The Malta Business Observer, Thursday 28th March

ANALYSIS

Issue 96

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Distributed with Times of Malta

March 28, 2019

No property bubble in Malta, US housing expert says

A no-deal Brexit would be a blow to the Maltese economy, but the extent of its impact is difficult to determine at this stage. see pages 5, 6 >

Marie-Claire Grima NEWS Many of the conditions that could create a bubble are currently present in Malta’s housing market, but there doesn’t seem to be one forming just yet, according to Professor Andrew Narwold, who cautioned that the risks were still there and were being keenly monitored.

“In terms of historically low interest rates, and the influx of foreign buyers and renters, it’s putting a lot of pressure on the market which you want to watch closely, but there doesn’t seem to be a bubble forming,” said Prof. Narwold, an expert in the macro-economics of the property market, who is using his extensive housing market experience and research to help the Central Bank of Malta develop housing price index, Malta’s firstever. “There are underlying conditions that could create a bubble – there is a possibility; but I think the Central Bank is doing a great job of monitoring it.”

Prof. Narwold, who is based at the University of San Diego in California, said that the housing market in Malta paralleled the situation in San Diego. “If you go down this list of housing market issues in San Diego, you could be talking about Malta. There’s restricted housing supply, and huge growth – for us, it’s domestic workers, but for you, it’s foreign workers – as well as historically low interest rates. I understand there are also the beginnings of homelessness in Malta – it’s something that’s been long established

e MFSA has launched a guidance document designed to assist companies operating in the fields of financial technology in their application for a bank account. see page 9 >

NEWS Since the introduction of GreenPak’s iBins, there has been a notable increase of 51 per cent in the collection of recyclable materials. see page 13 >

PROFESSOR ANDREW NARWOLD. PHOTO: INIGO TAYLOR

“ere are things, culturally and mechanically in the Maltese economy, that would preclude that great oscillation that you would see in other countries.” in the States, but a new phenomenon here. In San Diego, housing prices have gotten so high, people are living in garages and building illegal structures. When I said this to my colleagues in Malta, they

said, yes, all that is happening here, too. It has been really valuable talking about what these issues translate into, and whether they’re a result of what’s been happening in the market or a cause.”

What could lead to a bubble locally, Prof. Narwold said, was if, for any reason, the continued influx of foreign workers were to reverse itself; in other words, if foreigners stopped coming to live and work in Malta. “You’d have a lot of people investing in potential property without a lot of people to take it, and that could cause a dramatic readjustment. It’s unforeseeable at this point, but if [the number of new expats in Malta] were to dry up, you would have an oversupply of stock that you would need to readjust.”

Continued on page 3

CASE STUDY e number of e Convenience Shop outlets in Malta is expected increase to 71 by the end of 2019, according to CEO Martin Agius. see pages 20, 21 >

e Malta Business OBSERVER

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March 28, 2019

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NEWS

Central Bank developing the first housing price index for Malta Continued from page 1 However, he emphasised that even if a hypothetical property bubble were to burst, it would not affect Malta as severely as it would other countries. “There are things, culturally and mechanically in the Maltese economy, that would preclude that great oscillation that you would see in other countries. In other countries, there are highly-leveraged people borrowing money to invest in hot property and then when the prices fall, they have to get out, leaving all these distressed properties on the market.”

“But a lot of the Maltese that are investing in buying a home to rent, or a second property are allcash purchasers. So if there’s a price readjustment, they’ll say ‘okay, I wish that hadn’t happened,’ but they won’t be forced to run out and liquidate their property. And with no property taxes, you don’t have to worry about getting a return right away.”

Yet the lack of data means that it is difficult to determine when housing markets turn, and whether prices have increased excessively. Indeed, Prof. Narwold remarked that the lack of a visible property price benchmark often led to uncertainty about the appropriate prices, which led property owners to adjust prices based on little more than hearsay. “You hear landlords saying, I’ve heard about someone raising prices by 20 per cent – let me try that and see what happens. Lack of information might lead to expectations which are not really in line with what’s

happening in the market – on both sides.”

Indeed, the housing price index which he is working on developing with the Central Bank is a completely new concept for Malta. “While Malta has an advantage over the US in that it has a much smaller market, the lack of data is a disadvantage. Historically, Malta has not collected as much information about the property market – it has not needed to do so, unlike the States, where the valuation of every property, from the number of square feet to the number of bedrooms and bathrooms, is needed to determine the housing tax.”

“What we’ve been working on with the Central Bank is an index based on a sample of residential properties in Malta sold over the past eight years, which required a mortgage to buy,” he explained.

“Mortgage data does not provide a perfect index, but since it actually looks at the characteristics of the house, the square metres, the kind of property and where it’s located, and includes the architect’s report and the contract price, it gives us a more robust idea of what’s happening in the property market. Then, we will try to use those individual characteristics to develop a housing price that’s more quality controlled in terms of what’s selling.”

The exercise is still being developed as a working paper for the Central Bank’s own use, and there are no plans as yet to release it as a formal housing index which is accessible to the public.

“The Central Bank is working to reduce the amount of uncertainty so they can be proactive if they

see that things are getting out of control. But potentially, if it proves robust enough and tracks well enough, [the Central Bank] may consider releasing it,” Prof.

Narwold said, adding that there are also plans in the pipeline to replicate this exercise with rental and leasing prices.

It’s his sixth year visiting Malta, and Prof. Narwold said he enjoyed observing the parallels and the differences between Malta and the US, both in terms of markets as well as mentality. “There are cultural differences and structural differences – our thoughts on how to tackle a similar problem can be very different.”

In Malta, he observed, Government housing policy tended to be far more interactive than it was in the US. “For example, while the rising prices in the property market have made many Maltese households very wealthy on paper, because the price of their assets has increased, there have been people who have lost out. And from what I can see and hear, the Maltese Government has done a good job of being sensitive and helping out those who have had some difficulties – more willing to fine-tune policy in terms of introducing additional programmes to assist people with first-time housing, or introducing rent subsidy increases to compensate for higher rents.”

“In the US, the Government usually lets the market sort itself out.

But in my perspective, Malta is much more aware of being fair – we don’t want people to be left behind.”

Prof. Narwold’s US Fulbright Specialist Programme was sponsored by the US Embassy in Malta.

“e Central Bank is working to reduce the amount of uncertainty so they can be proactive if they see that things are getting out of control.”

e Malta Business OBSERVER

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ANALYSIS

No-deal Brexit will impact Maltese economy, though extent is difficult to determine, experts say Rebecca Anastasi UK PRIME MINISTER THERESA MAY. PHOTO: CONSILIUM

A no-deal Brexit would be a blow to diverse sectors of the Maltese economy, with the extent of its impact difficult to determine at this stage, leading economic and business experts have said in comments to this newspaper.

The effect of the UK crashing out of the EU without a deal – what Stefano Mallia, Chairman of the European Economic and Social Committee’s (EESC) Brexit Group, called the “worst-case scenario,” particularly in light of recent developments – would result in greater uncertainties for the Maltese economy.

In his reaction to the current state-of-play in Britain and the EU, Mr Mallia noted that industries which sell goods and services to the UK market were, perhaps unsurprisingly, most likely to be affected.

