MONEY SEPTEMBER 2015 ISSUE 32

BUSINESS | LIFESTYLE | DESIGN

THE FINANCE ISSUE ISSUE 32

FINANCIAL FAIR PLAY MONEY LAUNDERING INSURANCE

THE URBANITE LOOK INTERVIEWS

MFSA, MALTA STOCK EXCHANGE, FINANCEMALTA

A WORK OF PROGRESS. THE BMW X5.

STARTING FROM €60,430 Muscats Motors Ltd. Rue D’Argens, Gżira Phone: 2326 4581/2 Email: info@mml.mizzi.com.mt bmw.com.mt 2 - Money / Issue 32

The all-new BMW X5

www.bmw.com.mt

Sheer Driving Pleasure

Money / Issue 32 - 3

CONTENTS

WELCOME Think about it: what are the odds that a country that requires plenty of zooming in on Google maps, and which has a population of less than half a million people, succeeds? Not many, you might think.

And yet, Malta’s economy is doing well. Key indicators include healthy tourist arrivals, a good level of consumer and investor confidence, low unemployment rate, and a quality of life which compares well to the rest of Europe.

In this issue of Money, we focus on finance. The financial services sector is a high performer. In fact, the latest figures published by the National Statistics Office show that financial services are contributing 8.5 per cent to the GDP. Indirect contribution, including that from law and accountancy firms, is of at least another 8.5 per cent.

Moreover, the sector is attracting new operators, creating employment opportunities and generating a spillover effect on the rest of the economy.

This is being acknowledged not just locally but also internationally. The World Economic Forum’s Global Competitiveness Index 2014-15 gives Malta a high ranking with respect to financial market developments. Malta also placed in 10th position among 144 countries in the soundness of banks.

Of course, no sector should rest on its laurels. The financial services sector should continue to be flexible in regulation, sound in due diligence, and intelligent in achieving a high level of continuous training.

In this issue of Money, Veronica Stivala interviews Prof. Joe V Bannister, MFSA Chairman, who explains how the authority is driving innovation while introducing new regulations and initiatives. Profs. Bannister also stresses how innovation must be balanced with regulation.

Reinhold Karner, business advisor and multinational entrepreneur, focuses on start-ups and how these constitute an invigorating element in any economy. One of the main hurdles for start-ups, however, is to attract the right support in terms of expertise and finance.

For her dissertation, Ann Marie Mangion analysed financial literacy in Malta.

The findings are very interesting and should be the basis of further debate: while the Maltese have a sound financial knowledge, more effort should be made in boosting financial literacy since this, in turn, works in favour of a higher standard of living and welfare.

In this issue of Money, we also focus on money laundering, the educational sector’s contribution to financial services, and learn some lessons from New Zealand which, with a population of just 4.47m, is being hailed as a rock star economy.

Read on and enjoy.

THE FINANCE ISSUE SEPTEMBER 2015

9 CHAMPIONING INNOVATION

The Malta Financial Services Authority prides itself in being a champion of innovation. Prof. Joe V Bannister, MFSA Chairman, tells Veronica Stivala about the authority’s success in driving innovation, new initiatives and regulations and its role in education.

12 SUCCESSFUL TRANSACTIONS

The role of a stock exchange is to be a business enabler, says Eileen Muscat, chief executive officer, Malta Stock Exchange.

15 TRANSFORMING YOUR BUSINESS

Why should businesses move to the cloud?

18 THE DARK SIDE OF BUSINESS

To preserve its status as international financial centre of repute, Malta has implemented several safeguards against money laundering, says Dr Richard Bernard.

22 TAKING IDEAS TO MARKET

How can start-ups attract investment? Business advisor and multinational entrepreneur Reinhold Karner explains.

24 TAKING CARE

We are taking greater care of our wealth and possessions, Julian Mamo, president of the Malta Insurance Association, says.

26 ARE THE MALTESE FINANCIALLY LITERATE? The Maltese have a high level of financial literacy. However, financial literacy should be further researched and supported, says Ann Marie Mangion.

29 EAST ENDERS?

Is China’s sell-off a no go zone or an opportunity, asks Alexander Mangion.

31 A LEVEL PLAYING FIELD

With UEFA’s fair play regulations, even local football clubs need to start operating like businesses, says Reuben Buttigieg.

33 INNOVATIVE AND PROACTIVE

Ivan Grech, head of business development, FinanceMalta, outlines Malta’s strengths as a financial services centre of repute.

44 THIS IS NO HOBBIT ECONOMY

New Zealand is doing better than most of its economic peers, including Australia.

54 THE RISE OF FALL

Autumn doesn’t need to be a browner shade of brown. Money colours in the season with bold and bright gifts.

56 THE COAST IS VERY CLEAR There are two sides to going exclusive, says Mona Farrugia.

58 HOUSE OF (TRUMP) CARDS

Is there anything beyond Donald Trump’s entertainment value, asks the Bluesman.

COVER CREDITS Editor Anthony P. Bernard anthony@moneymag.me Consulting Editor Stanley Borg stanley@moneymag.me Design Roderick Peresso Design Studio m. 99258825 Printing Print It Distribution Mailbox Direct Marketing Group

Hand delivered to businesses in Malta, all 5 Star Hotels including their business centres, executive lounges and rooms (where allowed), Maltese Embassies abroad (UK, Rome, Brussels, Moscow and Libya), some Government institutions and all ministries For information regarding promotion and advertising call Tel: 00 356 2134 2155, 2131 4719 Email: hello@moneymag.me

Photography Nicky Scicluna Styling Luke Engerer Hair Adrian Buhagiar, at Barnuz Barber [m 9940 1980] Model Romek at ModelsM, wearing Joop blazer at Ascot House, €349.00 Tom Tailor shirt, €39.99 Joop jeans at Ascot House, €120.00

Money is published by BE Communications Ltd, No. 81, Howard Street, Sliema, Malta SLM 1754 All rights reserved. Reproduction in whole or in part is strictly prohibited without written permission. Opinions expressed in Money are not necessarily those of the editor or publisher. All reasonable care is taken to ensure truth and accuracy, but the editor and publishers cannot be held responsible for errors or omissions in articles, advertising, photographs or illustrations. Unsolicited manuscripts are welcome but cannot be returned without a stamped, self-addressed envelope. The editor is not responsible for material submitted for consideration.

Errata Corrige: The LifeMedGreenRoof project, featured in the February/March issue of Money, is partially funded through LIFE+ which is the EU’s financial instrument supporting environmental and nature conservation projects throughout the EU (http:// ec.europa.eu/environment/life/funding/lifeplus.htm).

4 - Money / Issue 32

J O O P. C O M

EXCLUSIVELY AT ASCOT HOUSE Ascot House, Regina Square, Valletta

MALTA’S NEW SHOPPING

EXPERIENCE

KIDS AREA

KITCHEN WITH CHEF

FRUIT & VEGETABLES

BAKERY

DELICATESSEN

WINE CORNER

Psaila Street, Santa Venera

A Daimler Brand

The new GLC.

Make the best of every terrain.

Town. Country. And everywhere in between.

Comfortable on long journeys, sporty on rural roads and efficient in everyday use, the GLC moves with effortless superiority between these automotive worlds.

You will be amazed at how the character of a car can change.

GLC 220 D 4-matic â‚Ź55,000 including 5 year Service Plan H.P. Terms available at 5.5% variable interest rate* * terms and conditions apply

Reg. No. S063

Auto Sales Ltd - Kind’s Mosta Road, Lija LJA 9011. Tel: 21433601 Mgarr Road, Xewkija XWK 9012. Tel: 21550962 / 99486417 / 99874301 www.mercedes-benz.com.mt

Interview INTERVIEW

CHAMPIONING

INNOVATION The Malta Financial Services Authority prides itself in being a champion of innovation. Prof. Joe V Bannister, MFSA Chairman, tells Veronica Stivala about the authority’s success in driving innovation, new initiatives and regulations and its role in education.

L

ast year was a progressive one both for the local financial services industry as well as for the Malta Financial Services Authority.

In his introduction to MFSA’s annual report for 2014, the chairman, Prof. Joe V Bannister, lauds the many positives of the year, including the news that came with the International Monetary Fund Article IV assessment that Malta continues to host a relatively large financial sector without exposing itself to excessive risk.

Excessive risk is the key terminology here, taking into consideration the fact that the total assets of licensed entities represents around 800 per cent of Malta’s gross domestic product.

stability risk. That said, Prof. Bannister notes how the local and international media often misinterpret the statistics, comparing the 800 per cent to Cyprus’ situation before the crisis.

“This could be seen as being an excessive risk to the economy,” says Prof. Bannister. “However, it is not the case, because when the figure is analysed properly, the exposure to the economy that hails mainly from banks, which form an integral part of the economy, only represents around 250 per cent.”

“Local and international media constantly draw parallels with Cyprus despite the fact that Bloomberg, Standard & Poor’s and the International Monetary Fund have all explained that the situation in Malta is different to the Cypriot one. We have to explain this position at every opportunity,” he says.

This is more or less equal to the European average.

The remaining percentage is international business which does not pose any financial

The MFSA rightly prides itself in its success and the many assets that give it a solid platform for the future. These are mainly:

Money / Issue 32 - 9

Interview INTERVIEW

EU membership; local political consensus; high quality, well-trained human resources; a genuine welcome from Malta’s authorities and people; robust and flexible regulation; and innovation to open up new opportunities for the finance industry and its clients.

Of course, one must acknowledge that every regulatory system has weaknesses.

“If there were no weakness, we would not have had the 2008 financial crisis,” notes Prof. Bannister.

Regulation is a continuously developing process.

Fortunately, as the chairman underlines, “The MFSA is part of the European process and we apply European directives and regulations. This means that any weak links are identified at EU level and any corrective measures would conform to the best international standards.”

Due diligence is extremely important. All companies and their senior officers apply for a financial services licence and have to undergo a due diligence exercise. The process is very rigorous and extensive. In certain cases, help is also sought from various agencies because the MFSA’s approach is “no due diligence – no licence”. That’s how much importance the MFSA attaches to the process, stresses Prof. Bannister.

What new legislation has the MFSA helped introduce, and with what aims?

Malta is under obligation to transpose EU financial legislation into national legislation and the MFSA is key to this process, notes Prof.

Bannister. There have been various transpositions and these are published in the MFSA newsletter.

However, the main important pieces of legislation have been the Alternative Investment Fund Managers Directive, the CRD IV Directive, the Bank Resolution Directive and currently ongoing is the Solvency II Directive.

A feather in the MFSA’s cap, and one of its star qualities, is the fact that it is a champion of innovative regulation. Prof. Bannister stresses how innovation must be properly balanced with regulation. He points out how the 2008 financial crisis clearly happened because “innovation outstripped regulation”. By this he means that financial institutions worldwide were launching products for which there was no regulation or sufficient regulation.

As regulator, the MFSA is not involved in product regulation but in innovative legislation which conforms to EU legislation.

“This is important because these frameworks must not create regulatory arbitrage,” he says.

10 - Money / Issue 32

The main area where innovation through regulation has taken place has been investment services with the introduction of the Incorporated Cell Company and the Recognised Incorporated Cell Company.

“The cell company concept lends flexibility to the structuring of various types of financial activities and products and has already been very successfully utilised in the insurance sector with the introduction of the protected cell company,” Prof. Bannister says.

Malta is the only EU member state to have this type of legislation. The cell company concept has also recently been extended to the re-insurance special purpose vehicles and to securitisation cell companies. The latter legislation is considered a first worldwide.

Finally, discussing the MFSA’s remit, we touch upon its educational side. The main aim of its

Education Consultative Council is to act as a forum for debate, coordination and information sharing on matters related to training and development for current and prospective employees with the FS sector. The council was in fact set up because the MFSA saw the need for training at what Prof. Bannister refers to as the “non-graduates”, including accounting technicians and investment advisers. These form the bulk of the industry as opposed to lawyers and accountants.

“The aim was to involve non-university institutes and training schools such as the Institute for Financial Services, the Malta International Training Centre, the PwC Academy and MCAST among other institutions. The ETC and Education Department are also represented.”

The main aim of the council is to co-ordinate training programmes at the non-degree level particularly at the diploma and certificate level.

“ALL COMPANIES AND THEIR SENIOR OFFICERS APPLY FOR A FINANCIAL SERVICES LICENCE AND HAVE TO UNDERGO A DUE DILIGENCE EXERCISE.”

Money / Issue 32 - 11

STOCK Interview EXCHANGE

SUCCESSFUL TRANSACTIONS The role of a stock exchange is to be a business enabler, says Eileen Muscat, chief executive officer, Malta Stock Exchange.

From your perspective, how has the local financial services sector performed in the past year?

During the past year, I can say that the market has continued on a positive trend. There has been a significant rise in market activity when compared to the previous year with the index also regaining some ground. While the primary market has not been as active as expected, indications are that the fourth quarter of the year will see increased activity in this respect.

During the year we have also registered considerable growth in other areas, in particular the services offered by the CSD operated by the Malta Stock Exchange.

From our perspective, we can say that we expect to see continued growth. The

12 - Money / Issue 32

local financial services sector in general also appears to be continuing in its steady development with new operators penetrating the market, an expansion of services and new sectors developing.

What is the role of the Malta Stock Exchange in fuelling growth in the financial services sector?

Just like any other capital market, the role of an exchange is to fuel economic growth by facilitating the change of savings and investment in productive development through the listing, trading and other ancillary infrastructures it provides. It provides another route for access to capital to both issuers and investors in order for them to continue to develop their business and broaden investment opportunities and in this respect has a direct role as a business enabler.

The exchange also supports financial services

sector operators through the provision of other services such as custody and other back office services, reporting requirements and access to international markets. These services may be an added encouragement and incentive for certain operators to set up operations within the local financial services sector.

