings During the second quarter this year, the volume and wholesale value of fish landings dropped by 39.5 and 30.4 per cent respectively. Fish landings in the second quarter amounted to 256,246 kilogrammes, a decrease of 39.5 per cent over the comparative period last year, on account of adverse weather conditions prevailing in this quarter. Blue Fin Tuna, the main species caught in the period under review, registered a heavy drop of 35.9 per cent. Furthermore, the wholesale value of fish landings dipped by 30.4 per cent to €1,841,248. Regional overview Maltese fishermen landed 214,079 kilogrammes (-17.7 per cent) of fresh fi sh during the

period under review, making up 83.5 per cent of total landings. An increase in the landings of Bogue (+105.5 per cent) and Swordfish (+47.4 per cent) were outweighed by drops in all the other species mainly Blue Fin Tuna (-36.6 per cent), Shrimp (-72.0 per cent) and Mackarel (-83.5 per cent) landings. The wholesale value of fresh fi sh landings by Maltese fishermen amounted to €1,660,018, a decrease of 27.4 per cent over the corresponding quarter last year. This was mainly due to a decline in the average price per kilogram of the two main species landed, Blue Fin Tuna (-21.3 per cent) and Swordfi sh (-11.7 per cent) over the comparative period of last year. Fresh fish landings by Gozitan fi shermen declined by 74.3 per cent over the comparative period last year, making up 16.5 per cent of the

total landings. Mackarel, the dominant species landed during the second quarter, declined by 83.5 per cent over the corresponding period in 2012. Similarly, the wholesale value of fresh fish landings fell by 49.8 per cent to €181,230 in the second quarter this year. Indices The quarterly ‘All Items’ fresh fi sh price index for the second quarter stood at 129.31 points, an increase of 16.29 points (+14.4 per cent) over the comparative period in 2012, mainly as a result of lower catches. This was also reflected in the quarterly ‘All Items’ fresh fish volume index, which stood at 78.64 points, down by 51.42 points, or 39.5 per cent when compared to the second quarter last year.

Source: External Cooperation and Communication Unit, National Statistics Office, Lascaris, Valletta VLT 2000, Malta 62

Venetian Blinds in Double Glazing

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NSO CENSUS 2013

Census of Population and Housing 2011

A focus on Surnames

Of the 19,104 surnames recorded in the 2011 Census, Borg, Camilleri and Vella stand out as the most common, covering between them almost 10 per cent of the population. More than 19,000 surnames found The 2011 Census of Population and Housing, taken on 20 November, recorded 19,104 surnames across the Maltese Islands. Almost 14,000 residents, or 3.3 per cent of the total population, had a double-barrel surname, an increase of around 45 per cent compared to the 2005 Census, when 9,507 persons were enumerated as such. Of these, 2,917 residents, or 21.2 per cent, were nonMaltese. Localities with the highest proportion of residents having a double-barrel surname were Mdina, with 15 per cent, followed by Swieqi (8.3 per cent), Hal Balzan (8 per cent) and Tas-Sliema (7.7 per cent). Localities in Gozo recorded the smallest proportions of persons with a double-barrel surname. Residents having a double-barrel surname tended to be relatively younger, with an average age of 32.4, compared to 40.8 for other residents.

“For instance Mintoff, which ranks 144th at a national level, has the most common cluster in Ghasri, while De Brincat is most concentrated in Munxar” Most common surnames identical to 2005 The top ten surnames were identical in rank to those recorded in the 2005 Census, and accounted for almost onefourth of the population. In particular, 13,610 persons, or 3.3 per cent of the population, bore the surname Borg, followed by Camilleri and Vella, with 13,090 and 12,192 persons respectively.

The top 20 surnames accounted for 38.6 per cent. No significant difference was observed on a gender level. The top three surnames among nonMaltese nationals were the same as for their Maltese counterparts. Additionally, the three most prevalent foreign surnames were Smith, Jones and Brown, with less than 80 persons carrying each surname. Interesting trends emerge at locality level The Census makes it possible to map the distribution of surnames, showing how the most popular surnames are spread across the Maltese Islands. For instance, whereas the majority of the most common surnames, including Borg, Camilleri, Zammit, Galea, Micallef and Attard, are found in Birkirkara and Mosta, the largest two localities on the island, other popular surnames are most prevalent in smaller localities. The Census highlights areas of concentration of particular surnames. For instance Grech, Farrugia and Spiteri are most likely to be found in HazZabbar, Zurrieq and Zejtun respectively, which place higher in rank in terms of number of residents. Interesting trends emerge among other less popular surnames, particularly in Gozo. For instance Mintoff, which ranks 144th at a national level, has the most common cluster in Ghasri, while De Brincat is most concentrated in Munxar. Similarly, although Carabott is the third most common surname in Marsaxlokk, it places 94th nationwide. Such trends indicate that despite an increasingly mobile population, many surnames still have strong ties to specific localities, even in a relatively small country such as Malta.