He also expects manufacturers which source their materials and components from the UK to feel the repercussions of Britain crashing out of the zone, since they would be faced with tariffs and hence an increase in costs.

Moreover, the degree to which a no-deal Brexit will affect the buoyancy of local markets, in general, is dependent on the consequences it would have on the EU economy as a whole, Mr Mallia explained. “If Brexit were to spark off a negative downward spiral in, for example, EU consumer sentiment, then this could have an indirect ripple effect on the Maltese economy, even visà-vis goods and services sold to continental Europe,” he noted.

However, the extent of the fallout from Britain’s exit from the bloc depends heavily on the form it will eventually take. Mr Mallia remarked that the ability of individual companies in sectors such as tourism, the food industry and

pharmaceutics to weather the storm is dependent on “any actions already taken by the firms to reduce the expected negative impact.”

Indeed, the Malta Chamber of Commerce, Enterprise and Industry reiterated its call to all businesses to be prepared for any eventuality, especially given the constant changes and fluid situation. “As a Chamber, we encourage our members to keep in constant contact with their suppliers or business partners in the UK and seek alternatives to their normal import and export routes,” Kevin J. Borg, Director General of the Malta Chamber said.

Mr Borg recommended that businesses keep in touch with the Chamber, the Customs Department and other relevant authorities to keep abreast of developments and it pledged to remain vigilant on the latest twists and turns in the Brexit process. He added that businesses should “consider seeking as-

sistance from relevant authorities such as Malta Enterprise (ME),” and looking into the ME’s Brexit-assistance scheme.

Antonella Lia, Accounts Director of E&S Group, a firm which specialises in providing corporate, tax and advisory services, echoed many of these thoughts and noted that since, in the event of a no-deal, the UK would be considered a thirdcountry overnight, there would be little to no time, for businesses to adjust to the change. “This would cause significant disruption in light of the uncertainty faced,” she added.

While enterprises operating in the tourism sector, financial services, IT and gaming, as well as companies that trade with the UK, might feel the greatest impact when Britain leaves the bloc, Ms Lia said that the repercussions of Brexit were wide-ranging and included an impact on the local workforce, with the possibility of Malta losing out on

invaluable human resources, “along with the talent and skills they have, in the eventuality that UK expats would need to relocate,” she asserted. However, she qualified this by specifying that this is dependent “on the type of agreement reached at EU level, or else between the two countries.”

Ms Lia also pointed to Malta’s historical connection with Britain, which resulted in the island having a “powerful ally at EU level”, since the two countries saw “eye-to-eye on a number of matters, including taxation,” a reference to the current EU discussions on tax harmonisation across the bloc, which Malta has been fighting against. “Once Brexit goes through, Malta will lose the backing support of such an important ally, which may have an impact on Malta in the long-term,” she said.

Kenneth Farrugia, Chairman of Finance Malta, also underlined the

need to be vigilant and stated that a no-deal Brexit would “be detrimental to both the UK and the EU,” with Malta standing to be affected as a consequence. “A no-deal is neither in the interest of the UK nor in that of the European Union,” since it will create “greater uncertainties” and will be harmful to both parties, he affirmed. However, he stressed that, until an agreement is reached, any predictions were premature.

Yet, the adverse effects of Brexit could even be noted now, in the short-term, the Chairman pointed out, saying that the extension until the 12th April, if the UK Parliament votes against Theresa May’s deal, or 22nd May, should her deal pass, is also “heightening and prolonging the current level of uncertainties impacting the exchange rate and the cost of doing business.” In the long-term, Britain leaving the EU – as well as the customs and single markets – will undoubtedly impact “the passporting of products from Malta to the UK” and “UK products and services currently passported to Malta.”

Leading economist Gordon Cordina, echoing Mr Farrugia, also emphasised that time will have a say on the impact of Brexit on the EU and Malta. He said it was essential to look at the UK leaving the bloc as “a three-pronged event” consisting of the current phase of uncertainty; the initial months and years during which economic, social and political relationships are redefined; and the long-term situation “where new normals are established.” The events, he stated, were interdependent. “For example, the prolonging of the current period of uncertainty may impact, positively and negatively, the subsequent phases,” he explained.

The consequences of Brexit on Malta, in his view, will depend on Continued on page 6

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e Malta Business OBSERVER

| March 28, 2019

ANALYSIS

Chamber urges businesses to “prepare for any eventuality” Continued from page 5 the inherent characteristics of the country – “would our small size insulate us from the shock or compound its potential effects?” – as well as its economic policies and business stance. These, he said, will determine whether our competitive position would enable us to reap opportunities or succumb under the pressures created by Britain’s exit.

Indeed, according to these parameters, Dr Cordina asserted that Brexit would impact Malta both directly, with the tourism sector most likely to suffer from the fallout, and indirectly “from a reduced EU budget through lower contributions from the UK.” However, he deemed the challenges posed by these factors manageable. “In the case of tourism, we can rely on the strong growth in the sector, and our ability to replace generic UK tourism with niche tourism from the same country. In terms of budget effects, we

“e most visible move we have seen is the transfer of one of the largest betting firms to Malta, but there have been other movements which may not be so visible but which, when added together, could represent something important to our economy.” – Stefano Mallia, Chairman, EESC Brexit Group would be well-insulated through our strong fiscal performance,” he said.

This was substantiated by EESC rapporteur Mr Mallia, who stated that since the Maltese economy is “currently in a healthy position, it should be able to absorb any negative shocks from Brexit.” He noted the productive work done by the Malta-UK trade promotion task force over the past 18 months, which has implemented numerous initiatives to attract new Brexitinduced business to our shores.

“The most visible move we have seen is the transfer of one of the largest betting firms to Malta but there have been other movements, which may not be so visible but which, when added together, could represent something important to our economy.”

And, while it was exceedingly difficult to quantify the direct inward movement, as a result of Brexit, what is certain, in Mr Mallia’s view is that “there has indeed been movement.”

FinanceMalta’s Mr Farrugia also sounded a more positive note, noting Malta’s proposals to UK-based financial service operators to help them sustain their business in Europe through a co-location arrangement, stating that Malta might see “companies which decide to co-locate or others that might decide to completely relocate.” At any rate, he expressed confidence that the very strong ties between Malta and the UK will not be negatively impacted in the medium to longer-term. “To

the contrary, I believe that the UK’s exit from the EU should give both countries the scope to strengthen existing ties also by way of Malta being a member of the Commonwealth alongside the UK,” he said.

In this regard, whatever the outcome of the Brexit negotiations, there is some faith that Brexit might lead to a more constructive relationship between the bloc, including Malta, and the UK. “There remains some hope that, in the context of the ongoing confusion, and the obvious difficulties of this process, the situation would resolve itself into one where the UK remains as close as possible to the EU in terms of economic and political ties, and that the EU learns the lesson of the need to remain continuously close to the citizen,” Dr Cordina stated in his concluding remarks. This is essential to ensure that the EU project is durable and effective at preserving peace on the continent.

e Malta Business OBSERVER

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NEWS

MFSA to issue guidelines for banks operating in blockchain and cryptocurrency spheres Marie-Claire Grima The Malta Financial Services Authority (MFSA) and the Financial Intelligence Analysis Unit (FIAU) have jointly published a consultation document on guidance for credit institutions, payment providers and electronic money institutions which have the capacity to open accounts for entities using financial technology.