Does being a boutique exchange give the Malta Stock Exchange added flexibility and the right tools to offer a more personalised service?

Just like any other business, it’s all about having the right business model to be able to operate in the most efficient and productive manner within the market in which you operate and which addresses the needs of your particular clients and then to develop the tools to address those needs.

If you have a business model that is dependent on volumes, on catering for the largest number of clients in the shortest possible time and at the cheapest price, then streamlined procedures and common technology which basically run by themselves are probably the best route to go down.

Addressing more specific needs requires something different – in many cases, its ability to think outside the box and be innovative in solutions, but not of course compromising on regulation, which however needs to be flexible enough to support such innovation. This is where boutique exchanges can, and do, excel – from expending times with potential users to understand their needs, to helping them find the best solution to their requirements.

In what way has the Malta Stock Exchange invested in technology, in order to be able to cater for the local economy’s business requirements?

Throughout the years the exchange has as far as possible invested considerably in new technology to provide enhanced and more efficient services as well as to ensure regulatory compliance as well as robustness of its procedures. Suffice to mention, for instance, the move from manual trading to electronic trading and then in 2001, the move the remote trading.

Within the ambit of the single European market and the global economy, connectivity between markets, systems and operators is imperative.

Secure, efficient and less costly connectivity can only truly be achieved through technology.

Of course, such connectivity means that participants in markets have instantly a much broader range of counterparties and financial instruments in which they can invest to grow their business or spread their investments.

Do you also hold international agreements in order to be able to provide global services?

In order to continue to develop, it’s impossible to just continue to cater for the local market, which is of a finite small size. Furthermore, it’s also important for local market participants to be able to access international markets rapidly and relatively cheaply.

Technology is a business enabler, but technology in itself isn’t enough. Technology has to be underpinned by arrangements and agreements between counterparties, in order to ensure smooth operations, limitations of risk, efficiency and containment of costs.

The exchange has a number of agreements in place, including a custody agreement with Cleastream Banking AG, one of the largest ICSDs globally, an agreement with REGIS-TR to provide services in relation to regulatory reporting of derivative trading, it’s a participant in Target-2 Securities, the pan-European Settlement System operated by the ECB and not least of course, it uses the Xetra trading platform operated by Deutsche Boerse AG.

How do you encourage listing and trading on the Malta Stock Exchange?

The basic role of a capital market is to provide facilities for the exchange of savings into productive development. In simple terms, investors provide funds through transactions for listed companies to invest such funds to continue to grow and develop their businesses.

How important is a robust yet flexible regulatory regime for a boutique exchange?

Good and robust regulation is paramount for any market to function well. However, such regulation needs to be tempered with sufficient flexibility in order to allow markets to respond rapidly to industry needs which are becoming more complex and developing at speed.

The exchange itself is not a party to such transactions but encourages such transactions by providing the right infrastructure, rules and regulations, a transparent and orderly market, and access to a wide pool of investors and instruments through technology and agreements.

Such flexibility in regulation is especially important for boutique exchanges whose business model is more dependent on being able to address and adapt to the specific needs of individual clients. In such a business model, the one-size-fits-all regulatory regime may not be the best to encourage business development.

“WITHIN THE AMBIT OF THE SINGLE EUROPEAN MARKET AND THE GLOBAL ECONOMY, CONNECTIVITY BETWEEN MARKETS, SYSTEMS AND OPERATORS IS IMPERATIVE.” Money / Issue 32 - 13

Why should businesses move to the cloud?

CLOUD

TRANSFORMING

YOUR BUSINESS M

aybe it’s the terminology that makes people think that the cloud is something insubstantial; a technology fad that will simply move away like, well, a cloud. And anyway, except for technical people, no one knows for sure how the cloud works. And if you don’t know how something works, then why should you use it?

Efficiency is also an important factor here. The time taken to study, commission, implement, configure and test services usually runs into weeks. On the other hand, cloud-based tools are available in a matter of hours. This turnaround boosts a company’s efficiency.

COST

In pretty much the same way, you don’t know how to exactly map the path that an e-mail takes from sender to recipient. But you still use it because it’s fast, cheap and you wouldn’t operate your business without it.

FREEDOM

Thanks to economies of scale, large cloud providers can offer cloud services at a greatly reduced cost.

Cloud computing has these same benefits and more. And that explains why the take-up of cloud computing is constantly on the rise. In the US, it is estimated that 78 per cent of small businesses will have fully adopted cloud computing by 2020.

Worldwide, it is estimated that by 2018, 59 per cent of the total cloud workloads will be softwareas-a-service. Public cloud computing spending will reach nearly $70bn by the end of the year while total cloud computing growth will increase by 26 per cent by end 2015.

The flexibility that cloud computing can afford is second to none. Businesses no longer have to worry about system upgrades, backup, system security and hardware – that is all offered as a service by a service provider.

Businesses can also afford greater mobility thanks to the cloud. Productivity can be maintained from anywhere because with the right cloud solutions, employees can access data and tools from anywhere and while on the move. All you need is an internet connection.

Yet beyond statistics, what proves that cloud computing is one of the fastest growing IT sectors is that cloud computing is no longer an IT term – it has become a business term. And that’s because moving to the cloud doesn’t just make good technological sense – it also makes good business sense.

Gone are the days when files are saved on a single server on one computer. The cloud offers greater access to business files and data, which also enhances the collaboration between employees. Using cloud collaboration tools, employees working from different offices or locations can upload, edit and comment on documents, according to parameters set by the employer. This enriches workplace collaboration.

SCALABILITY

INTEGRATION

One of the biggest advantages of cloud computing is scalability. Businesses can scale up or down according to their business needs and growth, without necessitating large investments. Moreover, businesses can invest in resources according to their needs. For instance, retailers normally experience a peak in demand in festive periods – therefore, they can scale up their demand during these periods, and then scale down when demand decreases to normal levels.

Nowadays, businesses are under constant pressure to do more with less. In such circumstances, companies should identify areas that are not critical to their business and try and reduce related investments, while still maintaining level and security of operations.

This is what makes cloud computing an ideal platform. Cloud computing is not the sole reserve of SMEs or large companies – rather, any business can move to the cloud, whatever its size, because cloud computing can be scaled up and down according to business size.

Cloud-based solutions cut down on wastage and create various opportunities for integration. Cloud computing helps businesses move away from the siloed approach of the past. Instead, businesses can use cloud-based tools to integrate back-office operations, including human resources, accounting and marketing. This allows businesses to cut down on administration costs and focus on areas that are more critical to their businesses.

With hardware and software investments decreased, businesses can register significant cost savings. This means that businesses can shift their IT capital expenses to operating expenses.

This is especially good news to SMEs, who can now access big-company IT set-ups without having to fork out the infrastructural costs.

Large companies that have dedicated IT departments can also free up their IT staff from maintenance and support. Instead, IT departments can focus on innovation and building new tools for the business.

CONTROL Moving to the cloud doesn’t mean losing control over your business. Rather, businesses are more in control of their IT needs and allocated costs.

Moreover, thanks to the cloud, businesses have access to big data – used correctly, big data helps businesses be better informed and, consequently, take better decisions.

Moreover, by analysing big data, companies can develop and offer the products and services that their customers really want.

“PRODUCTIVITY CAN BE MAINTAINED FROM ANYWHERE BECAUSE WITH THE RIGHT CLOUD SOLUTIONS, EMPLOYEES CAN ACCESS DATA AND TOOLS FROM ANYWHERE AND WHILE ON THE MOVE.” Money / Issue 32 - 15

market CLOUD Businesses should not trust just any cloud services provider. Check the service provider’s history and reputation as well as the measures taken to prevent privacy and security breaches. This does not exclude the risk completely – however, hosting services at your own office is not necessarily safer.

THE

SILVER LINING

Cloud services have created new ways of how businesses harness IT, says Jack Mizzi, Chief Marketing Officer, BMIT. Locally, what is the take-up of cloud services?

Customers have a wide range of cloud services that they can tap into and local businesses are increasingly making use of such services as part of their daily operations. The use of internetbased applications has quickly shifted from being an innovation a few years ago to almost a commodity, also thanks to the flexible and innovative approaches being adopted.

BMIT has been offering a range of cloud services for a number of years and we have noticed a consistent increase in demand from all types of businesses. Some products such as hosted e-mail or backup are in higher demand, since they provide immediate technical and cost benefits.

Other services, such as cloud infrastructure, are dependent on specific customer requirements and are therefore more IT-oriented in terms of target.

What advantages do cloud services offer to SMEs and larger organisations?

The principal benefits are flexibility and versatility.

Cloud services remove the barriers associated with high capital investments in IT, since the model is now one of pay-as-you-go. Additionally, cloud services users usually have the facility to scale up and down as required.

Cloud-based services have changed how customers consume IT, including hosting. The adoption of such technologies has created new ways of how businesses harness IT. For instance, previously unaffordable computing power is now within reach of most businesses and cloud-based applications have become ubiquitous.

SMEs are probably the biggest beneficiaries as cloud services enable SMEs to avoid capital expenditure related to hardware and software procurement or for implementation and maintenance services. This is a far cash-flowfriendlier approach than the traditional upfront investment model to IT which either requires SMEs to commit sizeable amounts of their already limited financial resources or discourages the investment altogether, limiting them of the ability to benefit from IT innovations.

16 - Money / Issue 32

At BMIT we take security very seriously. Apart from physical and environmental security, we have invested heavily in adopting the right internal practices. We are the only local commercial data centre with an ISO 270001 certification in information security management and are compliant with the PCI Data Security Standard, which provides a framework for a robust payment card data security process, including prevention, detection and appropriate reaction to security incidents.

The cloud has given SMEs access to software and hardware which in the past were only available to big players. Cloud services give business owners access to the best tools without a huge capital investment and without having to pay for an inhouse IT expert for maintenance. Moreover, you can use cloud services from anywhere and off any internet-enabled device.

Do cloud services translate into cost savings, especially regarding infrastructural costs?

Historically, infrastructural costs were a major barrier to businesses but now such costs have been shifted to the cloud services provider. This applies to the cost of hardware, software and network, but also to associated operational and management costs. For cloud services, customers usually pay a monthly fee and minimal or no set-up fees and therefore high one-time costs are transformed into a predictable monthly fee.

Does the cloud allow organisations the flexibility to scale up or down according to needs?

Companies are now empowered to utilise IT services as the need arises. Services can be provisioned and de-provisioned, scaled up or down according to needs at a specific point in time, while charging is only done for resources consumed. At any point in time, IT investment is reflective of actual business needs.

For instance, as BMIT, we have a number of cloud infrastructure customers who experience higher traffic to their sites and applications during weekends. They have therefore configured their servers to automatically scale up the resources during such period and then scale back when traffic is back to normal. This allows them to pay for the additional resources only for the time they are in use.

With the cloud, you are also empowered to add software and hardware as your needs arise, without the worry of running out of space, data or hardware when you need them most.

Why should businesses trust cloud services?

Security is always a challenge in an IT environment, especially when people run their business online.

Varied levels of security measures can be adopted, depending on the nature of the service.

Do you store data locally?

BMIT stores the data of its cloud services in one of our data centres in Malta. Such data localisation addresses a common concern that one never knows exactly where their cloud services data is residing. Advantages include the ability to comply with several industry-specific obligations which mandate that specific data needs to reside in Malta.

Local-based expert technical support is available on a 24x7 basis. Customers can also benefit from the personalised service which we offer to the local market. In this regard we offer a range of services through which customers can outsource the management of their infrastructure to us. This usually applies to more complex cloud set-ups.

What cloud services does BMIT offer?

BMIT offers a range of cloud services and solutions including public and private cloud, and hybrid systems that combine the benefits and functionality of both.

BMIT’s more popular products in the public cloud portfolio are core collaboration and communication tools such as hosted e-mail and document sharing as well cloud backup solutions which offer an endto-end solution for all backup issues, irrespective of the user’s location.

On the infrastructure side we offer a range of cloud server packages, including entry-level virtual private servers up to fully-scalable and pay-per-use cloud servers that can be procured, provisioned and paid for automatically online.

A third category relates to cloud hosting products, including web hosting, DNS hosting, custom storage solutions and other associated services.

Our customers have access to our expert commercial and technical teams, who can advise on the right service or solution. BMIT also offers a range of data centre services including colocation and hosting, supplemented by a number of managed services. Through this portfolio we offer a range of custom services, including disaster recovery solutions to an increasing number of operators in the financial services, communications and information technology industries.

For more information visit www.bmit.com.mt.

EFFORTLESS SAFETY Our idea of luxury

GasanZammit Motors Ltd., Mriehel Bypass, Mriehel BKR3000 Tel: 27788209/225/228 email: volvo@gasanzammit.com

www.gasanzammit.com

Interview LEGAL

THE DARK SIDE To preserve its status as international financial centre of repute, Malta has implemented several safeguards against money laundering, says Dr Richard Bernard.

The extent and sophistication of modern-day organised crime has led criminal entrepreneurs to devise highly innovative and complex methods to launder their profits.

Money laundering is the process of disguising the existence, illegal source or illegal application of the proceeds of crime with a view to transforming criminal income into ostensibly legitimate money or other assets. Simply put, it is the legitimising of illegitimately generated capital.

Accordingly, anti-money laundering law and regulation seeks, primarily, to facilitate the detection and reporting of any attempt to use legitimate business as a conduit for cleaning dirty money, with a view to cutting off the blood supply to organised crime by rendering its proceeds unusable.

The legislative logic is simple: depriving criminals of the proceeds of crime will make crime less attractive to commit and at the same time deters other would-be criminals. It will, of course, also starve criminals of the financial means to commit other crimes.

