The Business Observer Newspaper 16th July by Content House

INTERVIEW

Issue 30

July 16, 2015

Distributed with Times of Malta PHOTO: MATTHEW MIRABELLI

Chamber president Anton Borg believes more needs to be done to improve Malta’s ranking for ease of doing business – and quickly. see pages 10 and 11 >

NEWS Malta Industrial Parks is giving its factory tenants the option to install PV panels on their roofs – and to keep any revenue generated. see page 3 >

ird pillar pension beneﬁts to be extended to insurances Vanessa Macdonald The tax benefits for third pillar pensions are to be extended to certain insurance products, in a bid to get providers to come forward. The framework for third pillar pensions was announced in last November’s Budget but so far no products have been launched. The tax credit was €150 a year, which was seen by a number of providers as being insufficient to motivate non-savers to change their behaviour. Many felt that the only take-up of third pillar pension products would therefore come from existing clients, who would merely switch from one product to another to get the fiscal benefits. The latest development means that potential providers will not

have to invest as heavily in new products but would be able to incorporate the benefits into existing ones, while their clients would not have to ‘move’ from one product class to another. The Finance Ministry said that, from a regulatory point of view, both pension fund schemes and insurance products are well regulated under the Malta Financial Services Authority’s legislation, “hence the investor’s interest is safeguarded”. “The legislation has a few features which third pillar pensions would need to follow for the schemes to be eligible for the tax credit,” it added. The main eligibility criterion is that payouts will not be made before the beneficiary is 50 and cannot start if the beneficiary is over 70 (or any other age specified in the rules).

The ministry said that discussions have been held with both the regulatory bodies and the stakeholders to make sure that the necessary amendments to “fine tune the legal notice and MFSA regulations” could be made to “solve the issue once and for all”.

“e latest development means that potential providers will not have to invest as heavily in new products”

“Soon, we hope that there will be full agreement by all the stakeholders and that the amendments will be made so that third pillar schemes are launched by the financial service providers,” it said. It also pointed out that the tax credit had to be seen in the context of a pension scheme as an annual investment spread over a number of years. “A typical time span for such a pension plan is at least 25 years. Even if one were to assume that over the years the tax credit will remain at the level of €150 per annum per individual, over the 25-year span, a couple would have saved €7,500 in tax credits “Over the same period, the couple would have invested €50,000 in the pension fund,” it explained.

NEWS The lead partnerin the planned Sa Maison marina is already considering further investment in the yachting sector. see page 5 >

CASE STUDY HSBC Bank Malta has a number of tools to offer customers seeking to expand their trade, especially with China. see pages 12 and 13 >

e Business OBSERVER

July 16, 2015

NEWS

Maltco unaﬀected by Greek worries

Factory tenants given photovoltaic option Malta Industrial Parks has launched a scheme enabling factory tenants to use the roof for the installation of PV systems – and to retain the revenue from the electricity generated. A year ago, MIP had issued an expression of interest for the installation of the panels on some 155 factory roofs but the project proved to be too complex for various reasons. However, MIP decided to drive the project forward by breaking it down into individual premises, leaving it up to each tenant to take up the idea, even when the air space was not covered by the lease agreement. The current framework gives first preference to the tenant working within the premises underlying the roof. However, if they are not interested, the roof can be made available to other MIP tenants wishing to invest in the systems or to third parties who are not MIP tenants, in this order of preference.

MIP chairman Tony Zahra said that all costs related to the installation of PV systems were the responsibility of the owner of the system – but they also get to keep all the revenue generated. “Having said that, we do not exclude agreements whereby tenants can come to an arrangement with suppliers or financiers of PV systems, with the capital cost to be

“MIP had issued an expression of interest for the installation of PV panels on some 155 factory roofs”

met by the supplier who would then receive revenue from the generation of electricity,” he said. The terms and conditions for the use of the roofs depend on the type of contract of lease/letting agreement each individual tenant has with MIP. Mr Zahra pointed out that there were many types of lease/letting agreements made over 40 odd years, and MIP was bound to honour all the agreements according to their terms. “It is amazing how many different situations exist, some of which include technical as well as logistical challenges. However MIP is committed to move forward with this initiative, bearing in mind that MIP has also the added responsibility of looking after the common good of the industrial estate as well as the country’s best interest. “MIP’s policy is to be as tenant friendly as possible always bearing in mind that MIP has to look after the common good.”

In spite of the upheavals in Greece, Intralot, the majority shareholder of Maltco Lotteries Ltd, will continue to be in a position to service all its business obligations without any interruption – including Maltco, a company spokesman confirmed. “These obligations include our customers, state authorities, employees, suppliers and investors,” she said. Intralot maintains a platform of electronic banking hosted by firstclass financial institutions in London, effectively ring-fencing its financial transactions from potential disruptions in banking operations in Greece. “Intralot Group cash is held in deposit accounts outside of Greece, with major and robust international banks, and a specific amount is kept in Greece in order to support the necessary working capital requirements of the local operation,” she confirmed. She also stressed that the contribution of Greek business to the group’s consolidated turnover in 2014 was less than three per cent and subsequently dropped to less than two per cent in the first quarter of 2015. “This highlights the very small exposure of our group to any commercial activities from Greece and therefore its ability to

INTRALOT MAINTAINS A PLATFORM OF ELECTRONIC BANKING HOSTED BY FIRST-CLASS FINANCIAL INSTITUTIONS IN LONDON.

continue successfully servicing its global operations without any disruption,” she said. “Our services in Greece are primarily new product research and development, and group management. We have in place the appropriate business continuity planning to ensure the uninterrupted operation of our business functions in Greece and abroad.” Intralot has seen its losses grow from €4.6 million in 2013 to €49.5 million in 2014, and its accumulated debt by Q1 in 2015 was €393 million. The spokesman pointed out that revenues reached €1.85 billion in 2014, with positive cash flows and sufficient cash to finance its operations for the long term. At the end of March 2015 the consolidated cash resources of the group exceeded €388 million. “The reported loss was an accounting loss mainly by noncash items and one-off items. Group revenues grew by 20 per cent in 2014 and 12 per cent in the first quarter of 2015. “Intralot has one of the lowest net debt to Ebitda ratios of the international gaming sector of 2.2 times; Intralot is a healthy and sustainable company and we invest to further expand our product portfolio,” she concluded.