The guidance document is designed to assist companies operating in the fields of financial technology (fintech), artificial intelligence, distributed ledger technology, the internet of things and cloud technologies in their application for a bank account. The consultation is open to the public until 30th April 2019. Industry participants and interested parties are invited to send their responses via email to fintech@mfsa.com.mt.

News of the consultation comes in the wake of recent media reports stating that companies involved in blockchain and cryptocurrency setting up a base in Malta were encountering resistance, and even considering leaving the island due to the lack of infrastructural support. The Malta Business Observer approached a number of Malta-based banks for comment, and several had no response when contacted.

Meanwhile, a spokesperson for HSBC Malta said that HSBC Group was already making use of blockchain technology and is actively testing applications with customers in areas such as trade finance and foreign exchange.

“Using blockchain to simplify trade finance transactions could significantly boost the volume of global trade. HSBC Malta continues to welcome new commercial customers who meet HSBC’s account opening policies. These policies are the same for blockchain and non-blockchain companies. All banks determine their policies for new customers, based on applicable regulations and their risk appetite,” the spokesperson stated.

A spokesperson for BOV echoed these remarks. “Bank of Valletta plc extends banking services to a wide range of clients.

Relationships and accounts are opened in line with the bank’s risk appetite framework and customer acceptance policy. Each request is evaluated on its own merit and documentation is requested accordingly, as part of the due diligence process.”

Furthermore, the HSBC spokesperson said that HSBC Malta was monitoring the development of virtual and digital currencies such as Bitcoin as well as regulations governing their use. “In countries where use of virtual currencies is permitted by the authorities, we expect any customer transacting in them to comply with all applicable laws and regulations, just as they would for transactions denominated in traditional legal tender. HSBC does not process virtual currency payments and we do not bank virtual currency exchanges.”

The MFSA said that in light of the money laundering and financial terrorism risks which technological innovation may bring about within the financial services sector, it had taken steps, together with the FIAU, to ensure more clarity regarding the opening of accounts. “With this document, institutions can acquire a better risk understanding of prospective customers who are active in technology reliant areas, prior to servicing them. It also details the information

which institutions should be requesting from operators to determine their regulatory status and gain comprehensive knowledge on their activities.”

The establishment of fixed guidelines in this arena will surely come as welcome news. Indeed, Kenneth Farrugia, Chief Business Development Officer at BOV and Chairman of FinanceMalta, said that Malta’s banking sector needed to be supported with bespoke and comprehensive regulatory and legislative frameworks to mitigate the risks that new technologies such as blockchain inevitably brought along.

Speaking at the Malta Chamber’s Parliament of Enterprises event held on 13th March, Mr Farrugia said that Malta, whose financial services industry had been painstakingly built through a sound regulatory framework underpinned by a strong reputation going back three decades, had managed to attract a number of fintech companies to its fold, particularly those focusing on the payments space.

“Within this context, the banking sector will need to be supported with bespoke and comprehensive regulatory and legislative frameworks to mitigate the risks that these new technologies inevitably bring along, particularly mindful of the

“e guidance document is designed to assist companies operating in the fields of financial technology (fintech), artificial intelligence, distributed ledger technology, the internet of things and cloud technologies in their application for a bank account.” regulatory focus on sustainability and stability of the banking sector, as well as related AML concerns,” Mr Farrugia stated.

“The industry has become an important economic enabler by way of its contribution to the country’s GDP, which has more than doubled in the last few years, and brought about the creation of highly remunerated employment opportunities.

Consequently, it is imperative to protect the integrity and reputation of this industry as this will sustain its growth thrusts going forward.”

“In view of all these developments, Malta is today well-positioned to attract international fintech businesses to its shores which requires the commensurate introduction of the apposite support infrastructures. These include an efficient regulatory onboarding process, a strong supervisory oversight mechanism, facilities supporting start-ups and advanced start-ups, ease of availability of banking services and an overarching legal and regulatory framework,” he concluded.

e Malta Business OBSERVER

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e Malta Business Observer is Malta’s leading business newspaper distributed with Times of Malta every month.

Managing Editor Marie-Claire Grima

EDITORIAL

Sustainable development is key In this month’s front page interview, Professor Andrew Narwold, the US housing expert who is helping the Central Bank of Malta construct the first-ever housing price index for the Maltese islands, calmly deflated the theory that there’s a property bubble blooming over Malta. Even though the conditions seem ideal for such a bubble to form – an influx of foreign buyers and renters far beyond anything we’ve ever seen before, coupled with historically low interest rates – Malta’s property market seems poised to keep on climbing upwards. Indeed, the only thing that puts it at risk of bursting is if Malta stops attracting the foreign workers who are fuelling demand, which – with a record low unemployment rate, and JobsPlus estimating that 13,000 more foreign workers will be needed to join the ranks – seems unlikely.

While this is undoubtedly good news for Malta’s property and development industry, even key players are realising that unrestrained construction without any form of road map to guide the way will do far more harm than good. Indeed, sustainability was one of the key topics at the Parliament for Enterprises event organised by the Malta Chamber earlier this month. In a memorable intervention, Denise Micallef Xuereb, Construction and Development Director of AX Group, said that devel-

“While remaining all in favour of sustainable development, there needs to be real protection of the elements that are simply non-negotiable, including traditional village cores, as well as our rapidly dwindling countryside and ODZ areas.”

opment was not the same as construction, and that the former could help solve Malta’s overbuilding problem if implemented well. “Construction supports development, and development can be a vehicle for economic growth and sustainability,” Ms Micallef Xuereb said, adding that development did not have to mean sacrificing Malta’s built or environmental heritage.

She insisted that there needed to be further regulation and wellthought-out masterplans, adding that the fact that the sector is not sufficiently regulated has an impact on the quality and safety of the projects being developed. Measures such as the registration of contractors and the introduction of a classification system would lead to the sector being seen in a new light, she stated. However, Ms Micallef Xuereb also highlighted the fact that in order to bring about this change, there needed to be support from the highest administrative levels, since the private sector would not be able to do this alone. This last part is crucial to tackling the problem.

The property and real estate industry in Malta should not be demonised for doing what it is there to do. If there’s a demand for new housing and commercial properties, and permissions are handed out freely, then build and sell they will, for that is their raison d’être. But while remaining all in favour of sustainable development, there needs to be real protection of the elements that are simply non-negotiable, including traditional village cores, as well as our rapidly dwindling countryside and ODZ areas. There also need to be more creative solutions to deal with the current housing shortages that go beyond building beyond our means. This will require a complete shift in mentality, and support for this change has to come from the very top.

In his interview, Professor Narwold praised the ‘interactivity’ of Government housing policy in Malta, saying that unlike the US, where the market was usually left to its own devices, Malta was much more conscious about being fair and leaving nobody behind. And this will to do the right thing has to be extended to both the people who may have been left in the margins of Malta’s great property boom, as well as the natural and built environment that has borne the brunt of it all. There’s never good news when it comes to the environment – all one can hope for is that things don’t get worse. If there was ever a time for Government to get interactive with its development policies, surely it is now.