The laundering process typically comprises a series of multiple transactions used to disguise the source of financial assets, which may be broadly classified into three distinct stages: placement, layering and integration.

Placement is the process of placing, through deposits, wire transfers or other means, unlawful proceeds into financial institutions. Layering is when the proceeds of criminal activity are separated from their origin through the use of layers of complex financial transactions.

Integration is the process of using an apparently legitimate transaction to disguise the illicit proceeds. Money launderers do not necessarily seek the best rate of return but the easiest way to clean their dirty money.

18 - Money / Issue 32

The international community’s growing concern about money laundering and potential terrorist financing is not misplaced. The sheer economic power generated by illicit activities provides criminal organisations with a degree of leverage on all economies, large or small.

Indeed, globalisation and the communications revolution have made crime increasingly international in scope, particularly drug trafficking, money laundering and terrorism.

The corresponding financial aspects of crime have become more complex and money launderers are increasingly well organised, both financially and technologically.

Failure to comprehensively and effectively deter money laundering could have devastating social and security-related consequences for any country, but could be particularly damaging to a small nation, eroding its financial integrity and crippling its financial services industry.

Cognisant of the fact that as an international financial centre of repute, Malta could be targeted by money launderers, the legislator together with the competent authorities has implemented several comprehensive safeguards designed to weed out attempts to use Malta’s financial system as a conduit to launder the proceeds of criminal activity, with a view to preserving the jurisdiction’s financial and operational integrity.

As a member of the European Union, Malta has implemented all EU directives regulating the prevention of money laundering and is signatory to the main international multilateral treaties which represent the manifestation of the global push to tackle the affliction of money laundering in the world’s financial markets.

Malta does not appear on any international blacklist of countries which are likely to be used for money laundering activities.

It participates in several global initiatives aimed at combating money laundering and has implemented a robust prevention of money laundering legislative regime, comprising the Prevention of Money Laundering Act (the “Act”), the Prevention of Money Laundering and Funding of Terrorism Regulations (the “Regulations”) and Sub-Title IV A of the Criminal Code.

Dr Richard Bernard is a managing partner at Be Legal Advocates and is primarily responsible for the firm’s financial services and corporate and commercial law practice.

OF BUSINESS Besides criminalising the offence of money laundering, the Act effectively establishes the foundations for the legal framework by introducing basic legal definitions, laying down the procedures for the investigation and prosecution of money laundering offences as well as the measures for the confiscation of property upon conviction, the freezing of assets and measures for the issuance of investigation or attachment orders where appropriate.

The Act also establishes the Financial Intelligence Analysis Unit, the specially designated government agency tasked with the collection, collation, processing, analysis and dissemination of information with a view to combating money laundering and the funding of terrorism. The FIAU is also responsible for monitoring compliance by subject persons with the relevant legislative provisions.

The Regulations are designed to amplify the substantive provisions relating to the offences, setting out the various obligations incumbent upon subject persons as well as the systems and procedures that subject persons are required to implement in their day-to-day operations.

Moreover, the Maltese regulatory regime is bolstered by the Implementing Procedures issued by the FIAU in terms of the Regulations which serve as comprehensive guidance to subject persons with the primary purpose of facilitating effective and harmonised implementation of the salient legal provisions contained in the aforementioned legislative instruments.

The Regulations apply in their entirety to all persons (natural or legal) deemed to be ‘subject persons’, which term includes banks, insurance companies, stockbrokers, investment services providers, corporate service providers, trustees and other fiduciaries, auditors, accountants, tax advisors, notaries, lawyers, real estate agents, casino licensees, and generally any person trading in goods whenever payment is made in cash amounting to or exceeding €15,000 (whether the transaction is executed in one single operation or several linked operations).

The obligations incumbent upon subject persons in terms of the Regulations are focused primarily on rigorous due diligence and know-your-client procedures coupled with strict reporting obligations which are clearly geared towards the prevention of the subject person’s use for money laundering purposes as well as ensuring the timely reporting of any suspicious transactions to the competent authorities. Summarily, subject persons are obliged to implement

“FAILURE TO COMPREHENSIVELY AND EFFECTIVELY DETER MONEY LAUNDERING COULD HAVE DEVASTATING SOCIAL AND SECURITY-RELATED CONSEQUENCES FOR ANY COUNTRY.”

and maintain robust, appropriate systems, policies and procedures to facilitate effective: identification of the applicant for business and verification of such identity on the basis of documents, data or information obtained from a reliable and independent source; identification and verification of beneficial ownership; information on the purpose and intended nature of the business relationship, such that the subject person is able to establish the business and risk profile of the customer; scrutiny of source of funds; record keeping; ongoing monitoring of the business relationship; internal and external reporting of suspicious transactions; and staff AML training program which must be sufficiently rigorous to adequately train all appropriate employees to identify and react to red flags.

Subject persons are also obliged to appoint a designated money laundering reporting officer to whom internal suspicions of money laundering are reported and who generally acts as the subject person’s point of contact with the FIAU. The MLRO is responsible for determining whether the facts reported to him do raise a suspicion of money laundering or funding of terrorism and, if so, is duty bound to lodge a suspicious transaction report with the FIAU. As all subject persons will be aware, AML compliance comes at a cost. However, few will argue that these costs are not far outweighed by the overriding public interest to preserve the jurisdiction’s financial integrity and safeguard Malta’s role as an international financial services centre of repute, benefitting the industry as a whole.

From an international regulatory perspective, the goal should continue to be uniform enforcement and seamless cooperation across national jurisdictions. This should be coupled with ongoing cooperation and consultation between the public and private sectors with a view to containing costs, maintaining a level playing field and, ultimately, promoting an accepted global public good from which the benefit to each participant far exceeds the cost.

Money / Issue 32 - 19

simple banking Johann pays his barber through BOV Mobile Pay. BOV Mobile allows you to pay anyone easily from your mobile phone, regardless of where you are.

It’s that simple!

pay with BOV Mobile your success is our goal

Johann Schembri

Guitarist, Airport Impressions

BOV MOBILE

DOWNLOAD YOUR FREE APP FROM

Android is a registered trademark of Google Inc. 20 - Money / Issue 32

2131 2020 I bov.com

Terms and conditions apply.

Issued by Bank of Valletta p.l.c., 58, Triq San Żakkarija, il-Belt Valletta VLT 1130

market PROMO Interview

A STRONG MARKET PRESENCE Our new market centre is the very essence of what a real estate agent platform should be, says Benjamin Grech, Managing Director, Engel & Völkers Sara Grech.

How is the local real estate market performing?

2015 is proving to be a year of growth. We have seen substantial foreign investment in large-scale projects. The tax incentive for first time buyers has fuelled an increase in transactions. In fact, the first time buyer scheme was so successful that it was extended from the end of June 2015 till the end of September 2015. There are no exact statistics yet on the number of individuals who took advantage of this scheme but we eagerly await this information.

From our perspective, the Individual Investor Programme has also been a success story and contributed to the strength of the market this year. We are also experiencing a very healthy demand in the rental market. This significant increase in demand has in turn led to a low supply of available units.

We estimate that the local sales transaction volume has increased by at least 10 per cent in 2015 which we should look to sustain in the coming year.

What growth have you seen in the past year?

As a long established real estate company, we have now seen our new brand name become better understood by our customers. Through a clearer strategic approach, with each agent named as an Engel & Volkers Sara Grech license partner for a specific location on the island, we can work together effectively and more harmoniously as a team. With the added fact of a good market, our turnover has almost doubled in the past 12 months and now we see more scope in refining the quality of service we provide to all of our clients.

How are you catering for this growth?

We shall soon be moving into our new market centre which is the very essence of what a real estate agent platform should be. The dynamics of the business environment today demands high standards. The concept is a relatively new one and is now being replicated by our international partners in major cities across Europe – including in Rome, Barcelona, Paris and London – and as far as Dubai and New York.

This set-up creates endless possibilities as traditional communication barriers are removed, allowing increasing integration between brokers and the administration team who provide the working platform. This, combined to our property lounges around the island, allows us to cater for more professionals within the team while still providing them with the support they require and still having the market presence needed to promote real estate to the highest of standards.

The real estate market is very competitive – what gives you the edge over other agencies?

Our agent support system gives us an edge – each agent can focus on a specific location so they, in turn, can provide our clients with accurate market information. This is our strongest advantage.

Moreover, our brand name is a strong one – it’s a lifestyle brand through which we can offer clients real estate, yacht and aviation services.

How do you invest in your human resources?

We believe in both personal and professional development. Our agents and administration team are all given Engel & Volkers academy training and have access to an extensive database of sales techniques and information. Trainers are flown in from Hamburg quarterly to provide training sessions and we are currently in the process of training a full-time in-house trainer.

On the personal side, we are investing in a new gym which shall be part of our new premises as staying healthy and active plays a crucial role in having a healthy mind. We also have chill out areas which include game consoles and table football for those few moments where the staff need to break away from their desk and have a little fun.

You will shortly be opening a new office.

Where will this be located and which clients will it cater for?

Our new regional market centre is situated centrally, in Mriehel, giving agents and clients quick and easy access to pop in and out. Mriehel is the new, up and coming business district on the island and is already home to other large firms.

Benjamin Grech

What other plans for the mid- and long-term future do you have?

There are a couple of new projects in the pipeline – all are real estate related and one is focused on another European market. Locally we anticipate two more lounges in the next couple of years.

We hope to offer our team the opportunity to also travel and have the potential to experience working in another country.

COMPANY PROFILE After 25 years of operations, Sara Grech Limited co-branded with Engel & Völkers Group, a German brand which is well known in the brokerage of high-end real estate as well as yachts in the premium segment.

The service offered and provided by Engel & Völkers Sara Grech encompasses the brokerage of residential property, commercial real estate and yachting brokerage while focusing on the prestigious premium market segment. The presence of Engel & Völkers Sara Grech comprises offices in prime strategic locations throughout Malta.

Every day, we make choices that define who we are, and every once in a while a decision will change the way we live. Buying a home or a business is one of those decisions, and Engel & Völkers Sara Grech know how important it is for customers to enjoy living in the home and working from the business that they choose.

For more information, contact Engel & Völkers Sara Grech on malta@engelvoelkers. com or 2347 0000.

Money / Issue 32 - 21

Interview START-UPS

TAKING IDEAS

TO MARKET How can start-ups attract investment? Business advisor and multinational entrepreneur Reinhold Karner explains.

Start-ups disrupt business models by thinking differently. When it comes to financing, do startups also think differently?

We have to differentiate between three categories.

The first category consists of start-ups in the common and old-fashioned sense. These are totally new companies trying to establish a business on their own from scratch and are mainly driven by young, inexperienced entrepreneurs.

The second category is a new type of start-ups which are more often set up like a spin-off from established enterprises or family businesses, also in Malta, as they’ve learned that this is the most promising way to ramp up new, fast and flexible innovations outside of their structures.

The third category is a young concept started in 2012 by General Electric with their GE Garages business incubator structure, followed in 2013

by Allianz and many more. Large, mainly global companies in various sectors have realised that establishing symbiotic relationships with vibrant start-ups can be a very interesting way of getting involved with disruptive services, technology or trade. Companies do so by, for instance, embedding accelerators and innovation labs in their existing structures, which provide supportive structures, experience, mentoring, equipment and funding to promising entrepreneurs and their start-ups.

Let’s focus on the first category, as the second category is mostly getting good backing from their parent business and executives and the third category will be embedded in a bigger structure, even though that doesn’t guarantee success.

Start-ups are thinking different in nearly every aspect. This is, of course, positive – however, it can also have adverse affects. On the one hand, these start-ups have a very innovative idea, talent and the passion to turn it into a successful business as well as the willingness to fail, learn and try fast again until they succeed. On the other hand, they are normally short of money,

22 - Money / Issue 32

time, experience and the proof of concept.

This means that they are aware that they have very limited resources, time, trials and opportunities and so they have to be fast and run their venture in as lean and flexible a manner as possible. They are a tight team, manage a portfolio of suppliers with just short-term contracts, and use crowdsource innovation. They don’t think like established leaders or in a linear manner – rather, they think exponentially. Start-ups want to move 10 or more times faster. They don’t think about the amount of resources they can throw at a problem, but how they can run their organisation as leanly as possible.

When it comes to funding, unfortunately we often see an inexperienced approach. Many start-up entrepreneurs are so convinced about their innovation, business concept and value that they expect that banks or investors are overwhelmingly willing to finance their start-up. Yet most financiers are first of all looking for proof of concept to keep the risk of losing their money low and for a good and safe return. Furthermore, they know that the bleak truth is that just about 10 per cent of startups, if they aren’t supported by an experienced and professional mentor and 30 per cent if they are, manage to survive and be successful in the long term. Moreover, the EU average age of companies is about 12 years. That translates into an almost 10 per cent wind-up annually.

What start-ups usually also underestimate is that they will need a second, third or even fourth round of financing as their business plans are usually too optimistic or developments turn up quite different than expected.

This can be an issue because, as an entrepreneur and leader of the start-up, you have to invest most of your time chasing the next funding to survive – this means that you inevitably neglect your business, developments and team. And with a further round of funding you could probably lose credibility and more control of your business and shares.

This is why it’s so important to get an experienced and professional mentor, early funding, and prepare an honest, conservative business plan with a worst-, medium- and best-case scenario.

What financing models are the most effective for start-ups?

I strongly recommend a hybrid model, which means raising funds from banks, venture capitalists, investors, angel investors, and possibly crowdfunding. If you depend on just one funding partner, then the situation can become critical when things don’t go according to plan or the single investor or banker gets greedy.

From your experience, how does the financing of start-ups in Malta compare with that in the rest of Europe and the world?

Following the 2008 economic crisis, the world of financing has changed. Many banks are not really open and willing to finance even established businesses and their risk management has changed immensely due to new ECB and EU regulations.

On the other hand there are vast amounts of money around waiting to be invested. Yet to attract an acceptable interest, financiers have to take more risk. Viewed in this light it’s a very good time for start-ups to get funding – that’s probably one reason why they are increasing in number, maybe causing another kind of bubble.

Raising successful money for start-ups and getting a fair deal is hard and the market is very competitive. Having said that, you really have to convince your financiers on all counts: product, business model and plan, market and marketing, management and entrepreneurship.

The situation in Malta is similar to the rest of Europe. Of course, Malta is a very small market and its start-up scene is very young – however, it’s moving in the right direction.

Apart from finance, what other support do startups require?

From my experience, the key is to involve a professional and experienced entrepreneurial mentor from the start. Studies in the US show that start-ups that have this kind of support are three times more likely to succeed. Other forms of support vary, depending on the kind of business, product, business model and market.

What should encourage angel investors and venture capitalists to support start-ups?

Return is key. Sometimes it’s also about spreading their risk or a strategic partnership regarding their other investments in businesses.

From my experience, it’s not uncommon for investors to impose harsh terms, especially from the second round of funding onwards.

However, with some luck you might get a real angel investor or fair investor who totally believes and trusts in you and your business idea and who supports you in whatever it takes, including professional mentoring.

What financial returns should investors expect?

There is no golden rule. Investing in start-ups is always quite a risk and it’s only fair that an investor expects a much better return than you’d have to pay for a bank loan. So it depends on so many different factors: at what stage the start-up is, whether there is proof of concept, which barriers you expect the start-up has to face and to master and what yield could be achieved.

Do investors in start-ups also gain in status and social standing?

Yes and no. Yes, if it’s a private investor, angel or a local venture capitalist and they want to publish their involvement, support and commitment and want to build an honourable track record. No, if the investment is preferred to be kept anonymous (as it could fail) or low profile or if the track record of the investor isn’t that good because of valid reasons.

“MANY START-UP ENTREPRENEURS ARE SO CONVINCED ABOUT THEIR INNOVATION, BUSINESS CONCEPT AND VALUE THAT THEY EXPECT THAT BANKS OR INVESTORS ARE OVERWHELMINGLY WILLING TO FINANCE THEIR START-UP.”

Is investing in start-ups considered high risk?

If it’s still in the seed or another start-up phase definitely yes. But risk implicates also a big chance, so you either could lose a lot or gain a lot.

How can start-ups earn the trust of potential investors?

This list is long: you need a professional and reliable appearance, a serious business plan, full transparency, self-confidence, positive marketing and good knowledge of your market, numbers and competitors. You also need to talk frankly about challenges and worries and ask for advice, feedback and support. Last but not least, start looking for an investor at the early stages of your venture – if you are late, you’ll make mistakes and desperately try to get any deal, which could be dangerous.

Money / Issue 32 - 23

market INSURANCE Interview

TAKING CARE

We are taking greater care of our wealth and possessions, Julian Mamo, president of the Malta Insurance Association, says.

A

t first glance, statistics show that, compared to other EU member states, Malta lags behind in insurance penetration.

According to statistics published by Insurance Europe, which is the European insurance and reinsurance federation, Malta scores below average in both life and non-life premiums per capita. This, within the context of a market which in 2014 registered €0.4bn of gross written premiums.

However, statistics cannot be interpreted in isolation.

“We consider insurance penetration to be at a satisfactory level and steadily improving,” Julian Mamo, president of the Malta Insurance Association, says. “When compared to other EU member states, we are in the middle of the table, specifically in 15th place. For non-life, we have an average insurance density of 1.9 per cent, compared to a 3.1 per cent average in Europe.

“This would appear to be on the low side.

However, we have to keep in mind that in Nordic countries, penetration is very high, and this pushes up the average.”

It is important to note that Maltese do not just take out insurance that they are required to by legal and bank obligations.

“The Maltese do not only insure the bare minimum,” Mamo says. “For instance, in motor insurance, half the market is fully comprehensive.

This shows that Maltese customers acknowledge the value insurance coverage.

“This increased appreciation of insurance is in part due to the fact that as a a nation we have become more affluent, not only in monetary terms, but also because education and quality of life levels have increased. Consequently, we are taking greater care of our wealth and possessions.

24 - Money / Issue 32

Julian Mamo

Interview

“A CAREER IN INSURANCE IS VARIED, INTERESTING AND REWARDING ” refrained from living beyond our means. And that is a positive element for the Maltese economy.”

the sector, which encourages innovation and guarantees value.”

This consideration for the future is also what makes the ongoing pensions reform a critical one.

Within this context, the role of the Malta Insurance Association is to further the sector’s growth and well-being.

“The pensions reform is being addressed, which is a positive development,” Mamo says.

“Recommendations are being put forward and discussed. The Malta Insurance Association is part of this consultative process. We are in favour of the pensions reform and acknowledge that certain unsustainable issues need to be tackled. However, our position is that the pensions reform needs to be gradual but determined and must involve all stakeholders, from government and employers to insurance companies and the general public.”

In recent years, Malta’s financial services sector has enjoyed significant growth. The sector now contributes 13 per cent to the GDP while the number of investment funds has a current net asset value of €10bn. Has insurance, which forms part of this sector, also registered growth?

“The insurance sector has benefited in terms of growth,” Mamo says. “For instance, the registration of insurance undertakings is on the increase. However, the growth of the insurance sector has not been as rapid as in other sectors.

“Traditionally, Maltese people have always been savers. This means that not only do we save more, but we also take greater care in protecting our possessions and securing a good future for us and for our children.

“Of course, this cannot be a blanket statement.

There are two main outlooks on money: there are those who live for today and there are those who save for tomorrow. Yet the two are united by a common factor: as a nation, we have always

“That said, we are satisfied with the level of good steady growth. We are also aware that growth cannot be too rapid, as this would disrupt the market and lead to an increase in operational costs and, consequently, a decrease in competitiveness. It is essential that the resource pool can cope with the market growth and develops at a similar pace.

“As in any other sector, competitiveness is extremely important. Today, there are fewer operators in the insurance sector than there were 10 years ago. This is because 12 to 15 years ago, there were a lot of acquisitions and mergers. In fact, the number of operators today is almost half of the amount there was back then. This has maintained competitiveness in

“Our role is primarily that of a forum where agents and companies share ideas and concerns.

The association is also a focal point for communicating at an EU level as well as with government and regulator. Without a focal point, communication would be fragmented.

“The insurance sector is a very important one – however, this importance often goes unrecognised.. Bringing value to all policyholders is paramount for the success of the sector. We are here to pay genuine claims and to be careful with our clients’ money and investments.

“As the sector grows, the demand for qualified and trained people increases. The Malta Insurance Association promotes the sector and encourages people to seek employment in insurance. Therefore, we are working closely with educational institutions to convey the message that a career in insurance is varied, interesting and rewarding.”

MALTA INSURANCE ASSOCIATION The Malta Insurance Association is a non profit-making organisation that represents the views and common interests of all insurance companies in Malta, both indigenous and foreign. Every insurer transacting insurance is eligible for membership. Malta Insurance Association members offer employment to some 786 employees and are responsible for more than 434 insurance intermediaries, with hundreds more employed in ancillary services.

For more information visit www.maltainsurance.org.

Money / Issue 32 - 25

RESEARCH

ARE THE MALTESE

FINANCIALLY LITERATE? The

Maltese have a high level of financial literacy. However, financial literacy should be further researched and supported, says Ann Marie Mangion.

F

or my dissertation submitted to complete my B.Com (Hons.) degree in Banking and Finance, I surveyed different sectors within the Maltese population and conducted 11 interviews with financial practitioners, with the aim of analysing the level of financial literacy in Malta.

The statistical analysis, based on a total of 1,255 respondents, proved that the sectors targeted for this particular study (general public through a Facebook campaign supported by MSV Life, GRTU Members, University of Malta students and academic staff, and the National Council of Women members), have a sound financial knowledge comparable to other OECD countries.

However, the sectors surveyed do not represent the whole Maltese population.

THE IMPORTANCE OF SAVINGS Social Security used to be seen as a major source of retirement income. However, given the local scenario, the current generation of youth and those coming after will just get the basic government pension at retirement.

Many will retire in relative poverty unless they supplement their basic pension with alternative sources of investment income. Therefore it is in the best interest of the individual to start saving as early as possible.

The increase in life expectancy is another important factor for starting to save early for retirement. This is because unless one does not save to cover living expenses to be used over a longer time period after retirement, a person may become a financial burden on families. Therefore, accumulating more funds before retirement is a

26 - Money / Issue 32

must. This is another reason why people need to be financially literate to make the right decisions before they reach retirement.

THE LEVEL OF FINANCIAL LITERACY The factors affecting the level of financial literacy found in my study are nearly identical to those found by Lusardi and Mitchell (2011). The results found in my dissertation agree with the following: women are less financially literate, the young and old are less financially literate than the middleaged, while the more educated people are more financially knowledgeable.

However, in this Malta study, retirement planning was not a factor affecting financial literacy – instead the income bracket was found to be a dominant variable.

According to studies abroad, including the pilot study by OECD (2012), to make sound financial decisions, individuals should at least have some knowledge and understanding of interest compounding, inflation and risk diversification.

The survey in the dissertation covered these financial concepts and the majority of respondents answered them correctly.

In comparison with other countries, Maltese respondents seem to have a good understanding of both simple and compound interest, as well as financial diversification. For the other concepts like division, time value of money, interest on loans, risk and return and definition of inflation, Maltese respondents are very much aligned with several other countries, surveyed in the OECD study.

Ann Marie Mangion has just graduated with a B.Com (Hons) in Banking and Finance. Her dissertation was entitled An Analysis of Financial Literacy in Malta (2015).

RETIREMENT PLANNING

LEVEL OF FINANCIAL LITERACY Interest paid on loan

96%

Calculation of interest plus principal

95%

Division

90%

Risk and return

84%

Definition of inflation

83%

Diversification

71%

Compound interest

70%

Time value of money

61%

Malta’s level of financial literacy. The percentages indicate the correct responses per financial concept gathered through the questions asked in the survey.

Interviewees outlined the fact that since the national pension is being provided by government (at least for those who are currently middle-aged), a good percentage of the population is not concerned about the future. Interviewees also think that the younger population seem to take much more interest is their retirement pension, since it will probably not be sufficient for them to maintain an adequate standard of living. However, when respondents were asked whether they hold any retirement plan, the majority (74 per cent) did not have, irrespective of their age group.

Moreover, what is concerning is that the good majority of respondents did not know the correct amount that they will be getting upon retirement.

Given this scenario, more education should be given in this regard as it is a very alarming result.

OVERALL SCORE The Maltese respondents in this survey obtained an overall financial knowledge score of 80 per cent. This exceeded the high level set

by OECD of 75 per cent, showing a financial literate population. However, since not all questions in this survey were the same as those of the OECD study, a score for financial behaviour could not be identified for Malta.

The 48 per cent score in attitude is considered to be leaning towards the long-term security rather than the short-term gratification.

DISAGREEMENT WITH THE FOLLOWING ATTITUDE STATEMENTS (MALTA) I find it more satisfying to spend money than to save it for the long term

55%

I tend to live for today and let tomorrow take care of itself

65%

Money is there to be spent

25%

SAVINGS ATTITUDES When looking at the attitudes discovered in this survey, Malta has the closest results as those compared to Germany and Hungary. This means that just over a half of those surveyed find it more satisfying to save for the long term rather than spend today. This somehow explains why 65 per cent prefer to live for today and let tomorrow take care of itself. Malta seems to be conservative, as only 25 per cent disagree that money is there to be spent while 75 per cent agree that money is there to be saved.

MALTA’S SCORES High Knowledge Score

80%

High Behaviour Score

N/A%

High Attitude Score

48%

FUTURE CONSIDERATIONS The vast majority of participants appear to be financially literate. However, there are still other areas of finance which have been excluded from the questionnaire and interviews that are worth exploring. Other financial technicalities such as the difference between funds, bonds and equity, might be challenging to a large portion of the Maltese population, given the responses received from the majority of the practitioners interviewed.

Even though these financial concepts can nowadays be researched online, there is still a huge possibility that individuals invest in products without a full understanding of what they entail.

RECOMMENDATIONS In order to support and raise awareness towards financial literacy, the key recommendation is to focus on financial education. This should not be limited to schools but extended to investment campaigns targeted at different age groups. Financial services institutions should come together to help the government as well as the Malta Financial Services Authority to organise public seminars and activities. It is through such events that people get to ask questions and actively engage themselves on the issue of financial education.

A change in attitude towards life savings and retirement planning is vital and deserves immediate action before it is too late. Retirement savings can grow by incentivising further those who have already made use of pension plans. Word of mouth campaigns might be the most successful since the majority seek advice from their family and friends.

The analysis of financial literacy should be taken up to a national level. A census on financial literacy should be conducted by the National Statistics Office. This will place Malta in a good position to compare the level of financial literacy with that of other countries especially those within the EU. The dilemma of financial literacy does not solve itself solely with education since it is supposed to be an active process in which the communication of information is followed up with positive action taken by each individual. This will ultimately lead to an improvement in financial well-being, which will eventually reflect upon higher standard of living and welfare.

Money / Issue 32 - 27

Individual or Joint Account Option

Euro Fixed Term Deposit

No Hidden Fees or Bank Charges

Minimum Deposit â‚Ź1,000

3 year: 2.50% 2 year: 2.00% 1 year: 1.85%

Easy, Flexible and Secure

Euro Savings Account

1.25 %

Minimum Deposit â‚Ź50

Rates of interest are on a gross per annum basis

Visit our website, open your online bank account and start benefiting from superior interest rates on your savings and fixed term deposit accounts.

2132 2102 28 - Money / Issue 32

helpdesk@easisave.com

www.easisave.com

FIMBank p.l.c. is a licensed credit institution regulated by the Malta Financial Services Authority and listed on the Malta Stock Exchange.

The Bank is a participant in the Depositor Compensation Scheme in Malta. Terms and conditions apply.

MARKET Interview REPORT

Licensed stockbroker Alexander Mangion is Managing Director at MPM Capital Investments since 2009. The company is authorised by the Malta Financial Services Authority (MFSA) to provide financial services in Malta and holds a Category 2 licence.

Mr Mangion holds a Bachelor of Commerce (Hons) degree in Banking & Finance (University of Malta) and a Master of Finance & Investments (University of Nottingham.)

EAST ENDERS? Is China’s sell-off a no go zone or an opportunity, asks Alexander Mangion.

C

hinese equity markets have taken an extraordinary tumble over the last weeks.

The Shanghai Composite Index, which tracks companies listed on China’s two main exchanges, dropped 32 per cent between a June 12 peak and a July 8 trough. The question facing investors is whether the decline marks a buying opportunity or the beginning of a prolonged decline.

The index contains over 1,100 companies and is dominated by financials (37 per cent), industrials (20 per cent) and energy (12 per cent). A group of 14 banks comprises 23 per cent of the index.

The companies listed in this index are called A-shares and are listed in renminbi. They are not so easily accessible by foreign investors (who tend to acquire exposure to China via shares listed in Hong Kong) but are held by millions of Chinese investors. Although some fund management groups are launching China A-share funds to access the A-shares listed on the Shanghai composite, it is notable that these are typically stand-alone products. A-share companies don’t stack up so well when compared to standards outside China.

The market tumult comes on the heels of an 11-month rally that saw the Shanghai index rise some 59 per cent between the beginning of the year and June 12. Encouraged by rising share prices and loosened restrictions on investment, ordinary Chinese citizens have piled into stocks in recent months. In fact, onethird of China’s 258 million brokerage accounts were opened within the last nine months.

It seems that some 80 per cent of urban households invest in equities, and their equity allocations have increased from 10 per cent at the beginning of 2014 to nearly 30 per cent.

The Shanghai stock market does not operate in the same way as the stock markets we are familiar with.

There is scope for intervention and this is what has happened during the last few months as the Chinese Government has attempted to stimulate and then prop up the stock market.

In April the central bank cut the reserve requirement ratio, the amount of reserves banks are required to hold, by one per cent. Historically such a move has led to the market rising. But it accompanied the RRR cut with an expansion of the securities

The chart shows the movement of the Shanghai Composite Index, the leading index of Chinese shares, year to date. The market has fallen more than 29 per cent since its peak in June, but remains 13 per cent higher than it was at the start of the year (all measured in local currency).

lending programme, seen to encourage short selling and therefore designed to offset any market rally.

A day later there were announcements of revisions to securities law paving the way for more initial public offerings of shares. State media appears to have been used to boost the stock market further.

Margin lending appears to have given added juice to both the rally and the crash, with companies and shareholders borrowing against their portfolios to buy more stocks, and some homeowners going as far as to mortgage their homes to do likewise.

The Chinese Government has extraordinary measures to staunch the bleeding. First, the People’s Bank of China lowered reserve requirements for certain banks and cut interest rates for the fourth time in seven months. The Chinese government has also cut trading fees, allowed public pension funds to invest in stocks, banned short selling, prohibited corporate executives and insiders from selling shares for six months, and suspended initial public offerings.

On July 4, 21 large brokers also announced that they would invest 120bn Yuan ($19bn) in

China’s exchange-traded fund of blue-chip stocks and vowed not to sell their holdings so long as the Shanghai index remains below 4,500.

All those efforts aside, the most important measure by far was the July 8 announcement that the PBOC would funnel money to the stateowned China Securities Finance Corp, which lends to brokerages for margin trading and short selling. The same day, the CSFC announced it would lend 260bn Yuan ($42bn) to large brokers.

The CSFC is reported to have been buying shares to support the stock market, with as much as $483 billion on hand in mid-August.

Most reputable brokers remain wary of having exposure to China. Expectations are that it will grow at a much lower rate than predicted by the Chinese Government.

And a market subject to such deliberate intervention is not a comfortable one to invest in. European brokers are reported to have a very small amount of exposure to China via shares listed in Hong Kong, where listing rules are strict and governance is as tight as we expect in Europe.

Money / Issue 32 - 29

THE SMART CHOICE FOR BUYING AND SELLING REAL ESTATE

FOR SALE

by Auction

UNLOCKING TRUE VALUE AT THE STROKE OF A HAMMER REGISTER ONLINE FOR MONTHLY UPDATES www.maltapropertyauctioneers.com 2138 8399

MALTA PROPERTY AUCTIONEERS AUCTION ALERT NEXT AUCTION: 27 SEPTEMBER

market SPORTS Interview

Reuben Buttigieg is Managing Director of Erremme Business Advisors, Founding President of the Malta Institute of Management Accountants and President of the Malta Institute of Management.

A LEVEL With UEFA’s fair play regulations, even local football clubs need to start operating like businesses, says Reuben Buttigieg. n 2010, UEFA approved the new financial fair play regulations and since 2011, clubs that have qualified for UEFA competitions have had to prove they do not have overdue payables towards other clubs, their players and social or tax authorities throughout the season. This made sure that finally even football clubs adhere to financial regulations and do not overspend just to win.

Since 2013, clubs have also been assessed against break-even requirements. These require clubs to balance their spending with their revenues and restricts clubs from accumulating debt. In assessing this, each season, the independent Club Financial Control Body carries out an analysis of three years’ worth of club financial figures, for all clubs in UEFA competitions.

The first sanctions and conditions for clubs not fulfilling the break-even requirement were set following this first assessment in May 2014. The conditions relating to noncompliance with break-even requirements were effective for the 2014/15 season.

As from June 2015, UEFA has updated its regulations to address some specific circumstances with the aim of encouraging more sustainable investment while maintaining control on overspending. Situations addressed include clubs requiring business restructuring, clubs facing sudden economic shocks, and clubs operating with severe market structural deficiencies in their operating region. For the first time the work of the CFCB is potentially expanded to include clubs not yet qualified for UEFA competitions but who anticipate and want to participate at some stage in the future.

This has a direct effect on Maltese football clubs too, even though there is still a long way to go in this sense. Although certain clubs will meet the requirements as stipulated by UEFA, from a high level analysis of certain clubs’ books, there is certainly a substantial amount of hidden costs in Malta.

To be fair, the UEFA regulations themselves give room to certain manoeuvre. In fact, clubs can spend up to €5m more than they earn in a three year period. However clubs can exceed this level to a certain limit, if it is entirely covered by

a direct contribution or payment from the club owners or a related party.

The limits are €45m for assessment periods 2013/14 and 2014/15 and €30m for assessment periods 2015/16, 2016/17 and 2017/18. In order to promote investment in stadiums, training facilities, youth development and women’s football (from 2015), all such costs are excluded from the break-even calculation.

“IN THE COMING YEARS, LOCAL FOOTBALL CLUBS WILL NEED TO GO THROUGH A FINANCIAL RESTRUCTURING AND CHANGE THE WAY THEY OPERATE.” If a club’s owners inject money into their club through a sponsorship deal with a company to which they are related, then UEFA’s competent bodies will investigate and, if necessary, adapt the calculations of the break-even result for the sponsorship revenues to the level which is appropriate (fair value) according to market prices. Under the updated regulations, any entity that, alone or in aggregate together with other entities which are linked to the same owner or government, represents more than 30 per cent of the club’s total revenues is automatically considered a related party. In the context of Maltese football, this may become an issue if indepth audits are done. In the coming years, local football clubs will need to go through a financial restructuring and change the way they operate.

If managed properly, this can lead to a major change in Maltese football and also in the performance of local clubs. However, the Malta Football Association may need to take an even stronger role in this and start introducing stricter discipline in the presentation of financials at all levels. The accounting and financial presentation

of sports organisations and indeed financial management is very particular. There are in reality very few financial persons in Malta who have such knowledge. In this context, there are even less adequate financial officers within our clubs who meet the requirements stipulated by UEFA. The reality is that clubs need to start operating like businesses in order to meet certain standards. However, there are various considerations that one needs to take in the particular scenario of the game in Malta. The local authorities together with the Malta Football Association should come up with a vision on where this sports is going in Malta.

There is huge potential but certainly many things need to change. There have been various improvements over the years and the results shown in this year’s edition of the Europa League are a clear evidence of this. However, the local game needs to increase the momentum for change and clubs need to get their act in order. The regulations in Malta do not promote a level playing field in certain competitions. In this context, among other things, such unfair rules may need to be addressed. Otherwise certain clubs will always start at a disadvantage.

The way the financing of clubs in Malta is working is certainly leading to club bullying. One must say that the Maltese political scenario did not help in this context as much as certain interventions led to disruptive competition. Perhaps the time is ripe to correct certain measures which have led to this unfair playing field.

Presidents and officers of clubs who have the game at heart should start taking certain measures and getting their clubs in order.

Furthermore, they should encourage the Malta Football Association even further to engage in a continuous reform that changes the mechanism of the local football scenario.

Money / Issue 32 - 31

VAT & THE EU

MALTA INSTITUTE OF MANAGEMENT

CONFERENCE 2015 VAT Law - The Most Recent Changes

16th October 2015 Westin Dragonara Resort, St. Julians For more information contact: Malta Institute of Management

T. +356 2145 6819 E. info@maltamanagement.com

www.maltamanagement.com

MIM VAT CERTIFICATE COURSE COURSE STARTS IN OCTOBER 2015 IN MALTA AND GOZO

32 - Money / Issue 32

For further information kindly email:

education@maltamanagement.com

Interview FINANCE

INNOVATIVE & PROACTIVE Ivan Grech, head of business development, FinanceMalta, outlines Malta’s strengths as a financial services centre of repute.

When was FinanceMalta set up and with what aims?

FinanceMalta was established in 2007 as a publicprivate partnership between the Government and the different financial services sector stakeholders in Malta. The aim of FinanceMalta is to promote Malta as a jurisdiction of choice both outside and within Malta’s shores. It brings together the resources of the Government and the industry to ensure Malta maintains a modern and effective legal, regulatory and fiscal framework in which the financial services sector can continue to grow and prosper.

FinanceMalta’s remit is two-pronged: to strengthen Malta’s financial services brand through a comprehensive promotional programme, and to create networking opportunities for its members.

How has the local financial services sector grown since Malta joined the European Union?

The sector has grown and changed considerably since EU membership. I believe membership – followed by the introduction of the euro – is what has enabled the sector to grow in terms of GDP contribution from three per cent to the current 13 per cent.

The number of investment funds in Malta has grown from 165 in 2006 to nearly 600 last year with a net asset value of €10 billion.

This growth has been driven by new fund set-ups and re-domiciliations from non-EU jurisdictions.

Key international insurance operators have increased from 22 in 2006 to 60 as at the end of last year. Likewise the number of financial and credit institutions has nearly doubled between 2006-2014. During the same period, the number of authorised trustees has grown from 24 to 142.

What is the financial services sector’s contribution to the economy, in terms of direct and indirect intermediation?

The contribution to GDP currently stands at about 13 per cent. The National Statistics Office has just published some very interesting figures for 2014 in relation to the stock position of foreign direct investment. FDI inflow stood at nearly €142bn and a staggering 98 per cent of that (€139bn) is derived from financial services and insurance.

How does FinanceMalta promote Malta as a financial services centre of repute?

Malta has some significant strengths to offer the industry. As a member of the European Union and eurozone, Malta offers significant advantages to international business as a business domicile including passporting rights.

Operators benefit from: an excellent, professional services infrastructure; a respected, wellregulated, legal jurisdiction; a well-trained, motivated workforce; a lower-cost environment; and an advantageous tax regime backed up by more than 60 double taxation agreements.

We also offer a world-class information and communications technology infrastructure, English as an official language, an enviable climate and a strategic location.

Which are the key financial sectors and how are they performing locally?

The key sectors are: investment funds and asset management; financial institutions; insurance and reinsurance; capital markets; and wealth management. Another sector, Islamic finance, will gain in importance in the near future.

Is the financial services sector well served in terms of human resources?

Well-trained and available human resources are an essential part of the service offering to operators looking to relocate to Malta. However the recent rapid and ongoing growth of the financial services sector has resulted in an unprecedented demand for certain skills, namely accountancy, compliance, fund administration and other general regulatory requirements.

There has been a sustained effort across various areas to address this need by the authorities and also by stakeholders within the industry. This has included creating awareness of the career opportunities within the financial services sector starting from the secondary education level all the way to University, MCAST and beyond. For instance, the university’s Faculty for Economics, Management and Accountancy has a student population of nearly 2,000 and makes it one of the largest faculties at University. Additionally,

Ivan Grech specific training for, and continuous professional development within the sector is now being offered by an increasing number of institutions.

Does the financial services sector have the potential for further growth?

Innovation is key. We need to be innovative if we want to grow and offer value-added to our prospective customers.

As a jurisdiction, we’re innovative and proactive.

For instance, we’re the only EU member state with Protected Cell Company legislation. This provides numerous advantages compared to stand-alone insurance companies or captives, whereby the insurer can write business through the ownership of a protected cell, using the core’s capital.

Another innovative and important legal act relating to wealth management which will soon be presented as a white paper is that pertaining to family businesses. This is a first and will encourage the regulation of family businesses, their governance as well as the transfer of business from one generation to the next.

There is potential for further growth and we’re working to strengthen Malta’s reputation as an international centre serving global business and build on the success achieved so far in the financial services industry. Consequently, FinanceMalta is at the forefront in marketing Malta to extend its reach to both new areas of business as well as new markets.

Our focus for the coming 12 months is to explore the markets of Asia, the Middle East and New York to the west while simultaneously developing areas that show great potential for growth including international pensions, Islamic finance and Malta’s capital markets.

Money / Issue 32 - 33

Interview INTERVIEW

A SEA OF OPPORTUNITIES Malta has the right credentials to become a leading player in freight and logistics, says Dr Aaron Farrugia, Chief Executive Officer, Malta Freeport Corporation.

How important is Malta’s geographic position for the country’s shipping and logistics sector?

Malta’s geostrategic location at the heart of the Mediterranean has, for thousands of years, made the island an important centre to facilitate trade and commerce in the region. Just 9.6km offshore is one of the busiest trade routes connecting Asia, the Middle East and Europe.

Our ports and deep water harbours have always been exploited and we continue to exploit them today. Worldwide frequent connections with more than 115 ports are in place including an excellent feeder service to around 65 major ports throughout the Mediterranean and the Black Sea. Logistics providers can enjoy the free flow of goods within the European Union upon the payment of duties in Malta.

What does the Malta Freeport contribute to the local economy?

The container terminal at Malta Freeport is one of the leading transhipment hubs in the Mediterranean, handling in excess of three million twenty-foot equivalent units annually. Malta currently ranks 43rd in the World Bank’s Logistics Performance Index. However, there is the firm belief that Malta has the capability of achieving a higher ranking. Over 96 per cent of Malta Freeport’s container traffic is transhipments business. Key global carriers have chosen Malta Freeport as their Mediterranean transhipments hub. Malta’s Free Trade Zone enjoys a number of unique benefits which include its strategic location in the centre of the Mediterranean with shipping lines calling at the Freeport being able to serve the East and West Mediterranean with one main line call.

Various internationally renowned shipping lines, including CMA-CGM Group, Maersk Line, UASC, China Shipping and MSC, use Malta Freeport as

34 - Money / Issue 32

Dr Aaron Farrugia their Mediterranean transhipment hub, providing an established network of scheduled services from and to China, the Far East, India, the Arabian Gulf, Northern Europe, West Africa and the US. The Freeport is embracing future challenges with enthusiasm, determined to sustain its prestigious standing in the Mediterranean containerisation scenario whilst boosting Malta’s economic performance.

When it was set up in 1988, the Malta Freeport was the first transhipment hub in the Mediterranean. What growth has it achieved since then?

The Freeport is a success story for Malta as it was the first transhipment hub in the Mediterranean region. In the 1990s the Freeport handled around one million TEUs per year, while nowadays it is handling more than three million TEUs. Malta

is the first European port of call for many major shipping lines, and 95 per cent of the containers are for transhipment. The transhipment business is based on the hub concept whereby cargo is discharged from large mother vessels and relayed to a network of regional ports by regular and frequent feeder vessels. The oil and gas business is also doing well. With Libya being in turmoil, a lot of work has been moved to Malta.

How is the turmoil in the North African region affecting Malta Freeport’s business?

Our Free Trade Zone offers several potential opportunities for value added logistics and value added services especially for North African regions. These include Malta’s favourable position towards Libya and the other North African countries, a good understanding of doing business with the Maghreb and Mashreq countries, and good opportunities for performing VAL/VAS

including marketing and sales in Malta for the North African market. Several companies who owned warehouses in Libya are exploring the possibility of moving to Malta’s Free Trade Zone.

Do you plan to strengthen the Malta Freeport’s connections to Asia?

The Chinese government has recently been enthusiastically developing a programme of maritime infrastructure construction along the main Asia-Europe shipping route. China’s initiative for a so-called 21st Century Maritime Silk Road is aimed at port development in South-East Asia, around the Indian Ocean and in the eastern Mediterranean region. The Chinese Premier publicly presented its initiative for a 21st Century Maritime Silk Road in 2013.

Earlier that year China had already launched its Silk Road Economic Belt initiative, which is aimed at infrastructure cooperation in a zone that stretches from Xinjiang to the Baltic Sea. The Chinese government uses the term ‘One Belt, One Road’ to refer to the combination of these two initiatives. Chinese investment in large infrastructure projects constitutes the basis of One Belt, One Road.

an international centre for the maritime and shipping industries.

In a speech which Parliamentary Secretary Jose Herrera delivered during the Maritime Careers Day last year, he said that, “As a Government we believe that with a one per cent increase in the GDP this will equate to an extra turnover of €70 million into our economy.

However, if we collectively manage to reach our target and over the next five years increase the contribution of the maritime industry of GDP by three per cent, this would mean an extra €200 million injected into the economy.

In terms of employment this would roughly equate to thousands of jobs, a figure matching our usual rate of unemployment”.

The issue which we need to address is the skills gap that exists between these potential jobs and our available workforce. Through the recently launched maritime integrated policy and through a logistics institute which will aim to encourage and inspire students, employees and the broader public to study logistics in greater depth, we can address this gap.

“THE VISION IS FOR MALTA TO BECOME AN INTERNATIONAL TRADE AND COMMERCE CENTRE BY BEING A LEADING LOGISTICAL, WAREHOUSING AND DISTRIBUTION HUB SERVING EUROPE, NORTH AFRICA AND BEYOND.” These projects are financed, constructed, supplied and sometimes operated by Chinese firms that are either state-owned or that have close relations with the Chinese Government.

The Maltese Government has shown readiness to be part of the new Maritime Silk Road and has made it clear on several occasions that Malta strongly supports the Silk Road projects.

Logistics can be and should be one of the sectors that brings together both sides to serve the interests of both the Chinese and Maltese peoples by consolidating and furthering the economic links and people-to-people ties.

How do you invest in your human resources?

Our country’s workforce has an Anglo-Saxon work ethic which makes it second to none.

The maritime business encompasses sea transport, port and logistics management.

Malta has a strong maritime tradition and thanks to contributions from Government and the private sector today we can say that we are

What does your expansion programme for the Malta Freeport include?

The vision is for Malta to become an international trade and commerce centre by being a leading logistical, warehousing and distribution hub serving Europe, North Africa and beyond. Through proper focus, investment and acting in a coordinated manner, Malta can establish itself in this area and attain a distinct competitive advantage that will increase the amount of value added operations and contribute to a higher GDP. Speaking at the launch of the Green Freight Europe initiative in Brussels, Siim Kallas, the then vice president of the European Commission and Commissioner responsible for Transport, said, “Freight transport and the accompanying logistics industry represent one of the most dynamic and important sectors of the European economy, accounting for at least 10 per cent of GDP”.

Malta has the right credentials to become a leading player in this area and can leverage best

practice and expertise from other countries and organisations which are already enjoying the success of their investment. The ultimate aim is to increase Malta’s international connectivity by growing trade beyond our shores so that it becomes a key driver that contributes to the country’s sustainable economic development.

What are the Malta Freeport’s biggest challenges?

Our key challenge is capacity. Malta is a small island and space is limited. Demand for warehousing facilities within the Freeport’s Free Zone is growing, yet space is limited and fully taken up. The current situation in North Africa creates concern as well, because many companies that had storage facilities there lost everything. They are ready to look at Malta as an alternative, but there’s the issue of space. Once we have truly positioned ourselves as an international logistics hub, we will be able to accommodate more companies in Malta.

Another challenge – but we cannot do much about it – is the fact that Malta is an island and is not connected to mainland Europe, while competing ports in the Mediterranean can use intermodal freight transport.

What growth do you plan to achieve in the short- and long-term future?

Malta has always regarded its maritime sector as a key economic pillar, but should now set out on developing the country into a significant player in the global logistics industry. Responsible for regulatory compliance as well as the management and the security of the customs free zone and warehouses, the authority is leading the charge when it comes to developing Malta into an international trade and logistics base.

Malta needs to further exploit its geographical location and the already established sea routes around the world. We are in many cases the first port of entry to the EU and a vital transhipment hub for the North African market. The container terminals today already contribute to a substantial multiplier effect, now we need to increase this by adding a complimentary activity: a distripark.

A distripark can be defined as an integrated centre which offers numerous facilities and services to companies operating in the field of distribution with the flexibility of allowing activities which could even add value to the product.

Malta has always had the conviction to succeed.

With its track record, it has the potential to make a positive contribution to international trade and wealth creation for the benefit of the economy.

With renewed focus on this area and in line with initiatives such as the EU Marco Polo programme (motorways of the sea) and the new network alliances – the 2M, made up of Maersk and MSC, and Ocean 3, made up of CMA-CGM, China Shipping and UASC – who will be operating over 350 ships, including vessels of 18,000, 20ft container capacity, it is opportune to act.

Money / Issue 32 - 35

THE ADVANCED DIPLOMA IN INTERNATIONAL TAXATION (ADIT) Starting in October 2015 For further information kindly contact:

education@maltamanagement.com or call 2145 6819 / 2145 6820

THE DIPLOMA IN VAT COMPLIANCE Starting October 2015 For further information kindly contact:

education@maltamanagement.com or call 2145 6819 / 2145 6820

market PROMO Interview

UNLOCKING TRUE MARKET VALUE We offer properties that are unique, says Stefan Consiglio, manager at Pierre Faure Real Estate and Malta Property Auctioneers.

In your opinion, how is the local real estate market currently performing?

Many factors show that the real estate market is performing well. The number of foreigners living in Malta has increased tremendously, very few rental properties are left vacant, and rental prices have increased significantly since the demand is high. This gives buyers – both new investors and those who already have a substantial property portfolio – the confidence to invest further.

Which property types and areas attract the greater interest?

Investors looking at buy-to-let properties prefer the commercial hub, including Sliema, St Julian’s and Valletta. This hub has extended outwards over the last few years to incorporate Swieqi, Gzira, Ta’ Xbiex and Msida where most of the gaming companies, language schools and finance companies are based.

This is not to say that other areas are not in demand. Madliena, Victoria Gardens and San Pawl tat-Targa remain the favourite areas for higher end properties, with values still increasing steadily year after year.

Properties with large outdoor spaces or good views remain highly sought after by local families no matter where they are located. Locals are very house proud as well as knowledgeable about real estate so unique properties still sell well.

At Malta Property Auctioneers, we strive to offer properties with that little bit of uniqueness, that wow factor. We know that for a successful auction we need properties that attract a larger audience, whether it’s because of the rental return or simply because it’s a special property.

The financial services sector is achieving significant growth – is this having a spillover effect on the real estate market?

I would rather say that growth in the financial sector is fuelling the real estate market rather than just spilling over into it. Real estate investments are often on top of the agenda during financial planning and at Pierre Faure Real

Stefan Consiglio Estate, we have the expertise and familiarity with the peculiarities of the industry coupled with indepth knowledge of local regulatory processes.

Apart from sales and letting, you also offer clients the opportunity to buy property by auction – how does this work?

Malta Property Auctioneers offers a unique sales and marketing tool for those who wish to sell their property at the right price in a short period of time.

Without a doubt it’s the smartest way to buy and sell property. Our proven market based model aggregates demand and identifies value in real time.

We focus on genuine vendors who aren’t trying to reach extraordinary prices on their properties but only wish to achieve true and fair market value. By agreeing with our vendors on a preset reserve price we are basically negotiating on the buyers’ behalf upfront. From the realistic reserve price achieved (if we don’t think the reserve price is fair we simply don’t offer it on auction) we establish a guide price with which to market the property extensively. Potential purchasers, or interested parties, are invited to view the properties (the lots) and then bid for them on auction day. For those who fear being outbid or prefer to secure the purchase quickly, we accept offers prior to auction which we duly pass on to the vendors. If accepted, the lots can be bought prior to auction day.

Can clients view properties on auction?

We don’t expect to make a sale without thorough inspections of the properties. Our experienced agents are always available to show any of the lots. We also prepare preliminary paperwork such as plans and data sheets on each respective lot.

When is the next auction being held and what properties are being offered?

We hold auctions quarterly with our next one confirmed for Sunday, September 27 at the Royal

Malta Yacht Club. These auctions are public and anyone who wishes to attend is more than welcome. We always offer a different range of properties. This time we have some really spacious family homes both with or without swimming pools, beautifully finished character houses in Attard and Balzan, some nice apartments and penthouses, agricultural land and a most outstanding seafront townhouse in St Julian’s, probably one of the last remaining. All the properties going under the hammer are featured on our website but one can also register to receive notifications every time we list a new lot.

Knowledgeable and well-trained estate agents are critical to the real estate market. What training do you offer your staff?

Absolutely! The management of our team holds over 50 years’ experience in the local real estate market and we are always sharing our expertise with our staff. We take pride in offering professional yet personal advice and consultancy to our clients. This means that regular training is essential especially in a sector where prices, rules and regulations and standards change regularly.

Moreover, we believe that the sharing of information between the whole team helps us all grow stronger and more knowledgeable together.

Hot properties, clients, sales techniques, etiquette, time management, marketing ideas, setting targets and highlighting areas for improvement are all subjects we cover regularly.

Money / Issue 32 - 37

market INTERVIEW

A PORT OF CALL Malta has great potential, but we need more synchronisation between different sectors and further human capital, says Antonio Palumbo, owner and CEO of Palumbo Group.

Palumbo Group has been in Malta for five years, during which the Group has revived the Maltese docks. What is your vision for the next five years?

Palumbo Group has been investing in Malta since a decision was taken to bid for the dry docks concession in Malta. Our vision was to turn the Malta facilities into a hub for ship repair and maintenance using the island’s strategic location. The investment made was not only in the structure itself but also in the way the docks in Malta are promoted. We have also invested in streamlining the business philosophy of those who want to work efficiently with us. This is never a simple task as transmitting this requires time, persistence and the strong goodwill of all those involved.

We believed so much in Malta that we also tendered for the superyacht facility.

In the next five years, we would like to see our Group taking the lead in the Mediterranean and Malta is central to our plans. Palumbo Group has facilities in Malta, Marseilles, Naples and Messina – this gives us the opportunity to give our customers a flexibility that our competitors not always can achieve. We also intend to further increase the superyacht activities and are working on our strategy to achieve this.

A foreign direct investment like yours becomes an integral part of the economy. Do you feel that Malta can further attract foreign investors?

Any foreign investment brings with it various elements. Entrepreneurs want an adequate return for their investment – in this sense, companies form a philosophy on how they want to operate.

Being a group, we want to have the same philosophy on how we serve our clients. This requires a culture change which is not always easy particularly when there are subcultures

that have been in place for years. Different administrations in Malta have been investing and incentivising businesses to come to Malta.

Perhaps this sector for years was no longer a priority sector. However, there is great potential for Malta if it wants to invest further.

Perhaps, the main challenge that this sector currently has is the lack of human capital. I know that other sectors, such as the health and financial services sectors, are having the same issues. However, while a lot of emphasis is being made in other sectors, we are not seeing the education institutions in Malta investing in the shipping sector with the same effort.

One element that, in hindsight, we may not have evaluated in coming to Malta is the lack of synchronisation in the island’s economy. Sectors seem to be operated as stand alone economies.

This way of thinking is particularly noticeable in certain Government departments and entities. We believe that if there is an increased discussion between different stakeholders on how we can improve, Malta’s economy can achieve much more.

“IT IS HIGHLY REWARDING WHEN YOU SEE A VESSEL RETURN TO SEA ON TIME THANKS TO A TEAM EFFORT.” Other sectors seem to be investing in attracting more youngsters. Is there a coordinated effort in your sector?

Human capital is a major concern particularly in the younger generation. Malta’s economic growth also led to its people wanting different jobs which require less physical effort than that in our sector.

Our sector needs more human resources.

This concern is being raised by various countries as was clearly stated in the MIM Yacht and Superyacht Symposium. There are various options to address this but again not all cultures are open to such options.

Some British companies, particularly in the

superyacht sector, are encouraging young people to take a career break and spend a year as crewmembers. Others prefer utilising resources from countries where people want to operate in the sector. Some associate this with abuse of lower income persons but in most circumstances this is not the case.

We encourage young Maltese people to further explore this fascinating sector. It is not an easy sector and a lot of hard work is involved. We also face tough deadlines. However, it is highly rewarding when you see a vessel return to sea on time thanks to a team effort.

Without the adequate human capital, any sector is limited in the amount of work it can attract. If it ignores this factor, it risks losing credibility as it would not be able to maintain the required level of service.

Palumbo Group is now present in three countries. What is Malta’s role in this Mediterranean network?

Malta is the centre of the Mediterranean and strategically we recognise this. Malta, however, comes with its challenges. In fact, on different occasions we lost certain vessels coming into our docks. This was not due to the lack of facilities in our operation in Malta but due to reasons beyond our control related to decisions taken by the local authorities which in our view were not justified.

However, we strive to continue attracting more vessels to Malta and to concretely continue to contribute to the Maltese economy. The more vessels with feasible assignments we attract, the more jobs we can create.

A final word of advice to entities trying to attract business to Malta?

This really depends on the vision the Government has for Malta. Continuous investment in education at all levels must be constantly encouraged. Also, perhaps streamlining of legislation may be required including clear and unequivocal rules and regulations in certain areas.

Money / Issue 32 - 39

secure

effective

dependable Getting it Right Malta’s financial services centre offers financial institutions a combination of the essential ingredients for success: convenient location, rapid access to market, effective regulation, rocksolid legislation, accessible authorities and a pool of highly competent, experienced professionals.

Many internationally recognised financial institutions have already experienced the merits of operating out of Malta and their continued growth and success stands as testament to Malta’s strengths and potential.

The jurisdiction already hosts hundreds of international finance companies, credit and financial institutions, insurance companies, fund managers, insurance managers, pensions, trusts and treasury companies, all attracted by Malta’s unique and well-balanced recipe for success.

Success depends on getting it right - Malta is getting it right.

more information on:

www.financemalta.org

Scan QR Code with your smartphone

Find us on:

FinanceMalta

Effective

@FinanceMalta

FinanceMaltaYT

|

Secure

|

Skilled

FinanceMalta

FinanceMalta - Garrison Chapel, Castille Place, Valletta VLT1063 - Malta | info@financemalta.org | tel. +356 2122 4525 | fax. +356 2144 9212 40 - Money / Issue 32

FinanceMalta is the public-private initiative set up to promote Malta’s International Financial Centre

market iGAMING

A GROWING

SECTOR There is a whole ecosystem of businesses that benefit from the growth of the financial services sector, Edward Agius, Regional Letting Manager, RE/MAX Malta, says.

The financial services sector, including iGaming, has been performing well in recent years. What spillover effect does this performance have on the rest of the economy?

There is a lot of impact on the economy from the growth of these sectors. Apart from the impact on the real estate market, these executives – most of whom are well paid – need transport, they purchase food, they entertain and they eat out. Some are also be visited by friends and family from abroad.

There is a whole ecosystem of businesses that benefit from the growth of these sectors.

Foreign nationals working in the iGaming sector are choosing to invest in property. Do most prefer to rent or buy?

95 per cent of foreign nationals working in the iGaming industry rent homes. However, after a period of time and once they have settled in Malta, they invest in property, particularly in Special Designated Areas (SDA’s) as they have the opportunity to rent them out.

How do you cater for both the buying and rental markets?

What are the main aims of the forthcoming Malta iGaming Seminar?

RE/MAX is a founding partner of the Malta iGaming Seminar and our original objective was to attract more iGaming companies to Malta so that we would be able to service their relocation requirement. However, in the past three years, the event has gained recognition as a global iGaming event. While we are still attracting new gaming companies to the event and also servicing their requirements, we are also providing the paying delegates a full overall brief on various topics within the global industry. Our event has attracted many main players as sponsors as well as several recognised experts that have been in the business for over 20 years.

“THE REAL ESTATE INVESTMENT FOR RENTAL PURPOSES IS STEADILY INCREASING AND CONTRIBUTES TO CIRCA 15 TO 25 PER CENT OF OUR REAL ESTATE SALES.”

In particular, what effect does this have on the real estate market?

The iGaming sector employs over 10,000 people, of which 4,500 are foreigners, who need rental apartments. The market did not have the supply of properties and therefore locals have invested heavily into the real estate market to be able to keep up with this steady demand.

The real estate investment for rental purposes is steadily increasing and contributes to circa 15 to 25 per cent of our real estate sales.

What do foreign nationals working in the i-gaming sector look for in property: location, finish, design, comfort?

Their requirements include modern, light, fresh homes, with open plan layouts, Ikea-style furniture and definitely high-tech and modern gadgets.

RE/MAX has over 30 letting associates and more than 200 sales associates, all of which are able to provide a comprehensive service to any client coming from any industry. The advantage with RE/MAX is that we have several associates who specialise in dealing with foreign clients and have an eye for these types of investments.

What are the specific requirements that such clients demand?

In most cases, the average employee initially requests a one or two-bedroom apartment in the Sliema, St Julian’s and Msida areas.

However, several iGaming clients prefer to share apartments as it enables them to rent a higher end property.

What will be your role at this seminar?

We are key organisers and handle all the marketing of the event. This year we will be exhibiting at the Malta iGaming Seminar and handling all client requests.

Edward Agius has been part of the JK Properties team since its inception in 1999, when he took his career from real estate sales to property letting.

Despite the team being in its infancy, JK Properties quickly gained a reputation as the letting specialists in Malta. As a Senior Letting Associate, Agius was then asked to lead the team as the Regional Letting Manager when the RE/MAX franchise was brought to Malta. Today, he proudly guides and mentors a team of 30 letting associates – the largest letting team in Malta – distributed throughout 20 offices and offering their assistance for both residential and commercial letting.

Money / Issue 32 - 41

market PROMO

STRENGTH AND CONFIDENCE

Introducing the all-new Volvo XC90.

T

he all-new XC90 needs no introduction. It announces itself with a bold, upright design that exudes strength and oozes confidence.

It embodies the clean, uncluttered purity of Swedish design, enhanced by a proud grille and pronounced front and rear lights that are unmistakably Volvo.

And as good as it looks on screen, the all-new XC90 is even more impressive in real life.

Conveying power and prestige, it commands plenty of road presence, yet its clean, Scandinavian design is surprisingly subtle.

Made to deliver comfort in all conditions, the allnew Volvo XC90 combines materials such as soft leather and wood with handcrafted details and cutting-edge innovations.

Visit the GasanZammit showroom in Mriehel and get to know the most luxurious Volvo ever built.

42 - Money / Issue 32

Money / Issue 32 - 43

COUNTRY market PROFILE

THIS IS NO

HOBBIT ECONOMY New Zealand is doing better than most of its economic peers, including Australia.

W

ith a GDP of $16.7 trillion, the US is the world’s undisputed economic power. It is also slowly but surely recovering, with unemployment currently standing at 5.9 per cent, down from its 2009 peak of 10 per cent.

However, despite generating a quarter of the global total GDP, the US is nowhere to be seen in Forbes’ Best Countries for Business index. In fact, in this index, Denmark comes in first place, followed by Hong Kong in second place. The real surprise, however, is in third place: New Zealand.

When mentioning New Zealand, our mind immediately wanders to those stretches of virgin landscape used as the magical backdrop in the Lord of the Rings trilogy. Business is definitely not part of the coast-mountain-wildlife equation. However, Forbes commends the land of the Kiwis for its transparency, stable business climate and entrepreneurship. In fact, in Forbes’ list, it may be the smallest economy in the top 10, but it ranks first in four of the 11 metrics used to compile the index, including investor protection, personal freedom, and lack of red tape and corruption.

So how did the land of Bilbo Baggins make its way into the boardroom?

44 - Money / Issue 32

First of all, there is the administration’s general attitude, which has laid out a welcome carpet for foreign direct investment, attracting investors with incentives and rewards. A stable business and political environment also plays an important role. The World Bank and International Finance Corporation rank New Zealand in first place for protecting investors and helping investors start a business. The Transparency International Corruption Index, published by the NGO Transparency International, places New Zealand in second place as the least perceived corrupt country in the world – in 2012 and 2013, it enjoyed top place.

New Zealand’s fiscal incentives are also attractive, with a tax regime that is largely easy to navigate: there is no social security tax, no capital gains tax and no payroll tax.

Still, don’t think that you can just pack an overnight bag and travel to New Zealand to open a business. Being business friendly doesn’t mean a careless attitude. True, in theory, you can open your business in one day. Companies are required to apply for registration with the Companies Office online – the registration only takes one day to complete. You can also start trading in import and export in just 10 days.

Other permits, however, are more time consuming. Construction permits, for instance, involve six different procedures, which all add up to 89 days. Getting electricity is also an arduous affair: the procedure requires five procedures and takes 50 days to complete.

Moreover, while the fiscal environment is streamlined thanks to headline payments, there are some taxes which can constitute an administrative burden. VAT returns, for instance, are notoriously lengthy to complete. Enforcing contracts is also very complex – the 30 procedures involved take 216 day in total. And to resolve insolvency, you will have to wait more than one year.

Yet the business environment in New Zealand is largely attractive. Consumers are wealthy and the market is competitive and varied, also thanks to a free trade deal signed with China way back in 2008.

Agriculture is the main economic mainstay.

However, the manufacturing sector is also important. Film and tourism have also seen growth in recent years, also thanks, in no small part, to the Lord of the Rings trilogy, which showcased New Zealand’s natural beauty. Tourists are attracted to the unique flora and fauna, spectacular mountains and lakes, and unique beaches.

“THE NEW ZEALAND DOLLAR MOVES TOWARDS PARITY WITH THE AUSTRALIAN DOLLAR.”

Last year, in an interview with CNBC Asia, Paul Bloxham, chief economist for Australia and New Zealand at HSBC, described New Zealand as a “rock star economy”, with growth set to outpace most of its economic peers. In fact, 2015 has seen sustained growth, especially as the New Zealand dollar moves towards parity with the Australian dollar. The last time that the New Zealand dollar passed the Australian dollar was on October 18, 1973, and then only for a few hours.

Unemployment is low, there is an increase in labour demand, while the country has recorded

high inward migration. Moreover, demand in most sectors is being met by a stronger supply while GDP growth of more than three per cent in the first quarter of 2015 has been complemented by a CPI inflation of just 0.1 per cent.

1642

It was only in that Europeans became aware of the existence of New Zealand.

The cherry on New Zealand’s cake is that neighbouring Australia’s economy is not going through a particularly positive spell. And that, for now, is also plenty of encouragement for New Zealand to do even better.

In New Zealand, nowhere is more than

130km

from the sea.

1890s

In the , New Zealand was the first country to give women the vote.

New Zealand is comparable in size to the UK or the Philippines, but only has a population of

4.47m

.

34%

of New Zealand’s population is non-religious.

15.4%

Maoris make up of New Zealand’s population.

New Zealand’s population is growing at its fastest rate in a decade. From January till June of this year, the population grew by

1.9%

.

Money / Issue 32 - 45

UR BAN ITE PHOTOGRAPHY

NICKY SCICLUNA STYLING

LUKE ENGERER HAIR

ADRIAN BUHAGIAR AT BARNUZ BARBER [M 9940 1980] MODEL

ROMEK AT MODELS M

// Joop blazer at Ascot House, €349.00 // Tom Tailor shirt, €39.99 // // Joop jeans at Ascot House, €120.00 // Ecco shoes, €149.90 //

// Armani Jeans t-shirt, €60 // Armani Jeans jacket, €260 // // Armani Jeans jeans, €180 // Armani Jeans trainers, €151.25 //

// Armani Jeans shirt, €140 // Tom Tailor jeans, €59.99 // Ecco shoes, €179.90 //

// Esprit shirt, €49.99 // Esprit hoodie, €49.99 // Esprit track pants, €49.99 // Ecco trainers, €139.90 //

// Ben Sherman polo at IQ, €59.90 // Ben Sherman jacket at IQ, €115 // // Ben Sherman jeans at IQ, €115 // Polo shoes at Ascot House, €125 //

// Tom Tailor shirt, €39.99 // Ben Sherman cardigan @ IQ, €115 // 52 - Money / Issue 32

// Esprit jumper, €49.99 // Tommy Hilfiger track pants, €129 //

Interview GIFTS

THE

RISE OF

FALL

TOGETHER IN TIME The Watch Gallery and Hublot have once again joined forces to create a unique timepiece.

The classic fusion Chronograph Aerofusion is equipped with the brand’s iconic HUB1155 movement and is limited to just 25 pieces worldwide.

Autumn doesn’t need to be a browner shade of brown. Money colours in the season with bold and bright gifts.

HELLO TEDDY South African teddy bear brand Taunina has launched its Velvet Collection. The collection includes rich and vibrantly hued fabric bears embellished with florals and patterns inspired by royalty. Taunina employs women from disadvantaged communities at its Cape Town atelier.

LIQUID GOLD CHECK MATE Indigo chess set by Asprey, crafted from English saddle leather.

54 - Money / Issue 32

Kilchoman is the youngest and smallest of Islay’s whisky distilleries.

This young distillery produces three regular bottlings, each with its own distinctive character.

TWO WHEELS GOOD The Electra Ticino 8D aluminium and alloy bike comes with a slick brown leather seat and bar handles.

SMALL BUT LOUD Bluetooth speaker by Moss.

With its playful beach stripe design, it’s perfect for the last days of summer.

PACK AND GO The Master-Piece Potential rucksack is made of canvas trimmed with leather. Also features heat-absorbent padding on the waist and shoulders for extra comfort.

NOT AT ARM’S LENGTH Crafted in gold and precious metals, Trianon cufflinks are renowned for their playful design.

ON THE DECKS These calf hair and leather deck shoes by Visim are made using plenty of craft and love.

Money / Issue 32 - 55

TRAVEL

THE COAST IS VERY There are two sides to going exclusive, says Mona Farrugia. he CEO of the hotel where I’m trying to book a room is adamant: no, I cannot book direct. No, I cannot pay in any other currency except sterling, which means that my holiday is going to cost a lot more thanks to the euro’s poor performance against the sterling.

T

I’m living the modern dream (feels like a nightmare) where you have to work hard to be accepted in an exclusive hotel which obviously doesn’t have an online presence.

The hotel in the south of Turkey is tiny – nine villas – but it looks outstanding. Each villa is on a precipice and has its own pool. The hotel has access to the dazzlingly turquoise waters of Turkey’s Mediterranean coast as well as to a beach club decked in blue and white.

In spite of the fact that the cost and travelling operation is starting to resemble a quick trip to the Maldives instead of neighbouring Turkey (I have to fly to Istanbul, connect via an internal flight to Dalaman airport, then get a taxi for the remaining 124km of the trip), I still book. And yes, after many telephone calls, I convince the CEO to do it direct.

A week before my trip, at which point I have become ridiculously excited about the Acqua di Parma toiletries waiting in the bathroom (it doesn’t take much to impress the hardened luxe traveller, really), the CEO calls me.

a British agency based in Richmond. The situation with the other resorts was the same.

With only a few days to go, I took the plunge.

“You were supposed to arrive today,” he replies. I tell him I’ll get back to him soon.

Eventually, I realise what had happened. I had wanted a particular date but he had told me that date wasn’t available. Then soon after, he sent me the reservation, so I had assumed that he had found me an available room on my date of choice. Then I bought all the tickets and pre-paid the two-hour taxi. As it turns out, the CEO had actually booked me the dates he had available, and not the ones I wanted. If that were not enough, he also threatened to debit my credit card for the full amount of the stay.

As soon as I find a free five minutes, I scroll through the correspondence on my phone.

While I do that, the CEO is sending me such a barrage of messages through Facebook that I have to block him. Apparently, instead of working, I’m supposed to be relaxing by the pool on the Turkish coast.

That left me with tickets to a destination but no accommodation. I had originally wanted to go to Kas – however, as it turned out, Dalaman airport is also relatively close to Kalkan. The only hotel that seemed to fit my bill was the Kalkan Regency Hotel. It came with a caveat: I could only book through Exclusive Escapes,

Since Dolunay has taken me to see his parents’ farm, I thought he would be a little more amenable.

“Where are you?” he screams.

I’m not exaggerating – he actually screams.

“Excuse me?” I reply. It’s 8.30pm, I’m still at work, and I don’t know what on earth he’s talking about.

56 - Money / Issue 32

“Why would you do that?” I ask Dolunay Tomanbay, the Regency’s GM and owners’ son, when I finally arrive.

“They are very reliable and have offset the booking operation for us,” he tells me. “And they’re very organised.”

“Can I book direct next year?” I ask him.

“We really respect the agreement with them,” he answers with a smile.

Food and travel writer Mona Farrugia runs Angelica in Valletta. www.angelicamalta.com

CLEAR “KALKAN IS VERY CLOSE TO GREECE SO THE BLUE AND GREEN LANDSCAPE IS THE SAME AS YOU WOULD FIND IN THE GREEK ISLANDS.!

In the evening, over a fabulous dinner and entertainment – the genuine kind where the musicians really know how to play traditional instruments – I mulled over the fact that it’s scary for any business to have 100 per cent dependency on one agency for all bookings.

“What if something happens?” I ask Dolunay the next day. “Isn’t that like having only one indispensable staff member taking care of your reservations?”

“We’ll cross that bridge when we come to it,” he replies.

The thing is, it didn’t seem to be about to happen. Exclusive Escapes had won tons of awards, including media awards all over the UK, and they seemed very reliable.

Dolunay is a fabulously genuine guy, a pure hospitality professional. If I wanted to return I would need to go through Exclusive Escapes.

Kalkan, in fact, is absolutely packed with British holidaymakers. Many of them have been coming here for years. The Regency ones return every year. If anything, the British holidaymaker is extremely loyal. Some have bought apartments and villas here. I had never seen a village like it and there are entire shops dedicated to selling mega expensive Mulberry fakes to Brits. But then again, it’s a relief that everybody speaks English.

The Kalkan Regency is really charming, although maybe lacking in some luxe elements. The

amenities are not Acqua di Parma, to put it mildly and Dolunay had gently warned me to bring my own if I could not do without a good hair conditioner. I tried to buy them at the airport but since I was getting a domestic flight, the terminal did not stock Kiehl’s.

My room was lovely, overlooking the islands opposite. Kalkan is very close to Greece so the blue and green landscape is the same as you would find in the Greek islands. Since Turkey has different architecture though, your present spot is completely different. I had one of the two villas with their own private pool and was lucky that for a long time I did not have neighbours. This is, of course, hit and miss: on my last night, a family moved in.

I liked their Facebook page. And the Kalkan Regency’s. This was so that I could dream of my return next year. And it was through a post that I found out that Exclusive Escapes had, for some inexplicable reason, gone belly up and announced this on the Friday of the August bank holiday weekend, leaving hundreds of tourists stranded in Turkey, especially in Kalkan.

Especially at the Regency.

Dolunay immediately updated his customers and of course took care of them like he always does.

All goes on as normal. Except for the bookings: the Kalkan Regency now takes these direct. So grab the opportunity before they find another British agency and experience one of the most hospitable resorts on Turkey’s Mediterranean coast. No euro to sterling conversion necessary.

Money / Issue 32 - 57

The Bluesman is a Maltese sound engineer working in New York.

Interview NEW YORK

The

Bluesman’s Blog

Is there anything beyond Donald Trump’s entertainment value, asks The Bluesman.

C

ontrary to most predictions, Bernie Sanders, the Brooklyn-born independent senator for Vermont, has taken off in a big way in his run for the Democratic presidential nomination. Starting with his announcement to about 1,500 people in Vermont, accompanied by free Ben & Jerry’s ice cream and a teleprompter-free impassioned speech, Sanders’s ragtag army of supporters ‘carpet-bagged’ their way through the country like a Pied Piper.

Taking in the Midwest and Southern States like Texas and Arizona, where one would expect a frigid welcome for a self-declared Democratic Socialist, he hit the West Coast picking up speed with a record 27,000 attending his Los Angeles rally. This is more than any other of the hopefuls on both sides have had to date. Not even the television-friendly Donald Trump has come close.

Still, Trump has been having a great run berating everyone in his sights. He’s pretty much called all his fellow contenders incompetent, Mexicans crossing the border, “rapists” and Hillary Clinton a “disaster”, although he was quite pleased to point out that she had been invited to and had attended his wedding. A woman lawyer was “disgusting” for wanting to use a break from some meeting to use a breast pump, and he insinuated that Meghan Kelly, one of the Fox News moderators of what was laughingly called a debate instead of the question and answer fest it was, bleeding from “everywhere”.

No wonder the ever politically savvy Bill Clinton had called him and encouraged him to run – his antics will drive the undecided voter to Hillary’s camp if he indeed became the GOP’s nominee.

There’s also the priceless entertainment value: he “will get on great” with Vladimir Putin, his healthcare plan will be “tremendous”, he “cherishes” women and “likes” Mexicans.

Regarding his wealth many thought that his previous reluctance to disclose specifics beyond a dollar amount would stop him from actually pursuing a run when it came to the financial statement that all contenders must submit. It has fluctuated from “very rich” to $9bn in his statement to $3bn when Bloomberg calculated the liabilities, to his current claim of $10bn. Still, some serious money there thanks to having inherited $225m from his father and four well-timed bankruptcies.

58 - Money / Issue 32

So what do Trump and the rest of the one per cent have to look forward to regarding hanging on to or increasing their loot?

With increased oil and gas production in the US predicted by a few pundits came a reduction in the price of oil strengthening the US economy and reducing the power of Russia and the impact of Isis and other nefarious Middle East forces. A good thing, no doubt, but there are other factors.

American citizens from Puerto Rico, which is facing serious financial problems, are flooding Florida seeking jobs. Puerto Rico is not a state but the people are citizens. The commodities markets are not doing well although demand for softs will pick up and more companies are finding it hard to repeat the financial tallying magic they performed the last couple of years. With a dysfunctional Congress it’s unlikely that any fiscal policy will be enacted until after the 2016 elections.

In 2008 it was failed government policy, along with the banks shuffling worthless paper, that caused the crisis. What’s the reason for these doldrums in 2015? “Dysfunction begets dysfunction”, Washington “needs to get out of the way and let the chips fall where they may” says Dan Celia of Financialissues.org. Any adjustments by the Fed will have to be completed this year as waiting for 2016 risks effecting the presidential election.

The anniversary of the fatal shooting of Michael Brown by a Ferguson police officer in August 2014 has come and gone. Memorial marches were held, Talib Kweli organised two free concerts and, of course, a little bovver ending with an African

American suspect shot and seriously wounded by police. It would seem then that the past year of protest hasn’t changed much, especially as police killings of unarmed civilians continued to mount up. On July 26, unarmed 19-year-old Zachary Hammond was fatally shot in South Carolina, while on a date in a Hardee’s Restaurant parking lot.

Hammond was white, not the first Caucasian victim actually and making this cop violence more real to those with the he-must-have-done-somethingwrong mentality pause and maybe understand what’s going on. The winds of change, although currently a breeze, are beginning to blow and slowly municipalities are coming round to the idea that somebody needs to police the police. In fact, around the country about 40 laws or policy changes have been enacted. California has become the first State to ban Grand Juries (too easily manipulated) in cases of police shootings, elsewhere body cams, independent investigators and more prosecutions, where warranted, of trigger-happy officers.

August 6 marked the end of an era of sorts when Jon Stewart hosted The Daily Show for the last time. Created by Madeleine Smithberg and Lizz Winstead in 1996 it has developed the genius and careers of Steve Carell, John Oliver, Louis Black, Stephen Colbert, Larry Wilmore and Stewart himself. I’m nursing the hope that like Colbert, who will be taking David Letterman’s seat and hosting the Late Show as of next month, Stewart will show up in a new venture. As he himself lamented, what bad timing that his departure came just as all that comedic fodder with the opening salvos of the electoral campaigns appeared like manna from above.

“Your Ideal Property, the Ideal Money Making Machine”

“Nobody knows the lettings investment market like us!”

Kevin Buttigieg CEO & MANAGING DIRECTOR

Your extra space could mean extra income every month.Finding a rental investment, in the form of a business concern, office, shop, apartment or villa in Malta or Gozo – can garner you a rental yield between 4% and 7.5% depending on the property you buy.

At RE/MAX Malta, we have a set of specialised sales associates that work closely with our letting department so they may understand rental prices and be in a position to offer you the best buy to let options on the market.

Leave the complicated stuff to us. Simply contact one of our offices and ask for a Rental Investment specialist, and set up a meeting to discuss how we can get a potential property working for you.

e info@remax-malta.com f facebook.com/maltarealestateremax g plus.google.com/+remaxmalta

www.remax-malta.com Money / Issue 32 - 59