NEWS
Issue 75
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June 29, 2017
Distributed with Times of Malta
SWEDISH GAMING COMPANY BETSSON EMPLOYS 1,000 PEOPLE AT ITS MALTA HEADQUARTERS
e top guns of Malta’s leading five-star hotels speak out about the positive outlook ahead this year, as well as upcoming, ongoing or completed refurbishment projects. see pages 8 and 9 >
NEWS Seeking to expand its parking capacity on the airfield, Malta International Airport is looking for support to implement this expansion before the space shortage becomes a greater challenge. see pages 5 and 6 >
Gaming companies anticipate further growth in Malta Manuel Zarb Fears that Malta’s appeal as a destination for iGaming companies could be on the wane have proven to be largely unfounded so far, as a number of leading gaming companies operating in Malta have confirmed that they are experiencing strong growth and that they plan to retain and grow their operations in Malta. From heavyweights like Betsson, to companies who have just set up shop here, the gaming industry in Malta looks like it’s here to stay.
“Our vision is for Malta to become the Silicon Valley of gaming.” Ulrik Bengtsson, CEO of Betsson, which employs 1,000 people at its Malta headquarters and has offices in six countries, provided an outline of the company’s successes. “Betsson continues to grow every year – on average, we have increased revenues by 15 per cent every year. We chose Malta
for our headquarters as it has a lot to offer, and having been here since 2004 we’re proud to say this is now our home.” On the company’s future intentions, Mr Bengtsson said, “Betsson has common interest with any Maltese Government. We believe in Malta and if it keeps on the cur-
rent path, our intention is to keep having a large presence on the island.” Tipico, another growing gaming company employing over 240 people from 30 countries at its Maltese headquarters, is another gaming player experiencing strong growth in Malta. Joachim Baca, CEO of Tipico was categorical when questioned about the future of gaming companies in Malta: “As an operator who feels very comfortable here we know the important position of the enContinued on page 3
INDUSTRY FOCUS A closer look at how the logistics industry is changing in Malta, the role it plays in the economy and what is being done to strengthen the sector. see pages 15 and 16 >
STOCK MARKET REVIEW Christopher Mallia explains why local banks have highlighted the introduction of the Banking Recovery and Resolution Directive, as well as its hypothetical and potential implications on their investments. see pages 20 and 21 >
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NEWS
Establishing Malta as the top iGaming hotspot Continued from page 1 tire gaming sector for Malta’s economic growth. The development of our business is also a contribution to this. Malta’s effective and thorough regulatory regime creates legal certainty and stability, which is what gaming operators look for. On our part, we’re comfortable here and we’re sure gaming will remain a crucial sector for economic growth in Malta.” LeoVegas, one of the fastest growing gaming companies in Malta experienced a 70 per cent growth in revenue last year compared to 2015. Gustaf Hagman, Co-Founder and Group CEO of LeoVegas said that at this very moment the company, which employs 325 people, has 30 open vacancies for the Malta office alone: “We decided to base our operations on the island as Malta was the first to issue gaming licenses in the EU. Growth has been very good in successive quarters, and all in all the country has been a great choice for us. Our intention is to keep growing in Malta, which still has a lot to offer to the gaming industry.” Ariel Reem, the CEO of Genesis Global – a fairly new player in the local market – said his company started its operations in 2014 with 10 employees and since then the number of employees increased tenfold to 100: “We have seen incredible growth each year and we expect this to be improved upon even further with our relocation to the island. We plan to expand in the future based on quality, not quantity. Malta is establishing itself as the top iGaming hotspot, building on what has been done in the past, and we hope we can contribute to making Malta the go-to gaming jurisdiction in the coming years – the capital of the iGaming world!” “Unlike other gaming companies, Malta for us is not just an ef-
“For foreign operators the benefits of Malta are long established. But we believe it’s time for a review of the national regulatory framework to give local gaming operators some of the same benefits our foreign counterparts enjoy.” - Sergio Cappitta, Izibet ficient tax and regulatory jurisdiction, but an end market,” said the Operations Director of Izibet, Sergio Cappitta. “Our network of shops increased from 20 to 30 since 2015, and operating in every
locality allows us to keep in touch with punters all over the island. Our company has managed to take the retail gaming sector a long way locally. For foreign operators the benefits of Malta are long
established. But we believe it’s time for a review of the national regulatory framework to give local gaming operators some of the same benefits our foreign counterparts enjoy. This will leave us
even better equipped to provide a high-quality, competitive service.” Silvio Schembri, the new Parliamentary Secretary for the Digital Economy within the Office of the Prime Minister, was quick to outline the importance of the gaming industry in Malta. “The success of the gaming industry in Malta is obvious for all to see. In a span of just over a decade, the industry has grown to become one of the key pillars of our economy. The direct contribution of the gaming industry to the Maltese economy was valued at over €1 billion in 2016, equivalent to one-eighth of total Gross Value Added. Firms in the sector and associated businesses are estimated to employ around 9,000 persons on a full-time equivalent basis. The industry also contributed €56.3 million in gaming taxes towards the Government’s budget in 2016, with the total contribution to the public coffers, including other forms of tax revenue generated by activity within the industry, estimated at around €120 million,” he wrote in The Business Observer’s opinion leader (see full article on p11). Dr Schembri is not willing to stop there, however, showing ambition on the way forward. “This is just our point of departure. Our vision is for Malta to become the Silicon Valley of gaming. Over the years, we’ve developed a worldclass ecosystem for the industry with an effective, transparent regulatory regime. We need to take that and go further, encouraging thought leadership, innovation and technological development. A key element to fulfil this vision is a renewal of the regulatory framework. To do this we will launch a public consultation in the next weeks, in collaboration with the Malta Gaming Authority, for a new regulatory framework for gaming. We hope to turn this into law by early next year.”
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NEWS
MIA seeks to expand airfield parking capacity
Marie-Claire Grima MIA is seeking to expand its parking capacity on the airfield and is looking for support from the government to implement this expansion before the space shortage becomes a greater challenge, MIA CEO Alan Borg has confirmed. “Up until May 2017, Malta International Airport saw a 21 per cent increase in traffic over the same five month period last year and in excess of 5.2 million passengers are expected to pass through the airport this year. In view of this staggering growth, expanding our aircraft parking capacity on the airfield is on our radar, and we are seeking support from Government to increase our parking capabilities as this may become a challenge in the short to medium term,” he told The Business Observer.
“Considering the current growth patterns, our dual runway system is sufficient for our long-term traffic projections – for comparison’s sake, Gatwick Airport, which handles over 40 million passengers a year operates with a single runway.” When asked whether this meant that there were also any runway expansion plans for the near future, Mr Borg replied in the negative. “Considering the current growth patterns, our dual runway system is sufficient for our long-term traffic projections – for compari-
son’s sake, Gatwick Airport, which handles over 40 million passengers a year operates with a single runway.” The increased activity at the airport has in recent years led to a car parking problem within the parking facilities already
available and to this effect, plans have been drawn for a new car park. Mr Borg confirmed that the MIA has kick-started a tender process for the development of an overground multi-storey car park on the airport campus, which will accommodate at least 1,500 cars. “Car parking has become a real challenge, especially during our peak periods. Our plan is to be able to start the works on this in 2018 and we envisage that they will take around a year to complete.” MIA is also still actively working on getting the permits in hand for the development of SkyParks 2. The development, plans for which were announced in 2015, is expected to occupy a 4,000 sqm footprint and provide office space for 1,700 employees. Continued on page 6
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NEWS
Addressing key areas in the passenger’s journey Continued from page 5 “Our vision is for this building to become a beacon of innovation, providing a work space that stimulates and helps start-ups establish themselves. As mentioned, what’s exciting about this second centre is that it includes plans for a business hotel, which will give us a new edge and benefit both existing and potential customers. Guests will have access to all the services and amenities offered by SkyParks Business Centre, while enjoying the convenience of its proximity to the airport,” Mr Borg said. MIA is currently undergoing an extensive refurbishment effort, known as the Terminal Reconfiguration Project, which started in September 2016, and is now well underway. “The €28m project, which is being executed in two major phases, will primarily ensure that the terminal’s capacity adequately matches our increasing number of passengers. The first phase addresses two important areas which are key to the passenger’s journey – check-in and security. Once completed, our terminal will be furnished with at least eight additional check-in desks and a security area which is double its current footprint. This phase alone is a crucial milestone in enabling us to provide our guests with a more efficient, and in turn enjoyable, airport experience. The first phase of the project, estimated at €12m, has already
seen several milestones completed. Improved access to Baggage Reclaim, including new escalators, lifts and stairs have been installed to improve our passenger flows in this area,” Mr Borg said. As yet another part of this upgrade, a new La Valette lounge opened its doors in March, allowing both VIP members and onetime guests to enjoy the little luxuries of travel, including an outdoor terrace. Furthermore, the public Observation Deck on Level 3 has been reopened, providing aviation enthusiasts and families with an enhanced experience. The observation deck includes an outdoor space where visitors can either relax or follow the operations on the apron and runway. Furthermore, a new Central Screening Area with double the current footprint has now allowed
THE NEWLY RE-OPENED OBSERVATION DECK
the airport to increase its screening capacity by 50 per cent. “Research shows that security screening is one of the biggest pain points for our passengers, so we designed the space in a way to get plenty of natural light and to accommodate a bigger queuing area. On top of this, we will also be introducing family and fast-track lanes,” Mr Borg said.