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BUSINESS OPINION

Brexit uncertainty has impacted Maltese manufacturers with a foothold in the UK market

Anton Buttigieg

TradeMalta is a public-private partnership which was set up in 2014 by the Government of Malta and the Malta Chamber of Commerce to assist Malta-based companies reach international markets. Its mission is to help Malta-based companies to internationalise their business. The company has been providing a number of services to support its mission including supporting businesses that exhibit at international fairs, offering export-focused training programmes, and organising country information seminars and incoming and outgoing trade missions. We also re-

ceive regular requests from Malta-based businesses to set up one-to-one introductions with potential international buyers or customers.

In our opinion, Brexit will be a major challenge for Malta-based businesses that export their goods and services to the United Kingdom.

The uncertainty brought about by Brexit has impacted Maltese manufacturers who traditionally have a foothold in the UK market. As a result of Brexit, we have supported companies to extend their reach in new or alternative markets.

While this is an exercise that takes time, we have already seen some success on this front.

The challenging geo-political situation in North Africa and the Middle East is another issue of concern for Maltese exporters, as these geographically-close markets have been import/export destinations for products and services originating from Malta. As a result, we are observing the developments carefully and analysing their impact on the export turnover of Maltabased businesses.

Having said that, TradeMalta will keep exploring new markets

and we have plans to give Maltabased companies opportunities to visit new and emerging markets which can provide them with further international business.

As previously stated, a significant part of our support goes to companies that exhibit in international fairs, as we understand that visibility at these international events is crucial when trying to build an international brand. Exhibiting in fairs has other advantages, including providing networking opportunities with companies within a specific industry. It also brings businesses in touch with potential buyers and customers. International fairs are becoming more specialised, and we have successfully supported many Malta-based companies to exhibit at these specialised events.

The team also receives regular requests for one-to-one introductions with international contacts and very often we reach to our main shareholders for our support. The Ministry for Foreign Affairs and Trade Promotion has been very supportive on this front by providing information through Malta’s network of embassies, high commissions and consulates. The Malta Chamber of

“As a result of Brexit, we have supported companies to extend their reach in new or alternative markets. While this is an exercise that takes time, we have already seen some success on this front.”

Commerce is highly supportive too and its international reach with other chambers of commerce is an invaluable tool for companies that want to do business beyond Malta’s shores.

This year, we have already organised several trade visits. In fact, in January we supported business delegations travelling to India and Turkey. At the end of March, we shall be hosting a business delegation from Ghana. That will be followed by an outgoing business mission to Singapore and South Korea. Looking ahead, we are also looking forward to assisting Malta-based companies exhibiting at the China International Import Expo in Shanghai in November. We believe that this is a unique opportunity for Malta-

based companies to make inroads in the Chinese market.

By the end of March, we would have also concluded our annual training programme aimed at new exporters. I am proud to say that this programme has gone from strength to strength and has attracted significant interest from the business community.

We are also working on the second edition of the Malta International Business Awards which will be held in mid-November. We shall be launching this event in the coming weeks and we hope that a great number of applicants will submit their proposals this year.

Anton Buttigieg is the Chief Executive Officer of Trade Malta.

e Malta Business OBSERVER

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NEWS

51 per cent increase in collection of recyclable materials since introduction of iBiNs Martina Said Since the introduction of the intelligent bins, known as iBiNs, by GreenPak towards the end of last year, there’s been a notable increase of 51 per cent in the collection of recyclable materials through recycling points when compared to the same period a year ago, said GreenPak CEO, Ing. Mario Schembri.

“These results are well beyond our wildest expectations,” Ing. Schembri said, citing a number of reasons for the marked increase in the use of this public service.

“The new and attractively-designed bins have drawn public attention, and the availability of empty space to deposit recyclable waste is another factor for people using the iBiNs more frequently. Moreover, the iBiNs provide a hassle-free 24x7 service. Given people’s different lifestyles, the door-todoor collections of the green and grey recyclable bags do not adequately accommodate everyone’s needs. The iBiNs offer a service that allows the public to recycle waste – anytime, anywhere.”

GreenPak and Vodafone, who joined forces for this initiative, announced last November that 800 iBiNs will replace existing recycling skips in 42 localities by March 2019, with the

aim of making recycling simpler and more convenient, and also to do away with the unsightly overflowing of recycling bins.

The intelligent bins are able to measure their fill-level and transmit the information to a central system using a Narrowband Internet of Things (NB-IoT) technology provided by Vodafone Malta. They can also detect abnormal temperatures, and in the case of a fire, a signal is sent to the central system to call for assistance.

“With the help of this technology, GreenPak operates a better public service by emptying the iBiNs according to demand,” said Ing. Schembri. “The project has attracted lots of interest, not least because of the fresh design and uniformity of the bins. A good number of localities have enjoyed the use of iBiNs for many weeks

“e iBiNs offer a service that allows the public to recycle waste – anytime, anywhere.”

and by the end of March, the project will be nearing completion.”

GreenPak’s CEO said the iBiNs have achieved one of their main aims of making overflowing recycling bins a thing of the past; a sight which has reduced dramatically since their introduction, as bins are now being emptied before they’re completely full.

“Unfortunately, we still experience instances where, despite the iBiN being practically empty, irresponsible persons leave their waste lying outside the bin,” he asserted. “Recently, it was reported that around 1,500 individuals have been reprimanded, and as more legal enforcement comes into force, we expect to see further improvements.”

The launch of the organic waste bins in households by Government last year, which subsequently introduced the separate collection of organic waste, had a knock-on effect on the way people manage their waste, according to Ing. Schembri.

“Apart from having the desired outcome that less organic waste is being landfilled, GreenPak has noticed an increase of 35 per cent in recyclable materials collected through the kerbside green/grey bag collections when compared to the same period 12 months earlier. So yes, people are definitely recycling more.”

The joint project between GreenPak and Vodafone was the first within Malta’s waste management sector to use smart technology, but it won’t be the last. “The iBiN project has been three years in the making and at times very tiring. However, the results have been so encouraging and rewarding, that GreenPak is already working on other projects employing the use of smart technology,” the CEO asserted.

In the coming weeks, an app that’s synched with the iBiNs, which works on smartphones, tablets, portable computers and any mobile device, will be launched to the public after being released on a trial basis in early January to a closed group of around 300 people. “The app automatically detects your current geographical position and gives you feedback on the nearest iBiNs,” said Ing. Schembri.

“On selecting the colour-coded image of the iBiN, the app informs you whether the iBiN has free space to take your recyclables. If the bin is full, the app guides you to the next nearest available iBiN via a Google Map interface. User feedback has been very good and when the app is launched to the general public, we believe that people will find it extremely userfriendly and very useful.”

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e Malta Business OBSERVER

| March 28, 2019

CASE STUDY

FXDD establishes dedicated trading desk to make headway in Italy Jo Caruana FXDD, a provider of foreign exchange services that was founded in 2002 and has been an industry leader since, has established an Italian desk in order to make inroads within the Italian market.