Source: External Cooperation and Communication Unit, National Statistics Office, Lascaris, Valletta VLT 2000, Malta 64

ARTS

Dancing Brushes J

By Rob Parry

oseph Casapinta, an artist well known for his command of all mediums, has this time embarked upon a creative journey, an exploration of the real places that have inspired him throughout his life. In order to fulfill this Casapinta has developed a technique with watercolours that is beyond the traditional; indeed he states unequivocally that his inspiration is part of the technique he uses. Casapinta has visited different, personally inspirational, every day sights in Malta and beyond and has captured the very essence of what is actually there. For example, he has not produced scenic pop art that shows only the glory of the fortifications or the stunning beauty of the architecture concerned, no! What Casapinta has done is remarkable in the sense that he has included the street signs, the telegraph wires and the crates of Cisk and through his skill as an impressionist has delivered an amalgamation of styles that incorporate, serenity, natural beauty, bold and strong imagery alongside stunning modernistic and naturalistic reality. His work is visual poetry; one can hear the band playing, hear the idle chatter and humour of the local pub clientele; the scenes flow with elegance and a raw reality that gives such mood and depicts a vibrancy you would not ordinarily associate with a series of watercolours. One can view the myriad scenes and feel the atmosphere; cathartic not only for the artist, but in a sublime manner, for the viewer too.

The stunning seascapes and harbour views captivate the eye and the mind; one can hear the gentle lapping of the water against the pebbled shore or the shiny, well kept hulls. Indeed, the wonderful detail in reflection is breathtaking and is all part of the art of creating a visual image that flows from the heart, and onto the paper through those dancing brushes. The way Casapinta captures the mysterious shadows with the skillfully applied dark tones creates the beautiful, naturalistic light, allowing the impression of detail to come to the fore and this is all rooted in the technique he has been developing for some time. He chooses a scene, immerses himself in the creative mindset and then allows his brushes to dance over the page as if the scene is flowing through him and onto the pre stretched paper. There is indeed a real flow in the construction as he uses plenty of water to allow the paint to have free movement which blends colour and form in a manner that can only be described as breathtaking. Each composition relates a story from a uniquely personal perspective and this allows his actions

to be rapid and free moving; he already feels and indeed sees on the paper that which will appear before a single brush stroke meanders its way fleetingly across the page. Trails of watercolour blend and create a dynamic realism that captures not only the reality, character and beauty of a scene, but also enables the viewer to be as happily lost in the art as the creator was at that point in time he so skillfully encapsulates. Casapinta’s 5th soloOverview exhibition titled ‘Dancing Rob Parry’s Brushes’ will be open to the public from the 7th December Current 2013 till 31st January 2014 at Palazzo Depiro, Mdina. • Lecturer in English at MCAST Malta • Higher Education Lecturer at North Lindsey College Past • Lecturer BA Social Sciences (Politics) at University of Lincoln (NLC Campus) • Lecturer Study Skills at Hull University Education • L-Università ta’ Malta • The University of Huddersfield • The University of Hull

About Palazzo de Piro Palazzo de Piro is a 17th Century Palazzo nestled in the bastion walls of the medieval city of Mdina, Malta’s Silent City. In 1868, Alexander de Piro D’Amico Inguanez and his new wife Orsola took up residence here soon after their marriage. Orsola was an heiress with various properties including a palace and small church in the heart of Florence, but

it was here she decided to bring up a family of seven boys and two girls. As a great Maltese matriarch she managed both her family and considerable works of charity with energy and enthusiasm, and continued to do so after the untimely death of her devoted husband. Orsola’s son Giuseppe, who was born in the house founded the Missionary Society

of St Paul and is considered for sainthood. In 2005, Palazzo de Piro was acquired by The Metropolitan Cathedral Chapter, also responsible for The Mdina Cathedral and The Mdina Cathedral Museum, and extensive restoration works were undertaken to create a venue of cross-cultural, artistic and social dialogue. 65

