INTERVIEW
Issue 19
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February 12, 2015
Distributed with Times of Malta
Only a fifth of consumer claims ended up at the Tribunal in 2014, and director general Joyce Borg believes that the figure can be brought down even lower through effective dialogue with all parties. see pages 8 and 9 >
NEWS The Notarial Council scrambled to work out all the permutations for the new Final Withholding Tax for property and, while it has suggestions on ways to improve it, it cautions that no more changes should be made this year. see page 5 >
Palumbo reports profit, nearly doubles turnover Vanessa Macdonald Palumbo Malta Shipyards has reported a profit before tax of €1.56 million for 2013, compared with €2.96 million the year before. In line with common practice, it exploited the good results of the year to write down €1.5 million in inventory, and its administrative expenses were almost three times as much, without which the profits would have slightly less than double 2012’s profit. The company now has €2.05 million in retained earnings but the directors did not recommend a dividend.
The results were filed with the Company Registrar at the beginning of the month. Managing director Antonio Palumbo was upbeat about another year of profits: “I did not come here to open a charity. After all these decades, the Maltese can finally take pride in the fact that there is someone who is actually paying the government taxes because the shipyard is making a profit.” This is the second year that the shipyards made a profit since Palumbo was given a 30year concession in 2010 (see table). During that time, the shipyards increased the full-time employee headcount from 78 to 150 (55 of them exclusively for the shipyard), a
far cry from the thousands employed just a few years before the privatisation. The wage bill – down to just €1.6 million – is an important, if controversial, part of the yards’ business model, maintaining flexibility through the use of subcontracted labour. Under the terms of the agreement, Palumbo was also obliged to invest €23.5 million in the first five years. As at December 2013, it had invested €17.8 million. The company will also pay a government fee for €70 million in 30 years plus €18 million for the asset purchase in 10 years. The accounts Continued on page 3
FEATURE World Aviation Group, a joint venture between Air Malta and Cassar Aviation Services, is diversifying to ensure that it can face whatever changes the future brings. see page 6 >
CASE STUDY GC Renting Malta managing director Paolo Dellamano says that more and more companies are realising the benefits of renting everything from computers to shop fittings. see page 12 >
e Business OBSERVER
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February 12, 2015
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NEWS
‘But 2015 has had an auspicious start...’ Continued from page 1 show that it has already paid €8 million as at 2013 towards the government fee and asset purchase. Mr Palumbo is upbeat about the prospects for the coming year, in spite of pressure on the price of oil which has resulted in oil companies dramatically cutting their spending – particularly on exploration, and many oil rigs being “mothballed”. “The market is very fluid at the moment. But we have enough enquiries and enough work. We have worked on over 1,000 ships since we took over, and hosted a handful of rigs in 2014, as well as working on a substantial number of boats offshore too. We might also be starting a project soon on a very large gas-carrying ship,” he said. “Personally I am very positive. It is not necessarily what we would have chosen as we had to face many unforeseen problems. This has all taken up energy which should have been spent on marketing and looking for new opportunities. But 2015 has had an auspicious start...” He is pragmatic about the price of oil, which more than halved since June but which is now climbing up again. “This is a market with periodic cycles. We should not make a drama out of it in either a positive or negative sense. We have to be proactive and venture into other areas that are picking up, until the sector recovers,” he said. “The price has fallen very quickly and could rise again just as quickly. If it stays this low for a whole year, perhaps it would be time to call it a ‘crisis’ but certainly not after just a few months.”