The Head of FXDD Global’s Italian Market, Alessandro Ingargiola, joined FXDD in October 2016, after having gained experience with three other brokers working in Malta and Cyprus. His role as Head of Department is to consolidate the brand in Italy by planning and creating marketing campaigns, and developing relationships and contacts in the sector.

“I see FXDD as a fantastic leading company within the currency and commodities markets worldwide,” Mr Ingargiola said.

“Our history in the sector has allowed us to build up a wealth of knowledge and a great personnel team.”

“We have been here since the industry’s infancy, studiously working to build and maintain a great trading environment and provide superior service for our clients.

This kind of experience, especially on the personnel and technology fronts, really makes a difference.”

His other key tasks as Head of the Italian Market include leading the development of the business, promoting FXDD’s products and services, planning and undertaking presentations in the Italian market, explaining how FXDD’s trading system works, and planning and participating in exhibitions, conferences, seminars and training courses – to name but a few.

Speaking about recent endeavours, Mr Ingargiola explained that the company has been very focused on customer training. “In

“Technological efficiency must go hand-in-hand with the care and assistance for our customers, and that must be followed across all phases – from before they open an account with us, to long afterwards.”

2018 we organised and developed the FXDD Roadshow, a tour across a number of Italian cities, and worked with speakers who have an excellent reputation there,” he said. “The courses were designed to help us acquire aspiring traders, novice traders and advanced traders, through training courses that took place over eight hours in a day – usually on a Saturday.”

As it turns out, the FXDD Roadshow was a resounding success, and the company toured no less than 15 cities from north to south, including Milan, Turin, Genoa, Verona, Padua, Trento, Rimini, Bologna, Florence, Perugia, Pescara, Rome, Naples, Bari and Catania.

ALESSANDRO INGARGIOLA, HEAD OF FXDD GLOBAL’S ITALIAN MARKET. PHOTOS: ALAN CARVILLE

In addition to its very competitive offer with thin spreads and the lowest commissions on the market, the company stands for security, reliability, and the ability to trade in a professional environment.

“This is thanks to our Category 3 regulation, which was approved by the Malta Financial Services Authority (MFSA) in

2010. It allowed FXDD to expand into the rest of Europe, particularly in Italy,” Mr Ingargiola explained, adding that the company’s developments also apply to the new ESMA regulations.

“In addition, FXDD complies with the European markets through the Financial Instruments Directive (MiFID II) and is au-

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CASE STUDY

“We will continue hosting our training courses around Italy, in collaboration with several nationally-renowned traders who offer the opportunity for our new customers to access free training.” thorised to operate in Italy by CONSOB. Our determination to constantly work within the regulatory framework in which we operate demonstrates our seriousness and professionalism.”

FXDD’s customers vary substantially, especially as the company’s range of services is quite vast. “We work with everyone from institutional clients to private clients, and we introduce brokers, asset managers, hedge funds and white labels,” Mr Ingargiola explained.

“Overall, our strength definitely lies in the efficient, reliable and friendly service we provide to all our customers on a 24/5 basis,” he added, noting that FXDD’s characteristic trademark is the candlestick graphic that coincides with the closure of the New York Stock Exchange.

Indeed, there have also been a number of advances for the company on a technological front. “Maximum execution speed and advanced systems make our customer operation fluid and smooth,” Mr

Ingargiola continued, stressing that advancements in tech had to be complemented by the personal touch provided

by FXDD’s staff.

“From my point of view, this technological efficiency must go hand-in-hand with the care and assistance for our customers, and that must be followed across all phases – from before they open an account with us, to long afterwards.”

“That is why, in order for us to maintain the high customer satisfaction that is so important to us, we have set up and formed an efficient customer support department. It has become a company flagship and I am very proud of it.”

And there is plenty more planned – both to underline what has already been achieved by the Italian desk and other departments at FXDD, and to continue the company’s progress as a leader in this exciting international field. “For instance, in 2019 we started a partnership with Le Fonti TV and Visionforex, so we could present

live streaming TV programmes focused on economic, financial, legal and infotainment issues,” confirmed Mr Ingargiola.

“Next, we will participate in industry fairs, such as iFXEXPO International in Cyprus in May, the IT Forum in Rimini in June, and the IT Forum in Milan in November.”

“Finally, we will continue hosting our training courses around Italy, in collaboration with several nationally-renowned traders who offer the opportunity for our new customers to access free training. All of this will definitely underpin our growth into the future,” Mr Ingargiola concluded.

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e Malta Business OBSERVER

| March 28, 2019

TRAVEL

Princess Cruises to activate four additional Princess MedallionClass™ ships in 2019 and 2020 Princess Cruises has announced the expansion of its Princess MedallionClass™ experience to four additional ships – Royal Princess, Crown Princess, the new Sky Princess and the new Enchanted Princess – building on the enhanced and personalised cruise vacations guests are currently enjoying on its Caribbean Princess and Regal Princess.

With the Princess MedallionClass experience coming to Crown Princess in July, and Sky Princess in October, all guests sailing with Princess Cruises in the Caribbean will be able to enjoy an enhanced vacation through simplified, personalised and engaging experiences by the end of 2019.

Many of the MedallionClass ships will be operating in Europe by summer 2020. The new Enchanted Princess will join the fleet in June and be offering various seven-night sailings in the Mediterranean. The new Sky Princess will be based in Copenhagen, offering a selection of 11night voyages to the Baltics. Regal Princess and Crown Princess will

be based in Southampton offering various voyages to the British Isles, fjords, Baltics and Canary Islands.

Princess MedallionClass vacations offer guests a portfolio of experiences specifically designed to enhance their cruise holiday.

Guests who arrive at the terminal with travel documents (i.e. passports) uploaded to their profile have a personalised check-in process that starts off their vacation with ease. Personalisation starts precruise, with guests becoming OceanReady™ while at home.

The OceanMedallion™, available on all MedallionClass ships, is a complimentary wearable device that elevates the guest experience.

Considered a breakthrough in the vacation industry and recently honored with a CES® 2019 Innovation Award, the OceanMedallion features cutting-edge technology that delivers personalised service through enhanced guest-crew interactions, eliminates friction points, and enables interactive entertainment, resulting in high guest satisfaction scores.

Other hallmarks of the MedallionClass experience include: Hands-free keyless stateroom entry. Access to staterooms is a seamless experience where each guest is securely validated as the door automatically unlocks. Personalised greetings, including loyalty level recognition, welcome the guest on their door portal.

On-demand beverage delivery. Using smart devices, guests can order drinks using OceanNow™ and have them delivered directly to them throughout the ship, to their sun lounger or even in their stateroom.

OceanCompass™. Available on guests’ smart devices and portals throughout the ships, OceanCompass leverages the OceanMedallion to enable point-to-point wayfinding throughout the ship. OceanCompass guides guests throughout their journey, providing directional information so they can seamlessly navigate to their next point of interest, as well as easily locate and chat with friends and family on board using ShipMates.

The best Wi-Fi at sea. MedallionNet™ is fast, reliable, affordable and unlimited. MedallionNet provides land-like speeds that allow guests to stay connected from anywhere on the ship including staterooms which are each equipped with a WiFi access point. With MedallionNet, guests easily share vacation experi-

ences with friends and family back home, stream TV shows, movies, and sports events, and even make voice and video calls.