“The second phase of the project involves an extension to the terminal building, adjacent to the check-in hall, to allow for more gates and further check-in capacity. This will allow the airport to add more check-in desks, increase the number of boarding gates in the Departures area, together with more seating and circulation space created by the increased floor space.”
“As Terminal Reconfiguration works are well underway, our focus for this year is on mitigating the effects of these works, to continue to offer the best experience possible to our guests, in line with our vision. Armed with sensible investments, growth projections, and the support of our employees, guests, shareholders, and stakeholders, we journey on confidently and responsibly,” Mr Borg concluded.
“Research shows that security screening is one of the biggest pain points for our passengers, so we designed the space in a way to get plenty of natural light and to accommodate a bigger queuing area. We will also be introducing family and fasttrack lanes.”
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NEWS
Five-star hotels experiencing an ‘exceptional’ year Manuel Zarb The luxury hotel segment in Malta has had a strong start to 2017, and hoteliers representing Hilton, Corinthia, Westin Dragonara Resort, Le Méridien, Radisson SAS, Xara Palace and Excelsior were all upbeat in their comments to The Business Observer when questioned about reports that five-star hotels were reportedly experiencing a surge in occupancy. The fact that Malta hosted the EU Presidency between January and June has contributed signif-
icantly towards this outstanding performance. Various leading five-star hotels have long been preparing for increasing numbers of guests; some of them have invested in large-scale upgrades and refurbishment to meet the increased demand, while other five-star hotels are actually in the process of doing so. The first six months of the year have been very positive and we have experienced some record figures within the first half of this year. We attribute this success mostly to the contribution of business resulting from Malta’s
Presidency of the Council of the EU as well as other substantially large spin-off conferences, linked with the Presidency,” explained the Westin Dragonara Resort’s General Manager, Michael Camilleri Kamsky. “One must not forget the unfavourable geopolitical circumstances that some of our neighbour competitors, such as Turkey, Egypt and Tunisia, are currently experiencing, as well as terrorism attacks elsewhere. These are also displacing tourists from visiting these countries, who then choose Malta as one of the safe alternatives. Furthermore, over
the past years we have had major refurbishment projects on an annual basis so as to keep our product in pristine condition. These refurbishment projects have been consistent year in year out. For the near future we also have plans for further major refurbishments and added capital investment in line with our positioning strategy Meanwhile, Le Méridien will be rebranding to the Mariott Hotel and Spa following the acquisition of its parent company, Starwood Hotels & Resorts, by international chain Mariott. As General Manager Alex Incorvaja told us, however, the difference isn’t just cosmetic. “The rebranding of Le Méridien includes concrete changes, such as the addition of executive suites and a range of premium options – such works will start taking place towards the end of this year and in the first quarter of 2018,” Mr Incorvaja said. “We’re proud to be the first Mariott hotel in the country. The Marriott chain is one of the strongest brands worldwide in terms of hotel lodgings, and its arrival in Malta is definitely good news for the tourism industry. The rebranding will see us increase the number of executive suites, as well as offer other premium options to enhance visitors’ experience.” Commenting on the strong performance by leading five-star hotels in Malta, Mr Incorvaja confirmed that Le Méridien is having an exceptional year, where the first six months of 2017 have witnessed considerable growth over last year. “We are looking forward to seeing this trend persist throughout the summer months and we’re optimistic that 2017 will not only be another record year for Malta, but also for our hotel.” The Corinthia Group – which in Malta alone includes three five-star hotels branded as Corinthia and a further two as Radisson SAS – is expecting not only renovation, but an entirely new development to take place within the area of three of its Maltese five-star hotels. The ambitious project, which is expected to include a six-star hotel and possibly two tower blocks in St Julian’s, will include not only hotel suites but also residential spaces. Corinthia Chairman Alfred Pisani said discussions with the authorities are ongoing and these plans continue to evolve in line with the Group’s dialogue with the Planning Authority: “the new development we have proposed on our 77,000sqm site at
St George’s Bay includes a luxury hotel and serviced residences which will be on a par with what we have done – and are continuing to do – in other countries, where we have designed and built award-winning properties. Corinthia conceived this project in line with our vision to attract a high net-worth visitor to Malta and remains in discussions with the authorities on various planning matters related to the project.” Mr Pisani added that the Corinthia Group is also working on a luxury tourist development in an area in the northern part of the island, known as Hal Ferh, which has been in a dilapidated state for many years. On the occupancy level within the Group’s various five-star hotels in Malta, Mr Pisani confirmed that performance was strong. “All Corinthia hotels are operating at high occupancy and registering increased revenue year after year,” he said. “This is not just due to the record visitor numbers, but our efforts to market globally and focus on specific market sectors. We’ve always believed in quality over quantity, and in visitors who can bring added value to Malta.”
“Various leading five-star hotels have long been preparing for increasing numbers of guests; some of them have invested in large-scale upgrades and refurbishment to meet the increased demand, while other five-star hotels are actually in the process of doing so.”
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NEWS
Hilton General Manager, Matthew Mullan, is no less optimistic. “We’re confident about the way forward,” Mullan told us. “Over the past two years we’ve invested a lot in our product, including significant refurbishment works. This will allow us to meet the increased number of travellers this year, as well as their increasing demands.” Xara Palace General Manager, Edmond Bonett, also spoke about the momentum that the Xara is experiencing. “Clients are opting for quality nowadays, perhaps even more than in the past. We’re very happy with how the industry is doing,” Mr Bonett said. “Our occupancy has been similar to that of last year, and we’re looking to keep the same momentum going in future.” Excelsior General Manager, Norbert Grixti, is looking forward to a growth in both occupancy and revenue. “The first six months of this year have registered healthy growth in both leisure and corporate segments. Part of this can be linked to the EU Presidency. All in all 2017 should be a very positive year, and it augurs well for Valletta which will be the European Capital of Culture next year.”
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e Business Observer is Malta’s leading business newspaper distributed with Times of Malta every month. Editorial Coordinator Marie-Claire Grima
EDITORIAL
Publishers Allied Newspapers Ltd. Content House Group Ltd.