e Business OBSERVER

July 16, 2015

NEWS

Marina bidders planning further investment

ARTIST’S IMPRESSION OF THE NEW MARINA AT SA MAISON

The successful bidders for the marina at Sa Maison are already planning further investment in a service area for yachts and service berths for superyachts. An area at Sa Maison was offered to bidders by Transport Malta for a marina and although there were 28 entities that collected the relevant documentation, only five bids were submitted by the October 2014 deadline. It was subsequently awarded to the Marina di Valletta consortium, whose majority shareholder, with 50.4 per cent of the shares, is the giant Azimut/Benetti Group through its subsidiary Marina di Varazze, with the remainder held by various other companies coordinated by their agents in Malta since 2006, Esprit Yachting. This is not the first time that the group has tried to invest in Malta: it had made an unsuccessful €12 million bid for the Manoel Island Yacht Yard. In 2012, its owner Paolo Vitelli said the group would be willing to invest in the island with a marina and refit operation which at the time was estimated at circa €22m. He is now going to get at least a part of that – although the contract

for Sa Maison has not yet been signed and the concession fee and annual rental have not yet been made public. The Marina di Valletta – its name will tap into the capital city’s internationally-recognised brand – will be backed by the expertise of the group, which has four other marinas that the group built and now operates in Italy and Russia, Esprit Yachting managing director Niki Travers said. “It is a strategic position for them as they also have yards in various facilities in the north of Italy, Brazil and Turkey. But it really makes sense for them to have a base here. “Having such a well-known shareholder involved is crucial as it means immediate international exposure for us. Malta will feature as one of the group’s network of marinas, visible through its 138 offices in 69 countries, its media presence as a leading superyacht builder and its boat and trade show presence.” The 274-berth marina will require considerable investment to ensure all-weather protection. A so-called spending beach will be installed along the Pieta’ waterfront to absorb reflected waves,

while a 120m-long floating breakwater will arch across the entrance to the marina. “Don’t be fooled! It may be called floating but it is made of 2,500 tons of concrete, in 12 sections. It is 6m wide and you can drive a truck on it,” consortium chairman Pierre Travers added. In spite of the heavy capital expenditure and income based mostly on annual berthing fees, Niki Travers said that the business should break even after 10 years – well before the 25-year concession runs out.The marina will accommodate boats up to 22m but the breakwater itself will be able to accommodate a few visiting superyachts simultaneously. Around 90 per cent of the marina will be dedicated to permanent berths, which Niki Travers believes will only

ease the current demand for the next three to five years. “This is the first new all-weather marina for many years so there was a lot of pent-up demand from local boaters. And we are convinced that its proximity to Valletta will make it popular with visiting yachts,” he said. The marina will have several bonuses for its users. It will have 110 parking spaces – the highest ratio to berths of any marina (apart from the fact that they will be exclusively for marina users). It will have the amenities one would expect – like a capitanerie with chandlery, showers and a cafe – but also professional berthing assistance, cleaning services, a fuel facility and the first blackwater extraction service in Malta. The marina is expected to be fully operational within three

“is is the ﬁrst new all-weather marina for many years so there was a lot of pent-up demand from local boaters”

years. The Gozo Channel operations will be relocated to Marsa, meaning that apart from the AFM maritime base, Marsamxett will now be dedicated entirely to leisure maritime activities. In spite of the fact that marina will pay its own way, there is the potential for more value-added from charter, servicing and yacht management services offered by Esprit Yachting and its sister company, Strand Marine. “It is not easy to find appropriate land as you cannot have yachting activity in close proximity to industrial activities like oil and gas maintenance. For example, there are times when the Malta Superyacht Services had to halt operations because of an overspray from grit blasting from the dock across the creek when the winds were blowing that way… There have been a number of missed opportunities for this activity in Malta,” Pierre Travers lamented. “But things are coming together now and the future is looking bright. We believe that the group will make more investments within five years – and we would also want to move into superyacht berthing, refit and repair at some point.”

e Business OBSERVER |

July 16, 2015

NEWS

Switzerland stands to gain from UK tax changes Switzerland lies in “pole position” to gain from changes to the UK tax system which could encourage high net worth individuals living there to consider moving, according to a leading tax expert, John Huber. However, Malta should be doing more to attract a share of them, he said. “Chancellor George Osborne stated in last week’s summer Budget that persons born of British parents residing in the UK or those that have been residents in the UK for more than 15 of the last 20 years shall lose their permanent non-domicile status – which effectively means that they shall start to be taxed on their worldwide income. “Whether that shall lead to an exodus of high or ultra high net worth individuals from the UK especially London is still to be seen,” he said. “I believe that Switzerland would be in pole position to attract such individuals. However, Malta would indeed do well to attract a number as residents. They have always proven to be highly beneficial to our economy. “I believe that our present residence programmes cater well for such persons. However, having the right legislation in place is not anywhere close enough to attract theses individuals. The whole set-up for residence must be akin to that of the

Individual Investor Programme,” he cautioned. Bethell Codrington, the global head for international pensions at the TMF Group, added that returning UK domiciles would no longer receive favourable treatment in relation to any offshore trusts which they may have settled while they were non-UK domiciled and not resident in the UK. “They will be subject to UK income tax, capital gains tax and inheritance tax in relation to

offshore trusts in the same way as any other UK resident and UK domiciled individual on their return to the UK,” he explained. Mr Codrington was convinced that there would be an increase in individuals that would reconsider their options once the new regime came into force in April 2017. “They will be looking at whether remaining in UK over 15 years is in their best interest financially and whether they should be moving to Malta and taking advantage of the

various programmes on offer – which vary from global residence, individual investor, retirement and permanent residence – all of which look enticing. “It is not just the non-domiciles who may look at moving to Malta, but also those affected by the new swinging taxes on dividend income. “For those relying on income from investment portfolios, if the portfolio is over £140,000, their tax bill is due to increase substantially,” he said. Chris Casapinta, the country executive for Alter Domus Malta, also believes that Malta could be an option for the high net worth individuals, many of whom have already started to look at alternative locations. “This being said there are a number of challenges in the current environment... There is a significant drive for the tax authorities around Europe to collect as many taxes as possible. “High profile individuals will definitely be closely looked at for possible sources of tax revenue. So in general the appetite for tax planning could be very much reduced in the coming years to come, resulting in less business moving to our shores,” he warned. Identify Malta declined to comment.

Card fraud up by 8 per cent The total value of fraudulent transactions conducted using cards issued within SEPA and acquired worldwide amounted to €1.44 billion in 2013, which represented an increase of eight per cent from 2012. As a share of the total value of transactions, fraud rose by 0.001 percentage point to 0.039 per cent in 2013, up from 0.038 per cent in 2012, a report issued yesterday by the European Central Bank reported. Card fraud had reached a fiveyear low in absolute terms in 2011 and the level reported in 2013 is the highest in the previous five years. However, in relative terms, i.e. as a share of total transactions, fraud is still below the level observed in 2009. In 2013, 66 per cent of the value of fraud resulted from card-notpresent (CNP) payments, i.e. payments via the internet, post or telephone, 20 per cent from transactions at point-of-sale (POS) terminals and 14 per cent from transactions at automated teller machines (ATMs). With €958 million in fraud losses in 2013, CNP fraud was not only the largest category of fraud in absolute value but, unlike ATM and

POS fraud, also the only one recording an increase compared with the previous year, with growth of 20.6 per cent from 2012. The largest drop in the level of fraud was experienced by card fraud committed at ATMs, with 13.7 per cent less fraud in 2013 than in 2012, the first time in four years that ATM fraud fell, while fraud committed at POS terminals went down by 7.9 per cent. Counterfeit fraud accounted for 45 per cent of the value of fraud at ATMs and POS terminals, while fraud using lost or stolen cards made up 43 per cent.

“A wider usage of geo-blocking, as well as increased physical security measures at the terminal (e.g. lids to protect PIN entry, skimming device detectors, etc) and the deactivation of the option to fall back to magstripe usage for cards, might also have contributed to this reduction. “While ATM and POS fraud may diminish further as more countries outside SEPA migrate to EMV (Europay, MasterCard and Visa) standards, CNP fraud is likely to grow further unless appropriate mitigation measures are adopted, such as those required by the European Banking Authority and Eurosystem’s guidelines,” the report said.

■ The number of cards per

inhabitant ranged from 0.7 in Romania to 3.73 in Luxembourg (Malta: 1.9). ■ The number of payments made per year per inhabitant ranged from 21 in Romania to 256 in Sweden (Malta: 77). ■ The fraud-related share of the transaction value ranged from 0.004 per cent for cards issued in Hungary to 0.07 per cent for cards issued in France (Malta: 0.05%)

e Business OBSERVER |

July 16, 2015

INDUSTRY FOCUS

Watching events unfold before us The meltdown in the Chinese stock market and the persistent uncertainty over Greece do not affect the local stock market directly – but that does not mean the volatility does not matter. “Neither of these situations has, or is, affecting the local market directly, however, as we have seen in the recent financial crisis, any widespread and sustained financial turmoil does have an effect on investor sentiment, whether directly participating in a particular market or not,” the CEO of the Malta Stock Exchange, Eileen Muscat, said. “China is a huge economic powerhouse and, therefore, the recent considerable volatility seen in its markets, which has seen share values plummet, has been followed with more than a little interest. This downward spiral appears to have been contained to these markets which are now regaining ground. “What is happening in Greece is very complex and as we have seen during the last few days, is far from over, and potentially there may be many more twists and turns before a definite outcome emerges,” she warned, saying it was always important for investors to make

decisions based on their particular needs and the risks they are prepared to take in the light of information available, with, the help, as may be necessary, of their investment advisers. With bank interest rates still at record lows, bank products are also at a disadvantage. APS private clients manager Kenneth Genovese said that a one-year fixed deposit yields around one per cent, “providing a real challenge for people relying on bank interest to supplement their other income”. However, the quantitative easing set in motion last March created various opportunities for investments, albeit with a number of risks. “An ideal medium for capitalising on this situation and reducing investment risk, is investing through a fund or collective investment scheme. A fund offers clients the opportunity to access capital markets with relatively small amounts of money. The advantages in investing in a fund are the choice of risk, cost effectiveness, professional management, multiple points of entry and diversification. Notwithstanding these advantages, funds are not risk free, and one should consult an adviser

before investing to ensure that the chosen fund is line with his/her investment objectives,” he said. With one financial crisis seemingly following on the heels of another, it is perhaps no surprise that investors should consider other asset classes. And the sale of a Henry Graves Supercomplication timepiece, made by luxury watchmaker Patek Philippe in 1933, for a world record sum of $24.4 million last year, has not gone unnoticed. The Patek Philippe agent in Malta, Edwards Lowell, has seen a

noticeable increase in interest in watches as an investment, especially when it comes to top brands like Rolex and Patek Philippe. Managing director Malcolm Lowell said these two brands were by far the most interesting for investors, although a new line they now represent, Lange and Sohn, is also making waves. “When Christies and Sotheby’s have watch auctions, they often dedicate an entire auction to just Patek or Rolex, putting all the other brands together on another

day,” he said. The top brands do not churn out these precision items for the mass market, meaning that there is always going to be more demand than supply. In fact, new models are sometimes as sought after as old ones. “Many people buy watches not because they want to wear them but purely as an investment; the most sought-after models could easily double in value as soon as they are released. “We are lucky to get an allocation of models!” he smiled.

e Business OBSERVER

July 16, 2015

OPINION

Challenging the composition of the Industrial Tribunal

Joe Farrugia Two recent decisions by the Madam Justice Anna Felice have cast doubts on whether the composition of the Industrial Tribunal is constitutional. The decisions are related to cases involving the General Workers’ Union v the Attorney General, on Industrial Tribunal cases which the union has against Enemalta and Josephine Attard Sultana (who was previously a section secretary at the GWU). The decisions address a conflict between article 39(2) of the Constitution and articles 73(5) (b) and (c) and 80(3) of the Employment and Industrial Relations Act (EIRA). On the one hand, the EIRA states that, when there is a case involving entities that are owned by government, or else in which government has a controlling interest, one of the members of the Industrial Tribunal has to represent government interests and will be appointed ad hoc by the minister. On the other, the Maltese Constitution stipulates that any court or judicial authority has to be independent and impartial. Madam Justice Felice also referred to articles in the European Con-

vention to support her decision that the Industrial Tribunal, as currently constituted, does not respect the European Convention. The decisions also mentioned the issue of the security of tenure of chairpersons, as these can be removed by government at the minister’s discretion. This places undue pressure and influence on the chairpersons. Another point raised refers to article 80(1) of the EIRA which states that in any sentence, or decision or advice, the Industrial Tribunal has to take into consideration government’s development plans and economic policies. This also questions the impartiality of the tribunal. Madam Justice Felice also mentioned that the practice whereby the tribunal can seek external advice from third parties also jeopardises the impartiality of the tribunal.

The court concluded that the current constitution and composition of the Industrial Tribunal as defined in the EIRA does not respect the Maltese constitution and the European Convention on Fundamental Human Rights and Liberties. These decisions can have very serious repercussions on current cases and also past ones. The Industrial Tribunal has been operating since 1975 and the MGR’s decision, if upheld by the appeal, may well challenge the validity of the decisions taken since the tribunal was founded. The decisions are being appealed by the Attorney General. MEA is carefully following these developments and has asked for a meeting at the Employment Relations Board to discuss the implications and possible repercussions of this situation.

The fundamental difference between the MEA’s and the GWU’s approach is that the union has opted to challenge the constitution and composition of the Industrial Tribunal by taking the matter to court. The association has adopted a more responsible approach and proposed legislative reforms which will not jeopardise previous decisions. However, if the appeal finds in favour of Madam Justice’s decision, the association will seek immediate action, including a suspension of all Industrial Tribunal cases. This is why the association has underscored the need for reform of the Industrial Tribunal in its submissions for changes in the EIRA. Some of the changes that are being proposed address the concerns raised by the court in its decision. MEA’s main proposals include: • The removal of the provision in the EIRA whereby the Industrial

Tribunal decisions have to respect government policy. • Removing the provision that parliament can reverse an Industrial Tribunal decision. • Changing the structure of the tribunal to include a chairperson who is a lawyer and who would be assisted by two representatives – one from unions and another from employers – in all cases. • The chairperson will have a security of tenure for the period for which s/he has been appointed. • Introducing a capping on awards decided by the Industrial Tribunal (currently there are none). • Allowing for all decisions taken by an Industrial Tribunal to be subject to an appeal (currently an appeal can be made on a point of law).

Joe Farrugia is the director general of the Malta Employers Association.

e Business OBSERVER |

July 16, 2015

INTERVIEW

Pushing and pulling for change ANTON BORG was elected president of the Malta Chamber of Commerce, Enterprise and Industry last March. VANESSA MACDONALD tried to ﬁnd out whether his style and background – he is a past president of the Federation of Industry – will mean changes for the chamber. A recent press release referred to “flagrant abuse, bad management, dubious decision processes, conflicts of interest and outright lack of coordination” – from successive governments from both sides of the political spectrum. Isn’t this much stronger language than the chamber usually uses? Not really. We were hearing a lot of stories – the recent issues of both the Valletta buildings, and the concrete at Mater Dei. These things cannot be allowed to happen in this country. We need to rise above the petty comments made by one party and the other and get to the root of issues, to ask why this is happening. You will find that there is absolutely no control over the public works being done, for example. That is flagrant abuse of public funds. Somebody has to talk about them. I think that the chamber, as an apolitical institution, has a duty to talk about these publicly. And you often have. But the language is quite strident… We are passing through a good period in the economy. We are the envy of quite a few countries surrounding us. We do not want to go back to the period when Malta was known as a corrupt country. When you get story after story coming out in the public domain that these things are happening, we have to be very careful about decisions being taken. Of course, not everything is bad and the strong words we used were at a time when certain stories were coming out. It seems to have calmed down again.

Malta ranked 94th in the World Bank report on the ease of doing business and only one of the indicators – starting a business – was seeing progress. Name three things that have happened since then to improve our ranking… We are losing ranking because other countries are taking concrete steps to improve their ranking. Unfortunately, we are not taking any measures to improve ours. There is one area where there has been progress: we were invited to sit on a committee on judicial reform. But the process is very slow. Other than that, we are quite frustrated that there is so little concrete action to do what other countries are doing. The chamber’s crisis committee on Libya had warned that companies with significant exposure in Libya would probably have to start laying people off by the beginning of the year. Did that happen? Were you just trying to scare the government into helping? There were companies that laid people off, as we know. But because the economy here is doing well, they were absorbed and we have not really felt any increase in unemployment as a result. Is the chamber happy with the government’s measures to ensure a level playing field? The answer is no. We have been asking for market surveillance to ensure that our importers are trading on a level playing field. There are ways that this can be done without disturbing the importing method and infrastructure.

And there is also tax leakage for the government… If there is no manifest, anyone can bring items into Malta and go straight to the consumer with no traceability.

“e Chamber has been invited to help with justice reforms but it is frustrated by the lack of progress in making Malta more business friendly”

The government is going to start removing eco-contribution in phases by September 1. How will you make sure that the customer benefits from lower prices? Are we ready to meet the obligations of the WEEE Directive? The WEEE Directive will make it much more onerous for the people who put electronic and electrical goods on the market. There will be a producers’ liability through the WEEE scheme, with bank guarantees or insurances required. If you look at all the measures listed in the new scheme, we believe they will provide control and a level playing field. We don’t want there to be the same problem as there was with packaging, with some people paying twice and some not paying at all! At least the shift is being done in stages and we are no longer in default on the WEEE directive.

However, we are still in the process of trying to convince the government that this is required. The setting up of a type of Guardia di Finanza was announced in the last Budget – but it has not been implemented yet. The only change is that some taxes were shifted from an ecocontribution to an excise tax, which should help enforcement as excise authorities have more force. But enforcement, as far as we know, has not been stepped up.

The chamber has been very active in promoting the work of bilateral chambers of commerce and setting up new business councils. Have you measured their success in any way? The creation of a business council is the result of members’ expressing interest in a particular country. We measure success through the attendance over a few years. Some of the councils are not as followed as they used to be when they were set up. But others have increased membership and are very active.

The removal of eco-contribution on some items at least means that our members do not have this added cost which abusive traders were not burdened with. Has abuse been reduced after it was publicised? What are your members reporting? Our members report that nothing has changed. We urge the government, once again, to take action as some of our members are seriously suffering as a result.

e Business OBSERVER

July 16, 2015

INTERVIEW

enough collateral or enough shareholder engagement? The explanation given to us is not that the shareholders needed the guarantee but that the client needed the guarantee to sustain the security of supply.

We do not have figures of what trade they generate but the number of activities and number of members attending indicate their impact. We have consolidated and instead of having councils for individual countries, we now have regional ones as we found that many companies are interested in more than one country in a region and this was more efficient. You keep making very impassioned statements about the importance of Air Malta, which is all very well and good. But what if the unthinkable happens and it does not manage to find a strategic investor? Would it really be all doom and gloom? Whenever we predict doom and gloom, something unexpectedly crops up to save the situation… This is a national airline and often the only one that flies to particular destinations. Cargo is not an issue but for bringing business people together, certain destinations would need to be serviced by other airlines. As Maltese, we have control over Air Malta, where it flies to. If that closes, what control would we have over other airlines? If a route is not viable it should be perfectly clear to us by now that Air Malta will not be able to operate it even if it did survive… The problem for Air Malta is undoubtedly the economies of scale, given the number of planes it operates. It will not be easy for it to get into the black, even after all this restructuring. We are aware of this and we think that, at a European Union level, this fact must be acknowledged. Assistance must be given to Air Malta – not a subsidy, but we are a remote island region. We cannot drive to continental Europe. We need special assistance. This is a very important point that the EU must not forget. There are extra costs to bring goods in and out. By ignoring this, the EU is actually being unfair and unjust to Malta. We want to be brought back to a level playing field by neutralising the additional costs that we have to bear.

Businesses are paying €50 million less this year in utility bills. What is happening to those savings? Are they being passed on to the customers or clients to make Malta more competitive – or just increasing shareholder profits? The cuts only came into force last April so it is too early to say. However, I am assuming that they will be used to invest in more modern machinery. You have to understand that electricity for most companies is one of the top overheads so a 25 per cent reduction goes a long way towards helping them to remain more competitive. It was also one of the recommendations that we made in the economic vision.

ANTON BORG PHOTO: CHRIS SANT FOURNIER

We are not asking them to subsidise us to make us more competitive. We are saying remove the unfair disadvantage that we have. You made a fair point. If a route is not viable then why should Air Malta operate it? But there are many business opportunities that we are missing out on, where we could be doing much better, such as North Africa where there is so much uncertainty. Imagine if we had more flight and shipping connections. We could host foreign countries who would use Malta as their soft landing zone – but we need more direct connections to places, like Egypt for example. It is one thing to convince Air Malta that these are needed. It will be quite another to convince low-cost airlines or other legacy airlines… If its financial situation allowed it to pick and choose destinations, I think we would be in a much better position to exploit this type of business.

“It will not be easy for Air Malta to get into the black, even after all this restructuring” We need to look at it on a more holistic basis. What would be the cost to Malta if investments were not made because of poor connectivity? As a country we are doing extremely well and we need to sustain this. If Air Malta were to stop operating, it would put a brake on what we are doing now. It would certainly have an impact. You said in a statement that the “power station guarantee was no straightforward matter”. The

government had to step in because the bank wanted security. Presumably the bank wanted security because the shareholders did not want to put up enough of their own collateral. Isn’t that a red flag? Not really as the guarantee is a temporary one. We need to see things from a larger perspective. Is it in our interest to stop the development of the new Electrogas power plant – because the government should not give a bank guarantee? Or is it in the interest of the country for the government to give this bank guarantee so that we will have electricity generated from gas by June next year? It would work against us if we said ‘no’ because the government should not give a guarantee to a private enterprise and then not have electricity. Which is the lesser of the two evils? I would prefer to have the guarantee. So it is not because the project is not viable, or because there is not

What will you be focusing on for the next Budget? The main focus will be more initiatives for the private sector to invest in research and development. The country is going through a period of economic growth – four per cent is very good! This is the time to invest in future competitiveness, when the country is doing well. In fact, we presented a recommendation to the MCESD earlier this week on incentives for the private sector to invest more in R&D. And finally. How is your membership doing? It is increasing and a good number of new members are being approved at every council meeting. It is interesting to note that we are also being approached by a number of associations who want to fall under the chamber’s umbrella. Work is increasing and there is a lot to do as we are involved in so many things. The more help we get from members the better.

e Business OBSERVER |

July 16, 2015

CASE STUDY

China: ‘Hang in there’, HSBC advises New links between Malta and China are making the news every week and the prospects for more exports are encouraging but with trillions of dollars wiped off the value of Chinese stock exchanges – 30 per cent of their value – in just three weeks, it helps to have a trusted advisor who can see past the short-term knee-jerk reactions. “The current volatility in equity markets in China is one part of the

story. The other part is international trade, which is growing at a faster rate than the GDP in most countries. We at HSBC Bank believe the longer term trend – which is what we focus on – is the trade story,” James Woodeson, the head of global banking and markets at HSBC Bank Malta, explained. “The longer-term outlook for China investing – into Europe in particular – is an ongoing story that we see developing positively.”

Information is the key at such volatile times, and HSBC has a global research platform which it provides readily to its customers, offering up to date information on the economic situation. “Our customers, like us, typically take a long-term approach. As with trade in any country, I would recommend that you do your research and build relationships, because trade is a relationship business.

“Being the most established international bank in China and obviously also having such a presence in Europe, helps us make introductions to group customers. We therefore have the knowledge, expertise and tools to help customers make informed decisions. That is not to say there isn’t risk, but we can help clients make the best possible connections.” HSBC Malta is well aware that its clients in Malta are usually

experts in their field – but once they start to export to non-euro countries, they venture into new territory, involving risks like currency exchange and even interest rate fluctuations. “We have a team of risk consultants who can engage with clients and look at their forecasts for an entire year so that we can help them manage that risk on a forward looking basis rather than on a reactive basis.

e Business OBSERVER

July 16, 2015

CASE STUDY

“We try to take away uncertainty and speculation. Any finance director knows that if you do not manage risk, it could manage you. So it is very important for clients to think about risks that could impact their financials when they enter foreign markets,” he said. “Traditionally trade in China was done in dollars but we are increasingly seeing trade in renminbi. It can be quite complex to negotiate with the Chinese side as to what currency to deal in. Sometimes there can be discounts if you accept renminbi.” Currency volatility is still a particular issue for renminbi, which is set to become the reserve currency for the future. The bank recently handled its first transactions in renminbi, via its HSBC Net – a platform aimed at businesses. HSBC Bank Malta also launched an electronic foreign exchange platform handling 18 currencies at the end of last year, Get Rate, which forms part of the HSBC Net platform. Head of commercial banking Michel Cordina said there has been fantastic take up, thanks to the ease it offers customers: “A good portion of our local turnover in foreign exchange goes through this platform now – representing $150 million worth of local transactions since launch. We believe it will get up to 75 per cent as clients feel the value of a simpler platform with a live price – and they can negotiate pricing with their relationship manager to reflect their needs for the entire year.” The bank has a number of other tools to help prospective traders, including a specific product aimed at boosting trade. “We launched the €50 million Malta Trade for Growth fund in late 2013, and it was fully subscribed within nine months, much sooner than we anticipated. “This represents around 40 existing or new-to-bank customers, most of whom would not have been able to get traditional financing because they did not have sufficient collateral to offer as security. The fund is unique because it is not money to set up a business but to actually cover the whole of the trade cycle through structured finance – which means we can offer a discount on the interest rate too. “For the bank it reduces risk as we are aware of the customer’s operations and know what is going on,” Mr Cordina said. The success of the first fund encouraged the bank to launch a second wave, this time offering €75 million.

“International trade is in our DNA. We started as a trade bank and have been around for 150 years. We have specialists on the ground in 60 countries. The main advantage of the group that we are trying to maximise is connectivity. We know about three million importers and exporters so it is actually very easy to find a counterpart for a Maltese exporter in another country,” Mr Cordina added. The concept of connectivity is not just words but also action. HSBC Bank Malta launched a video on Malta, called Why Malta?, which was recently on the front page of the HSBC global intranet – viewed potentially by its 275,000 staff. “Putting Malta on the map is important as you often get blank faces when you mention Malta in Asia – although the Shanghai Electric Power investment into Malta enabled us to raise the profile. “We need Malta to spring to mind when they have an exporter interested in the EU or someone looking to base a company there. We can see the difference already. Last year, after the first video was released, the number of FDI potentials we met in China, South Africa, Middle East, even the US, was the best we have seen in the past three or four years.” The video is now available in several languages and is also available on You Tube for the public. The bank also has a publication dedicated to Malta as part of its Doing Business series on 20 countries. “The HSBC global economic forecast showed that from an average of 1.5 per cent annual growth between 2012 and 2014, world merchandise trade should increase by about 8 per cent a year from 2017, according to the report. “We believe that there are many sectors where Malta could benefit from some of that growth. Emerging markets for Maltese exporters are so rich, if you find the right partner,” Mr Cordina said. “A good portion of the €50 million taken up was by customers doing hubbing from Malta. There is huge scope for more but better infrastructure is needed. We should have a ‘show’ warehouse near the Freeport which we can show customers who are interested in Malta as their hub. “And hubbing does not only mean transhipment, storage or global distribution but also valueadded such as assembly, packaging and so on. Malta is in a very good location for American or Chinese companies looking at both European and African markets. Malta means much shorter lead times for delivery,” Mr Cordina stressed.

“We launched the €50 million Malta Trade for Growth fund in late 2013, and it was fully subscribed within nine months”

HSBC BANK MALTA’S MICHEL CORDINA (LEFT) AND JAMES WOODESON BELIEVE THAT INFORMATION IS THE KEY BEFORE SEEKING TO TRADE OVERSEAS.

e Business OBSERVER

July 16, 2015

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

No point reinventing the wheel

Publishers Allied Newspapers Ltd. Content House Group Ltd.

The government has confirmed to The Business Observer that insurance products are going to be considered suitable as third pillar pension products. By doing so, it has bitten the bullet and accepted what it has been told by the industry for some time: it was never going to worth providers’ while to invest in new products – especially annuity-based ones – given the expected low number of investors. And it was going to be even less worth their while if the investors were already their clients for long-term insurance products. Ergo, why not just attach the fiscal incentives to existing ones – and just tack on a few eligibility criteria to make them sound like pension products? For example, that payouts will not be made before the beneficiary is 50... The government itself has stressed the long-term nature of pension products, saying that over a 25-year span, this represented tax credits of €7,500 but much more importantly an investment into one’s retirement of €50,000. If you assume (very, very optimistically) that 20,000 people would take up these products, it would mean €150 million in tax credits over the 25 years (assuming all remains the same), but savings of €1 billion. That means the government would have to miss out on €6 million a year in tax revenue and deferred consumption – but comforted by the knowledge that those 20,000 will have put aside €40 million each year, fermenting slowly, which will give them a slightly better lifestyle in retirement and be a slightly lower burden on the government. Why did the government do this, at last? So far, no third pillar products have been launched, several months after the fiscal benefits were announced. How embarrassing for the government – and how

A M E M B E R O F T H E A L L I E D G R O U P O F C O M PA N I E S

irritating, after having been chased by providers for years, to now have them go all coy. For insurance companies this is a win. They will merely need to endorse existing policies and tweak products – getting €150 from the government to pass on to their customers, for doing exactly what they were doing before. For customers this is also a win. Those wise enough to already be putting money into long-term insurance products will be rewarded by a bonus of €150 a year (in the guise of a tax credit). For those who have not yet started saving, perhaps (perhaps) it will be enough of a reminder that they should be doing so. For the government it is also a win. They were going to give the tax credit anyway and whether you call it a third pillar pension or an insurance product or a retirement annuity, the aim is the same: to encourage people to save now so that they will have a more adequate pension in the future. All good? For sure. Except if this makes sense now, it also made sense 10 years ago. The White Paper on Adequate and Sustainable Pensions suggested third pillar pensions should be introduced on a voluntary basis in January 2006. We have effectively wasted 10 years. By now there would already be €400 million in that third pillar pot, growing according to the magical rules of compound interest. By now we might have been talking about second pillar occupational pensions, not putting them off yet again for review in five years time. That is the real shame. The government can make all the excuses it wants about economic recovery and financial crises. Would it really have been so impossible to do this 10 years ago given that the answer was so pragmatic after all?

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BUSINESS OPINION

Economically sound use of land

Malcolm Bray Economics, as a social science, studies how individuals, firms and nations make choices when allocating scarce resources to satisfy their unlimited wants. The country’s high population density clearly highlights that surface area is a scarce resource in Malta and the issue is whether current land policy is leading to its optimal use or otherwise. Malta’s limited surface has to accommodate competing needs: residential, productive and environmental. Optimality requires that the returns – in terms of net benefits, monetary and nonmonetary combined – are identical across the three possible uses. It is important to bear in mind that the maximisation of welfare requires that optimal allocation decisions should not be based solely on financial considerations. Each time a piece of virgin land is used for residential or productive purposes, we must be sure that the resulting net benefits outweigh the benefit of protecting the environment.

Judging by the current state, it is clear that over the years, residential and productive motives have largely been given prominence over the environment. This raises issues of sustainability, which Robert Solow, Nobel laureate in economics, defines as “an obligation to conduct ourselves so that we leave to the future the option or the capacity to be as well off as we are”. Interpreted along these lines, this does not mean that one should never build on green areas, but that any current use of land must pass on to the next generations something that is at least equally valuable. Given that the destruction of the environment may entail costs which are hard to quantify and in some cases can only be assessed over a long time span, countries have tended to restrict activities in specific areas to ensure that they don’t fall into the temptation of destroying precious environment. This falls under the general precautionary principle. In Malta this takes the form of the Outside Development Zone (ODZ) policy. However, as economists have long evidenced along the lines of rulesversus-discretion debate, unless there is a robust rule-based framework, discretion will result in sub-optimal outcomes. Translated this means that allowing for the possibility of bypassing ODZ, for whatever reason – be it for the benefit of speculators, for education, for power generation or whatever other reason – makes such a policy ineffective.

“Naturally an eﬀective ODZ policy also presupposes rigorous policing and zero tolerance”

The best way to strengthen ODZ policy is to enshrine it in the constitution. Otherwise, quantifiable short-term gains will always prove to be a very

easy justification for the breaching of ODZ requirements, despite the long-term (possibly unquantifiable) consequences which may be harmful.

Naturally an effective ODZ policy also presupposes rigorous policing and zero tolerance. What is surprising in the case of Malta is the very limited amount of high-rise buildings found on the island. Hong Kong and Manhattan are clear examples that the best way to deal with population density is to build upwards. This effectively renders almost limitless the volume of building possibilities, while protecting surface area. A policy of encouraging high-rise buildings would strike the right balance between protecting the environment and ensuring that a country’s economic growth is not hampered. For example, the recent decision to allow hotels to build further floors is a step in the right direction but one should question whether a height limit should still exist. Advancement in building construction makes highrise buildings cost effective, be it for productive or residential purposes. Optimal land use also suggests that one should periodically re-examine the use of existing areas, in particular questioning whether it is possible to extract greater value from land use. It is hard to understand how some schools and government departments are situated in prime areas, when these areas would render a much higher value if used for alternative purposes. An economically sound land policy is not about maintaining the status quo but about ensuring that this limited resource is used to satisfy the highest amount of wants, both for current and future generations.

e Business OBSERVER

July 16, 2015

APPOINTMENTS

Cauchi new GM at Waterfront Raphael Cauchi is the new general manager at The Waterfront Hotel in Sliema. Mr Cauchi has 28 years of experience in the four- and five-star hotel and food and beverage business in Malta and internationally. He was notably the general manager of the Radisson SAS Golden Sands Resort and Spa when it hosted 52 heads of states during the Commonwealth Heads of Government Meeting held in Malta 10 years ago.

AAT Research announces new chairman and directors AAT Research has appointed Peter O’Connor as chairman, Peter Griffiths as vice-chairman and board director, and Simon Trevisan as director. “Peter O’Connor, Peter Griffiths and Simon Trevisan bring extensive experience and know-how to AAT. Their vision and their expertise will be invaluable in steering our small but dynamic biotech company forward as we continue to develop with the goal of meeting aggressive growth plans,” said Adrian Attard Trevisan, founder and CEO at AAT Research, a group of companies that researches, designs, develops and manufactures quality medical solutions with a focus on the neurosciences field.

CHAIRMAN PETER O’CONNOR

DIRECTOR PETER GRIFFITHS

DIRECTOR SIMON TREVISAN

Depasquale appointed to 6PM board Tonio Depasquale has been made a non-executive director at 6PM. Mr Depasquale was the chief executive officer of Bank of Valletta up to 2011 and he was a director in, among other companies, Middlesea Insurance, Midi and Viset. He currently acts as a director for a number of companies operating in a wide spectrum of commercial activities.