Now is the perfect time to book a Princess MedallionClass voyage.

Call local agents the Cruise & Travel group on 2122 2999 or contact your preferred travel agent.

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TRAVEL

Seabourn to launch its first purposebuilt expedition vessel in 2021 Seabourn has announced the name of its first ultra-luxury purpose-built expedition ship, Seabourn Venture, drawing on its heritage in providing expedition experiences. Seabourn Venture is scheduled to launch in June 2021, with a second yet-to-benamed sister ship slated to launch in May 2022.

Both ships will be designed and built for diverse environments to PC6 Polar Class standards and will include a plethora of modern hardware and technology that will extend the ships’ global deployment and capabilities. The new ships, which are being built by T. Mariotti, will feature a brand-new innovative design, created specifically for the ultra-luxury expedition traveller, and will include many features that have made Seabourn ships so successful.

A new and exciting offering will be the two custom-built submarines carried onboard, providing an unforgettable view of the world beneath the ocean’s surface. The ships will also be designed to carry a complement of kayaks and 24 Zodiacs that can accommodate all onboard guests at once, which will allow for a truly immersive experience. Each ship will feature 132 luxurious oceanfront veranda suites. More details and full-colour renderings of the ship and its interior spaces will be released in the months ahead.

Seabourn continues to represent the pinnacle of ultra-luxury travel with intimate ships offering key elements that set the line apart: spacious, thoughtfully appointed suites, many with verandas and all 100 per cent ocean front; superb dining in a choice of

EXPEDITION DIFFERENCE

venues; complimentary premium spirits and fine wines available on board at all times; award-winning service, and a relaxed, sociable atmosphere that makes guests feel right at home on board. The ships travel the globe to many of the world’s most desirable destinations, including marquee cities, UNESCO World Heritage Sites, and lesser-known ports and hideaways.

Specific details about itineraries and booking availability will be released in the next few months. Contact your travel agent or the Cruise & Travel group on 2122 2999 to register your interest and get yourself on the mailing list. The first ship is currently planned to sail in the Arctic in late summer 2021, with a full summer season in Antarctica to follow.

▪ Purpose-built expedition ships, PC6 ice-strengthened hull, with advanced maneuvering technology for superior stability, safety and comfort ▪ World-class expedition team, delivering immersive experiences ▪ Handcrafted itineraries developed for the expedition traveler, taking you to the most coveted and unfamiliar remote destinations in the world.

▪ Two custom built six-guest submarines, giving you the option to extend your expedition further for greater ocean exploration.

▪ Enhance your expedition experiences with Zodiacs, mountain and e-bikes, scuba diving, snorkeling plus optional kayaks.

▪ Open bridge policy*, hosted by members of the expedition team, providing first-hand access to the ship’s command center and officers navigating your journey ▪ Meticulous and purposeful adventurers’ resort at sea, designed for the luxury traveller, with unique attributes and spaces to enhance your experience.

▪ All veranda, all ocean-front suites luxuriously appointed. *at the Captain’s discretion

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e Malta Business OBSERVER

| March 28, 2019

CASE STUDY

“In failing to plan, a family business plans to fail” Vanessa Conneely The phrase “in failing to plan, a family business plans to fail” is one that defines Dr Nadine Lia’s role as the Regulator for the Family Business Office. The office was set up in 2017, shortly after the introduction of the Family Business Act – an innovative law introduced to assist family businesses, which was a first for Malta and internationally. “More than 85 per cent of all businesses in Malta and Gozo are family-run,” Dr Lia said – which translates into a great deal of people who need advice and assistance in ensuring that their businesses operate and transfer at their optimal strength.

The Family Business Office is based in Tigné Point and principally run by a team of three people, whose aim is to support family-run business throughout Malta and Gozo. “From an international perspective, 175 of the Fortune 500 companies in the US are still largely family-owned, and family firms internationally account for 78 per cent of new jobs, 60 per cent of employment and 50 per cent of Gross Domestic Product,” Dr Lia explained.

“In Malta, micro, small and medium-sized enterprises make up a huge majority of businesses, with many of them being familyrun. More significantly, 95 per cent of these SMEs are classified as micro-enterprises, having fewer than 10 employees. These companies generate around 80 per cent of all jobs in the economy and create 71 per cent of the overall value added. For both variables, this is about 14 percentage points more than the EU average.”

“More than any other member state in Europe, Malta’s economy depends on its SMEs. These groups have managed to remain robust over the past decade, despite the global economic crisis of 2008.

Since then, the number of SMEs increased by almost 1,000, and the employment level grew by 2,320 or 2.5 per cent over the period of 20082012. These increases in and by themselves are rather modest, but when put against the backdrop of one of the most serious economic crises in decades, this performance is quite remarkable.”

Even though many Maltese businesses managed to pull through this difficult period on their own steam, it was deemed on a policymaking level that there was a lack of a support structure in place on a larger scale. “Before we set up the Family Business Office there was no sectorial recognition, direct assistance or a reference point in Malta, and this is the situation the world over. As family businesses form the backbone of the economy and are the biggest contributor

GDP-wise, it is essential that they are provided with assistance.”

According to Dr Lia, there are three main areas where families go wrong when it comes to passing on their business to the next generation. The first is planning, the second is the emotional impact, and the third is executing the transfer smoothly during the founders’ lifetime and avoiding the business shock when it is forced to be done on the sudden death of the owner.

“The Achilles heel of family-controlled enterprises appears to be planning – or more accurately – the lack of planning. Family businesses are very dependent on the current generation of owners, because children of self-made entrepreneurs develop different personalities, skills, work ethics, confidence levels and interests than the parent who built the business.”

“An informal survey carried out in 2010 revealed that the majority of family businesses do not have formal structures governing employment, education and remuneration of family members. The figures available for training and skills development also point to a need for catch-up in this area, which show that, for example, only 16 per cent of businesses in Malta provide training to their employees. This represents just two-thirds of the EU

average. So, in failing to plan, a family business plans to fail.”

Dr Lia says the second pitfall many people encounter is the emotional boundaries connected with working with family members. “Whilst we have to accept that some family businesses die a natural death or change their format to adapt to the times they are in, others are killed before their time due to the hurdles faced in going through the arduous and emotional process of transferring a business they grew up in and grew up with.”

“Handing over any business is a difficult task in normal circumstances, but when you factor in the emotional dynamics involved within families, it can become a lot more complicated. For example, those who founded the company may not be ready to retire or feel a loss of self-efficacy.”

“Conversations around the issue of transferring the family business can become taboo and uncomfortable, or there may be generational gaps between people, with the young generation feeling the business model is outdated and no longer a viable option. But the statistics don’t lie; it has been found that roughly 70 per cent of business successions don’t work and 70 per cent of busi-

“e Achilles heel of family-controlled enterprises appears to be planning – or more accurately – the lack of planning.” nesses have no succession plans in place. It is often the most neglected area of activity by the typical family firm owner.”