Back to business The general election has come and gone. The outcome couldn’t be louder and clearer. The people opted for continuity. However, this does not translate into a mandate for Government’s top brass to continue operating in a way that makes one wonder whether the country’s institutions are still functioning, as senior people in Government facing serious allegations of money laundering, abuse of power and corruption have been retained as if the election outcome could actually erase the incidents that unfolded over the past few years from the country’s history books still have a police force refusing to investigate FIAU reports on corruption and money laundering, and we still have a bank operating in Malta which is facing highly serious allegations of being used by PEPs for money laundering purposes. To this day, nothing seems to have happened, as the institutions are acting as if they cannot really function. While the entire country awaits the outcome of the numerous magisterial inquiries into these serious allegations (in some cases there were more than allegations as a couple of black-on-white FIAU conclusive reports were passed on to the police to supposedly take action), the country is moving on to a ‘back to business’ scenario on various fronts. While the issues highlighted above will remain of grave concern and the allegations will not go away (especially pending the outcome of the various magisterial inquiries), we are in favour of seeing the country getting back to business. In this edition of The Business Observer we report prominently on two economic sectors that seem to be doing particularly well. Our front page story deals with the rumours circulated before the general election that certain gaming companies – in light of the country’s political crisis and due to certain decisions taken by some foreign banks that were no longer accepting to offer correspondent bank-related services – were considering leaving Malta. We have spoken to a few well-known gaming companies and found that they have a positive outlook on their operational setup in Malta, with one of them declaring that not only is management extremely happy to have set up here but that it is committed to make Malta the capital of the iGaming world! Of course we welcome such
a positive outlook and we also welcome the bold statement being made today in this business newspaper by Silvio Schembri – the new Parliamentary Secretary for Digital Economy, Financial Services and Innovation within the Prime Minister’s Office – that the Government is determined to pursue its vision for Malta to become the Silicon Valley of gaming. This industry has become a critical success factor for the overall well-being of our economy. As Dr Schembri himself has pointed out, there are now 9,000 persons working in the local gaming industry and the direct contribution of the gaming industry to the Maltese economy is significant. Another positive indicator is being reported in a separate story today that focuses on the sentiment being shared by the top guns of some 10 leading five-star hotels in Malta that have reported strong business in the top-tier bracket of our tourism industry in the first six months of the year. This is welcome news; while tourism trends remain extremely positive for Malta, they also changing, and there is a natural shift towards a self-catering, boutique or alternative style in so far as accommodation is concerned. So the fact that despite such international and local trends, Malta’s luxury hotels are reporting strong demand and a very positive outlook is another positive indicator for our economy. The hoteliers have argued that the EU Presidency and the unfortunate political climate of some neighbouring countries have helped considerably to reap the positive results registered in the first half of 2017. This should serve as an urgent reminder to our Government and the Planning Authority to do their basic fundamental duty to protect the environment and our heritage, as they are both major contributors to the future success of the tourism sector. In this sense recent decisions to demolish old townhouses in the village square of Zebbug (Gozo) and the oldest house in Marsascala are wrong and should be immediately reversed. We should not destroy our heritage for our own sake but we should also know that destroying our heritage in the long-term equates to destroying our tourism product. Let’s not kill the goose that’s laying our golden eggs.
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BUSINESS OPINION
Malta must become the Silicon Valley of gaming
Dr Silvio Schembri The success of the gaming industry in Malta is obvious for all to see. In a span of just over a decade, the industry has grown to become one of the key pillars of our economy. The direct contribution of the gaming industry to the Maltese economy was valued at over €1 billion in 2016, equivalent to one-eighth of total Gross Value Added. Firms in the sector and associated businesses are estimated to employ around 9,000 persons on a full-time equivalent basis. The industry also contributed €56.3 million in gaming taxes towards the Government’s budget in 2016, with the total contribution to the public coffers, including other forms of tax revenue generated by activity within the industry, estimated at around €120 million.
The results achieved must be our point of departure and not our point of arrival. We cannot afford to sit on our laurels but we must pursue our vision for Malta to become the Silicon Valley of gaming. Along the years, Malta has established a sophisticated and well-developed ecosystem for the gaming industry which is world-class. Malta’s regulatory regime is effective and transparent with a regulatory authority that is highly-skilled and experienced. Malta is in essence a role model for other countries to follow. This vision can only be achieved through thought leadership, the fostering of innovation and investment in technology. A key element in fulfilling our vision is to make sure that we provide a regulatory framework which continues to spur the development of the sector. It is our strategy to have a pioneering regulatory
framework, one of the first worldwide, that imposes obligations and requirements to attain its objectives, but does not go beyond that which is necessary. It is a framework that promises protection to consumers, prevention and detection of associated criminality, legal clarity and a safe and reputable base for local and international business to choose Malta as their jurisdiction of primary establishment. In fact, in the coming weeks we will be launching a public consultation in collaboration with the Malta Gaming Authority, for a new regulatory framework, which we hope will turn into law by early next year, keeping our jurisdiction at the forefront of this industry. In a sector where jurisdictional reputation is key, we have to make sure that the industry is kept crime-free and one of the next milestones we are facing is the im-
plementation of the 4th AntiMoney Laundering Directive (AMLD) in the gaming industry. All operators in the gaming industry will now become ‘obliged entities’ under the new 4th AMLD, and Government together with the MGA has been working on the implementation of this Directive and publishing clear guidelines on how the various parts of the industry ought .to take on their new obligations. Finally an area which has always been close to my heart is that of the promotion of responsible gambling. We have a responsibility to ensure that the success achieved by this sector is not at the detriment of the vulnerable. We have recently published a survey, which is the first one of its kind in Malta, which gives an overview of the consumption of gaming services by Maltese residents, includ-
“In a sector where jurisdictional reputation is key, we have to make sure that the industry is kept crime-free and one of the next milestones we are facing is the implementation of the 4th Anti-Money Laundering Directive (AMLD) in the gaming industry.”
ing economic and social considerations. Among the most interesting results of this survey one finds that in 2015, the Maltese population is estimated to have spent around €125 million in gaming services, which is equivalent to 2.8 per cent of total household consumption expenditure. Around 195,300 persons are estimated to have spent money on some form of gaming activity in 2015, which is close to 56 per cent of the population aged 18 years and over, and in general, around 1 per cent to 2 per cent of the population (which can vary between 2,000 and 4,000 persons) who acquire gaming services for payment report some type of adverse effect between gaming activity and lifestyle. The findings of this study indicate that problems associated with gaming activities undertaken through regular channels are relatively contained. This is in line with the trends in other EU jurisdictions. This survey should help all stakeholders to shape policies based on scientific data rather than impressions or myths, resulting in a more informed debate about the economic and social effects of gambling in Malta. Dr Silvio Schembri is the Parliamentary Secretary for Digital Economy, Financial Services, and Innovation.
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CASE STUDY
Assets Under Management hit the €950 million mark Martina Said BOV Asset Management Limited which has recently undertaken an extensive restructuring and rebranding exercise, has today built a solid portfolio of investment solutions consisting of local and international oriented mutual funds, risk-driven solutions and institutional portfolios, totalling €950 million, to date. The composition of funds is split between 65 per cent invested in the local market and 35 per cent in the international market. Mark Agius, Executive Head, BOV Asset Management Limited, gave an overview of the company’s core business activities. “BOV Asset Management Limited, formerly known as Valletta Fund Management Limited (VFM), was set up in 1995 with the core activity being the investment management of the funds set up by the Wignacourt, Vilhena and La Valette SICAVs. VFM was also responsible for promoting, distributing and marketing the funds, but this all changed with a review of the business model for VFM,” he asserted.
BOV Asset Management Limited was originally owned by Bank of Valletta p.l.c. (BOV) and Rothschild Asset Management Inc. (RAM), with a 60 per cent and 40 per cent shareholding respectively. Since 1995, however, the 40 per cent stake was acquired by Insight Investment, and in August 2016, Bank of Valletta p.l.c. acquired the 40 per cent share in VFM from Insight Investments, making BOV Asset Management a fully owned subsidiary of Bank of Valletta p.l.c. “In this context, the rebranding of VFM into BOV Asset Management was a natural step reflecting the growth of the company. The primary trigger was the extension of the company’s business activities to include portfolio management for institutional clients, moving from a solely fund management company to a fullyfledged asset management company.” Mr Agius asserted that after taking full ownership of the company, Bank of Valletta p.l.c. took the strategic decision to service institutional clients from BOV Asset Management Limited. “I believe that the BOV Group took this decision on the basis that, as UCITS
Manager, BOV Asset Management Limited has built a robust governance and operational structure which culminated with the classification of all funds under UCITS rules, following the consolidation of all the funds under the Vilhena SICAV. The regulatory oversight function required under the UCITS Directive has been strengthened with the introduction of three internal committees – the Investment Committee and the Risk and Regulatory Committee and the Portfolio Review Committee, recently set up with the aim of monitoring and handling the necessary oversight over institutional mandates. We have a dedicated Compliance Monitoring and Risk Management team to support our core activities. Meanwhile, we have strengthened our Asset Management team with experienced and highly qualified employees.” Mr Agius explained that the UCITS Directive regulates collective investment schemes and allows them to be promoted across the EU. “The Directive aims to provide a secure environment for fund investing, and a uniform reg-
“e primary trigger for the rebranding was that the company’s business activities extended to include the portfolio management of institutional clients, moving from a solely fund management company to a fully-fledged asset management company.”
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CASE STUDY
ulatory regime for the structure, management, governance, safeguarding of assets and marketing of collective investment schemes throughout the EU member states,” said Mr Agius. “According to recent statistics published by EFAMA (the European Fund Asset Management Association), UCITS net assets increased by 5.2 per cent in the first quarter of 2017, reaching €9.1 trillion at the end of March.” UCITS funds are considered the appropriate funds for retail investors who are not professional investors, and so require an extra degree of security, Mr Agius explained. “A number of aspects within the UCITS regime provide investor protection, namely eligibility of assets, diversification, liquidity, valuation of the fund and individual assets, risk management and compliance, oversight and safekeeping, as well as fund information. In essence, UCITS provides an additional line of defence for the retail investor.” Whilst offering individual retail investors a number of domestic and international funds, BOV Asset Management is today also servicing, companies and institutions. Indeed, the governance structure and the in-house asset
“Our strategic view is that BOV Asset Management Limited should be at the forefront of innovative and value additive investment solutions to retail and institutional investors alike.”
management experience are now being extended to institutional and corporate clients. BOV Asset Management Limited is successfully providing tailor-made portfolio management solutions to different institutions with different return objectives and risk parameters. “Given the wide range of our clientele, our product suite need not just to be dynamic but also flexible to accommodate for the specific needs of different institutions. A robust structure along with asset management talent expertise and a strong BOV brand support our value proposition to institutions.
Last December, the company also launched three portfolio funds under the BOV Investment Funds, which is also the first UCITS contractual fund structure registered in Malta. These funds are specifically managed on a risk-based approach. “This is a completely new concept for Malta,” said Mr Agius, “enabling us to meet the requirements of conservative, balanced and more adventurous clients through funds that have a pre-determined level of risk tolerance. The BOV Investment Funds are multi-asset global funds – through which we invest in bonds, equities, cash, deposits and alterna-
tives such as gold and oil, and include the BOV Conservative Portfolio Fund, BOV Balanced Portfolio Fund and BOV Growth Portfolio Fund. With the latest updates of the UCITS Directive, the SRRI (Synthetic Risk Reward Indicator) was introduced. This is a visual risk indicator with a scale from 1 (lowest) to 7 (highest), that has to be applied to every fund set up by a fund management company. Our commitment is to not exceed an SRRI risk level of 3, 5, and 6 for the Conservative, Balanced and Growth Portfolios respectively.” The innovative contractual fund structure also allows for a low-cost investment solution for our clients compared to more traditional schemes. All this is perfectly synchronised with our strategic view that BOV Asset Management Limited should be at the forefront of innovative, value additive investment solu-
tions to retail and institutional investors alike. Mr Agius added that these Portfolio Funds provide peace of mind to investors, who feel reassured knowing that they won’t be risking more than they’re prepared to. “The value of the BOV Investments Funds since being launched last December to date, amount to €23 million. We also believe that these three funds have a perfect fit with the financial life cycle of an individual. One can shift from growth to balanced over the years, and nearing retirement, can shift to a conservative profile, in line with the individual’s own life cycle and risk appetite. The company is also in the process of extending its license to include pension management, so that we’ll be in a position to support institutions who want to set up a pension scheme for their employees.
The information, views and opinions provided in this article are being provided solely for educational and informational purposes and should not be construed as investment advice. BOV Asset Management Limited is licensed to conduct investment services by the Malta Financial Services Authority. Issued by BOV Asset Management Limited, registered address 58, Triq San Żakkarija, Il-Belt Valletta, VLT 1130, Malta. Tel: 2122 7311, Fax: 2275 5661, Email: infoassetmanagement@bov.com, Website: www.bovassetmanagement.com. Source: BOV Asset Management Limited.
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INDUSTRY FOCUS
Developing Malta into a regional logistics hub
e logistics industry plays an important role in connecting the Maltese market to the European mainland. Marie-Claire Grima spoke to a number of persons within the logistics and freight industry to find out about the complex and changing nature of the sector, and what is being done to bolster it. ATTARD HOLDINGS Kevin Attard Managing Director of Attard Holdings Can you comment on the role that logistics and shipping companies play in connecting an island like Malta to the rest of mainland Europe and making it more competitive? The logistics sector has changed a lot over the past couple of years, following Malta’s introduction to the European Union in 2003. This proved to be rather challenging for this industry. Joining the EU gave Malta more exposure to the rest of Europe, thus the Maltese market was able to widen its horizons. Therefore, Maltese logistics companies had to adapt in such a manner as to operate under these new cir-
cumstances. Attard Holdings, for example, joined forces with one of the most established international transport companies in the south of Sicily – Passalacqua Trasporti. The two companies merged their fleets to reach client demands. The partnership between these two transport companies created a great synergy, enabling the two to become market leaders in a new niche – a niche which took competitors a while to understand. The frequency of ferry services to and from mainland Europe meant that Italian ports helped to minimise transit times taking orders carried out by importers and exporters to the next level. However, this had negative effects too – clients became more demanding and all this came with a cost.
Even though stocking services were delivered at a high quality, the demand for faster and more efficient deliveries increased with clients placing a lot of importance on rates being offered. Shipping rates did not contribute positively to the development of the industry. Competition is healthy in this industry as it keeps all entities on their toes, however authorities should ensure that all operators, are able to operate on the same level playing field. This is a must and surely, the way forward! Malta’s geographical position has always played an important part for all industries and their logistics. Authorities are to ensure that ferry costs, terminal handling charges and other additional operational costs are controlled, so as to remain competitive with the rest of the European countries.
THOMAS SMITH GROUP Joe Gerada Managing Director, Thomas Smith Group What do you think of the efforts which have been made so far to develop Malta into a regional logistics hub? The first important step is to recognise the fact that a logistics hub would be a desirable facility and that at a private investment level, there is great potential for enterprising individuals to generate activity out of this. The added advantage is that this activity is not restricted by the limited size of our market. A logistics hub implies importation, handling – including repackaging or a similar continued on page 16
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INDUSTRY FOCUS
Maintaining a streamlined, low-cost transhipment process continued from page 15 process, and re-export. An important factor would be to treat cargo in such a way that it does not incur local importation and exportation costs, and to keep the transhipment process as streamlined, low-cost and involving minimal handling as possible. A straightforward legal, geographical and administrative environment is necessary. Consequently the construction of warehouses is not enough. In fact the lack of response to such an invitation speaks for itself. We must think air, sea and road transport. We must assess what the strengths and weaknesses of our competition are in other established, well-positioned hubs in Europe. In terms of seaport and airport, Malta has no inherent disadvantage, but in terms of roads, it leaves much to be desired. A winning logistics hub needs to sharpen its act on the three modes of transport and interchange between them. I think a lot of work still needs to be done. EXPRESS GROUP Franco Azzopardi Chairman and CEO, Express Group Have there been any recent investments within the company to help it improve and develop its logistics service?
As a leading logistics company which is strongly built to endure, our investments towards this end are ongoing. We look at investment under three categories; people, physical space and equipment, including our fleet. We believe that our people are the key differentiating asset in our offering. As such we have successfully completed a number of training programmes in management, customer relations and health and safety. The company’s human resources are also provided with best-of-breed IT tools, and investment in the IT infrastructure is regular and ongoing. Express Trailers has also recently completed important infrastructural works in its outer yard premises. The investment involved the resurfacing of its external yard as well as an upgrade of its maintenance workshops. The works involved strengthening of existent structures to support the installation of new overhead cranes to assist better the technical staff in the growing business of the company, including the side-loader reconditioning. Re-building and reconditioning of side-loaders is a service we are delivering in collaboration with HAMMAR, a world-known Swedish brand in the sideloader business. The newly installed roof and over-head crane system not only helps us reach new efficiencies but provide a safer
working environment for our employees. We also completed a major resurfacing project in our yard to facilitate the manoeuvrability, organisation and efficient management of Express Trailers’ increasing fleet of trailers, trucks and other specialised equipment. MOBY LINES AND TIRRENIA Dr Alessandro Onorato Vice-President, Onorato Armatori S.p.A., Moby Lines and Tirrenia
time operations plan to Sicily with connecting ro-ro ferries to all major Italian ports. Since it became a member of the EU, it is evident that more and more of Malta’s business will be transacted with its closest EU nation, which is Italy. This, together with the fact that local importers are utilising trailer services more than container services, means that local operators are in need of a competitive, efficient and regular service from Sicily and mainland Italy.
Tirrenia restarted operations in Malta in 2016 after an absence of 35 years. Can you comment on why the decision was made and how the Maltese market has changed after more than three decades? We have followed the evolution of the Maltese market very carefully and we decided to invest in a nation that is growing fast and that we believe will continue to grow in the next years. Of course many things have changed in the last three decades both for the island and for Tirrenia: Malta is now an important industrial and commercial centre while Tirrenia is part of a group which is emerging as one of the most important ones in all of Europe. The results of our first nine months of operations gave us the confidence to invest more and change our operations, from one weekly trip to a four-
Moby Lines is a major player for freight traffic to the main islands in the Tyrrhenian Sea. Malta already has an excellent trading relationship with Sicily – do you think the same results can be replicated in Corsica and Sardinia, and how is Moby Lines playing a role in this regard? Our aim has always been to give the market the best service possible. What we are most proud of is giving our transportation companies the chance and opportunity to grow – as a result, you encourage the whole islands to grow. With a regular service operating four times a week we believe that transport companies will also take advantage of this to their benefit. Of course our challenge is to replicate our strategies in Malta and we strongly believe that trading between Malta and Sicily still has a lot of space for future development.
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CASE STUDY
JEFFREY BUTTIGIEG, COO OF RE/MAX MALTA
Authorities should provide updated national statistics to inform businesses – RE/MAX In a market that is still evolving whilst on the verge of regulation, COO of RE/MAX Malta Jeffrey Buttigieg explains that in order to seize the opportunity of taking the industry to the next level with the regulation, the authorities must work with the industry and provide on-going national statistics and support so that businesses may take knowledgeable decisions on the way forward.
A company that takes pride in being the knowledge leaders of the industry, RE/MAX Malta believes that sharing knowledge and information is the key to ensure that when regulation becomes a reality with the proposed licensing system real estate companies will not stop at just simply participating in making sure their agents attend a mandatory course. “It’s of utmost importance that before anything else that the
newly set-up authority focuses on a longterm plan in educating the industry including the public with ongoing data and trends,” Mr Buttigieg said. RE/MAX Malta certainly knows a thing or two about data – it’s a company that counts its constantly-updated knowledge of the market as one of its greatest assets. “We are very diligent in utilising market research, as a business can’t do everything
on assumption alone,” Mr Buttigieg said. “Markets change – they’re always changing. It doesn’t matter how long you’ve been around - you must put your hand in your pocket and invest in market research to understand your market. We invest thousands of euros yearly on different types of research, finding out how many people live in a home, where they’re living, understanding customer behaviour
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and so on. Every quarter we examine the trends and carry out market polls. One of the main things I attribute to our success is the knowledge that we give to the customer. Anyone who visits our blogs will find over 1,000 articles about Malta – from buying, to rental investments, to doing up your flat, to reasons to live in particular areas – we try to give them a whole knowledge base. The way we see it is that if we’re going to do something, we will either do it well or we won’t do it at all.” RE/MAX has now also created its own property price index, which will be launched to the public in the coming months. “The public price index will compare listing prices, using data from all over the islands, which will allow customers to see how they’re changing on a quarterly basis, and even compare them to sales prices. The areas where the data isn’t 100 per cent accurate due to lack of information will be flagged, so that the client will be able to gauge the accuracy of the index. We’ve developed the index and are currently testing it internally – it should be released to the public around September.” RE/MAX has held the number one market share in the United States and Canada for several years, and while Mr Buttigieg estimates that RE/MAX Malta currently has around 35 per cent of the real estate market share in Malta, he’s working on bringing that figure up too. The company seeks to stay one step ahead when it comes to tech, seeing technology as a tool that will revolutionise the industry. Furthermore, it is
“We were the first company in Malta to train our people specifically in selling real estate, and our courses have only become more detailed and intensive with time.” meticulous about its online presence, with a carefully-updated website and Google rankings that are the envy of any real estate company operating locally. Of course, as part of an international franchise, RE/MAX Malta benefits from knowledge and innovation from all over the world. “Nobody has a bigger network than we do. We always have opportunities to network and inform clients about opportunities in Malta. We take advantage of our network and attend several referral networking events at International conferences.” Virtual reality remains a long way away from becoming a viable real estate marketing tool – “there’s no plug-and-play – it involves a lot of work that still doesn’t compare to a real on-site visit. We’ll be there before the technology becomes a commodity, but we’ve looked at different providers and weren’t happy with the results. Taking a client to see the place in person is still the best option.”
While Malta has become a popular property location for various high-net-worth individuals, due in no small part to the IIP programme and Malta’s favourable tax regulations, Brexit has become another driving force directing people to the islands. “Brexit isn’t the worst thing to ever happen to the UK, but when a business is enjoying certain benefits, such as passporting rights, they’ll probably try to find ways to hang on to them. Moving to Malta would be a sound business decision. They’re doing their due diligence, dealing with landlords, planning their next move. When it happens, they’ll be prepared to leave.” Besides RE/MAX’s own considerable efforts, Mr Buttigieg said the government is ticking most boxes when it comes to making Malta appealing to foreign buyers. “The government has already been proactive enough to come up with a committee called Property Malta, created specifically to market Malta abroad, and to set the stage for the
regulation of estate agents. This will add credibility to the industry, and we’d like to get involved when it happens. We were the first company in Malta to train our people specifically in selling real estate, and our courses have only become more detailed and intensive with time.” “High-net-worth people are buying property in Malta, with the intention of living here, but this doesn’t mean they don’t have other homes worldwide. Multi-millionaires rarely live in one place, but Malta is a perfect base because from here you can go anywhere. It’s attracting a lot of people in tech, bankers, retired corporate types – people who have floated their business on a US stock exchange and either moved out of their business or who now want to use their money to invest in international property.” Mentioning high-net-worth buyers circles us back to the issue of the townhouses and heritage builds. Isn’t Mr Buttigieg worried that the destruction of prestigious traditional homes to make way for modern high-rises will ruin Malta’s fabled charm and make it less attractive to buyers? As always, he is pragmatic. “The ideal would be to preserve the old and build the new. Malta is small and we have to meet certain demands; right now, we have three or four requests from companies who would need around 15,000 sqm of space to themselves. Finding that kind of space in Malta, in the most demanded areas requires planning. So I don’t see a problem with going higher. In fact, it’s probably the only solution.”
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STOCK MARKET REVIEW
BRRD: e first act Christopher Mallia Investors holding local bank bonds may have been surprised by the letters they received over the past few months from each of the banks highlighting the introduction of the Banking Recovery and Resolution Directive (more commonly known as BRRD) as well as its hypothetical and potential implications on their investments. BRRD was enacted on 2 July 2014 as part of the eurozone’s efforts towards the creation of a banking union and to avoid a repetition of the various bailouts undertaken by a number of European governments to those banks facing financial difficulties in the aftermath of the international financial crisis. Although the law was formalised in 2014, its main provisions became effective on 1 January 2015 whilst the part related to the bail-in resolution tool became effective on 1 January 2016. The main aim of the bail-in resolution tool is to force a bank that is facing capital or liquidity deficiencies to first exhaust all options available to it to correct its situation before making a request to its respective state for a bailout. In other words, the bailin resolution ensures that losses are first incurred by shareholders, then by bondholders (starting with the lowest-ranked subordinated bonds) and ultimately by uninsured depositors before any public funds are utilised in a bank’s rescue. Furthermore, the EU directive states that the bail-in resolution tool
may apply to any liabilities which are not backed by assets or collateral including subordinated and unsecured bank bonds as well as uninsured deposits. Additionally, before any request for public funds is made, at least 8 per cent of the bank’s total liabilities must first be written-off. Although this resolution was commended as a step in the right direction and also triggered various capital raising initiatives across the European banking industry, given that it was an unprecedented piece of legislation, uncertainty still reigned across financial markets on how this resolution would actually be enforced when the need arose and on its effectiveness to resolve material bank issues. Regulators got their first chance to prove the resolution’s effectiveness earlier this month. The first resolution under this regime was triggered by the Single Resolution Board (SRB), a fully independent EU agency acting as the central resolution authority within the banking union. The SRB triggered the bail-in resolution tool on Wednesday 7 June after it declared that Banco Popular of Spain (i) is failing or likely to fail; (ii) there is no reasonable prospect to prevent failure within a reasonable timeframe and (iii) a resolution action would be necessary in the public interest. The resolution meant that Banco Popular’s Tier 1 equity (together with additional instruments forming part of the bank’s Tier 1 capital) was completely wiped out. Likewise, the resolution led to the conversion of the €2 billion subordinated bonds into shares which were ultimately sold to Banco Santander for the symbolic price of €1. All this was executed within 24 hours, with the SRB receiving praise from various quarters for the expedient and effective action which had a minimal impact across eurozone equity and bond markets. It is important to highlight that while
“e main aim of the bail-in resolution tool is to force a bank that is facing capital or liquidity deficiencies to first exhaust all options available to it to correct its situation before making a request to its respective state for a bailout.” shareholders and holders of subordinated bonds were wiped-out, senior bondholders and depositors of Banco Popular were spared from any losses.
Nonetheless, certain commentators still opine that additional evidence is required before further judgments are made regarding this directive. In the aftermath of the
Banco Popular resolution, critics stated that losses at other banks that would require a resolution, such as Liberbank in Spain, are potentially much larger than those at Banco Popular and therefore senior bondholders and uninsured depositors may also need to bear the brunt of losses. Such a scenario is being dubbed as the real test of BRRD as the consequences could have contagion effects across equity and bond markets. Various articles across the international media had also identified Banco Popolare di Vicenza and Veneto Banca in Italy amongst the European banks that are next in line to fail. Last Friday, the European Central Bank (ECB) declared the two Veneto banks as ‘failing or likely to fail’ on the back of repeated breaches of capital requirements and the lack of credible solutions to these breaches. The ECB accordingly informed the SRB of these findings which in turn announced that whilst the banks are failing, a ‘resolution action is not warranted in the public interest’ given that ‘their failure is not expected to have significant adverse impact on financial stability’. As a result, the two Italian mid-size banks were bailed out by the Italian government (as approved by the European Commission) drawing criticism that the move is circumventing EU rules. The bailout is estimated to cost up to €17 billion comprising a €4.8 billion capital injection into Intesa Sanpaolo (which assumed the ‘good’ assets of the failing banks), a further €0.4 billion in guarantees to Intesa Sanpaolo against potential future losses as well as up to a further €12 billion in guarantees to cover losses from bad loans. In the case of the two Veneto banks, shareholders and junior bondholders were also wiped out whilst senior bondholders and depositors were safeguarded. As such, although the bail-in resolution tool seems to have passed its first test, other cases that are likely to emerge in
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the future will surely test its effectiveness once again. So why did Maltese banks send out the letters with respect to BRRD? Since Malta is part of the eurozone, all Maltese registered banks fall under this regime including those securities issued by local banks prior to the creation of this legislation. The provisions of BRRD, which apply to all European Union and European Economic Area member countries, also oblige banks to inform all holders of their unsecured bonds of this new directive and its potential implications on their bond investments. The letters were therefore sent out to satisfy a legal obligation intended to ensure that all bond investors are aware of this new investment characteristic. Nonetheless, the letter described a hypothetical situation which currently is highly unlikely to materialise in the local banking industry under present circumstances. Local banks have historically retained a strong capital base and sufficient liquidity. Given that the outlook for the European banking industry remains challenging in view of the more stringent regulatory and capital requirements, further cases of bail-in resolutions may hit the headlines in the coming months across Europe. However, local banks seem to have adequate capital and liquidity levels in line with prevailing regulatory requirements and are also planning ahead to meet the more stringent capital requirements that come into force on 1 January 2019. Nonetheless, investors should constantly remain abreast of developments at local banks in which they are investing whilst also remaining cognisant of the investment characteristics as well as risk factors of their equity and bond investments. Christopher Mallia is Head of Research at Rizzo, Farrugia & Co (Stockbrokers) Limited
“Given that the outlook for the European banking industry remains challenging in view of the more stringent regulatory and capital requirements, further cases of bail-in resolutions may hit the headlines in the coming months across Europe.”
Rizzo, Farrugia & Co. (Stockbrokers) Ltd, “Rizzo Farrugia”, is a member of the Malta Stock Exchange and licensed by the Malta Financial Services Authority. This article has been prepared in accordance with legal requirements. It has not been disclosed to the company/s herein mentioned (if applicable) 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, if any, to which this article relates (other than executing unsolicited client orders) until such time as the recipients of this article have had a reasonable opportunity to act thereon. Rizzo Farrugia, its directors, the author of this report, other employees or Rizzo Farrugia on behalf of its clients, may have holdings in the securities herein mentioned, if any, 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 Rizzo Farrugia, 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 article.
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CASE STUDY
PTL shifts focus to more specialised IT solutions “Malta is already an international hub for IT solutions,” said PTL’s general manager, Peter Bugeja. “Fortunately, we have a talent pool of motivated and energised professionals and this is the reason Malta has been so incredibly successful. However, as its size presents some limitations, it is wise to specialise to ensure our offering is more competitive on the international market.” Mr Bugeja’s comments about Malta’s IT solutions offering as a whole mirrors PTL’s path, as well as the vision he has for the company going forward. Established back in 1946 as Philip Toledo Ltd, it quickly became one of the leading IT companies in Malta delivering technologies and hardware solutions to diverse sectors such as banking, finance, retail, hospitality and various state entities. In 2012, it was acquired by Hili Ventures and rebranded to PTL. Mr Bugeja joined the company last year as General Manager, heading the new management team that was brought on board to direct PTL, now part of Harvest, the Hili Venture’s Technology Division, into a more specialised direction. His career in IT spans nearly 40 years – he spent 16 years in the UK working for British Telecom, before moving back to Malta as the CIO and deputy CEO of MITTS Ltd (now the government’s IT agency, MITA) for 10 years, and another 10 years as Chief Operations Officer at 6PM, which was recently acquired by IDOX. “In the past, PTL acted as an end-to-end service provider, offering comprehensive solutions to a cross-section of the commercial community and Government. In today’s world, however, technology has moved at an amazing pace and customer demand has evolved exponentially and IT companies are evolving into specialist providers. At PTL, we
“We’re refocusing our company resources on specialised areas and driving as much innovation into these areas as possible.”
recognise this shift and we shall further our position as thought leaders in the areas we have been systematically focusing on. Thought leadership can only be recognised by bringing added value and the drive to deliver business benefit to our customers. We’re refocusing our company resources on specialised areas and driving as much innovation into these areas as possible.” As from July 1, PTL will spin off two new independent companies which will handle separate functions that used to be part of PTL’s remit. The first - Eunoia - will be concentrating on business analytics, providing industry-specific and tailor-made solutions for the
finance, retail, distribution and other sectors. The second, Stride Technology, focuses on integrated business applications from global partners and niche business solutions. This move will enable PTL to put all its strength behind two key areas – technical solutions and software engineering – which Mr Bugeja said intrinsically complement each other. “Nowadays, you can’t work on one area independently – you have to think about the full stack of a technical architecture to the support offerings. By making this shift, PTL is increasing agility to deliver great services and valueadded, quantifiable benefits to its customers.” It has also been a reason for customers to approach PTL for systems engineering and managed services. “Customers systematically find deploying the use of outsourced systems engineering much faster and cost effective.” Some of PTL’s solutions include Sales in Motion, an automated order-taking system which allows sales representatives to take orders directly at customers’ locations and seamlessly integrating with their ERP solution, and møde247, a meeting room management software that connects to an enterprise calendar offering greater flexibility in both availability and booking from any device. “In the past few months, we took a conscious decision to turn these two solutions into state-of-the-art products, and we directed considerable investment to future-proof them, allowing us to offer greater value to our local customers and market new products internationally.” Mr Bugeja explained that PTL will engage in increased international business, and innovate further in the company’s niche products aimed at banking, finance, health including law and
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enforcement. “We’re changing the mind-set; moving from bespoke solutions to niche products which can be applied to multiple sectors. On the other hand, we are currently evaluating the creation of different value-added products within the health sector, which is a key area for our future. As people are living longer, the demands on the health sector are growing. Any solution within the health sector that’s going to make the running of a hospital or community care centre more efficient, offering better patient care and delivers significant ROI in a short period of time, will certainly be key to our international business strategy.” Finding the right resources is always a challenge in Malta, especially with IT resources so highly in demand. Mr Bugeja believes that a key part of attracting people to the company is the firm’s philosophy that if you’re in IT and
you’re developing something, you take pride from the fact that it’s something that’s going to make a positive difference. “The drive and satisfaction of working with such a company is what sets us apart from others.” Another challenge is finding resources for research and innovation (R&I) which is crucial to a company like PTL, but Mr Bugeja remains undaunted. “Investment in R&I requires longterm vision but we are great believers in innovation. One of the areas we are investing in is applied R&I for evolutionary prototypes in our specialised focused areas. It is a long process but the rewards will be substantial. Ultimately, we always have to strike a balance between safeguarding the financial health of the company and its workforce and investing in ensuring that we continue to grow in our focused areas in a sustainable manner.”
“We’re changing the mind-set; moving from bespoke solutions to niche products which can be applied to multiple sectors.”
PTL GENERAL MANAGER, PETER BUGEJA. PHOTO: INIGO TAYLOR
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ANALYSIS
Next steps on the economy Manuel Zarb The burgeoning state of the national economy was the major selling point of the previous Labour Government, and as the storm of activity surrounding the election quiets down, the Government will look to continue this success whilst downplaying governance concerns which could affect faith in the economy. Foremost is the issue of the financial services and gaming industries. The election campaign saw the Opposition voice concerns that corruption has harmed Malta’s reputation in these key sectors. In the face of this, Prime Minister Joseph Muscat decided to hold on to the financial services portfolio, and said that large gaming operators are choosing to do business in the country. Dr Muscat’s recent visit to Betsson is sure to be followed by a series of similar announcements, as the Government engages in a charm offensive to assure businesses that all is well in this area. A key ministerial appointment demonstrates another Government priority. Minister Konrad Mizzi, formerly tasked with energy and later responsible for energy projects, is now to oversee the privatisation of Air Malta as Tourism Minister. Dr Mizzi’s actions will be heavily scrutinised by the press, and his level of success in handling the national airline will reflect greatly on tourism and the wider economy. Getting it right will be a crucial priority for the Government. Moving on to electoral promises, the Government’s pledge for increased assistance to SMEs will have a big impact. The Government will increase assistance to Malta-based enterprises from €30,000 to €50,000 (with Gozo-based enterprises, or those with majority-female shareholders benefitting from €70,000 in assistance). This policy could greatly benefit SMEs, and is one of the pro-business pledges put forward which could truly bolster the economy. It will be interesting to see whether the Government can pull it off. Gozo is also set to benefit from many initiatives. Several promises were made regarding the island, but the most signif-
icant is the pledge to start work on a tunnel connecting Gozo to Malta. The impact this would have on the island and Gozitans is difficult to overstate. Prime Minister Muscat said this year that the tunnel could be operational within seven years – a formidable promise, and a significant achievement if this happens. On the environment, the Government has said it will not allow major projects outside of the development zone. The Government lacks credibility on this issue given its track record. Nevertheless, a genuine effort to respond to the concerns of the environmentalist lobby
“Giving public holidays back to the workers will be particularly hard on businesses employing many people, who could lose thousands of hours of work. A public consultation on the pledge – not unlikely, given the Government’s pro-business leanings – could allow businesses to voice this concern, leading to a better policy overall.”
FUTURE FOCUS Leading economist Gordon Cordina identifies the strategies we should be focusing on for the future of our economy, starting with a concerted effort towards the development of the ‘global lifestyle hub concept’ for Malta over the medium term. “Malta needs to become the regional place of choice for people from all over the globe to work, learn, relax, heal and develop culture and art. This will build upon our distinctiveness as a people and Malta’s unique heritage and geography. We also need to address economic strategies for diversification within and away from our overweight sectors, maximising opportunities from Brexit and
would be better for the economy in the long run. Land is the most valuable resource in Malta – taking care of it properly would secure tourism prospects, and could even help the development industry overall. Everything depends on whether the Government is willing to act differently. Of direct interest to business owners is the pledge to ‘give public holidays back to the workers’; in practice, giving employees additional leave days for public holidays falling on the weekend. This will be particularly hard on businesses employing many people, who could lose thousands of hours of work. A public consultation on the pledge – not unlikely, given the Government’s pro-business leanings – could allow businesses to voice this concern, leading to a better policy overall. Another critical area where big promises were made is transport and roads. Prime Minister Muscat pledged €700 million for road resurfacing over the next seven years – a massive investment to be overseen by Transport Minister Ian Borg. Traffic has consistently been a top con-
diversifying away from excessive dependence on tax competitiveness.” “From a practical perspective, it’s important that we have a strategy for the maximisation of our human capital value – with better use of EU funding for learning and continuous training, and the reaping of opportunities for the availability of human labour. Lastly, I would stress the need for renewed focus on housing as a determinant of poverty and on more cost-effective solutions for poverty reduction, as well as continued focus on investment in the energy sector to help us sustain our competitiveness and reduce poverty.”
cern for Maltese voters. Critics argue that resurfacing the country’s roads in seven years is not feasible; the scale of investment and the appointment of Dr Borg show a determination to do so. If the timeline is uncertain, the necessity of the project is clear, with a big knock-on effect on the rest of the economy and, more generally, on the quality of life. During the previous legislature the Government did deliver on much of its economic promises, even as poor governance and the environment posed problems over the last four years. The prospects for this Government’s term, whilst bright, also depend on events outside its control – such as the outcome of four magisterial inquiries, three of which concern the Prime Minister or his chief of staff directly. Negative verdicts would require a lot of time spent on damage control, weakening the Prime Minister’s hand – verdicts favourable to the Government, on the flip side, would allow it to implement its economic programme with more political capital than before. As with most things, only time will tell.
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BUSINESS UPDATES
Hertz Malta celebrates 20 years of car-leasing services Hertz Malta is celebrating its 20th anniversary in the car-leasing sector, providing individual and corporate customers with flexible long-term car rental products. “Hertz has been successfully operating its business in Malta for 55 years, having added its leasing services 20 years ago to ensure customers’ long term car rental needs were also fulfilled. United Garage Ltd, the company that operates Hertz in the country, boasts a longstanding experience in the leasing business, which was certainly instrumental to consolidate our brand portfolio,” explained Ron Scerri, General Manager, Hertz Malta.
“Strengthening our leasing service means putting customers in the driving seat, matching their requests for preferred model, leasing plans and packages and supporting them with additional practicality, convenience and added-value.”
“Clients want flexibility and a personalised approach through the complete freedom of choosing the model, leasing plans and packages that best suit their requirements. Strengthening our leasing service means putting customers in the driving seat, matching their requests for preferred model, leasing plans and packages and supporting them with additional practicality, convenience and added-value.” “Our corporate lease offer and professional fleet management service help customers optimise costs and efficiencies while freeing up their time and resources so they can concentrate on running their business,” added Ron Scerri. Further information about Hertz Leasing can be found on the new website www.hertzlease.com.mt
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BUSINESS UPDATES
HSBC introduces new debit and credit cards for businesses Businesses make up the backbone of Malta’s economy. HSBC Malta recognises their contribution as drivers of the economy by offering them a new portfolio of business cards. e new HSBC Business Debit and HSBC Business Credit cards offer businesses greater buying power that traditionally was not available to them, whilst also providing more opportunities to earn rewards. For instance, the HSBC Business Credit card allows the main account holder to allocate different credit limits to cardholders according to business requirements. “HSBC Business Debit and Credit cards resolve an important issue for businesses as sometimes they need immediate buying power to fund their growth,” said HSBC Head of Commercial Banking Michel Cordina. “e cards are designed purposely to achieve not only that, but also to offer the countless possibilities of the HSBC capabilities such as worldwide acceptance, multi-trip travel insurance, and cash back on airfares.” “ese new cards are ideal for many different levels of businesses, from sole traders to small businesses to corporates,” he added. e cards are easy to use and an ideal way to keep track of day-to-day expenses such as travel, hotels
NEW HSBC BUSINESS DEBIT AND BUSINESS CREDIT CARDS GO WHERE YOUR BUSINESS IS GOING
and restaurants, building materials, office supplies and equipment. e HSBC Business Debit and Business Credit cards replace the HSBC Debit and Credit Negozju cards.