Feb-Dec 2010
2011
2012
2013
€6.36 million
€19.04 million
€20.25 million
€31.89 million
Profit (loss)
(€1.038 million)
(€1.54 million)
€2.96 million
€1.57 million
Tax (credit)
(€363,861)
(€534,005)
€993,119
€539,376
€13.4 million
€13 million
€11.5 million
€9.5 million
Turnover
Govt: outstanding
“We want to make a long-lasting contribution to the economy, and not just by paying tax, but by leaving a positive impact on the community” Bloomberg claims that hundreds of rigs will be scrapped as a result of the low cost of oil, but Mr Palumbo does not see that as an area that Malta will compete for. “This activity is being carried out successfully in the Far East and other Eastern European countries, hence it is more difficult for us to compete as we are operating in a region where the running costs are higher, labour rate is more expensive, the environmental obligations are nothing to
compare and we have to ship most of the resultant waste out of the country,” he said. However, he sees the government’s intention to dedicate Marsa Shipbuilding to oil and gas as being a step in the right direction. “I have lived – and still live – within a competitive market at an international level. I have nothing to fear from local competition. Quite the contrary, it will push us to improve; it stimulates me. “It will also put Malta on the map. I always give the example that in Rome, London or Naples, within a few hundred metres, you find a concentration of outlets relating to film or fashion. “They create their own dynamism. It will be the same with this: the more activity there is in Malta, the better for all of us,” he said. Palumbo’s yard looks cleaner and more organised with each passing year. At the entrance, floral wreaths were placed against the monument, laid there to commemorate the 20th anniversary of the Um el Faroud explosion, an important reminder to the
younger employees about occupational safety, he said. “I am still not satisfied. We have three objectives: quality; safety; and environment. These are fundamental to our success. We need to improve on all these aspects if we are to compete – especially in the Mediterranean. “We are still in a very weak position when compared with emerging countries. We have to update our management and procedures, to use our time more efficiently. “We are also trying to reduce our overheads. We finally, after considerable time, got the permits for a photovoltaic installation which will save us millions of euros – but it is has been almost halved in scope as the EU funds were less than expected. “One area where we have not made any headway is in the reintroduction of the apprenticeship scheme. We have reached out to the educational institutes – but unfortunately, without success so far. “We want to make a long-lasting contribution to the economy, and not just by paying tax, but by leaving a positive impact on the community.”
e Business OBSERVER
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February 12, 2015
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NEWS
Changes to property tax proposed... but not now The Notarial Council is hoping that the government will reconsider its decision to remove the option for property sellers to pay capital gains tax, at least in certain transactions. It has proposed concrete alternatives to the Ministry of Finance and the Inland Revenue Department. At this point, however, such changes should only be done after a thorough consultation is held with all the relevant stakeholders. The Notarial Council had been in regular contact with the Finance Ministry and the Inland Revenue Department (IRD) about an overhaul of the tax scheme on property, which has been tweaked a number of times since 2006. However, it was not informed that decisions had been taken and had been taken completely by surprise by the Budget announcement that would limit tax options to a final property transfer tax on the whole selling price as from January 1, 2015. The details given in the Budget speech were minimal and the council scrambled to get more information so that notaries could publish contracts of sale safe in the knowledge that the correct tax rate and regime were being applied. A number of meetings were held after the Budget with the Inland Revenue Department in an effort to understand the variants, exceptions and exemptions, among other things. Council president Clinton Bellizzi held up a detailed two-sided flow chart that the council drew up together with the director general of Inland Revenue to help its members decide what tax rate is applicable. A ‘frequently asked questions’ section was also put on to the IRD’s website (www.ird.gov.mt) and its own (www.notariesofmalta.org) covering all the reasonably foreseeable scenarios that could materialise following the coming into force of the new tax regime with all the possible variants and exceptions.
Dr Bellizzi described the notaries as being “an extension of the State” and made it clear that even though it was not consulted about the system announced, their duty was to accept the changes, understand the new system, assimilate the posible permutations and move on. “We had to make sure that we fully understood the system as we need to advise the vendors accordingly. If we get the tax wrong, then the IRD might go back to the vendor to collect the shortfall – and we could also ultimately be liable,” he said. The changes made in the Budget reduced the final withholding tax rate – but removed the capital gains option. All the statutory exemptions that were in place prior to 2015 were retained. “But the new system does not afford the possiblity for vendors to apply for an exemption from tax if selling at a loss or breaking even and they still have to pay the applicable rate of final withholding tax, that is, either five, eight or 10 per cent” he said. The new scheme has come under fire as the capital gains option worked by allowing the vendor to offset expenses for sale of property taking place within 12 years from acquisition. This system taxed the actual profit made on the sale and provided a solid incentive to get Vat receipts and deter tax evasion. However, Dr Bellizzi said that at this point, it would be unwise to simply suggest reverting to the old scheme without considering an alternative method of taxation in agreement with all the stakeholders. “Notaries are at the front line and ultimately take decisions every day about what tax rate to apply. We need certainty,” he said. “We have all voiced our concerns about the new scheme but suggesting a change in the system at this point would be unsettling for everyone involved.” He proposes that the government should sit down with all the stakeholders – not just real estate
“Notaries are at the front line and ultimately take decisions every day about what tax rate to apply”
agents and developers, but also accountants, notaries, the Kamra talPeriti and financial advisers. “It is very important that all the stakeholders’ views are considered. We can’t have one influential sector which imposes the situation that suits it best.” The old scheme had its share of problems and burdens. The capital gains system was based on the presentation of fiscal receipts to justify the expenses claimed, which posed an administrative burden on the IRD. Another administrative burden is the refunds that had to be paid on provisional tax collected on contract. “The system is set up in such a way that provisional capital gains
tax collected on contract is worked out on the property sale alone, but when the vendor – whether an individual or a company – comes to submit the income tax return for the year, the capital gain is calculated on the actual profit made. Therefore, the taxpayer may be entitled to a refund.” “However, this administrative burden could be lightened by resorting to independent third parties – like an accountant or auditor – to draw up the profit and loss on the sale of the property under their responsibility,” he said. Proposals along these lines had already been made by real estate veteran Frank Salt prior to the Budget, but they had not been taken up by the government.
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e Business OBSERVER
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FEATURE
World Aviation Group diversifying and expanding The World Aviation Group (WAG) is diversifying and expanding, ready to take on whatever role helps to grow the business. WAG was set up in 1989 as a joint venture between Air Malta and Cassar Aviation Services, originally as a general sales agent for various airlines in Malta. In 2006, it added a call centre, under the Centrecom brand, and grew rapidly, offering customer care and a year later, BPO Services was set up to offer back office assistance for revenue accounting. The recently appointed chief executive officer Nadia Pace is confident that the group has now built up sufficient momentum and growth. Ms Pace has worked for WAG as the business development manager since 2008, except for an 11-month period. She has seen the company grow to over 240 employees. The call centre offers 24/7 support for Air Malta, from reservations and ticketing to frequent flyer programmes and refunds. It also provides services to government entities such as the Inland Revenue Department, Transport Malta, Arms and the Employment and Training Corporation. More recently, it took over all the customer care support for Israeli gaming company Lotter, mostly on a B2B basis with the company’s agents but also with some direct customer support. The latest addition is Gumtree UK, part of eBay Classifieds’ group, for which it offers full customer support, including content moderation, live chat, phone and email support, and even fraud detection. “We now process over 3 million transactions a year and moderate over 4 million replies a year. It is always a steep learning curve when you take on a new client, but we do our utmost to come up to speed as soon as possible. First call resolution is more and more important. This is why we also firmly believe in providing feedback to the client on the issues being raised as this insight is the best way to improve customer care,” she explained.
WORLD AVIATION GROUP CEO NADIA PACE.
“Airlines find it very difficult to operate under present conditions in Libya so we have a major advantage being able to offer them a ready-made solution with our office still operating in Tripoli”
However, the client is not the only focus for the company: Ms Pace also believes that one of the group’s strengths is its team and she said the attrition rate – at around 20-25 per cent – was not as high as the industry’s. “The fact that we cover so many sectors makes it very interesting and challenging for our customer service team, and ensures career progression,” she said. The majority of the call centre team is Maltese but the need for languages like Hebrew and Russian means some foreigners are being taken on. “For the main European languages, the pool of multilingual Maltese is improving all the time,” she said. “It is one of our unique selling points, along with the fact that Malta is still cost-effective for nearshoring compared with Western Europe. And of course, we also have strong cultural ties with Europe which makes it easy for us to align with our clients’ business ethic.” Just as Centrecom has diversified its client base, so has BPO Services. This company offers very specific and skilled services – revenue accounting – which has to keep tabs on the revenue from tickets sold and complete the picture by keeping track of whether the
ticket has actually been used, what proportion of it is due to other airlines on that ticket’s route, as well as breaking the revenue down by flight, tax, fuel surcharge and also refunds. When it was set up in 2006, Air Malta was its main client but it now also services APG. The group has another unit – Aviation Online – which has taken over the original role of general sales agent (GSA), representing Air Berlin, Cathay Pacific, Etihad Airways, Brussels Airlines, Nikki, Aegean Airlines and Fiji Airways – the latter for the whole of Europe. “Even with online sales, the role of the GSA remains important as the market is too small to justify an office, but the airlines still require someone to handle sales and marketing, agent support and other roles,” Ms Pace said. “Our vision is to extend the services of Aviation Online to other countries. “We also have offices in Libya. Currently the Tripoli office is open but the Benghazi one is temporarily closed. “Airlines find it very difficult to operate under present conditions in Libya so we have a major advantage being able to offer them a ready-made solution with our office still operating in Tripoli.”
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e Business OBSERVER
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INTERVIEW
Consumers urged to do their bit to avoid being bitten Consumers who buy from dodgy traders or online sites are being warned that their rights cannot be enforced if the supplier cannot be tracked down. “The client does not insist on a receipt, engaging someone based only on the recommendation of friends. And often all the client has is a mobile phone number, which can easily be changed. So if things go wrong or they are dissatisfied in any way, there is no way to get redress,” the director general of the Consumer Affairs Directorate, Joyce Borg, said. Melanie Vella, a lawyer working with the directorate, said that there are vendors on sites like Maltapark or Facebook who have no company and no premises. “It is incredibly difficult to track them down if things go wrong – even more so if the vendor is not in the EU,” Dr Vella warned. The directorate receives complaints about various categories of products and services, with some clearly more prone to problems than others. The majority of claims submitted to the Consumer Claims Tribunal involve faulty white goods, most of which are still covered by warranty. “We also get a number of cases involving mobile phones and tablets bought online, from sites which do not provide any
information about the company itself or the mandatory right of withdrawal form,” Ms Borg said. “People also buy used cars without checking them in person, and without a warranty. This makes it very hard to verify whether a subsequent problem is due to normal wear and tear for a used car or due to a latent defect. “Home repairs and maintenance services are also fraught – but the lack of any contract makes it very hard for us to pin down what was actually agreed. We do encourage people to have clear
“e lack of any contract makes it very hard for us to pin down what was actually agreed”
contracts and to take photos where applicable. This has proved to be very effective for laundries, for example. “The problems with telecommunications companies are well known and there are complaints year in, year out. The marketing is too aggressive in some cases, and the customer care staff turnover is very high so they are often insufficiently trained. Although we have seen improvements, it is a problem,” Ms Borg admitted. Of course, it is not only the trader who could be at fault. Numerous frivolous complaints are rejected. There are also many cases where the consumer’s complaint cannot be substantiated, for example, because no proof of purchase has been retained, or when the warranty period has expired. The directorate forms part of the Malta Competition and Consumer Affairs Authority, headed by Marcel Pizzuto, who said that the resources were being strengthened. “We now have our own lawyers and we filled the post of a director which had been vacant for a long time. We also have an economist on board, which is very important when it comes to competition issues.” The biggest satisfaction for the directorate is that more and more
SENIOR CLERK DOROTHY FARRUGIA (LEFT) AND DIRECTOR-GENERAL JOYCE BORG BELIEVE THAT MEDIATION CAN PREVENT CONSUMER CLAIMS FROM ESCALATING TO THE TRIBUNAL. PHOTO: JASON BORG
consumer disputes are being sorted out satisfactorily without escalation, thanks to a proactive stance based on mediation. Out of the 1,361 cases registered in 2014 and the backlog of 528 cases, 639 (33 per cent) were settled through mediation. A further 622 were dropped, but this includes over 300 consumers affected by the Fantasy Tours bankruptcy, which effectively blocked any hope of settlement. The pending caseload has also been halved, and stood at just 280 at the beginning of this year.
Only 348 (18 per cent) went to the Consumer Claims Tribunal – although Ms Borg wants this number to fall even further, even though the majority of tribunal cases had satisfactory outcomes. “Sometimes the problem is not that the trader does not give a hoot but that he is in financial trouble – and cannot supply the goods already paid for, for example. “The approach is to find a solution, even if it means that the trader refunds the consumer in instalments...” Ms Borg said. “We believe that our mediation efforts
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INTERVIEW
or attempts to make contact by the directorate itself. Although the directorate was empowered to issue PWS some years ago, it has only actually been used since 2010. However, there is no doubt that the PWS is effective with traders scrambling to settle when they realise that the directorate means business. The PWS – which is published on the directorate’s website, in the media and in the in-house Għazla magazine – also raises consumer awareness, bringing forward many complaints that would otherwise never have come to light. The most notorious was that issued about Fantasy Tours, which exposed many loopholes in the system, Ms Borg said, which are now being closed. She stressed
are not only aimed at getting the consumer what they deserve but also explaining to the trader why the consumer’s rights matter and why a conciliatory attitude is so important in the long term. “Far too often, a complaint escalates into an argument and once they are at loggerheads, then neither side wants to back down. But Dorothy Farrugia, my senior clerk, works with both sides and her calm and pragmatic approach has enabled us to solve many disputes – saving the trouble and expense of going to court.” Once the Consumer Claims Tribunal makes its decision, if it is ignored, a warrant for seizure can be issued through a lawyer –
and although the €600 cost is half the normal one for such warrants – it still involves considerable paperwork to research all the banks where the trader may have accounts. Once there is a ruling on a case, the directorate follows up with the consumer to ensure that it has been respected by the trader. If not, then several attempts will be made to contact the trader. The last resort for the directorate is to issue a public warning statement (PWS), only done when the trader completely ignores the decisions of the tribunal
that preventing bad service – through awareness – is always preferable to dispute resolution. The proactive approach does not only cover dispute resolution but also monitoring bad service as the directorate believes that many consumers simply do not come
“We often encounter cases where goods are imported in all good faith by people who have simply not done their homework”
forward – even though it costs as little as €9 to file a claim, up to a maximum of €24. “If we had the resources we would be able to monitor social media much more extensively. We do what we can and we have intervened on two occasions when safety was involved, referring the case to our CE mark section,” Dr Vella said. “One of the problems with Facebook sites or radio shows is that the consumer complains vociferously but the complaint is not always justified. We have to listen to both sides before taking any decision. Things may seem clear cut at face value but when all the facts emerge – and we do scrutinise all the documentation involved on both sides – the picture could be quite different!” she warned.
“Having said that, Facebook sites like Are You Being Served are very important as they put a lot of pressure on traders to improve their customer care. We know of many companies that routinely monitor comments and who take action as soon as a problem is highlighted. It means that we do not need to get involved as often!” At the end of the day, it is all about a relationship between customer and trader based on respect. The directorate wants traders to be proud of their customer-centric approach, and for customers to seek out traders with a positive and helpful attitude. This is why it is encouraging outlets to display a “Trust Mark”: this is only given for a year at a time to companies with a clean sheet and is only renewed after inspections and so on. “I hope to be able to see them everywhere soon. The great majority of traders offer a very good service and even though anyone can encounter problems, the fact that these are resolved without the matter escalating is very important for consumers to appreciate,” Ms Borg said. Mr Pizzuto also issued an appeal to the public to come forward with complaints: “We do not have an army of people to monitor all the shops, all the service-providers. “Although we get reports on safety through a Europe-wide rapid alert system called Rapex, it is important that we find out about any problems as soon as possible.” He also invited traders and entrepreneurs to seek advice from the authority. “We often encounter cases where goods are imported in all good faith by people who have simply not done their homework. Importers get lured by bargain prices but they need to know the regulations with regards to all sorts of things such as labelling, standards and so on. As a result, the goods get stuck at the border. “A simple phone call could save them a lot of wasted time and money.”
e Business OBSERVER
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February 12, 2015
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e Business Observer is Malta’s leading business newspaper distributed with Times of Malta every fortnight. Editorial Vanessa Macdonald, Head of Content (Business), Times of Malta.
EDITORIAL
e benefits of the new Silk Road The time has come to put our relations with China into a more realistic and updated perspective. For the past few years, the holistic picture has been all too often overshadowed in public perception by one-off events (sometimes with knee-jerk reactions): Chinese visas being withdrawn after a few English language students escaped; Sai Mizzi’s role and how much she was paid for it; abusive working and living conditions for employees at Leisure Clothing. The public perception has not kept up with economic realities either. In 1985, China had a GDP of $307 billion. By 2013, it was $9.23 trillion. Adjusted for purchasing power, it was the world’s second largest economy in 2002 – the IMF believes that it is already the largest. Not that long ago Maltese manufacturing companies moved production to China because it was much cheaper, but now China gets its lowcost manufacturing from Vietnam. China is now involved in the increasingly sophisticated production of computers, pharmaceuticals, and automobiles. Its industries have grown 60-fold between 1985 and 2012, and its services 127-fold. It is the largest manufacturing economy in the world and the largest exporter of goods, the world’s fastest growing consumer market and the second largest importer of goods. Outbound tourists broke through the 100-million barrier for the first time in 2014, spending $164.8 billion. The number is expected to reach 200 million by 2020. Its clout as an investor is also extraordinary. HSBC Group ranks it as the third biggest global investor behind the US and Japan, growing at an average of 35 per cent between 2005 and 2012. It is estimated that it will invest $500 billion in other countries in the next five year. The rapid revolution has not been without missteps: the country has been accused of unfair trade practices, artificial currency levels, intellectual property theft, protectionism and local favouritism. But the issue is whether China is learning from its mistakes.