NEWSMAKERS

Competition policy: Tougher stand needed on social dumping - David Casa MEP

n Opinion on competition policy, co-drafted by David Casa on behalf of the EPP Group, has been adopted by the Committee on Employment and Social Affairs in the European Parliament. “I am pleased with the Opinion that has been adopted in Committee yesterday. I welcome references made to the issue of matching labour skills to market needs. EU initiatives that target this issue, such as the online tool ‘EU Skills Panorama’, have been a step in the right direction. However, there is still much more to be done. One other key issue is social dumping which is also tackled to a certain degree in this Opinion. This is a serious problem in various member states that should be better controlled and regulated”, remarked Mr Casa after the vote. Although there is no universally accepted definition of social dumping, it is generally understood to be the use of very cheap labour to significantly lower production costs temporarily for the purpose of wiping out competition. “Competition pushes businesses to offer the best possible goods and services at the best prices to European consumers. It is what increases consumer choices, enhances

the quality of product offerings and it is what stimulates companies to be more efficient and innovative”, stated David Casa. Amendments tabled by the Maltese MEP however made clear that the goal of competition policy should not be to micromanage but rather to enforce fairer and clearer rules in which market forces can effectively function. The objective of the Opinion is that of dealing with employment issues related to competition policy and will subsequently feed in to the main Report being prepared in the Committee on the Internal Market and Consumer Affairs. The Opinion on competition policy received substantial cross-political group support and was adopted by the committee with a vast majority.

FITCH re-affirms BOV ratings

itch has reaffirmed Bank of Valletta’s longterm rating at investment grade BBB+ with a stable forward outlook. The Bank’s Support Rating Floor (SRF) has been revised to BBB- following the recent one notch downgrade of Malta’s sovereign rating. The SRF does not assess the credit quality of the Bank but communicates Fitch’s view on the ability of the sovereign to support the Bank if this becomes necessary. All other ratings remained unaffected. BOV Chairman John Cassar White expressed his satisfaction on the affirmation of the Bank’s long-term rating by the international agency Fitch. “The Bank’s core business remains robust with a strong balance sheet and capital position” said Mr. Cassar White. “This will ensure that BOV continues to reinforce its commitment to support the Maltese economy.”

About Bank of Valletta Bank of Valletta is the leading financial services provider in Malta, delivering the full range of financial services including retail and investment banking, private banking, fund management, bancassurance and stockbroking. Domestic operations include a nation-wide network of branches, investment and business centres, while all retail banking is also delivered via internet, phone and mobile channels. BOV also issues bank cards under the Visa, MasterCard and American Express brand names. BOV offers the most comprehensive suite of products aimed at the business sector, financing the pillars of Malta’s economy. It also hosts a dedicated support office to provide tailored banking services to SMEs and sole traders.

‘Best-in-market’ offers on home and car loans from HSBC Malta - Home loan interest rates starting from 1.99%

SBC Malta launched two new ‘best-in-market’ fixed interest rate home loan offers and an equally attractive deal on car loans. These offers are set to close on 31 December 2013. The HSBC home loan offers are: 1.99% fixed until 31 December 2014, and 2.7% fixed until 30 June 2015. Both offers apply on new loans and amounts up to €1,000,000 although requests for amounts above €1,000,000 will be considered on a case by case basis. The car loan offer provides a fixed interest rate of 4.99% for the entire duration of the loan, which may be for 2, 3, 5 or 7 years - although the latter term is only available for loan amounts of €10,000 or more. No early repayment fees will be incurred for early or additional repayment and further discounts on processing fees are available for HSBC Premier and HSBC Advance customers. “These new time-limited deals offer HSBC customers the most competitive home loan interest rates currently on the market as well as the peace of mind that only a fixed rate can give,” said HSBC Malta’s Paul Steel, Head of Retail Banking and Wealth Management. More information about HSBC Malta’s special offers is available on www.hsbc.com.mt, by calling Customer Service on 2380 2380, or by visiting any HSBC branch in Malta and Gozo.

Application on-line

You may apply on line to the Academy to reserve a place. However, final acceptance is dependant on meeting the entry registration criteria of Napier Edinburgh University. http://www.123contactform.com/form-662180/MASTERS-DEGREE-IN-BANKING-AND-FINANCIAL-SERVICES

MASTERS DEGREE IN BANKING AND FINANCIAL SERVICES Programme commencing December 2013

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