Acumatica captures key data affecting project profitability In today’s fast-moving digital arena, having all the necessary information that pertains to your business can be the most powerful weapon in your arsenal. This can be even more pertinent in professional services organisations. With everyone communicating digitally, and expecting to receive both insight and instruction at a moment’s notice, it’s paramount for companies to ensure that all critical project information is flowing through the right channels – for employees as well as clients. Acumatica’s Project Accounting module centrally manages budgeting, billing, and profitability for individual business initiatives involving multiple employees, tasks, and materials. This ensures your
communication with staff and clients is instantly made clear from the word go. Once the relevant project data is accounted for, and your plan is itemised in a way that you can both see and account
for with no confusion or ambiguity, you can get to what’s really important for your project to succeed and your business to grow. Let’s face it – project profitability is widely dependent on the proper management of deployed resources, the status of projects currently running, and the ability to efficiently process client feedback. Acumatica’s Project Accounting module provides a powerful 360degree view of your customers’ activities, requests, and projects, enabling your company to stay ahead of the competition. Learn more about Acumatica Project Accounting by visiting www.computimesoftware.com/a cumatica-project-accounting; T: 2149 0700; E: info@computimesoftware.com
e Malta International Arts Festival – an exciting, colourful kaleidoscope The Malta International Arts Festival will be taking place from 29 June till 16 July 2017, in venues all over Valletta. The artistic team, led by Michelle Castelletti, has created a varied programme full of new work – premieres by Maltese composers, installations, new choreography, new theatrical work, calls for artists and much more. “The aspiration is for Malta to become a destination on the world’s cultural map. The vision is to achieve this by bringing art to the people, through distinctive programming and by creating a unique cultural offer. We have brought together Maltese and international artists together with exciting results. We are bringing what is happening in the world to Malta, but, importantly, we are nurturing talent and giving our young artists a platform,” explained Dr Castelletti. One of the highlights is the residency with the London Sinfonietta, with workshops for Maltese composers, and which will culminate in a performance with live orchestra and a film screening of Jonathan Glazer’s Under the Skin with score by BAFTA winner Mica Levi (Micachu). From the fantastic sound of big bands, with Malta’s very own Big Band Brothers performing as you have never seen them before, to world-renowned Mnozil Brass, to passionate flamenco with Francesca ‘La Chica’ Grima and Puerto Flamenco, MIAF promises to entertain everyone. www.maltaartsfestival.org
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BUSINESS UPDATES
Malta Business Bureau and international partners launch Horizon 2020 project
Express Trailers announces improved groupage services to and from Poland and Turkey Express Trailers has announced improvements and developments in its consolidated weekly groupage services to and from Poland and Turkey. “Express Trailers has already been assisting Maltese businesses in their trade relations with business partners in Turkey and Poland for a number of years. We wanted to help Maltese businesses be in a position to offer more commitment to their business partners and this is why we decided to organise an advanced consolidated weekly groupage service between Malta and Turkey by sea loading on the first available vessel as well as a fixed departure on Thursday between Poland and Malta by road arriving on Monday,” explained
David Fleri Soler, Head of Sales and Business Development at Express Tailers. “While Poland is a member of the EU, Turkey is not and therefore, certain regulations, health and safety conditions, documentation and procedures are best handled by those who have the knowhow and the experience to ensure that all the risks involved can be handled effectively,” said Chairman and CEO Franco Azzopardi. “Being able to service new markets and routes is the result of the experience, the capabilities, and the people who, over the years, have made Express Trailers the most trusted company when it comes to transport and logistics.”
e Malta Business Bureau (MBB), Design for Europe partners, the Business and Cultural Development Centre (KEPA) in Greece and the National Agency for Innovation and Research (LUXINNOVATION) in Luxembourg have launched a new Horizon 2020 project. DesignShots will focus its activities on peer-learning exercises to review existing design-driven innovation and the applicability of such systems in the respective partner countries. e project will draw upon the use and uptake of design by SMEs, allowing the partners to identify how agencies and business intermediaries can better support enterprises to integrate design in their innovation processes. e project will also explore the use of various support mechanisms for SMEs depending on their level of design maturity. “Following MBB’s past success in LIFE+, ESF, Leonardo and Erasmus+ projects and very recently our role as Ambassador for the European Commission’s Design for Europe
Programme, it is with pleasure to once again be granted EU funding to implement a Horizon 2020 Project,” said MBB CEO Joe Tanti. “MBB is proud to join key partners KEPA and LUXINNOVATION to bring the latest innovation insights to Maltese businesses.” is project has received funding from the European Union’s Horizon 2020 research and innovation programme. For more information about this initiative contact Ana Vella, E: avella@mbb.org.mt
Q2 to launch second release of seafront homes at Tigné Point The new Q2 luxury homes at Tigné Point are nearing completion and this prestigious seafront block is poised to release another set of apartments on the market shortly. Located at the water’s edge, and forming part of the award-winning Tigné Point mixed-use development, these beautifully designed apartments combine form, function and stylish innovation. Q2 offers a variety of layouts, all with open plan living areas and well-proportioned terraces designed for outdoor entertainment. The sleek interiors, entrusted to one of Malta’s leading architectural and interior design firms, Martin Xuereb and Associates, maximise on practicality, elegance and good taste to suit the most discerning of clients.
“Buyers today are looking for homes offering comfortable and stylish interiors alongside excellent connectivity to restaurants, shops and entertainment. With the Q2 apartments, we have striven to create one-of-a-kind properties that embrace and complement today’s way of working and living,” said MIDI CEO Luke Coppini. The unique location elevates these units to a whole new level of luxury and convenience. The block is also strategically situated next to The Centre, a state-of-the-art business block, which is set to become a leading business hub. For further information on the next Q2 release, interested parties can contact the Tigné Point sales office on T: 2065 5510 or visit www.Q2.com.mt
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e Business OBSERVER
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BUSINESS UPDATES
Not just trucking Jonathan Vella It is undisputed that technology is changing the concept of trucking, just as it has transformed and sometimes also disrupted so many other industries. It has improved vehicle performance, vastly increased the amount and type of data that trucking business must constantly evaluate, whilst also changing the role of the driver per se. Along with that, these innovative technologies can and should be viewed as cost-saving or rather an essential tool for the fleet manager and fleet owners. While we’re still a few years away from having an industry that runs on self-driving trucks, there are many technologies that exist today that not only help businesses grow their bottom line, but enhance the lives and safety of drivers – ultimately shrinking shortages and improving retention. The Rise of the Electronic Log Device The electronic log device (ELD) mandate is the single greatest change to the trucking industry. The ELD synchronises with a vehicle engine to automatically record driving time for easier and more accurate hours of service recording. This not only streamlines the accurate tracking and managing of records of duty status, but also creates a safer work environment for drivers. From what we’ve seen of its impact to-date, we can expect a 10 per cent reduction in utilisation across the industry. This will result in a levelling of the playing field – making it easier for LTL carriers to compete with TL carriers. It will also help to eliminate the single greatest barrier to
industry growth – driver shortages. While some have raised concerns that the ELD could worsen the driver shortage by managing and limiting work hours, others see it as a boon – creating a better experience for drivers who otherwise would have been overworked and attracting others to the industry. This would be a huge benefit for companies that have had to hold off on growing their fleet due to the driver shortage. Improve Safety, Improve ROI Improving driver safety is an important priority of its own and should always be a top concern for businesses. It can, however, also have the side-effect of improving a company’s bottom line. There are a number of driver-focused technologies available today that can help trucking businesses identify and address risky behaviour. For example, face recognition software can help to detect driver fatigue while wearable devices can monitor vital signs. This not only helps to remind drivers when it’s time to rest, but can also catch other risks affecting drivers before they cause issues on the road. In addition to technology that monitors the driver’s health, there are also systems that focus on improving driving. Collision warning and lane detection systems alert drivers to issues, increasing reaction times and in turn avoiding potential accidents. All of these advances contribute to lower insurance expenses and fewer claims that have to be paid. Businesses should not underestimate the value of such risk-abating technologies – it’s estimated that lane detection technology should provide a three-to-one cost benefit payback, with return on investment in just four to 12 months. The Importance of Analytics Access to new data streams are great, but are only truly valuable when there are systems in place to actually
analyse inputs and take action based on insights generated. This can be as simple as analysing video to prove that a driver was not at fault in an accident, or as complex as reviewing all the elements of driving to improve performance. By making sure that investments are made in analytic systems as well as connected truck technologies, trucking businesses can make more significant changes – not only identifying and eliminating risky behaviours, but instituting practices for the best driver performance. While some business owners may hesitate to invest in new technology because of upfront cost concerns, others will jump in quickly only to realise limited benefits because they cannot maximise their use. It’s important for owners to work with their team and advisers to determine which technologies can offer them the best return on their investment – which can do the most for them today to provide new insights and improve driver performance. Setting up dashboards and monitoring key performance indicators such as maintenance expense per kilometre driven can lead to true operational effectiveness and increased profitability, when approached from this perspective. About Express Logigroup Express Logigroup, is a transport and logistics powerhouse serving business with dedicated freight solutions which overcome cost and time. Our experience in the transport and logistics sector is coupled with the ongoing investment in human capital and innovative transport solutions. We pride ourselves on being small but effective – our customer is centrally positioned in every aspect of our decision-making process. Jonathan Vella is the CEO of Express Logigroup, transport and logistics powerhouse.