Ambassador to Malta Cai Jinbiao gave an interview to The Report last year in which he tackled many issues head on, albeit in ‘diplospeak’: “When China first opened up to the West in the 1970s, there was indeed a period of mutual accommodation due to the vast difference in ways of thinking cultures and traditions. But as time went by, China has become increasingly interwoven with the rest of the world. Nowadays, China has embraced many Western business ideas and vice versa.” Another myth debunked by an HSBC Group expert, Spencer Lake, at a conference in Malta last June was that Chinese want to ‘take over’: “Chinese investors are not only interested in purchasing majority stakes. Instead, Chinese investors are increasingly happy with minority stakes, because they appreciate that the Western management framework is indigenous and they do not want to undermine that.” The government signed a memorandum of understanding last summer, and recently finalised Shanghai Electric’s investment in Enemalta. It has also revived the Joint Commission on Trade and Economic Cooperation, which had not met since 2009, and which is evaluating potential areas of cooperation. These go well beyond Enemalta, looking at local opportunities, as well as using Malta as a stepping stone into North Africa. Discussions even touched on the possibility of Chinese financial institutions establishing branches here. Both sides also agreed that Malta had a role to play in the 21st Century Maritime Silk Road project being vigorously pursued by China. A country cannot and should not ignore issues like political freedom, human rights, working conditions, corruption or transparency. But selfrighteous preaching is not nearly as effective a tool as dialogue, trade and cultural exchanges. The Azerbaijani Ambassador recently wrote in The Business Observer to highlight the progress being made in his country. The Chinese one has sent out similar positive messages. Can we afford to get stuck in the past instead of looking ahead?
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BUSINESS OPINION
Greeks... but not bearing gifts Malcolm Bray The Greek melodrama continues. To understand the current situation, we must go back to the period between 1994 and 1998, when the EU countries wanting to adopt the euro had satisfy the Maastricht criteria. The Maastricht criteria were meant to be a robust assessment of the extent to which a country could safely abandon its exchange rate to adopt the single currency, effectively relinquishing an important policy tool. When the first assessment was made in 1998, Greece failed. That was the first warning sign that the Greek euro experience was going to be anything but smooth. In 2000, Greece asked for a re-evaluation, and managed to scrape by. However, it was simply not credible that an economy could achieve a turnaround within just two years. That was the first mistake made by European policymakers. The second warning sign came few years later when Greece was accused of falsifying its fiscal deficit, leading to the EU spokesperson to famously exclaim in 2004: “Greece would not have joined the euro with the figures we now have.” Greece should have been put under much closer surveillance at that time. Far from being committed to sound policy, the Greek economy continued to be sucked down a vortex of bad policymaking. The 2007 report prepared by the International Monetary Fund
(IMF), stated: “Over the longer term, a persistent loss of competitiveness raises the prospect of a prolonged period of slow growth. Averting this risk requires improving cost competitiveness through wage moderation, an environment that encourages product upgrading, and a broadened effort to reform product and labour markets.” The IMF experts had correctly identified a root problem: high wage increases which were “relatively large and often exceeded productivity growth”. Economic theory suggests that the currency of a country can exert strong discipline on wage growth. Excessive wage growth leads to loss of competitiveness, which is neutralised through a constantly depreciating exchange rate. Hence, to preserve the exchange rate, economic agents would be cautious with wage claims. The problem in Greece was that this channel was no longer operative with the adoption of the euro, since the euro exchange rate is influenced by the general economic conditions in the eurozone and not by the specificities of a single small country. In short, anyone with a basic economic knowledge knew that the conditions were there for a perfect storm and the information was publicly available for anyone to analyse. Investors ignored the warning signs, as the risk-return combination appeared attractive. But the financial markets suddenly realised that Greece had reached the point of no return. International liquidity dried up sud-
A GREEK FLAG FLUTTERS NEXT TO A STATUE OF ANCIENT GODDESS ATHENA IN CENTRAL ATHENS. PHOTO: YANNIS BEHRAKIS/REUTERS
“Since 2010, eurozone member states and the IMF have been providing financial support” denly, leaving the Greek government unable to fund itself. At that point, the European economy was in disarray, and the financial markets clouded with uncertainty. The short-term solution was to offer assistance to Greece – not to be confused with the long standing assistance it receives in the form of EU funds. Since 2010, eurozone member states and the IMF have been pro-
viding financial support. In 2012, further assistance was offered in conjunction with ‘private sector involvement’, a euphemism which meant private sector investors experienced a cut in the value of their Greek bond holdings. Recent news suggests Greece wants to renegotiate further which, despite the huge marketing drive, in practice implies that lenders are being asked to make further sacrifices. In particular, the idea of growth-indexed bonds means that the risk of lower returns (in the eventuality that GDP growth is low) is passed on to the lenders. So the Maltese government has borrowed money at a certain rate in order to fund the loan to Greece, but the rate at which Greece will repay this loan is determined by Greece itself. Other talks of extending the repayment period likewise entail a cost to the lenders in the form of a decline in the net present value of the bond holding.
The situation has become tragicomic: a tieless prime minister feeling strong enough to boast that ‘you either do as I say or else you suffer’. But providing further breathing space at this point is tantamount to a gambler who lost but who wants to play again to recover his money. We must also not underestimate the damaging effect of moral hazard: if a country is allowed to twist the rules in its favour for the umpteenth time, it would not be possible to stop other countries from doing the same in future. Joining the EU and the eurozone is an act of belief, based on mutual respect and obedience of the common rules. Anything else would undermine this project. The countries which blame Germany for their current woes are completely misguided. Germany’s success is the result of sound policy making, not luck. In the end Grexit must not be ruled out.
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e Business OBSERVER
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CASE STUDY
Keeping cash flow alive: the case for renting Have you ever been to the Malta Aquarium? Outside, there is an LED screen showing clips about the underwater world. As you go in, the sound system guides you around, and interactive tablets give information about the fish and mammals in the tanks. Other
tablets are used by the waiters in the cafeteria to take orders – and then there is also the kitchen equipment itself. What do all of these things have in common? They were all rented from GC Renting Malta Ltd, enabling the aquarium to invest its capital in the
elaborate displays, rather than on equipment which would also weigh down its balance sheet. GC Renting Malta was set up two years ago to operate the Grenke franchise. The Grenke Group was set up in 1978 in Germany, and has bought over €1.3 billion worth of
equipment in 2014 alone, through its presence in 29 countries. GC Renting’s managing director, Paolo Dellamano, was in Malta a decade ago on holiday and, as so many do, fell in love with the island. The long-term Grenke in Italy employee eventually found
the perfect reason to return: he could see that the island’s service economy was thriving and the Grenke model would fit in perfectly. Mr Dellamano invested in GC Renting, along with the Grenke Group, setting up offices in
e Business OBSERVER
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CASE STUDY
Tagliaferro Centre in Sliema, and started to offer companies the opportunity to rent their equipment, whether start-ups wanting an all new set-up, established companies wanting to refurbish, or growing companies wanting to expand. The model is very simple: the companies determine what they want and source the products. GC Renting then pays the reseller for the products – in full, within 24 hours – and rents the equipment to the client for a minimum of 15 months and a maximum of 60 months, “because by then the product is probably due for upgrade anyway”, Mr Dellamano said. The model has obvious advantages for the client, who saves on the upfront capital expenditure, while still benefiting from service and maintenance agreements – and even the option of upgrading the equipment before the end of the rental term. The ‘cash’ payment made by GC Renting means they can often negotiate a good discount from the reseller.
“With the number of clients growing constantly, GC Renting is mulling the idea of specific packages for particular equipment” The quarterly rental instalments are also considered to be a ‘cost’ in accounting terms, and can lead to tax advantages. The company is under no obligation to purchase the equipment at the end of the contract, in which case GC Renting can, when appropriate, use its international channels to find it a suitable second home, rather than just dumping it. For GC Renting, the trick is to balance speed and service with risk – after all, it is basically shelling out up to €340,000. To ensure a low delinquency rate, it has a robust due diligence system, carrying out credit checks on the
applicant. It also relies on relationships and networking, which is a given reality in Malta. “Malta is very low risk. This is also part of your business culture,” he said. The company is very proud of its response record, which is all based on speed. “We understand that once companies have gone through the whole process of identifying their needs and going through the procurement process, they are anxious to get going as soon as possible. This is why we pride ourselves on being able to give a reply on equipment of up to €50,000 in just 20 minutes, and of over €50,000 in a few hours, certainly no more than 24 hours,” regional sales manager Massimo Pappalardo explained.
Start-ups are perhaps harder to assess – but then the value of the equipment is also usually much lower, so GC Renting does as much as it can within its comfort zone. “The Grenke franchises overseas get hundreds of enquiries from start-ups that no one has ever heard of before. Here it is much easier as the people behind them often have a track record. And many start-ups represent or have a link with overseas companies so we can tap into the Grenke Group’s experience,” Mr Dellamano said. The rental model differs from a bank loan in that the client does not need to provide any collateral – the equipment itself remains the property of GC Renting. And the negotiated interest rest is very competitive when compared to that offered by a bank. GC Renting is constantly expanding the list of resellers in its client portfolio and has moved beyond IT into more and more sectors, from medical equipment for St James Hospital to kitchen equipment for Michael’s Restaurant in Valletta, from shop fittings and POS equipment for fashion retailer List Roma to IT systems for the Radisson Blu hotels. Some clients – like Alberta and Vivendo Group – are both resellers and clients. Moreover, other big projects are financed for Vassallo Group and AX Holdings Ltd. With the number of clients growing constantly, GC Renting is mulling the idea of specific packages for particular equipment. “We have in mind a print plan package for photocopiers and printers, against one easy monthly rental for a set number of copies or prints,” Mr Dellamano said. “Ten years ago, I had only a vague idea of how it would work out. Now, after just two years, we are already thinking about expanding. My instinct about Malta was right,” Mr Dellamano laughed. www.grenke.com.mt
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e Business OBSERVER
| February 12, 2015
BUSINESS UPDATES
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e cost of non-compliance Any organisation, be it large or micro, has a legal obligation to know what data is being held on its system and to safeguard it. Organisations are also obliged to limit access, monitor who has access and secure data from both internal and external threats. Finding the right solution to protect your data can be a very challenging task. TIM Ltd has been partnering with McAfee Security for the past sixteen years to deliver I.T. Security solutions to enterprises so as to safeguarding critical data and help ensure regulatory compliance. McAfee Data Protection solutions offer encryption options including enterprise-grade drive encryption or management of native encryption for Apple FileVault and Microsoft BitLocker management. Available individually or in suites, McAfee Complete Data Protection Suites and McAfee Data Loss Prevention solutions provide multi-layered protection for your data regardless of where it resides — on the network, in the cloud, or at the endpoint. As an integral part of the McAfee Security Connected framework, McAfee Data Protection solutions are fully integrated with McAfee ePolicy Orchestrator (McAfee ePO) software, which unifies and simplifies data security management for a wide range of McAfee enterprise security solutions. Confidently prevent data loss, stay ahead of threats, and manage data protection efficiently and effectively. For more information you can contact TIM Ltd on info@tim-ltd.com or call on 2144 8820/9942 3711.
iMovo and Microsoft seminar to address customer relationship management in financial services The financial services industry is undergoing a period of huge change, driven not only by the fallout of the 2008 economic and financial crisis, but by technological and cultural shifts including social and mobile technologies, changing customer expectations, and the cloud. In this challenging economic environment, many financial services companies are striving to differentiate themselves from the competition. However, price, products and distribution models can often be imitated by competitors. Many companies are finding that the best way to attract and retain customers is to deliver an outstanding customer experience. iMovo, in collaboration with Microsoft, is organising a half-day seminar to address how Microsoft Dynamics customer relationship management (CRM) can help professionals in the financial services industry to develop meaningful and enduring relationships with their customers.
INES VLAHOVIĆ, CRM SALES LEAD AT MICROSOFT, AND PIERRE MALLIA, MANAGING DIRECTOR AT IMOVO, TWO OF THE SPEAKERS WHO WILL BE ADDRESSING THE EVENT.
The seminar will be held on February 18, between 8.30am and 12.30pm at the Microsoft Innovation Centre, Skyparks, Luqa. Aimed at executives and business leaders working in financial services, the event will be addressed by senior personnel from Microsoft Corp as well as iMovo’s CRM services unit, who will cover practical
scenarios of best CRM practices in the industry. The event is free of charge. Due to limited seating, attendance is subject to confirmation. Successful registration will be confirmed by e-mail. For more details and to register please visit http://imovo.com. mt/events/
Strand Electronics introduces paperless software solutions for improved document workflow The fact is, no matter how well organised you think your company is, invoices and other important office documents often arrive on paper or in formats that are difficult to integrate into your workflow. Converting, indexing and filing the documents in the correct target applications takes up a lot of time and money. Automating this process effectively streamlines your office workflow, reducing operating costs and significantly increasing productivity. NSi’s fast and efficient document capture software, AutoStore, releases your employees from many of the burdens of administration, leaving them free to do what they do best.
Making AutoStore work for you
AutoStore increases efficiency in all departments, businesses and organisations that need to systematically deal with business documentation.
AutoStore utilises your existing infrastructure and captures information from your Kyocera multifunction peripherals (MFPs), e-mails, fax servers, shared/public folders, FTP sites, Microsoft Office applications, PC desktops, XML data streams and other sources. The captured information is then processed based on the workflow configuration. Scanned images are enhanced, forms are converted into usable electronic information, barcodes are read, etc. Once processing is complete the information is distributed to any number of locations. It can be faxed, e-mailed, stored in a document management system (DMS), and sent to FTP sites, secure folders and other destinations simultaneously. It sounds complicated, but all the user needs to do is log in and press a button. That’s it. The workflow happens immediately, ensuring your information goes where you want it to go quickly and accurately every time.