Finally, and crucially, the more challenging hurdle is executing the actual transfer. This is no easy feat and requires sound financial and fiscal planning and resourcing, clear identification of the new ‘leaders’, demarcation of new roles, maintaining the trust and confidence of employees, collaborators and all persons associated with the business in the new management – all this without disrupting the momentum and operation of the business Another area which causes issues is that of gender discrimination, said Dr Lia. “The imbalance of roles in family businesses is another weak spot to their sustainability. In the EU, women earn, on average, 16 per cent less an hour than men and there is a dearth of women in high-level and leadership positions. The labour prac-

tices and wage systems applied to men are not the same as those applied to women, making it more difficult for the latter to be financially independent, participate fully in the job market and achieve a work-life balance.”

“In family businesses, women often play an invisible role, or act as figureheads, and do not have their job or salary status appropriately recognised. This has serious repercussions in terms of social security contributions, pensions and welfare entitlements, as well as recognition of their skills.”

The Family Business Office serves as an advisor to a broad spectrum of family businesses, ranging from carpenters to manufacturers to hoteliers to name a few.

And while family-run businesses are nothing new in Malta, Dr Lia observed that the traditional model is changing. “We see businesses that started out as a sole-trader for the first generation, converting to fuller companies as they are passed

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CASE STUDY

on to the next generation. There’s also been the introduction of new legislative instruments such as trusts and foundations, which are given new scope to be used by family businesses.”

As well as helping clients manoeuvre both legally and administratively from one generation to the next, Dr Lia said businesses can save a lot of money by educating themselves on incentives Government has to offer. “In 2018, more than €29 million worth of savings were made by family businesses in Malta and Gozo thanks to the fiscal benefits, governance schemes and tax credits made available,” she said.

“Another €12 million were generated for public funds after people transferred their businesses and benefitted from a reduced stamp duty. This was more money that went back into the public funds to be utilised for the common good.”

As well as helping people from their base in Mimcol, Sliema, the Family Business Office holds regular events where members of the public can get more information.

“Last year we held 15 events across Malta and Gozo. They varied in size and style from one-to-one sessions, to larger events hosting more than 150 people. The aim was to raise awareness, as well as

“Handing over any business is a difficult task in normal circumstances, but when you factor in the emotional dynamics involved within families, it can become a lot more complicated.” educate the business community about the numerous incentives which are available to them. We were also able to hear the concerns of people and provide a reference point for future contact.”

For further information about the incentives and benefits available or for assistance from the Family Business Office, contact T: 2220 9524; E: familybusinessact.meib@gov.mt; Fb: Family Business Office Malta; www.familybusiness.org.mt

DR NADINE LIA, REGULATOR, FAMILY BUSINESS OFFICE

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e Malta Business OBSERVER

| March 28, 2019

CASE STUDY

e Convenience Shop outlets expected to number 71 by end of 2019 The number of The Convenience Shop outlets in Malta is growing exponentially, with expectations that it will increase to 71 by the end of 2019, according to CEO Martin Agius.

Mr Agius knows a thing or two about the retail business, having spent over two decades with General Soft Drinks, one of Malta’s leading soft drinks companies. As Sales and Marketing Manager, he managed to help the brand grow its business in a challenging market and a change in mind shift of consumer behaviours for soft drinks.

In December last year he decided to take up a new challenge as the CEO of the rapidly-expanding The Convenience Group, which already has 62 outlets under its umbrella as either fully-operated stores or franchises. “It was clear the shareholders behind The Convenience Shop had a clear vision to take the chain to different heights. It was tough to leave my former post, but their drive and determination to succeed had great appeal,” Mr Agius said.

The first The Convenience Shop outlet was relatively inconspicuous, opening in Zebbug 10 years ago in an attempt to target changing market trends. However, it did not take long for the founders to realise the concept had enormous potential. “The original owners were humble, but visionary at the same time. They saw quite quickly that more and more people were

seeking outlets that fitted in with a more hectic lifestyle and they started to service this market by opening more stores in various towns and villages around Malta,” said Mr Agius. “The formula has remained the same: a family-run business focused on delivering a special customer-experience while retaining a local feel. All our stores have a traditional look, such as wooden shelving, but are presented in a way that captures shoppers’ emotions. That’s what makes us stand out.”

Mr Agius explained that the ‘convenience concept’ has become more important than ever, due to Malta’s changing demographics and socio-economic environment, particularly the expansion of the expat and tourist sectors. “We are not competing with the traditional supermarket model, because the vast majority of our shoppers don’t want to spend much time in a store.

We actually complement supermarkets as our customers are all about ‘quick mission shopping’.

Our role is to meet their expectations in a five to 10-minute period.”

The key to achieving this aim is to ensure that each shop is stocked with an adequate range of items and to tailor the contents to each locality. “There is no one-size-fitsall. That doesn’t work for us. We are focused on the specific needs of our customers and items like freshly-baked bread and milk re-

“We are not competing with the traditional supermarket model, because the vast majority of our shoppers don’t want to spend much time in a store.” main big sellers. We are also committed to buying stock from local distributors and suppliers, and do not engage in parallel trading. We support local businesses and believe in the importance of nurturing close relationships with them,” Mr Agius said.

MARTIN AGIUS, CEO, THE CONVENIENCE SHOP LTD

The Convenience Shop outlets are now present in almost all Maltese towns and villages, except Mellieħa and Gozo, although Mr Agius affirmed that

there will be no hesitation in establishing a presence in these areas when the right opportunities come along. The current business model is based on a

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CASE STUDY

60/40 split of fully-operated stores and franchisees which see the benefits of being part of a successful modern brand. “Our strategy is to continue to grow rapidly,” Mr Agius went on. “Our growth strategy involves identifying new localities without cannibalising volumes, with the aim of retaining all the good elements that have made us popular with customers.”

“The Group is very conscious of the challenges presented by its expansion plan, and is investing in a sophisticated IT infrastructure to efficiently analyse market information and make informed decisions and ensure its workforce have the necessary information to take the right strategic decisions.”

The Convenience Group also places significant emphasis on human resources – it already has 750 members of staff on its books – and acknowledges their contribution to its success. “The company wouldn’t have gotten anywhere without them and we consciously operate an equal opportunities policy that has at its heart diversity and inclusion. We invest in training and stress to all our employees that we can offer not just a job, but a career.

We are training our people in customer care, merchandising, food preparation. Several of our people

started off as stackers and have made it to management positions, so the opportunities are there.”

In line with its growth, the Group is also focusing on creating a solid corporate governance structure.

Along with shareholders Ivan Calleja, Joe Pace, Manuel Piscopo and the recent addition of lawyer

Dr Kevin Deguara, who brings a wealth of experience from a corporate legal and financial perspective, two independent directors have been appointed, Benjamin Muscat and Charles Scerri, who have extensive experience in the retail, real estate, accounting and corporate finance sectors.

In its efforts to continue expanding and improving its operations, the Group recently invited the capital market to invest in the Convenience brand via the issuance of a €5 million bond. This was fully subscribed and is now trading on the Malta Stock Exchange Prospects MTF

List. “This was further confirmation that the Convenience brand has become a household name and a strong vote of confidence in the Group’s activities,” Mr Agius said. “We are striving to enhance and grow both our management and organisational structures. Our mission is to be the best convenience retailer in Malta by consistently serving the changing needs of consumers, as well as ensuring the company has a sound administrative backbone to support our expansion.”

Environmental considerations are also high on the list of priorities, as the Convenience chain seeks to be a champion in waste management. “We want to be at the forefront of environmental initiatives,” Mr Agius said. Corporate social responsibility is also an integral part of the philosophy of the Group – it recently opened a The Convenience Shop for Puttinu Cares in Qormi, the profits of which will be donated entirely to the Puttinu Cares Foundation.

“Our business is not just about profits. We want to play an active role in the community and this initiative is just one way of giving something back. We will provide support for good causes wherever we can; we believe in sharing and support towards the community,” Mr Agius concluded.

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e Malta Business OBSERVER

| March 28, 2019

STOCK MARKET REVIEW

Governance standards in public listed companies – where are we?

Vincent E. Rizzo

The Companies Act, Chapter 386 of the laws of Malta, regulates all public companies in Malta. It states that public companies must have a minimum of two directors and the memorandum and articles of association would principally not restrict share transfers nor limit the number of shareholders a company may have. A listed public company

therefore invites the general public to subscribe to shares (capital) or bonds (debt) of the company at any time for various reasons, introducing it to a varied mix of stakeholders using the capital market.

Although legal principles and matters related to corporate governance emanate principally from the Companies Act, and there is no major distinction in terms of governance principles between private and public companies, Appendix 5.1 to chapter 5 of the Malta Financial Services Authority listing rules provides the code of principles of good corporate governance for public companies listed on the Malta Stock Exchange. In the preamble, one can find a clear overview of the code’s objectives.

Quoting from the code, “the adoption of these principles is expected to provide more transparent governance structures and improved relations within the market which should enhance market integrity

and confidence.” Furthermore, these principles are expected “to ensure proper transparency and disclosure of all dealings or transactions involving the Board, any director, senior managers or officers in a position of trust or other related party.” Finally, and to my mind, most importantly, the code aims to “protect shareholders from the potential abuse of those entrusted with the direction and management of the company by the setting up of structures that improve accountability to them.”

The importance of corporate governance becomes more evident if one were to consider the parties that are involved in its proper function. Governance is a combination of processes and structures implemented by a Board of Directors principally to monitor, manage and enhance an organisation’s activity in order to ensure that it meets its objectives – the creation of shareholder value. Therefore, a com-

pany’s stakeholders – and principally, its shareholders – are fundamental to the core importance of corporate governance. Shareholders appoint a Board of Directors to act on their behalf and in their best interests at all times. The main scope is for a Board to constantly ensure that any action or decision is taken in the interests of all shareholders equally. This is a key point.

The role of shareholders and other stakeholders is becoming more and more important as companies increasingly resort to the public for part of their financing and growth plans. As such, over time, a larger number of stakeholders are becoming more significant in the corporate structure and as a result, protection measures are increasingly fundamental.

As indicated in the code and highlighted above, a critical component of good governance is transparency. How confident are we that publicly listed companies in Malta

are indeed adhering to this key principle in its widest context? We have been following listed companies in Malta for over 20 years now.

Admittedly, standards have improved over the years, especially in the recognition of the importance of the need for good governance structures, and in so far as transparency and disclosure with respect to publication of results, selected market communications, and dealings are concerned. But although improvements have indeed been registered, much more can be done in certain instances.

There are a good number of experienced, skilled and respectable individuals handling key roles within governance structures of public companies. However, in my opinion, we are regrettably still lacking and nowhere near fully appreciative of being accountable on matters related, for example, to related party transactions, acquisitions or disposals of material

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STOCK MARKET REVIEW

assets and relevant detailed communication in this regard. Furthermore, and principally as a result of a lack of active minority shareholder engagement, it is evident that a number of companies are happy to provide the bare minimum information merely in compliance with the rules rather than be open, detailed and totally transparent in these instances. In other words, the ‘box-ticking’ attitude still regrettably prevails over genuine detailed and transparent follow through. Why? Unfortunately, announcements that quite obviously lack the necessary information and value-added, especially to minority shareholders, still occasionally stand out. This is where clear differences between the effectiveness of governance structures emerge between public companies that should be following the same rules and principles. But over the years, this does catch up. Companies that are not totally transparent in all areas and on all matters will see trust and faith in them dwindle. At this point, companies should not resort to blaming the market for not appreciating what is, from their point of view, being done to ‘enhance shareholder value’. Instead, perhaps value would be enhanced were the companies to ask themselves whether the quality of information, the effectiveness of

their structures, the drive and ability of persons handling key roles in this regard, and the amount of time some people have spent in sensitive key roles are indeed the reasons why there is a lack of follow through in ‘value creation’ in the secondary market for a company’s shares.

Many people, be they company executives or shareholders, believe that it is all about the bottom line and dividends. It may well be for some, but certainly not for all. Over the years, the appreciation and identification of key determinants that are used and considered in assessing companies has extended far beyond its ability to pay dividends. This is a good sign and it is pleasing to see an increasing number of market followers, participants and opinion-formers comment about company structures and related relevant risks and threats when assessing.

Given the characteristics of our country and our culture, the risk of complacency when it comes to ensuring that all shareholders, minority or otherwise, are treated equally at all times increases dramatically.

Is it time to make changes to the code that, for example, limit the number of years key individuals in important governance roles hold position? How can potential conflicts of interest be better managed?

It can only be beneficial for the con-

tinued long-term interests of the domestic capital market to at least debate these issues and understand whether improvements can be made if we collectively aim to add value in a genuine manner.

Only then can we really ensure that

the enhancement of market integrity and confidence remain at the forefront of good corporate governance objectives.

Vincent E. Rizzo is a Director at Rizzo, Farrugia & Co (Stockbrokers) Limited

Rizzo, Farrugia & Co. (Stockbrokers) Ltd, “Rizzo Farrugia”, 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. Rizzo Farrugia, its directors, the author of this report, other employees or Rizzo Farrugia 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 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 report. © 2019 Rizzo, Farrugia & Co. (Stockbrokers) Ltd. All rights reserved.

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BUSINESS UPDATES

HSBC Malta and MUBE sign five-year collective agreement HSBC Bank Malta plc and the Malta Union of Bank Employees (MUBE) have announced the signing of a five-year collective agreement covering the period 2019-2023. The agreement builds on the existing commitment of the bank to be a leading employer and provides the foundations for a sustainable business for both employees and customers.

“I am very proud of my outstanding HSBC colleagues who work so hard to support our customers and believe this is a fair agreement that further advances the best interests of all

our employees in this next phase,” said HSBC Bank Malta CEO Andrew Beane. “As HSBC repositions our strategic focus towards measured growth, I am delighted that we have provided certainty on our employment terms so we can focus on running our business and being a great employer for our people. I would like to thank the Union and all colleagues for their professionalism during the negotiations.”

“With a pensions plan now in place and with an efficient implementation of flexible arrangements, the consolidation of the

HSBC MALTA CEO ANDREW BEANE (CENTRE) AND HEAD OF HR CAROLINE BUHAGIAR KLASS (LEFT) TOGETHER WITH MUBE PRESIDENT WILLIAM PORTELLI SIGNING THE AGREEMENT

terms and conditions of a renewed five-year agreement should provide further stability to the workforce in general. