MONEY SEP 2017 ISSUE 44

BUSINESS | LIFESTYLE | DESIGN

THE FINANCE ISSUE ISSUE 44

INTERVIEW

IVAN GRECH ON BREXIT UNDERSTANDING REPUTATIONAL RISK

BITCOINS & BLOCKCHAIN COVER STORY

READY FOR THE FUTURE

INTERVIEW WITH CHRISTIAN SAMMUT

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CONTENTS

WELCOME

THE FINANCE ISSUE

SEPTEMBER 2017

The run up to the Budget tends to be the silly season, with employers’ associations and unions coming up with their wish-list for the Finance Minister to consider.

However, sometimes, we tend to forget that this is nothing more than a time-honoured ritual. Employers’ associations are duty bound to pass on their members’ ideas, just as the unions are duty bound to point out that the motives of the employers are not necessarily aligned with those of their members.

The capitalist/socialist rhetoric has long been de-fanged but at times like this, it rears its ugly head again. Except that it should be seen as just that: rhetoric.

There is nothing wrong with the demands themselves – reverting to a day off in lieu of public holidays falling on a weekend, having the government pay for the first day of sick leave, having government departments available on summer afternoons, having guaranteed higher rates for restaurant workers on Sundays and public holidays as on weekdays. But none of those making these suggestions in their pre-Budget position papers are naïve. The employers know that the unions will resist them, and vice versa. And both the employers and the unions know that the Finance Minister will resist them. And with good reason.

6 UNDERSTANDING REPUTATIONAL RISK

28 MORE THAN PLAIN VANILLA FINANCING

12 NOTHING CRYPTIC ABOUT CRYPTOCURRENCIES

32 WASTE NOT, WANT NOT

16 COVER STORY READY FOR THE FUTURE

43 TEACHING AN OLD DOG NEW TRICKS

With politicians and their aides in the spotlight for moneylaundering, what are the reputational risks for the financial services sector. We asked Money magazine asks four key figures for their opinion.

Victor Paul Borg caught up with Leon Siegmund to get the lowdown on bitcoin, and the plans for his startup, Ivaja.

Christian Sammut, chief executive officer at BMIT, explains that the benefits of the cloud are not the only way in which technology is helping the financial services sector.

They also know that the Finance Minister of the day will come up with a host of his own ideas – many of which have not been put to them for consultation, from strange taxes on mobile calls to bed-taxes on tourists, some of which will be shot down the very same day and disappear without a ripple. Others will be implemented as proposed and others still will be tweaked beyond recognition.

Because the Minister’s proposals are sometimes as much of the time-honoured ritual to shoot for the moon as are those of the constituted bodies.

18 LINKING IT ALL TOGETHER

The aims of the three are clearly opposing when you look at them too closely, but the further you get, the more it becomes apparent that they all want the same thing: a bigger pie. The bigger the pie, the more there is for everyone to eat.

As Brexit looms in the near future - bringing with it more questions than answers - Giselle Borg Olivier speaks to Ivan Grech, head of business development at FinanceMalta.

So let us not be afraid of the sometimes outrageous demands, nor of the wall of resistance. It’s the silly season, remember?

Editor Anthony P. Bernard anthony@moneymag.me Design Peresso Design Studio peresso.webflow.io Printing Print It Distribution Mailbox Direct Marketing Group

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How many times have you been told that blockchain is “the next big thing’? Theo Dix explains why you should believe it.

24 LOOKING AT IT FROM ALL SIDES

In the good old days, property developers used their own cash or went to see the bank manager. Times have certainly changed. Karl Cachia and Ayrton Borg explain the findings of their study of the financing of the construction industry.

Waste can be obvious but it can also be invisible. Joseph Micallef explains what to look for and what to do about it.

Richard Muscat Azzopardi explains why there’s life yet in traditional marketing tools.

48 MARA

An original piece of theatre that sought to celebrate women through time by means of interactive sound design. The photo are excerpts from that exhibition, and a small selection of a still-ongoing project by photographer Jamie Iain Genovese.

58 PRESCRIPTION FOR DISASTER

The Bluesman shakes his head in disbelief over the prognosis for American politics.

COVER CREDITS Christian Sammut, chief executive officer at BMIT PHOTO BY CHRIS SANT FOURNIER

READ THE FULL INTERVIEW ON PAGE 16

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.

4 - Money / Issue 44

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INSIGHT

REPUTATIONAL RISK

There are criminal investigations currently underway on whether Konrad Mizzi, former Minister Without Portfolio, and now Tourism Minister, and Keith Schembri, the Prime Minister’s Chief of Staff, broke money laundering laws when opening secret companies in Panama. There is even a request to investigate the Prime Minister himself. Is the financial industry being protected from political repercussions? Could this be turning away companies that were considering moving to Malta following Brexit? And when should we start to be worried, or relieved?

Money magazine asks four key figures for their opinion.

JOSEPH PORTELLI, CHAIRMAN - MALTA STOCK EXCHANGE (MSE) In the light of the recent Pilatus Bank controversy, are institutions failing to protect the financial industry from political interference?

I have trouble accepting your assertion. I can say categorically, without any doubts, that since becoming chairman of the MSE in May 2015, government has never interfered in the operations of the Exchange. Not even when we hired a new CEO, awarded promotions, or hired staff did government chime in. When I took over as chairman, Finance Minister Scicluna’s instructions were that, as long as we followed a path of good governance, we had his support.

Is there any evidence that the doubts raised about regulatory and enforcement authorities is driving companies away from Malta?

There shouldn’t be any doubts in the first place. The Malta Financial Services Authority (MFSA) and the Financial Intelligence Analysis Unit (FIAU) are highly professional, well-respected regulatory organisations, that have done a good job regulating and supervising institutions.

The MFSA, for example, has licensed easily over 1,000 financial institutions, including investment funds, 99 per cent of which are either still in operation, or have closed without incident as a matter of routine. I refute the premise that “one or two negative instances” should blemish a highly-regulated financial industry which gets it right almost every time.

What impact is it having on companies that were considering Malta as a jurisdiction – especially those considering an alternative to London because of Brexit?

I have heard that some projects had been put on hold, but I have also heard the pipeline of companies considering Malta is healthy and on the increase. The recent news that Starr Companies – the American insurance company run by the legendary Hank Greenberg, ex-chief of AIG – is seeking an MFSA licence is very positive.

At what stage should we start to get worried — or relieved?

We need to relentlessly sell and promote the narrative that our financial industry offers a fantastic, well-regulated and highly cost effective solution. Malta is very pro-business, and our accountants and lawyers are world class, not to mention that the island is an amazing place to live. There is room for improvement, and we must always be vigilant – but we have so much to offer international clients. The future is bright; we’ll do just fine.

8 - Money / Issue 44

JOSEPH CUSCHIERI, CHAIRMAN - MALTA GAMING AUTHORITY In the light of the recent Pilatus Bank controversy, are institutions failing to protect the financial industry from political interference?

I do not agree that institutions are failing to protect the financial industry from any alleged political interference. I believe all regulators act in good faith and in the public interest without political interference. One needs to be careful when making such sweeping statements which reflect negatively on institutions, their management and employees. This should not be interpreted to mean that our institutions do not need strengthening and/or improvement. This is an ongoing challenge which governments all over the world face, especially in sectors which are dynamic, complex and fast paced.

Is there any evidence that the doubts raised about regulatory and enforcement authorities is driving companies away from Malta?

There is no such evidence. My experience as the regulator of the gaming industry is that we are experiencing unprecedented interest and growth in Malta, particularly from the world’s top brands in the gaming sector. We are also experiencing strong economic activity directly attributable to the gaming industry as a direct result of new operators establishing themselves in Malta. This interest is also backed up by existing operators increasing their substance in Malta.

What impact is it having on companies that were considering Malta as a jurisdiction – especially those considering an alternative to London because of Brexit?

We are seeing a strong interest in Malta as a result of Brexit. To this effect, there will be some interesting announcements in the coming months.

MARIO DE MARCO, PN DEPUTY LEADER In the light of the recent Pilatus Bank controversy, are institutions failing to protect the financial industry from political interference?

The key to Malta’s success is reputation, a reputation built over the years by our regulators, legislators and practitioners. To safeguard our reputation, we need serious institutions which are autonomous and independent from political interference.

Regrettably over the past few months and years a number of our institutions have failed to rise to the occasion and have not appeared to take strong or decisive action when necessary, in cases where it would have been inconvenient for the Executive had such action been taken. We have all read about certain FIAU reports being left idle despite their clear conclusions. The consequences of such failures are serious and the ramifications extensive. If government wants to make Constitutional reform a priority in this new legislature, then one of our priorities should be our institutions so as to ensure that they are truly autonomous and independent in their functions from the Executive.

Is there any evidence that the doubts raised about regulatory and enforcement authorities is driving companies away from Malta?

I have no doubt that serious companies of repute, when choosing a jurisdiction among various competing jurisdictions, have institutional reputation as one of their topmost considerations.

What impact is it having on companies that were considering Malta as a jurisdiction – especially those considering an alternative to London because of Brexit?

So far, we have seen various companies opting for Ireland, Luxembourg and other competing jurisdictions. In grasping opportunities, we can leave no stone unturned. And if we have a reputational problem or if we are even perceived to have a reputational problem, we need to address it immediately, strongly and decisively. Last week government announced that it had formed a high-level task force to address opportunities as a result of Brexit. While this is a step in the right direction in so far as seeking to attract companies seeking alternatives to London, it is a step that should have been taken a year ago.

At what stage should we start to get worried — or relieved?

You get worried when people in boardrooms start talking about you for the wrong reasons. We cannot allow this to happen. So we all need to get our act in order. For our country’s sake and that of its workers.

Money / Issue 44 - 9

INSIGHT

THE LOCAL POLITICAL SITUATION MIGHT MEAN A LOT TO US ON THIS ROCK, BUT GENERALLY IT MAY BE OF VERY LITTLE SIGNIFICANCE AND INTEREST TO FOREIGNERS

DAVID FABRI, HEAD OF DEPARTMENT OF COMMERCIAL LAW - UNIVERSITY OF MALTA The recent political debates may have led people to question whether the financial industry is independent of any political interference. What are your views on this possible perception and what do you feel institutions should do to mitigate the effects of such a perception?

Your question focusses on possible perceptions. I believe it is more important to consider the objective reality of the situation rather than what people may think. I think the proper enquiry is whether our institutions really are as effective, efficient, professional and autonomous as they often claim to be.

Perceptions are relevant and interesting but not as much as the reality of the situation.

What people may think is often incorrect and is in any event only of relative importance.

And regrettably on occasion public agencies indulge in self-praise and assume a superior and irritating smugness.

There have been a number of incidents which seem to reveal that public agencies are not fully immune from political and other forms of influence and conditioning. Some problems are structural while others are personal.

The local political scenario, statements by foreign politicians and certain articles in foreign newspapers may have pushed investors to reconsider coming to Malta.

Professionals in the industry state they had a slowdown in queries during the peak of the political debate. What are your views on this?

Are you sure that your question is actually based on facts rather than suppositions: have foreign investors really been scared off by our internal politics?

What is important for me is that the public agencies do their work properly and

10 - Money / Issue 44

correctly. If they perform honestly and fairly and legally, favourable perceptions should follow. If public agencies fail to inform the public, and act or fail to act in a manner which raises public doubts and controversies, then they may have only themselves to blame.

I believe that the recent political disputes should have encouraged public institutions to be less secretive; they should have learnt to be more open with the public whom, after all, they should be serving.

This is how they can secure their legitimacy and win the support of the public, foreign authorities and investors.

Brexit may be an opportunity for Malta.

However, do you think that the current questioning on Malta will put it at a disadvantage? What measures can Malta take to enforce its reputation?

The reasons why companies move from one jurisdiction to another is usually a very complex strategic matter involving the consideration of various factors, especially the financial ones. It is not a beauty contest. The local political situation might mean a lot to us on this rock, but generally it may be of very little significance and interest to foreigners.

I repeat that rather than focus on perceptions, local institutions should make sure they act within the law, effectively and in line with administrative correctness.

If they do this, public perceptions would probably also be favourable. If certain public agencies fail to meet the very standards they expect from others, do not blame perceptions. They have to work hard to gain respect and not just presume that they deserve it.

BITCOIN

NOTHING CRYPTIC ABOUT CRYPTOCURRENCIES

Victor Paul Borg caught up with Leon Siegmund to get the lowdown on bitcoin, and the plans for his startup, Ivaja.

You talk up the success of bitcoin, but there are still only a few million people in the world who hold bitcoins…

There is no way to trace how many people hold bitcoins; it’s just an estimate. Market capitalisation of bitcoin is currently about $40 billion, which is the same as Bill Gates’ net value. I do concede that bitcoin transactions in comparison to the Visa network are still small, but bitcoin has been growing rapidly.

One of bitcoin’s hurdles is its complexity.

It is hard for normal people to understand the concept of cryptocurrencies and how they are relevant to their shopping and investment activities.

I can see where you are coming from because it took me three months to learn about bitcoin, and you cannot explain how it works in a short interview. What I can say for sure is that this is new technology, and it will in the end prevail.

Leon Siegmund

12 - Money / Issue 44

Victor Paul Borg has published more than one million words, as well as hundreds of pictures, all published in books and magazines and newspapers in every corner of the world.

The self-avowed 25-year-old Libertarian talks about the phenomenon of bitcoin with revolutionary fervour, and in recent months he co-founded Ivaja (from the Maltese words iva and hajja), a startup that will be installing trading bitcoin ATMs in Malta and providing other services related to bitcoin.

Ivaja organises events through bitcoin clubs in Malta and Gozo separately, and runs the website www.ivaja.net Bitcoin was invented in 2009, and since then it’s had an illustrious, if rocky, history. It’s a disruptive technology that is the antithesis of traditional currency, which is centrally planned and controlled. Cryptocurrencies are based on the free banking theory in which it is the market that spontaneously controls the currency.

While studying economics at a public university, Leon Siegmund stumbled on the so-called Austrian School of Economics, a school of thought that predicted many of the crises that hit economies in the past decades.

The German’s reading led him to cryptocurrencies – digital currencies, of which bitcoin has by far the largest market share.

As far as shopping is concerned, bitcoin is no brainer: you simply go to a shop and scan the QR code and pay digitally; it is that simple. So, for shoppers, instead of using cash or a credit card, they would simply use an app on their smartphone or tablet and scan the QR code to pay.

The benefit of bitcoin is that there is no intermediary (i.e. bank) involved in the transactions and no inflation, so this makes bitcoin the most disruptive technology of this century.

Having said that, bitcoin is still not widely accepted as a paying mechanism. At present, it is mainly great as an investment – for financial gurus, entrepreneurs, pioneers and early adopters. My prediction is that bitcoin needs five to 10 years to be adopted by the mass market.

How do people go about investing in bitcoin?

You can learn to find your way through reading about it, or else get information and assistance from an intermediary service – such as our company, or others.

The process will be simplified with bitcoin

Bitcoin has grown phenomenally, and some of the world’s leading brands (including Amazon.com) now accept payment in bitcoins, albeit in a roundabout manner. But the debate about whether it is a commodity or currency is still not settled, and the digital currency still mostly exists in a legislative limbo. In the EU, a directive that would provide the regulatory framework on cryptocurrencies is still being worked upon, and the Maltese government is reportedly working out a blockchain strategy.

ATMs. We at Ivaja will be installing a second bitcoin ATM soon.

Malta the process of acceptance can be fast because it’s a small place.

People can buy and sell bitcoins at the ATM. It’s also helpful for people who want to buy bitcoins for the first time; it’s quick and simple. You need a smartphone with internet, and you need an e-wallet – which you can set up while you are at the ATM.

There have been busts and frauds. How can you convince people that investment in bitcoins is safe?

You can invest as much money as you like, starting with €10 (many smart people invest €10-50 every month to achieve their financial freedom).

You can redeem bitcoins at the bitcoin ATM, with another local trader, or at an online exchange. You can go to the ATM and withdraw euros in exchange for your bitcoins.

Do any shops accept payments in bitcoins in Malta yet?

In Gozo there is the computer shop Reboot and a guesthouse; in Malta there is Gochi, the sushi restaurant in St Julian’s and Novi café in Gzira. But as explained before, we are not at the point where bitcoin is widely accepted yet; that will take another five to ten years. In

There is also fraud in the current cash system, and trading in bitcoin is the safest and most advanced technology available, as long as the user handles it well and takes precautions. In this sense I find arguments that bitcoin is not safe to be quite ridiculous. Sure, there are scammers in the bitcoin world but compared to the benefits of bitcoin, scamming is a marginal issue.

It’s open source technology so although thousands of hackers try to steal money, it’s not possible. However, the general advice I would give is to never invest money that you cannot afford to lose, a philosophy that applies irrespective of the nature of investments. As long as you have a backup of your private keys, it’s a good investment.

(The private key is a cryptographic key; it’s operable via an app or software, but it’s the code that’s essential.)

Money / Issue 44 - 13

DISRUPTION

MY PREDICTION IS THAT BITCOIN NEEDS FIVE TO 10 YEARS TO BE ADOPTED BY THE MASS MARKET The ‘private key’ is proof of ownership but if you lose that digital key, you would lose all your bitcoins…

It is crucial to have a backup of your private key written on a paper or saved on a hardware wallet. With proper knowledge and the right approach, then it’s a good place for assets. Other options for investment include bonds, gold or other securities, yet bitcoin is the best performing currency.

Much has been said about volatility in the price of bitcoin. Doesn’t this make investments a gamble?

Well, the crashes in bitcoin are behind us now and the fluctuations we experience now are market corrections. The more people there are on the system, the more stable it will become. Investment in bitcoin is still speculative, but the value will go up

14 - Money / Issue 44

in the long-term, so it really has to be seen as a long-term investment of 10 years or so.

If we go to Ramla Bay and declare sand to be money, then the next day you would have hyperinflation because sand is not that scarce in Gozo. This is why the inventors of bitcoin set a limit of 21 million so that bitcoin will never have any inflation or hyperinflation but will always go up in value in the long run.

Ultimately, it is people who decide what is money, not the law or the government. I believe that bitcoin is the greatest money the world has ever seen, especially because it’s easy to exchange everywhere, it is fungible and it holds its value.

You can resist the future or be part of the future but bitcoin is coming and it will change banking and the finance industry in a very positive way.

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COVER STORY

READY FOR THE FUTURE

Christian Sammut, chief executive officer at BMIT, explains that the benefits of the cloud are not the only way in which technology is helping the financial services sector.

Are there any new developments within the IT industry which the financial services sector should be looking out for?

IT is playing a critical role in reshaping the financial services sector. Fintech is

16 - Money / Issue 44

growing and we are already seeing many successful cases of technology companies disrupting the financial services sector as we know it today. Worldwide investment in fintech almost tripled between 2010 and 2016, and we’re now seeing exciting

new developments in AI-driven investment services known as Robo Advisors.

The adoption of cloud services is no longer a novelty but a matter of fact for many service providers. At BMIT, we have

In the immediate future, we will be able to provide our clients with a low-latency and direct access to the world’s most popular cloud-based services such as AWS, Azure and Google Cloud. We see this being particularly beneficial for the financial services sector as low latency and stringent performance guarantees are a critical component to their services.

Malta is now looking at futureproofing itself by developing niches of sectors such as digital games of skill, but also seeking new sectors. What do you think these would be?

Christian Sammut

We are closely following the developments taking place not just in Malta but across the world. Technology has brought markets closer than one sometimes imagines and this provides an opportunity for countries like Malta to build competence and authority in key areas. We have seen it happening in financial services and online gaming and there is no reason why we can’t repeat this success. Of particular interest are the various blockchain initiatives currently

TECHNOLOGY HAS BROUGHT MARKETS CLOSER THAN ONE SOMETIMES IMAGINES AND THIS PROVIDES AN OPPORTUNITY FOR COUNTRIES LIKE MALTA TO BUILD COMPETENCE AND AUTHORITY IN KEY AREAS been successful in providing cloud-based solutions to a number of operators in the financial services sector – which have proved extremely beneficial and critical to these customers’ operations.

underway. Government has already made clear its intention to have Malta lead in the area of cryptocurrencies and this would have a direct impact on several sectors, including technology, financial services, fintech and others.

Some larger organisations prefer to opt for private cloud or hybrid cloud, whereby we pool together our technologies, services as well as our specialised knowledge to put together custom-built and tailored solutions.

In other cases, customers opt for more standard services, which obviously we can cater for as well.

IT has become an integral part of the operations of any company, from payroll and stock control, to business intelligence and social media. What is BMIT offering in this new scenario?

With IT requirements increasing at an exponential rate, we realised that locally

there was a need for an upgrade to the underlying infrastructure that supports dayto-day IT operations. Throughout these past couple of years, BMIT set out to improve four critical components that affect all of its service offerings: capacity, speed, resiliency and security.

We’ve built an entirely new data centre in SmartCity Malta while also establishing a data centre presence in Milan and Frankfurt, allowing our customers to host their data locally or in mainland Europe.

We’ve connected all our data centres via a high-speed, private network with multiple redundant links to ensure that our services remain undisrupted even in the case of faults to any of the links.

We understand that for fast paced industries such as the financial sector, speed and security are crucial. Through our newlyestablished direct connections to internet exchanges in central Europe, we offer a high-capacity low-latency connection – the fastest out of Malta. The network is also secured with the latest DDoS protection & mitigation technologies.

BMIT often says that it is ‘simplifying IT’.

What does that mean in practical terms to a businessman?

BMIT aims to provide businesses with an efficient service that satisfies all their IT requirements through its ever-expanding portfolio. From setting up and maintaining your office hardware, to getting your business to the cloud, you only need to get in touch with one service provider.

Outsourcing IT and moving to the cloud also has the advantage of turning capital expenditure into operating expenditure, so costs increase only as the business grows.

Is blockchain the future and what could Malta’s role be?

My view is that blockchain and all derivatives from such technology will shape how we do many things in the future. The distributed nature of blockchain will see new applications, which to date have been unachievable.

Money / Issue 44 - 17

INNOVATION

LINKING IT ALL TOGETHER How many times have you been told that blockchain is “the next big thing’?

Theo Dix explains why you should believe it.

E

veryone has heard of bitcoin but it is the technology behind it that is now getting businesses and governments across the world excited.

Blockchain is arguably the ‘new geek on the block’ that has at once left many curious, excited and perplexed.

The reason for the hype is that blockchain technology has the potential

18 - Money / Issue 44

to streamline and accelerate business processes, increase cybersecurity and reduce or eliminate the roles of trusted intermediaries (or centralised authorities) in industries across the board.

So what is blockchain? Simply put, this technology is a distributed ‘ledger’ with a continuously growing list of electronic data records (‘transactions’) that are recorded as ‘blocks’. Each block contains a timestamp

and is linked (or ‘chained’) to the previous block and shared between participants.

Blockchain’s claim to fame is that it solves the problem of trust. A blockchain is ‘distributed’ in the sense that all participants have an identical copy of the record and, depending on the consensus protocol used, are responsible for agreeing whether changes are valid. On this consensual basis, any proposed change

Theo Dix is a senior consultant within EY’s transaction advisory services team

AS WITH ALL BIG ECONOMIC AND TECHNOLOGICAL TRANSFORMATIONS, THOSE NATIONS THAT ADAPT FIRST AND FASTEST ARE THE ONES THAT WILL FIND THEMSELVES AT THE CENTRE OF NEW, EMERGING ECONOMIC ECOSYSTEMS. is made either to all linked copies of the ledger or to none.

without manual intervention based on predefined events - “if X occurs, do Y”.

While destroying or corrupting a traditional ledger requires an attack on the central database storing the data, doing so with a blockchain requires an attack on every copy of the ledger simultaneously. This makes records immutable – that is, they cannot be edited or deleted after they are embedded on a blockchain.

Once created, smart contracts are able to operate autonomously – independently of any party in the system, including its creator – and consequently are thought to be capable of replacing legal contracts. In other words, these smart contracts can be used to model the terms of a real-world contract and automatically enforce its clauses as contractual conditions are met. Despite the name, ‘smart contracts’ capabilities are not limited to legal contracts and can be quite complex; complete software applications can be placed on a distributed ledger to operate autonomously.

Blockchains have another novel new feature over traditional ledgers: the ability to embed logic within transaction data. This allows for the creation of programmable, automated “smart contracts” which can be executed

Angus Champion de Crespigny, EY’s Financial Services Blockchain Leader for the Americas noted: “Blockchain is often described as a ‘foundational protocol’ similar to Transmission Control Protocol/Internet Protocol (TCP/IP) – interesting technology by itself but having little consumer or commercial application without a complementary technology stack on top, such as the world wide web.

“The development of technology standards will accelerate vertical development and produce the applications that drive adoption.

The technology will also need, and greatly benefit from, a legal framework that enables, supports and protects contractual arrangements on the blockchain.”

Banks, traders, exchanges, regulators and companies from across industries are involved in many pilot projects and have launched multiple industry consortia to study blockchain’s use.

The long-term blockchain vision is markets that run themselves, with finance embedded directly into the normal activities occurring within those markets. In such an environment, the finance industry will look very different from the way it does today.

INNOVATION

For example, in a New York City neighbourhood, a private experimental blockchain helps homeowners share solar-electric power generated on their rooftops without the local power utility’s involvement. If payment functionality is built into the blockchain, home suppliers of energy could automatically get paid for the energy consumed by neighbours they are supplying it to - without any middleman.

A slightly longer-term scenario involves a blockchain hosting all-inclusive records of an automotive ecosystem. Ownership, financing, registration, insurance and service transactions could all be tracked together. Such a blockchain would make it possible for a manufacturer of driverless cars, for example, to place its cars in a ride-hailing company’s fleet.

Every time the car is paid for a ride, a blockchain smart contract with embedded financing delivers a revenue share to the manufacturer. The manufacturer may never need to ‘sell’ a car to a consumer; it may not need bank financing, depending on the long-term cash flow resulting from its share of every transaction entered into by its products.

Blockchain companies are striving to identify, implement and showcase high profile use cases which can be moved into production.

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Public sector use cases in an EU member state would definitely fit the bill.

One of the biggest hurdles to widespread production versions is that the blockchain itself does not possess any legal status unless legislation is drawn up to change that.

Records stored on the blockchain are not currently admissible as ‘evidence’ in court.

Similarly, smart contracts are software, rather than contracts, and like the blockchain itself, do not possess any legal status. To be commercially viable, issues in relation to intent, custody, liability and indemnification will need to be figured out. The law needs to catch up with blockchain.

Malta has precedents in developing legal and regulatory frameworks to build new industries. The fact that it is an EU member with laws and court proceedings available in English certainly enhances Malta’s appeal as a test bed location for the technology, should the country pass legislation that recognises aspects of blockchain technology within the legal system.

As with all big economic and technological transformations, those nations that adapt first and fastest are the ones that will find themselves at the centre of new, emerging economic ecosystems. While the whole world

gets benefits from the amazing technology of smartphones and apps, it is Silicon Valley that enjoyed the most enduring economic boom as a result of these industries.

This country has all the right ingredients to become a hub for this new ecosystem – with collaborative regulators, educated workers and mature local expertise in multiple industries. But it is not alone in this race. Abu Dhabi, Dubai, Singapore and Hong Kong (to name a few) all want to compete with San Francisco, New York and London to be one of this industry’s emerging global hubs.

It is therefore highly encouraging that Malta’s Prime Minister and the Parliamentary Secretary for Financial Services, the Digital Economy and Innovation have signalled their intention for government to be the catalyst to drive this opportunity forward, harnessing blockchain to drive the next wave of the country’s economic growth. They announced that a National Blockchain Strategy is currently being developed which will encompass both a regulatory framework and public sector implementations to deliver better public services.

Speed of execution will be key. If we don’t act quickly, the opportunity to be a leader in the field could swiftly pass us by.

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22 - Money / Issue 44

FUTURE

LOOKING AT IT FROM ALL SIDES As Brexit looms in the near future - bringing with it more questions than answers - Giselle Borg Olivier speaks to Ivan Grech, head of business development at FinanceMalta, who developed a SWOT analysis to understand what it is doing to attract new companies, especially ones that might be looking to set up outside the UK. STRENGTHS What are FinanceMalta’s strengths in its mission to attract foreign business to Malta?

The result of the Brexit referendum was a surprise (and a disappointment) to many in the

24 - Money / Issue 44

UK, but also to people here in Malta. From the onset, it was decided that FinanceMalta should not adopt a ‘vulture’ approach – which many other bigger jurisdictions have done – thus almost creating a feeding frenzy as to who could attract most businesses to relocate outside of Britain.

Ivan Grech

FinanceMalta immediately embarked on a campaign (which is ongoing) to offer UK businesses a clear message: Brexit does not necessarily imply an exodus from the UK, but rather offers the opportunity to leave those businesses there while using Malta as an excellent base to retain

FROM THE ONSET, IT WAS DECIDED THAT FINANCEMALTA SHOULD NOT ADOPT A ‘VULTURE’ APPROACH – WHICH MANY OTHER BIGGER JURISDICTIONS HAVE DONE

passporting rights and structure their panEuropean operations.

What can Malta offer to companies seeking alternatives following Brexit?

I don’t think I can say that Malta has one big advantage over other jurisdictions, but rather it is a matter of many plus points all creating synergy. Take, for example, the language: Malta has two official languages, Maltese and English, so all legislation is published in both languages which is adequate. But, when it comes to the courts and in cases of litigation, the English language takes precedence over Maltese, thereby offering a level of stability and peace of mind to foreigners or non-Maltese speakers, as it does away with possible interpretative situations. Speaking of language, it is pertinent to point out that when hiring local staff in certain industries, all are therefore English-speaking.

How is Malta being positioned against other competing jurisdictions?

Another advantage – and this is pointed out to us many times by companies operating from Malta – is the regulator’s approach to business: firm, but very accessible and open to discussion. In Malta, one may set an appointment with the regulator within days, whereas in some jurisdictions this could take months, if ever.

There are other, indirect, advantages such as the unparalleled lifestyle and favourable weather, the daily flight connections to the

WEAKNESSES

we coordinated a meeting between a UK company that decided to set up its operation in Malta and interested parties, and on the last day they thought that they were going to miss a meeting since they had a plane to catch. What they didn’t realise was that the next meeting venue was only a 10-minute drive from our office, and the airport another 10-minute drive from there!

What difficulties does FinanceMalta face in attracting companies to Malta?

How does Malta’s size affect prospective foreign companies?

Obviously Malta is not alone in trying to position itself as a base from where firms may continue to make use of their passporting rights. Indeed, nobody knows yet where the Brexit discussions will lead: will it be a hard or a soft Brexit? What conclusions will there be on the negotiating table? Who will give what and take what?

The uncertainty behind the situation does pose certain challenges because we are working within an unknown scenario.

With regard to workforce availability, the economic success has translated into practically full employment in Malta. Malta is actually in import mode on this front and there is no reason why this should not continue; it has after all been recently voted as one of the best places for expats to live!

Nonetheless, both the industry and the educational authorities are working together to ensure a steady flow of qualified personnel to fill the required places.

What difficulties does Malta itself have in attracting companies?

OPPORTUNITIES

UK, mainland Europe and beyond, excellent schooling for executives relocating here with their families, the economic/political/social stability – just recently Fitch upgraded Malta’s rating to A+. These are just a few perks of the Malta ‘package’ offered.

Like any jurisdiction, Malta has its limitations, perhaps more specifically in terms of its physical size and workforce availability. But this need not be a limiting factor – being a small island means that it is easier to get from point A to point B. For example, last week

What is FinanceMalta doing to maximise post-Brexit opportunities for Malta?

Let me be very clear here – Malta is attracting a substantial flow of

Money / Issue 44 - 25

FUTURE

LET’S FACE IT, MOST BUSINESSES IN THE UK HAVE NOT YET DECIDED WHAT TO DO, POSSIBLY PREFERRING TO WAIT AND SEE WHERE DISCUSSIONS ARE GOING TO LEAD business to its shores. FinanceMalta is a member-based organisation and this is precisely what our members are telling us – business is strong and it is not solely Brexit-related. Let’s face it, most businesses in the UK have not yet decided what to do, possibly preferring to wait and see where discussions are going to lead.

While it’s true that the bigger firms may have already taken such decisions, one must remember that these larger firms already had operations in other European jurisdictions, likely making the decision to move easier.

Are concrete opportunities truly available?

As I said before, FinanceMalta has been acting on the Brexit reality for a year now, putting its message across via the many conferences, fora and seminars we participate in. Our speakers, our members, and our people have responded eagerly to all the initiatives that we either participated in or created. Just as an indicator, FinanceMalta last year took part in or set up 52 initiatives both overseas and in Malta and this would not have been possible

26 - Money / Issue 44

without the energy and support of its board and members.

What can be/is being done to enhance Malta’s attractiveness to foreign companies?

Our strategy was, and continues to be, to consolidate our traditional core markets as well as attracting new markets and developing new sectors. We will be seeing increased activity during the last quarter of this year as well as next year. Our three ‘general’ pillars or sectors are funds and asset management, wealth management, and insurance/reinsurance. We will continue to promote and develop these sectors while putting our resources behind new or emerging sectors especially those related to FinTech – watch this space!

THREATS Other jurisdictions are the ‘threats’ to Malta as everyone is vying for new business – what is being done to overcome this?

Financial services used to contribute 3% to GDP – less than agriculture did! Nowadays

financial services are a substantial pillar of the economy, contributing both directly and indirectly around 13% to GDP. That’s quite a substantial leap when one considers a world recession in between and that FinanceMalta was only set up 10 years ago.

Are there other threats that FinanceMalta specifically faces?

One must be very wary of a by-product of success – complacency. Malta’s financial services industry has thrived thanks to several factors. ‘Growth through Innovation’ has always been our maxim and it must remain so. We must be innovative in our approach, in our products and in our service. Political consensus was, and must continue to be, of essence to push the sector forward. We need to look out for trends in the marketplace, the developing sectors and be quick to develop the right environment for businesses to take advantage of all that Malta has to offer. Maintaining our status quo is not an option. Growth through innovation must continue to lead us through these challenging but exciting times!

IN MALTA, THE EUROPEAN UNION INVESTS IN IDEAS THAT CREATE

Europeans come up with good ideas which bring about advances in health, education, the environment, transport, digital technology and many other fields. These ideas can benefit us all, but they need support. European Union investments lead to innovation, more jobs and economic growth.

Read how at www.europa.eu/investeu

OPPORTUNITIES START HERE. #investEU

CONSTRUCTION

MORE THAN PLAIN VANILLA FINANCING

Ayrton Borg

Karl Cachia

In the good old days, property developers used their own cash or went to see the bank manager. Times have certainly changed. Karl Cachia and Ayrton Borg explain the findings of their study of the financing of the construction industry.

A

lthough the main source of finance for construction companies remains, undoubtedly, conventional bank finance, the capital market is becoming more attractive for Maltese construction companies.

report have bond issues through a finance company and another two are considering taking that route. It also emerges that share issues remain the least attractive option due to dilution of control and low take-up.

Two companies out of six of the major construction companies surveyed for the

Companies which have a diversified sphere of operations tended to find it easier to secure

28 - Money / Issue 44

financing, because the credit risk was perceived to be diluted, apart from the fact that the group was often able to offer guarantees to its subsidiaries.

However, banks are not always satisfied by the level of preparedness of companies that seek financing – and a change in mentality may help their success rate.

7% 13%

HOW CONSTRUCTION COMPANIES USE DIFFERENT SOURCES OF FINANCE ACCORDING TO FINANCIAL STATEMENTS FROM 2011 - 2014

31%

Trade Creditors 31%

20%

Related party balances

29%

Bank overdrafts

20%

Long-term bank loans

13%

Short-term bank loans

7%

29%

The construction industry is considered to be one of the main drivers of the Maltese economy. Although the core industry contributes around 4% towards the local GDP, the wider construction industry contributes approximately 9.3%.

A detailed analysis of the financial statements covering the four years ended 2011 to 2014 revealed the extent to which construction companies make use of different sources of finance.

Trade credit (31%) was the most widely used source of finance, underlying the importance of working capital as a source of finance for day to day operations.

with the respondents’ predisposition towards bank overdrafts as opposed to other sources of bank finance, particularly in relation to runof-the-mill operations.

Finance from related parties (29%) was the second most widely used source of finance, meaning that a significant source of finance is tapped through a group-wide network.

During the four years under review the average debt ratio for the selected companies stood at 83%, considered to be high. When analysing each of the four years separately, the debt ratio registered a decreased of 3% and thus remained relatively stable across the years.

Overdrafts (20%) were the most widely used in terms of bank financing. This is consistent

The average gearing ratio of the selected companies stood at 57% over the four years under review. This is considered to be on the high side but still deemed to be well within the norm.

GEARING RATIO 65%

Over the same period the ratio registered a decrease of 10%. The decrease in the gearing ratio implies less reliance on borrowings and/ or increased levels of equity.

60%

The five bank officials interviewed for the study confirmed that construction companies tend to favour overdrafts, although banks are becoming more stringent and were moving away from providing revolving facilities in order to mitigate credit risk.

55%

An analysis of the financial statements of the selected companies showed clearly that overdraft facilities were not being utilised on a short-term basis, due to their recurring nature.

50%

2011

2012

2013

2014

Two construction companies that form part of a corporate group made use of the capital market and currently have bonds issued to the

Money / Issue 44 - 29

CONSTRUCTION

DEBT RATIO 85%

80% 2011

general public. However, the bonds are issued in the name of a finance company forming part of their group and therefore the financial liability is not held on their balance sheet.

Two construction companies stated that they would not consider share issues mainly because their company is a family-run business. Public share issues dilute the voting power of the original shareholders, and as put by one CFO “owners are wary of outsiders ... family members do a lot of micro-management and wouldn’t want their power to be diluted”. This is, ostensibly, symptomatic of most family-run businesses in Malta and is perhaps not limited to the construction industry.

One company that issued bonds emphasized that finance was mainly sought to fund specific projects and not for run-of-the-mill operations.

Respondents also claimed that bonds were preferred to shares since they are more likely to be successful.

Respondents also highlighted that the bond market has a cash flow advantage over the bank-based system. This is because the original capital raised in a bond issue is paid at maturity, while bank loans involve capital repayments made over the life of the loan. Thus, a company is only obliged to service the interest payment over the lifetime of a bond, although it could also

30 - Money / Issue 44

2012

2013

create a reserve to set aside funds and repay the principal at maturity.

All construction company CFOs emphasized the pivotal role that bank finance plays for their organisation. All respondents considered banks to be a very reliable source of finance and that no major problems are encountered when applying for credit. When it comes to the repayment of bank facilities, all CFOs highlighted that there were cases in the past where repayment obligations couldn’t be met on time. This was mainly due to project delays and changes to the projects’ original design.

In some instances, this resulted in sanctions imposed by banks.

Contrastingly, bank officers did not share the perception of construction companies on the ease with which bank finance is obtained.

All bank officers were categorical about their prudent approach when dealing with construction companies, particularly due to the lessons learnt from the financial crisis.

The property market in Malta is going through sustained growth that has, understandably, led to higher demand for financing provided by banks. One bank official stated that banks have to be more cautious in times when the economy is thriving.

In fact, one of the problems pointed out is related to high value exposures in the construction industry which could

2014

translate into a concentration of downside risks, thus materially impacting banks’ profitability. Although this is certainly not to be overlooked, it should also be noted that the local scenario cannot be compared to that elsewhere in Europe because of the specificities of the local property market and because land in Malta is scarce, not to mention that, from a regulatory side, the problem of large exposures to specific individual companies is mitigated by restrictions levied by the Capital Requirements Directive.

The most notable problems highlighted by local bank officials are related to the way construction companies seek finance. One glaring problem is that several construction companies do not file financial statements on time, something which is certainly frowned upon by banks.

The bank officials’ perception was that construction companies are not investing enough in terms of professional personnel, although one respondent stated that the construction industry was one of the industries that made marginal improvements in this regard.

Unfortunately bank officials highlighted that companies are not always prepared and do not always present a well-thought out, documented proposal to substantiate their application for credit.

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Directors, Square Catering Ltd. (beneficiary BOV JEREMIE financing package)

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EFFICIENCY

WASTE NOT, WANT NOT

Waste can be obvious but it can also be invisible. Joseph Micallef explains what to look for and what to do about it.

T

he workplace can generate copious amounts of waste. While waste may be obvious in industrial organisations, it might be less so in services operations.

Nevertheless it could have a great impact on a company’s profitability.

Waste is any expense or effort which does not transform inputs into something the customer is willing to pay for: “perceived

32 - Money / Issue 44

value”. The most renowned proponent of ‘lean wastes’ was Taiichi Ohno, considered the father of the Toyota Production System (TPS). Ohno laid down the basic benchmark for what should be considered waste, simply stated as “anything that doesn’t increase value in the eye of the customer”.

While this concept originated in the manufacturing industry, the same

principles are very much transportable to any type of business sector.

Seven of the defined wastes are processoriented, while the eighth is directly related to management’s ability to use personnel skills and capabilities. Having said that, all have a universal application to all types of businesses today. It is therefore worth evaluating their impact on your organisation.

Ing. Joseph Micallef is a partner and chief operations officer at BEAT, a Maltese nichebased consulting firm specialising in the provision of project management, strategic advice and business transformation solutions www.beatconsult.com

THE EIGHT LEAN WASTES: 1. NON-QUALITY

One of the most easily recognisable wastes in any type of operation relates to nonquality, defective or erroneous outcomes – in the context of this discussion, let’s call them defects. These usually require additional time, effort, resources, and money to fix or remake. Defects are one of the most significant wastes because they lead to the exponential generation of additional non-value adding activities (thereby generating even more waste!).

While completely eradicating any form of waste is impossible, defects can certainly be limited by the application of Poka Yoke (or mistake-proof) methodologies, standardised work plans, careful risk identification and planning, more robust quality assurance systems, and appropriate levels of quality control at specific levels.

It does not take much to imagine why a lack of standardised processes, and poor

communication with the customer, will lead to the delivery of products or services that do not conform with the latter’s requirements.

When this happens, the products or services delivered must somehow be repaired or remade to satisfy the customer’s needs.

2. OVER PROCESSING

Excessive processing – spending more effort than what is really needed in delivering products and/or services – will lead to an unnecessary increase in costs, time and resources. And while you’re at it, you should also check whether the systems you have in place are helping your employees make the right decisions at the right levels. Excess processing of data, information and materials, and top-heavy systems, do not add more value to the ultimate outcome.

3. OVERPRODUCTION

Overproduction, which occurs any time that there is more stock of parts, products or services than the customer is willing to purchase, has a great negative impact on

FOR ANY BUSINESS, WASTE MUST BE THE GREATEST ENEMY OF PROFITABILITY

success. It consumes vast amounts of time and resources, and thereby subsequently generates spiralling higher levels of waste.

Overproducing hamburgers in a fastfood chain means management having to invest in storage facilities and space, staff needing to manage the stock, control the storage conditions, and possibly discard any stock of hamburgers remaining unsold at the end of the day.

Overproduction can be tackled by establishing a reasonable workflow that enables value to be “pulled” in accordance to the varying demands of the customer. This may be achieved by putting into place well-defined procedures for every process in your organisation, and possibly redesigning new processes to ensure better flows through particular bottlenecks.

4. WAITING

Whenever work has to stop for any reason, the resulting inaction leads to additional (overhead) costs to attach to a product or service. When a process is in waiting mode, no value is being produced. In the meantime, however, the cost of overhead operations continues to grow, which strips potential profit from the sale.

Waiting not only disrupts material and information flow, but also generates excess inventory (have you noted the pending tray on your desk lately?). Providing adequate capacity and staffing to handle the workload at known bottlenecks is one way of approaching this issue. Simplifying tasks to enable better flowthrough could be another way of reducing queues.

5. INVENTORY

Inventory is a fact of life. However, it is also a waste because it is value – in the shape of a valuable product, material or information – that is being held at a cost. Poor planning and weak monitoring systems will increase the time inventory is held. Meanwhile, its profit margin is reduced because overheads must be paid to maintain the product while it is stored.

Likewise storing masses of data and information requires infrastructural overheads and management effort. In reality, the value of that information sitting in your databases may fast be losing its value as it becomes out-dated by other more recent and up-to-date facts.

6 TRANSPORTATION

Moving products and data around costs money, and therefore transportation can

Money / Issue 44 - 33

EFFICIENCY

IT DOES NOT TAKE MUCH TO IMAGINE WHY A LACK OF STANDARDISED PROCESSES, AND POOR COMMUNICATION WITH THE CUSTOMER, WILL LEAD TO THE DELIVERY OF PRODUCTS OR SERVICES THAT DO NOT CONFORM WITH THE LATTER’S REQUIREMENTS be classified as a wasteful activity, using substantial amounts of resources and time, while no value is being added to the benefit of the customer. Try mapping out on a “spaghetti diagram” the paths traversed by your e-mail correspondence relating to a specific task, before any real value-adding activity is evident. In order to reduce this kind of waste, managers might need to look at improving plant or office layouts, or finetuning process flows and systems, clearly defining information requirements to prevent unnecessary movement of material and/or information.

34 - Money / Issue 44

7. MOTION

Employees moving around on a shop floor or within an office or warehouse, and the shifting of equipment or machinery, files and paperwork, does not add value to a product or service. This is referred to as ‘motion waste’. Inefficient shop floor and office layouts, as well as improper equipment, lack of planning and undefined process flows all contribute to unnecessary motion.

8. PEOPLE SKILLS

Although not on Taiichi Ohno’s original list, the issue of non-utilised talent has become increasingly relevant to productivity in

businesses across the board. There is no doubt that failure to value and tap into people’s talents, skills and knowledge can have a detrimental effect on an organisation. Failure to engage employees in the process of change and improvement, and defining their roles to best fit their individual capabilities, is therefore seen as a fundamental ‘waste’.

Identifying and eliminating waste requires that you determine whether activities in your process are really adding value or not. Ask yourself “Is the customer willing to pay for the activity?”, and “Does the activity transform the good or service?”. If the activity is not done well at the outset, all subsequent activities done to correct it are waste. Eliminating waste here means completing the activity to the expected level of value, getting it right the first time.

Only systematic elimination of waste improves processes, ensures positive development, and ultimately maximises output and profitability.

And that is, after all, what every manager should be aiming for.

㄀㄀㌀Ⰰ 倀愀漀氀愀 刀漀愀搀Ⰰ 吀愀爀砀椀攀渀Ⰰ 吀堀一 ㄀㠀 㜀Ⰰ 䴀愀氀琀愀 ⬀㌀㔀㘀 ㈀㄀ 㘀㘀㄀ ㈀㜀㌀ 椀渀昀漀䀀攀爀爀攀洀洀攀⸀挀漀洀⸀洀琀

brings cool back to the kitchen with engaging content, edgy design and a lifestyle flair.

5TH ISSUE IN OCTOBER 2017 Distributed exclusively from Park Towers supermarkets and from selected outlets.

Man of the hour is a series of interviews in association with Edwards, Lowell Ltd featuring high profile industry leaders.

INTERVIEW

The

MAN of

the HOUR

THEIRRY

STERN

The slogan “You never actually own a Patek Philippe. You merely look after it for the next generation” could just as easily apply to the company itself as to the watches. Thierry Stern is now the third generation of Stern’s to run this most prestigious of brands. He explains his vision to MONEY. How do you keep the traditions of such a well-established brand alive?

Being a family-owned company, since the beginning of our history we have worked and lived by our values; our independence gives us the freedom to do so, to think and act long-term.

Most importantly we have a tradition of innovation, so we evolve in a constant way in respect of our history, know-how and by creating new innovative watches in terms of quality and dependability, technically with new movements and functions, and of course aesthetically. Our goal is to make our client dream; we have to surprise them with new creations in line with our DNA. The challenge is to create a very attractive watch for today that you can wear for a long time.

Just as quartz watches in the 1980s disrupted the industry, today the mechanical watch industry is facing threats from ‘smart’ watches. Do you think this new technology can affect the luxury watch industry?

When you make technical mechanical watches as we do, you are different, this is what will maintain our success. We are confident, our future is good, because we know where we are going. My program of development and new creations is already

planned until year 2030. We also see a lot of interest from younger generations of clients and potential clients for the world of fine watchmaking. This interest was reconfirmed to us during our Grand Exhibition in New York last July: the most important visitors were of the age group from 25 to 35.

Patek Phillippe watches continually break records at auctions; are you surprised by the prices reached by some pieces?

From 1839 until today, without any interruption in our production, we follow our founders’ vision to make the best watches in the world, in terms of quality, technically and aesthetically. These are founding elements that answer collectors’ main criteria, such as rarity, quality and provenance. Yes, sometimes we are surprised, but of course this is a very good sign of the trust collectors place in our brand!

What is the secret is behind Patek Phillippe’s longevity and iconic status?

Creating watches is our passion and our métier, long-term vision is our guiding rule. We do not come from the financial world, so we have no short-term marketing, quick return on investment strategy or opportunistic behavior. We are familyowned and this gives us the freedom to be Patek Philippe Aquanaut Jumbo (Blue Dial, White Gold, 42mm)

different and hopefully stand the test of time for many years to come.

Which is your favourite watch of all time?

I am asked this question often, but no, I do not have a favorite Patek Philippe watch. I am totally involved at every step of the creation of our watches, it’s my passion and I am proud of what we propose to our clients.

Maybe there is one watch creation I am particularly proud of because it was for me a ‘rite of passage’: when my father asked me to redesign the famous Ref. 3970, he said ‘It’s a beautiful watch, but now you have to find a new design’. It was a huge challenge and so the Ref. 5970 expresses all the passion, respect and knowledge I have for Patek Philippe.

What is the best advice you have been given?

Never sell the company.

Money / Issue 42 44 - 37

what what a great combination what what a greatwhat combination

your firm benefiting from at combination your firm benefiting from a great membership to FinanceMalta a greatcombination combination

membership to FinanceMalta our firm benefiting from your firm benefiting fromadvantages include: Membership bership to FinanceMalta your firmtobenefiting from Membership advantages include: Company listing on our website • membership FinanceMalta

membership to FinanceMalta

Company listing on our&website • • Participate in webinars podcasts

Membership advantages include:

Membership advantages include: Participate in webinars & podcasts • • Opportunities to showcase your firm

Company listing on our website •

Company listing on our website •

Participate in webinars & podcasts •

Participate in webinars & podcasts •

Opportunities to showcase your firm • • Business networking & educational events

Business educational events • • Complimentary passes to somenetworking of Europe’s&most important events

Membership advantages include:

Opportunities to showcase your firm •

Opportunities to showcase your firm • Complimentary to some Europe’s most important events • • Opportunity topasses take part in roadofshows, press briefings & workshops Business networking & educational events •

Business networking & educational events •Opportunity Company listing on our website •• • take part in road shows, press briefings & workshops Access totomarket intelligence reports & branded marketing materials Complimentary passes to some of Europe’s most important events •

s to some of Europe’s most importantOpportunity events •Access to taketopart in roadintelligence shows, press briefings workshops •& quarterly market reports &&our branded marketing materials • • Thought leadership articles featured on website newsletter

Participate in webinars & podcasts •

t in road shows, press briefings & workshops •market leadership Access to intelligence reports branded on marketing materials • Thought articles&featured our website & quarterly newsletter •

Opportunities to showcase your firm •on: information Thought leadership articles featured on our website & quarterly newsletter •more gence reports & branded marketing materials •

s featured on our website & quarterly newsletter •

more information on: Business networking &www.financemalta.org educational events • more information on:

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Complimentary to some of Europe’s most important events • more information passes on:

www.financemalta.org Opportunity to take part in road shows, press briefings E f f e c t i v e |& Sworkshops ecure | Skill• ed Effective

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Secure

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Effective | Secure | Skilled Access to market intelligence reports materials • FinanceMalta & branded @FinanceMaltamarketing FinanceMaltaYT FinanceMalta Find us on: Find us on:

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FinanceMalta

FinanceMalta @FinanceMalta FinanceMaltaYT FinanceMalta Find us on: Thought leadership | Secu r e | S k i l l e darticles featured on our website & quarterly newsletter •

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FinanceMaltaYT

FinanceMalta - Garrison Chapel, Castille Place, Valletta VLT1063 - Malta

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

FinanceMalta

more information on:

info@financemalta.org | tel. +356 2122 4525 | fax. +356 2144 9212

is initiative the public-private initiative FinanceMalta isFinanceMalta the public-private set up to promote Maltaset up to promote Malta 38 - Money / Issue 44 as an Internationalas Financial Centre. an International Financial Centre. n Chapel, Castille Place, Valletta VLT1063 - Malta

g | tel. +356 2122 4525 | fax. +356 2144 9212

www.financemalta.org

FinanceMalta is the public-private initiative set up to promote Malta as an International Financial Centre.

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

EUROPE’S SHADES OF WHITE… AND GREY

No one would dare to predict the impact of Brexit on the UK or its trading partners, but Alex Mangion reminds us that the doom and gloom forecast after the French and Dutch elections did not materialise either.

UNCERTAINTY CLOUDS THE BRITISH ECONOMY...

T

he best news to happen for Europe and Britain’s leading journals and newspapers over the past year was probably Brexit: thousands of pages have been dedicated to the process of Britain leaving the EU, to the impact on the economy and on British and European firms.

One day we’re told that one particular business is still doing well, the next day that another might be shutting down its doors. And despite many other factors impacting their operations, it is Brexit that takes the blame – or the merit.

The reality is hard to determine. But there is one fact that can be ascertained at this stage: after an initial ‘bullish’ outlook that seemed to imply Britain can be great with or without Europe, uncertainty has started to creep in.

Officially, Britain is now a laggard to what has become a fast-track recovering eurozone, as top (and not only) companies – as well as the consumer on the street – worry about Brexit, while feeling the effect of increasing inflation and a weak sterling.

70% of their market outside the UK have actually seen their stock go up by around 20%, while those with over 70% of their market being the UK, suffered losses, which averaged at around 6%.

Her Majesty’s economy is not expected to grow by more than 0.3%, for the second quarter running – a clear display that the momentum is gradually being lost. Growth in the eurozone is expected to reach double that figure. The usually buoyant services sector last month registered the weakest performance for a full 12 months.

What happens next is hard to predict, but the chief economist at Unicredit, Erik Nielsen, put it succinctly a few weeks back: “Where would growth come from at this stage in Britain? There is erosion of real income because of the inflation numbers and the uncertainty means investment will not play a role until you get some clarity on what is going on (about Brexit)”.

As for investing, there has been an interesting paradigm: those companies with more than

It will be an uneasy ride or, at least, so seem to predict Europe’s top economists.

...WHILE EUROPE FLOURISHES Economists are not always right though, are they? Readers of the international press will certainly remember the doom and gloom reported towards the end of last year, with postTrump, pre-French/Dutch elections concern. Yet, when it comes to Europe, the performance was much better than anticipated across the board.

The eurozone economy grew more quickly over last year than previously estimated.

The eurozone has been described as one of the positive surprises for the global economy this year, growing even faster than the United States in the first quarter and further accelerating in the second.

According to Eurostat’s recent releases, the economy expanded by 2.3% in the three months to June compared with the same period a year earlier, the fastest rate of growth recorded since the beginning of 2011. But the good news in Eurostat’s figures was not merely in the numbers, which always leave room for interpretation, but also in the details, which shed light on the factors behind such recovery. A major stimulus came from investment spending, which rose strongly, with exports performing brilliantly despite a strengthening of the euro and dollar.

This news has boosted the shares and bonds of major European companies.

Particularly since Macron’s victory in France, international investors seem to have rediscovered Europe as the market of choice. As interest in the US dwindled, shares of banks and resources companies flourished to double digits.

The FTSE Europe Index Fund has gone up by more than 15% in 2017, while the European indexes collectively registered an 11% growth rate. With Angela Merkel looking as a shoe-in to remain at the helm of Europe’s largest economy, finally it seems that stability can re-enter Europe’s vocabulary once again.

Money / Issue 44 - 39

COUNTRY REPORT

LOOKING OVER THE WALL

US President Donald Trump wants to build a wall to keep out Mexican migrants, and threatens American car manufacturers that assemble cars there as he wants to keep more jobs in the US. But as they say: be careful what you wish for, because you might get it.

S President Donald Trump is not very happy with the trade deficit his country runs with the rest of the world, which reached $500 billion in 2016.

U

States than it imports, the fourth largest surplus for the US, after China’s $347 billion, Japan’s $69 billion and Germany’s $65 billion.

Mexico, its third largest trading partner, is an easy and obvious target. The countries do $525 billion worth of trade every year, but Mexico exports $63 billion more to the

There are clear reasons for this. The North American Free Trade Agreement (NAFTA) entered into force in 1994 and since then, manufacturing has bloomed, accounting for

40 - Money / Issue 44

approximately a quarter of Mexico’s $2.2 trillion economy.

NAFTA is by no means the only link that Mexico has with the world across its borders.

The country has free trade agreements with 46 countries, meaning that more than 90 per cent of its trade is covered by free trade agreements. However, it is actively

economy which is believed to suck up half the workforce, weak rule of law, and corruption.

Official figures list unemployment at just 3.6 per cent, but unofficial estimates put it closer to 25 per cent.

It does not help that one of the major revenue generators of the country is drugs: producing them and offering a conduit for them from other countries.

The CIA estimates that Mexico is the world’s second largest source of opium poppies and largest foreign supplier of marijuana and methamphetamine to the US market. It also reports that 95 per cent of the cocaine that gets into the States passes through Mexico.

ITS GDP PER CAPITA WAS $18,900 LAST YEAR, PUTTING IT IN 90TH PLACE IN THE WORLD RANKINGS seeking to seek new markets and to reduce its dependency on the US: Mexican trade officials are planning a high level visit to China in September, which is currently more of a competitor than a potential market.

There is still a long way to go. It is no wonder that so many Mexicans try to find work in the US: per capita income there is roughly one–third what it is across the border, and the income distribution remains highly unequal. It is estimated in the CIA Fact Sheet for Mexico that as many as 46 per cent live below the poverty line.

For a variety of reasons, the country of 54 million underperforms. Its GDP per capita (adjusted for purchasing power parity) was $18,900 last year, putting it in 90th place in the world rankings.

Since 2013, its GDP has only grown by two per cent annually, and there is growing scepticism that President Enrique Pena Nieto’s sweeping economic reforms will give the hoped-for returns. Two years ago, it started to hold public auctions for oil and gas, relinquishing state domination of this sector – approximately 10% of government revenue comes from the state-owned oil company, Pemex - but there is much more to be done.

The country has deeply ingrained structural issues, such as low productivity, a black

Trump said in an interview with The Economist last May that he wants to get the US/Mexico trade deficit down to zero, and to renegotiate NAFTA to get a better deal for American companies and workers, or else…

Doing so would have serious repercussions for Mexico and its economy, ones which would only drive even more Mexicans to seek greener pastures across the border, no matter how high the wall might be.

Public debt:

56.3%

of GDP (2016 est.)

Population below poverty line:

46.2%

(based on foodbased definition of poverty)

The national unemployment rate stands at around

3.6%

Labour force by occupation:

(2017 estimate)

Agriculture:

13.4% Mexico’s population (2016) stands at

127.5 million

Services:

61.9%

Industry:

21.4%

GDP (purchasing power parity):

$2.307 trillion (2016 est).

Money / Issue 44 - 41

MARKETING

Richard Muscat Azzopardi is the CEO of Switch - Digital & Brand, a marketing agency that forms part of ICOM, the world’s largest network of independent agencies. You can get in touch on richard@switch.com.mt

TEACHING AN OLD DOG NEW TRICKS

Richard Muscat Azzopardi explains why there’s life yet in traditional marketing tools.

M

arketing in the digital era is incredibly rewarding. It’s a great challenge and it usually offers immense return on investment. Most of what you do is measurable; you can incrementally improve any efforts you make; your reach is global and you can target almost millimetrically.

communications problem. I’ve rounded up a few methods that might seem to have been superseded by digital marketing but which can still offer incredible returns if done wisely.

In short, I love digital marketing.

It might seem strange to start off with a digital medium, but most people seem to think that e-mail marketing is dead. There was a period where millenials were not using e-mails, so everyone assumed they never would. “They all use Messenger,” they said. Well, they did. Until they got to an age where they had to go to work.

In spite of this, sometimes we are tempted to overlook most other channels that can still give us a massive boost when needed.

Even though I head a company that includes the word “digital” in its name (we’re technically called Switch – Digital & Brand), I make it clear to our team that we must always think of every means possible to solve a

E-MAIL MARKETING

I must be honest, I do speak to a couple of clients on Messenger and WhatsApp,

however, I spend most of my time in my inbox – and so do my colleagues, even the ones in their early 20s.

E-mail marketing expectations have changed somewhat: you have to make sure that you use e-mail in a way that is not intrusive and does not damage your brand (or your domain reputation – you don’t want to be blacklisted), but when used well it has the power to change behaviours in ways that basically no other medium online can compete with.

PRINT Magazines, specifically. There is still a lot of scope for specialised publications – and if you can get into them, then you can reach

Money / Issue 44 - 43

MARKETING

For B2B communications (or for high value and exclusive B2C products or services), the scope for direct marketing is still as strong as it ever was. If someone can find you a list of the right people to talk to – and get their details – then you can speak to them on a one-to-one basis and get them on board with much less effort than it would take to win their business through regular advertising.

We’ve used this technique for quite a few of our clients, and it’s always proven to give a phenomenal return on investment.

PHONE

A FEW METHODS MIGHT SEEM TO HAVE BEEN SUPERSEDED BY DIGITAL MARKETING BUT CAN STILL OFFER INCREDIBLE RETURNS IF DONE WISELY an audience that’s basically guaranteed to be interested in your product or service. You also have a sort of guarantee that – unless they’re browsing through it at the dentist – the people seeing your ad or reading your contribution are in the right frame of mind to absorb your content.

We also tend to forget that magazines still offer much better quality control over the medium than any digital medium (including TV) – so, when you place an advert there you know that it will look just like you intended it to look (you can’t tell how someone’s going to see your digital ad on a 5-year-old phone or on a brand new top of the range smartphone; they’ll look completely different).

44 - Money / Issue 44

SMS SMS is a funny thing. It’s one of the oldest surviving media of the technology age (together with e-mail), yet it is still as powerful as anything. People still regard SMSs as something very personal, so the open rate for SMSs is still incredibly high. There’s also an advantage that very few people actually bother with SMS because it’s a major hassle to build and maintain a list and you need to pay per send. However, when an SMS hits someone’s phone, you are practically sure they’ll see it, even if it’s just to dismiss it.

DIRECT MARKETING The power of getting to the right people with the right message is what digital marketing is all about. This was preceded in the past by efforts in direct marketing.

This is essentially the art of building a list of hyper-targeted audiences and communicating with them directly to show them a product or service you can offer them. Using direct marketing for low value items has been completely superseded by online marketing – it’s definitely better to spend on overspill when you are spending so little to hit potential clients.

This follows direct marketing perfectly.

It might seem counter-intuitive, and I’m really not advocating spammy sales calls to sell people shares half way across the world here. However, if you have a good list of contacts you can call, then I would advise you to consider this as part of your marketing strategy, especially if you’re looking at B2B clients. Far too often we tend to forget that there is no better personal connection than an actual conversation, so if you are looking to land clients for high volume work, then getting decision-makers on the phone is one of the best ways to secure a meeting.

I must admit that there is a fine line between marketing and sales functions, but in my mind the two should not be separated. They’re working towards a common goal – improving business by creating long-term, value oriented relationships – and the lines should be blurred. Treating your calls like marketing and not like sales will ensure that you minimise the potential damage that repeated sales calls could do to your business.

And in the end... The bottom line is that, with the exception of print, each one of the recommendations I’m giving revolve around one thing: ownership of your own list.

No matter how much effort you put into marketing on third-parties’ platforms (and believe me, your Facebook Page is not really yours), you are always reliant on the party providing the platform. When you own your own list of e-mail addresses, phone numbers, physical addresses and SMS numbers, then you can do with them as you please. You can communicate on your own terms, at your own rhythm and as frequently (or infrequently) as you would like. You can easily change providers, you can segment your list, you can test on your list and you can monetise it if you ever get to sell your business.

PERKS AND POINTS AT THE POINT SHOPPING MALL WITH VISA Leading shopping mall, The Point, has partnered exclusively with Visa to launch The Point shopping mall’s loyalty card ‘Advantage Card’, a now popular and very well received reward programme.

Anyone using their Visa card at The Point shopping mall will automatically receive points on their ‘Advantage card’ which can be translated into several perks such as discounted parking or coffee as well as discounts in a selected group of The Point’s many outlets.

“It is always great to collaborate with strong established brands such as Visa since it ensures that our customers

benefit further from their shopping experience.” Said Mark Ellul, business development consultant for The Point.

Whether shopping or getting a snack, any transaction made with a Visa card at The Point shopping mall during the duration of the campaign will earn loyalty points.

There is also the referral element now where existing card holders get bonus points when they refer a friend.

To activate The Point shopping mall’s loyalty card, shoppers need to present their Visa purchase receipt made at any outlet at The Point to the Visa stand on level -1. Please visit www.visa.com.mt for more details and terms and conditions.

DEX WORKSPACES COMPLETES FURNISHING PROJECT FOR SIMONDS FARSONS CISK Malta’s oldest brewery and main importer of many food and beverage brands has recently undergone a serious makeover. The need for a healthier space for employees and more efficient environment for production led the group to seek the professional help of DEX Workspaces. The project was spread over 3,000 square metres and delivered within 6 months. With customer satisfaction as their primary goal, DEX left a lasting impression on their clients. “DEX immediately understood the vision of the designers for the new Farsons workspaces,” said Christopher Ciantar, COO at Simonds Farsons Cisk.

“In turn, they responded with product options that offered quality and value engineering as required.”

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MARKETING

BUY CHEAP, BUY TWICE You probably don’t need to be told that an expensive pair of shoes will look and feel more than twice as good as a pair that costs half as much.

So why don’t we apply the same logic when it comes to marketing?

Richard Muscat Azzopardi explains that this service should be procured with the same rationale.

O

ne of the best things you can do with your marketing efforts is to hunt for good value, not low prices. The quicker you understand that lower prices are not necessarily a better return on investment, the quicker you can start working on marketing that is an investment, not a spend.

Price vs value - explained The first thing we need to look at is the difference between what you spend on something and what it’s worth. The

46 - Money / Issue 44

problem here is two–fold. I have an intense dislike for LinkedIn memes, but there’s one that always makes me nod my head in agreement, even if it’s one of the most over-posted memes of all time.

It’s a short story about an engineer who headed over to an airline and solved a problem with a plane that had stumped everyone who had attempted to fix it before. They had spent months trying to get the plane off the ground, but something was wrong and they couldn’t solve it. The

engineer just tightened a bolt and all was dandy. She then proceeded to bill the airline €10,000 for her services.

Someone (from the bean-counting department, presumably) questioned the bill: “But you only spent 10 minutes fixing the plane”. Her answer says it all: “Well, I can change the bill if you want: €10 for tightening the screw, €9,990 for knowing which screw to tighten”.

There are two very important issues at hand.

The first, and most obvious one, is that you

Richard Muscat Azzopardi is the CEO of Switch - Digital & Brand, a marketing agency that forms part of ICOM, the world’s largest network of independent agencies. You can get in touch on richard@switch.com.mt

have to pay for quality over quantity. If a lesser engineer stood around the plane for a couple of days charging at a much more modest rate, say €100/hour, they’d have charged much less than she did. But they wouldn’t have solved the problem.

We seem to think that paying less is better, but we don’t understand that sometimes it’s much better to pay more and get the right solution the first time round. Ask anyone at Air Malta how much it costs to have a plane grounded for a week or two if you just can’t find someone to fix it.

This brings me to my next, and more important, point. The value of the fix to the airline could not be counted from the hours the engineer spent on the job. The value of having a plane fixed quickly and effectively is immense. It means that no revenue is lost while a solution is searched for.

While the link to marketing might be seen as tenuous, it’s not. If you see how much it costs to run your business at a level that’s not even close to full capacity, you can see that it is worth spending more to look for the best value around.

It is of immense value to build a good channel of communication with your audiences when things are going well, because to try and build it when you’re in need will be a nightmare. We recently had

WELL, I CAN CHANGE THE BILL IF YOU WANT: €10 FOR TIGHTENING THE SCREW, €9,990 FOR KNOWING WHICH SCREW TO TIGHTEN a meeting with a potential client who had a problem that could have been avoided had they worked on long-term marketing and communication efforts. However, since they never felt they needed any, they had no channel open when they needed it. The public had no idea what they stood for and had no respect for what they had to say – even though it was of great value to the community.

Return on investment Another thing I see all too often in my meetings, both as a representative of Switch and as a consultant, is that people seem to ignore the relationship between what you spend and what you get back in return.

The return on investment that two different services can give you will vary greatly based on who’s providing them: their level of quality, their experience, their expertise, their training, their attitude, their colleagues and more...

We regularly get requests from government departments that tell us the choice of who to work with will be based purely on the cost of the service rendered. How will this ever result in a good return on investment?

and to work only with marketing efforts that will give you a good return on investment than to spend a little less on work that will not serve your needs.

Measuring everything My final word of advice, and one which combines both of the above points, is to measure all your spend. Don’t put money into marketing efforts unless you know that you’re going to get something back. This is not something you do because some rule somewhere says you should work on your marketing. Measure what you get in return, ensure that you’re getting the best return on investment in every effort you make.

Going back to the engineer example earlier – is it better to choose your consultant based on a lower hourly rate or based on how likely they are to solve your issue? I do understand the need to observe procurement best practices – heck, I pay far too much in taxes to not care. However, I’d also like to see my tax money being spent judiciously.

Some things are going to be harder to measure than others – but feel free to challenge your provider to justify the choices made anyway. A good agency or consultant will always have the right reasons for the choices that they make for you, should always be ready to tell you not to spend money on items that will not be good value for money, and to point out what will be an excellent return on investment.

Don’t be that kind of company. Spend your money wisely. It’s better to wait a bit longer

Richard Muscat Azzopardi is the chief executive officer at Swtich.

Money / Issue 44 - 47

mara

Photography by Jamie Iain Genovese

On the weekend of 2016’s August the 19th, MARA¸ an original piece of theatre that sought to celebrate women through time by means of interactive sound design. In the production, audio plays an important part in the storytelling, where the sound designer takes on the role of a performer, composing and manipulating sound live whilst interacting with the actors. A multidisciplinary piece involving song, movement, poetry, dance, drama, elements of verbatim theatre and visual art.

This was the first theatrical production by the singing sisters Bettina and Philippa Cassar, following their debut album SEEKER SEEKER in 2015. MARA also collaborated with ArtsExcel and Jamie Iain Genovese, whose recent work was related on a thematic level to the project and was exhibited at the entrance of the venue.

The following images are excerpts from that exhibition, and a small selection of a still-ongoing project which the photographer Jamie Iain Genovese introduces and describes as such: “This small selection of portraits is dedicated to their subjects, to the women that are irrevocably a part of my life. I may never really know them, to see the world as they see it, and this is okay. On a lightless night, I can look up to the sky, and I can see the stars, using glass to magnify them many times over, I can see satellites gliding through the dark, giants and planets strolling throughout the seasons. But I will never be any of those things, sit where they sit, walk where they walk. I can only talk about them; and on a lightless night, be glad that they are there.

And this, too, is okay.”

“Then I beheld all the work of God, that a man cannot find out the work that is done under the sun: because though a man labour to seek it out, yet he shall not find it; yea further; though a wise man think to know it, yet shall he not be able to find it.”

DOMINA The girl with flowers in her hair. Met her at a wedding; she was wearing a flower crown, and I semi-bravely asked to take her picture again sometime.

She said yes.

CHRISTINA MARI

Finnish, very calm, cool and collected, somewhat mysterious, and has a killer flying fish tattoo.

She makes clothes, and often misses home.

An enigma unto her own.

I know most horse people love their horses, but she’s the first one I’ve ever actually known, and I only ever realised a few years after making her acquaintance.

She’ll one day goad me into riding the noble beasts.

LAURA

She would walk in and out of G.F. Abela Junior College, years ago, and was a student I shared no classes with.

She was altogether too cool, half-French and halfMaltese, always excellently dressed and somewhat bored.

DIANA With the world beneath her feet and the sun on her skin, altogether with and without troubles and joys. Or so I feel, she flies around the world, walks in and walks out. Always with new stories, and eager to tell them over a cappuccino.

EMMANUELLE Unbelievably honest person­—brutally so, especially after a glass of wine or two. The first time we met was at a legal office I was taking headshots for. The second time we met she made me a perfectly adequate vegetable lasagna. The wooden spoon may or may not have been used.

Interview FASHION

GET THE LOOK

Maison Margiela jacket

Money’s essential trends for this Autumn/Winter season.

Maison Margiela sweater James Perse t-shirt

THE DOWN JACKET It’s ideal for that tricky period between seasons when it’s not quite cold enough to justify wearing a coat, and it’s generally also thin enough to be layered underneath a coat on very chilly days.

Maison Margiela shoes Prada trousers

THE CHECKED FLANNEL SHIRT It first rose to prominence in America in the early 20th century, when it was a staple of hunters, cowboys and lumberjacks, and its connotations with the great outdoors and rugged, old-school masculinity have survived to this day. You might only be heading out to grab a soya latte from the local vegan café, but with a flannel shirt on your back, you feel as though you’re off to fell a tree.

Gitman Vintage shirt

APC Jeans Red Wing Shoes

Filson jacket Shinola leather briefcast

54 - Money / Issue 44

THE COAT

Caruso coat

A coat is perhaps your most crucial autumn purchase, so it pays to get it right. And when it comes to outerwear, there are few better names in which to place your trust than Caruso. It’s run by Mr Umberto Angeloni, the erstwhile CEO of Brioni, who sold his stake in the Milanese tailoring giant in 2007 and used the funds to purchase what was, back then, a third-party garment manufacturing company in Soragna, a small town a few miles from Parma. Under his stewardship, Caruso began producing its own range of softly structured suits and jackets, and is now one of Italy’s most respected menswear brands.

Boglioli sweater

Brunello Cucinelli trousers

Edward Green boots

THE BOOTS

Outerknown cotton twill shirt

If you’re planning to engage in the quintessential autumnal activity of kicking through leaves, you’ll need to invest in something a little sturdier and stain-proof.

Red Wing Shoes leather boots Polo Ralph Lauren t-shirt

THE CORDS

APC Jeans

APC sweater

Plush, napped fabrics such as corduroy and velvet are having a moment right now, their popularity buoyed by the support of high-profile Italian brands including Prada and Gucci. Look beyond the trend, though, and you’ll find smaller designers who have been trusting in the timeless appeal of these materials for years.

Margaret Howell trousers

Officine Generale shirt Spalwart sneakers

Money / Issue 44 - 55

Interview DESIGN

TOP OF THE NOTCH

Money’s pick from the world’s best designer and tech gear

SAMSUNG GALAXY S8 TechRadar Phones editor Gareth Beavis thinks the Samsung Galaxy S8 is the best phone on the market for a number of reasons, but primarily for its stunning display. Gareth says “it makes every other handset on the market look positively antiquated”. The handset smashed all our benchmarking tests, and it boasts an excellent camera and strong battery, plus that screen is in a league of its own.

TUDOR HERITAGE BLACK The iconic Tudor Heritage Black Bay, first launched in 2012, now comes in a steel and gold execution with, for the first time in the Black Bay family, a date function. The Black Bay S&G is powered by TUDOR calibre MT5612, featuring hour, minute, second and calendar functions. Its other notable features include a “weekend proof” 70-hour power reserve as well as an antimagnetic, high precision silicon balance spring. Exclusively available from Edwards, Lowell Co Ltd, T: +356 2138 4503, www.elcol.com

56 - Money / Issue 44

MOOV NOW It doesn’t have all the bells and whistles you would associate with a fitness tracker. It doesn’t have GPS tracking; it doesn’t even have a screen; but what it does have is a cheap price tag and six-month battery life. During those six months, you can track your steps, your sleep, your fitness, your running technique and a whole lot more.

This may be an unconventional fitness tracker, but it’s a great one.

ALL-BLACK LOUIS VUITTON TAMBOUR CHRONOGRAPH Tambour finds its latest expression in a chronograph model that joins a powerful trend towards all-black watches. The 46mm steel case features a PVD coating as well as a matte black dial and matte anthracite indexes. With a rubber-clad crown and matching (interchangeable) strap, even with its Luminovaflecked indices and hands, it’s on the noir side, and doesn’t neglect to pack an automatic ETA chronograph movement, complete with 42-hour power reserve.

SENNHEISER MOMENTUM WIRELESS If we had to pick the best headphones overall, then we’d go for the Sennheiser Momentum Wireless. They’re wireless, which makes them more convenient for portable use, and they’re noise-cancelling. They do all this without compromising on sound quality, which still lives up to the high standards that Sennheiser achieves.

DELL XPS 13

NEW IPAD

The XPS 13 manages the impressive task of fitting a 13.3-inch screen into an 11-inch frame. It’s thin, light, and managed a battery life of more than seven hours when running our video test. A serious champion.

According to our tech gurus, the best tablet on the market right now is the new iPad (2017), with its sharp 9.7-inch display, beautiful design, and A9 chip. While the new iPad (2017) isn’t doing anything revolutionary, it’s a solid update on an already five-star device.

Money / Issue 44 - 57

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

Interview LAST WORD

PRESCRIPTION FOR DISASTER The Bluesman shakes his head in disbelief over the prognosis for American politics. ime’s fun when you’re having flies, said the frog. Six months down the road and the buzzing of flies intensifies, attracted by the increasing amounts of a fly’s favourite substance in which to lay eggs. The Lord of the Flies stumbles on regardless. A pig’s head on a stake in the wilderness. Flies come and go and the odour permeates but the shambolic effort to govern will eventually prove disastrous.

T

I know it’s a strained metaphor but I can’t resist stretching and reversing it a little – one day the conch shell will be shattered and the spell will be broken. I won’t belabour the point but the book shows the restoration of order only when a British Naval officer arrives on the island. Savage behaviour exists within us, postulated author William Golding.

I personally do not quite buy that, but certainly once the checks and balances are removed there are those who would try to stretch the boundaries.

There has been much coverage these past days of a last ditch effort by Yertle the Turtle to bring to a conclusion his fixation of more than seven years to repeal the Affordable Care Act, known as Obamacare, for reasons that ranged from the pretense that it wasn’t working to claims that it was unpopular among the populace. It must be remembered that the stated mission of the GOP when Congress convened in 2009, was that they would obstruct any legislation put forward by President Obama. So the ACA, as passed, is not without flaws. It would have been a better approach by the Republicans – now that Obama is out of office and they therefore don’t need to fear that the credit would go to him – for them to work at refining it in a bipartisan effort and let the new guy bask in whatever glory might be there.

Instead, after seven years of failing to come up with a veto-proof bill, they suddenly found themselves in control and discovered that

58 - Money / Issue 44

‘Repeal and Replace’ had a nice alliterative ring to it but, gosh dang, the ‘replace’ bit is much harder to do. So much for Golden Boy’s boast that it would be done on day one.

and the repeal was killed. Yertle almost fell out of his shell, stunned.

Faced by vociferous constituents at every turn and meeting, and mindful of the midterm elections coming up in 2018, many Republicans had second thoughts about backing this venture. There were two attempts at presenting hastily and secretly written legislation which failed.

The underlying factor that made this defeat such a catastrophe is the fact that, egged on by billionaire backers, the GOP is set to reduce taxes on the top one per cent at the expense of the remaining 99 per cent (because an annual salary of millions is never enough), and to find the money to do so, government needs to spend less on such things as healthcare, environmental protection and other luxuries. (Not enough that insurance providers had decided to nudge premiums upwards because they felt the system was not providing enough profit.)

“Who knew healthcare could be so hard,”’ whined someone.

Eventually it was to hell with Replace, let’s just Repeal and maybe we’ll luck out on ‘Replace’ later. Accordingly another hastily written secret bill was produced by a handful of people over lunch. Although previously there had been a few from the GOP side who had professed voting with the Dems, some wavered but not the Senators from Alaska and Maine [the East /West extremities] so the VP was readied to come in and break a tie as happened the time before.

‘REPEAL AND REPLACE’ HAD A NICE ALLITERATIVE RING TO IT BUT, GOSH DANG, THE ‘REPLACE’ BIT IS MUCH HARDER TO DO As a backdrop, the moderate Senator from Arizona found himself fighting his own health issue when he was diagnosed with brain cancer but this former Vietnam War PoW flew back for the vote.

At around 1.30am, the former naval aviator walked up to the clerk, paused dramatically made the thumbs down sign and said ‘no’

Obamacare is still the law of the land.

The Houses are now on their Summer Break, bless ‘em, and won’t be back till September.

Before you know it, Christmas will be upon us and all thoughts will go to preparing for those elections. It is expected that the swing will go against the Republicans.

It cannot be underestimated how much money is thrown at politicians by lobbying groups and wealthy individuals with a deep interest in making sure they can go on lining their [or their corporations’] pockets by making sure their pet Senator or Congressman stays in power. Two brothers heavily invested in oil and petroleum threw a billion dollars at the general election and are even now preparing to invest big time in the 2018 mid-terms.

It does seem that selfishness and callousness have risen to seemingly dominate those of us who just want to live in some sort of peace and security but, to conclude the thought in the first paragraph, eventually balance will be restored.

No literature was harmed in the garnering of the above quotes.

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