TONIO DEPASQUALE

EY Malta boosts TAS

GRACE CAMILLERI

GILBERT GUILLAUMIER

KEVIN MALLIA

CHRIS PORTELLI

EY Malta has boosted its Advisory, Assurance and Transaction Advisory Services (TAS) with newly appointed executive directors. Grace Camilleri joined EY’s TAS team in 2001 and currently heads Malta’s Financial Services

Advisory offering. Gilbert Guillaumier has been working with EY for over 13 years, leading a range of diverse engagements including restructuring, lead advisory and transaction support services. Kevin Mallia re-joined EY in May 2014 after having, for a

number of years, occupied the post of chief officer internal audit & risk at Air Malta up to 2011, following which he was appointed group internal auditor of Midi. With 13 years at EY under his belt, Chris Portelli has gained a wide range of experience serving

audit clients in the asset management, insurance, manufacturing, utilities, oil and gas, retail, hospitality and shipping industries. Franco Borg and Rudolph Mifsud Saydon have been promoted to the post of director in the Advisory and TAS respectively.

e Business OBSERVER |

July 16, 2015

STOCK MARKET REVIEW

6PM seeks ﬁnancing to fund strategic changes Edward Rizzo The announcement made on June 8 by 6PM Holdings plc confirming that it had submitted an application to the Listing Authority to issue a new €13 million bond may have caught some investors and market participants by surprise. It is true that almost two months earlier 6PM had announced that it had initiated formal discussions to

acquire Blithe Computer Systems Ltd, a UK private company that specialises in the provision of information systems and software for the health care sector. However, the amount of funding at €13 million was the real surprise, given the size of 6PM’s balance sheet and the €5.8 million required to purchase the UK company. Hence, over the past few weeks between the initial announcement of the acquisition of Blithe

on June 10 and the publication of the prospectus on July 14, market participants may have questioned the additional €7.2 million being raised by 6PM. 6PM’s reporting currency is in sterling, given that historically the UK was the main market for the company and 70 per cent of revenue generated is in British pounds. The total amount of shareholders’ funds shown on the company’s balance sheet as at December 31, 2014,

amounted to £5.7 million (€8.1 million). The amount being raised is therefore larger than the current level of shareholders’ funds – depicting the significant increase in leverage of 6PM going forward. In fact, the gearing ratio will increase to 55.5 per cent given the total net debt estimated at £7.6 million and shareholders’ funds of £6.1 million as at December 31, 2015. The prospectus published earlier this week provides the information

e Business OBSERVER

July 16, 2015

STOCK MARKET REVIEW

on the reasons for the bond issue and use of proceeds. Apart from the acquisition of the UK company, 6PM also intends to utilise €3.2 million to repay part of its existing bank facilities with HSBC Bank Malta plc and Bank of Valletta plc; €2.7 million will be used to enhance its software products while the balance of €0.8 million after issuance costs will be available for working capital purposes. The 6PM Group is principally involved in the provision of IT products and services to the health sector, primarily to trusts within the UK’s National Health Service. The principal health products are split into three categories: (i) logistics management consisting of operational support to optimise service standards and improve efficiencies; (ii) information management consisting of the use of data analysis tools to assist business decision processes and (iii) clinical management consisting of health applications. The Intelligent File and Inventory Tracking product, branded iFIT, is the group’s flagship product contributing 36 per cent of total revenue from the health sector. The CareSolutions Data Warehouse falling under the information management category contributed 10 per cent of overall revenue within the health sector while the clinical management applications to support HIV, stroke and dementia contributed less than 10 per cent of health sector revenue. The €2.7 million investment in new products is a positive and bold initiative. However, it is difficult to judge when and if this investment will pay off. Unfortunately, no additional information is available in the prospectus on the extent of the expected future revenues and contributions over the next two years that will be derived from this investment. 6PM’s shareholders and financial analysts would have also looked for additional information on Blithe Computer Systems since the company announcements over recent weeks only provided a brief overview of the company and its historical financial situation. Blithe specialises in the provision of systems and solutions for the management of Electronic Patient Records (EPR) within the health sector with a focus on sexual health and substance misuse. Blithe’s two solutions are currently being used by more than 10,000 healthcare professionals across more than 700 locations throughout the UK. However, despite the large number of users, the prospectus revealed that between 2012 and 2014, Blithe’s revenue declined from £2.3 million to £2.1 million and the

Rizzo, Farrugia & Co. (Stockbrokers) Ltd, (RFC) is a member of the Malta Stock Exchange and licensed by the Malta Financial Services Authority. This report has been prepared in accordance with legal requirements. It has not been disclosed to the company/s herein mentioned before its publication. It is based on public information only and is published solely for informational purposes and is not to be construed as a solicitation or an offer to buy or sell any securities or related financial instruments. The author and other relevant persons may not trade in the securities to which this report relates (other than executing unsolicited client orders) until such time as the recipients of this report have had a reasonable opportunity to act thereon. RFC, its directors, the author of this report, other employees or RFC on behalf of its clients, have holdings in the securities herein mentioned and may at any time make purchases and/or sales in them as principal or agent, and may also have other business relationships with the company/s. Stock markets are volatile and subject to fluctuations which cannot be reasonably foreseen. Past performance is not necessarily indicative of future results. Neither RFC, nor any of its directors or employees accept any liability for any loss or damage arising out of the use of all or any part thereof and no representation or warranty is provided in respect of the reliability of the information contained in this report. © 2015 Rizzo, Farrugia & Co. (Stockbrokers) Ltd. All rights reserved.

Ebitda shrunk from £0.8 million to £0.27 million. Unfortunately the reasons behind the significant decline in operational performance were not provided in the prospectus. On the other hand, 6PM stands to benefit from Blithe’s access to the NHS network which enables any third party provider on this network to provide support and maintenance from any remote location. As a result, this should lead to reduced costs going forward. Another important detail that emerges from the prospectus is that during the past few weeks, 6PM decided to close the Compunet retail operation. This is surprising given that 6PM acquired Compunet only in 2011 for €1 million and it had launched a sizeable rights issue at the time to fund a number of acquisitions including Compunet and also to repay certain bank facilities. The purchase of Compunet four years ago followed a change in

business strategy of 6PM as it aimed to increase penetration across the local market by acquiring a number of IT companies in view of the challenges prevailing in the UK NHS market at the time. 6PM’s CEO had explained in the media that the 6PM Group had already earmarked 10 firms under its planned consolidation programme of the local IT industry. The closure of the Compunet retail outlet (although the prospectus indicates that 6PM will continue to supply technological infrastructure and devices to its clients) is disappointing for shareholders and although this was not a major contributor to the group’s financial performance, it still ought to have been communicated to the market via an appropriate company announcement. The change in strategy after such a brief period is also surprising but this shows the danger and risks associated with acquisitions

– as well as possible opportunities arising from cross-selling and other synergies. 6PM aims to achieve such benefits from the acquisition of the UK company Blithe. However, the prospectus does not provide details on how 6PM aims to turn around Blithe’s financial performance. Despite the lack of success in expansion across the local market, 6PM still performed very positively over the past three years. Ebitda grew from £0.82 million in 2012 to £1.47 million in 2014 mainly through the success of iFIT in the UK. Shareholders were rewarded accordingly through growing dividend payments in each of the last three years. The prospectus reveals that during the current financial year to December 31, 2015, Ebitda is estimated to rise by 19 per cent to £1.7 million and by a further 69 per cent in 2016 to £2.9 million. According to the Financial Analysis Summary

“6PM’s CEO had explained in the media that the 6PM Group had already earmarked 10 ﬁrms under its planned consolidation programme of the local IT industry”

appended to the prospectus, the significant improvement in operational performance is expected to materialise from the UK market apart from the consolidation of Blithe from the second half of 2015. The 6PM bonds at a coupon of 5.1 per cent per annum are reserved for 6PM shareholders and the prospectus indicates that in determining the allocation policy, “the Issuer shall take into consideration the number of shares held by such shareholders”. In this respect, 6PM’s largest shareholder is Charts Investment Management Service on behalf of clients, with 32 per cent, followed by Ivan Bartolo and Nazzareno Vassallo at 18.6 per cent each. These three shareholders are likely to have the financial resources to possibly subscribe to a large portion of the bonds available. As such, small shareholders may therefore only be allotted fractional amounts while other investors are unlikely to have the opportunity to apply for any of these bonds via the intermediaries’ offers. Hopefully, other bonds will be available in the months ahead which will be available for subscription to the market at large.

Edward Rizzo is a director at Rizzo, Farrugia & Co. (Stockbrokers) Ltd.

e Business OBSERVER

July 16, 2015

BUSINESS UPDATES

Literature about family businesses from a Maltese perspective made available to all by APS Bank omas Smith awarded the Lufthansa Cargo Silver award Thomas Smith’s commitment to providing industry-leading services in air freight and logistics was celebrated when the Freight Forwarding division was given the coveted Silver Award by Lufthansa Cargo. The award is given out on the basis of achieving a growth in volume registered, as well as the strong support provided to the air freight and logistics services organisation during the year 2014. Thomas Smith has to date been presented with six bronze awards, meaning the 2014 reward was their first silver. The award, which was announced in May 2015, was presented by Lufthansa Cargo Regional Manager North East Italy and Malta, Abré Smit. Luciano Galea, senior freight executive, accepted the award on behalf of Thomas Smith’s Air Freight division. Lufthansa Cargo AG is a cargo airline forming part of the Lufthansa Group, operating worldwide air freight and logistics services on behalf of Lufthansa, of which it is a wholly owned subsidiary. Founded in 1994, Lufthansa Cargo now ranks among the world’s leading cargo carriers. Thomas Smith Group forms part of the Lufthansa Cargo Forum, which is made up of the top five selling agents in Malta.

Constituting 75 per cent of local businesses, family-owned companies are a predominant influencer of Malta’s economic landscape, and to a large extent, of Europe’s economy. Notwithstanding this, Malta is the first country about to introduce the Family Business Act, aiming to set a benchmark for other countries to follow suit. Perfectly complementing this unprecedented development is the first locallyproduced book about the dos and don’ts of family enterprises, which has been recently launched and made available to all for free by APS Bank on its website and Facebook Page. Titled The Maltese Family Business: Getting Organised, the book weaves together the views of academics and practitioners about the essential matters every family business should be well informed about, such as accurate financial planning, family governance, tax planning and succession planning. The publication was edited by Mario Duca who, for the past two decades, has gained invaluable experience in business management and consulting. This is not APS Bank’s only endeavour to widen the public’s awareness about family businesses. Two seminars were organised on the topic in collaboration with the Malta Assocation of Family Enterprises (MAFE) and EY Malta respectively, during which a number of key speakers and the attending audience discussed the soon-to-be-enacted legislation.

THE MALTESE FAMILY BUSINESS: GETTING ORGANISED TACKLES THE ESSENTIAL MATTERS EVERY FAMILY BUSINESS SHOULD BE WELL INFORMED ABOUT, SUCH AS ACCURATE FINANCIAL PLANNING, FAMILY GOVERNANCE, TAX PLANNING AND SUCCESSION PLANNING.

Panta Lesco’s customised renewable energy design to cater for future needs Being involved in projects right from the start sets the foundation to correctly assess clients’ current and potential energy requirements. Reaching the required energy production at a particular point in time is a continuous process, as energy needs change over time. In a sense, it is the technical team’s biggest challenge to understand the diverse requirements of each and every potential client and recommend a suitable way forward. Therefore, being involved in the project right at the start allows a customised design of renewable energy

product/s which meet clients’ current needs but have the possibility to grow with the client and their changing requirements over time. By abiding by this principle of always considering the potential of future expansion at the design stage, Panta’s technical team ensure required energy specifications are reached and, where possible, grow with the client into the future. Panta Lesco specialises in these customised solutions. For more information, contact enquiries@pantalesco.com

e Business OBSERVER |

July 16, 2015

BUSINESS UPDATES

Bank of Valletta launches a series of gallery talks Debbie Caruana Dingli conducted the first in a series of three gallery talks at BOV Centre in Santa Venera, held as part of Bank of Valletta’s 23rd Retrospective Art Exhibition, featuring 37 works of art by this prolific contemporary artist. A group of around 30 art students and enthusiasts attended the gallery talk at BOV Centre. Ms Caruana Dingli spoke about her evolution in style and preferences while moving across the three sections that make up the exhibition. Speaking at the end of the gallery talk, the artist enthused: “Art is great because it allows for multiple interpretations to coexist side by side. No two people looking at a work of art will see it in the same manner. I particularly enjoyed questions posed by children, who with their ingenuity and candid honestly, often managed to interpret a painting very well.” Bank of Valletta will be hosting another two gallery talks with Ms Caruana Dingli on July 22 and 24, between 6pm and 7pm. Anyone who would like to attend may book a place through the bank’s website. Groups are kept

ARTIST DEBBIE CARUANA DINGLI (LEFT)

small, so those interested in participating are encouraged to book their place so as not to be disappointed.

Valletta Fund Management Ltd presents donation for a good cause Valletta Fund Management Ltd has recently presented a donation in support of the Alive 2015 cycling challenge for cancer – a voluntary organisation which was set up to raise funds for cancer research. This year’s funds will be raised to support children’s cancer research. Mark Vella, head of marketing and business generation at Valletta Fund Management, congratulated and praised Josephine Decelis, who represented the 45 cyclists who shall be participating in this 10-day cycling challenge across seven different countries. Mr Vella said: “VFM believes that business is not only about money but its ingredients should incorporate responsibility mixed with public good. In order for there to be a good sense of community, there has to be an element of caring.” Ms Decelis thanked Mr Vella for this act of generosity which serves as a

MARK VELLA PRESENTING THE DONATION TO JOSEPHINE DECELIS.

source of motivation and pride aimed at encouraging the volunteers to take on the difficulties they constantly face while preparing for the challenge.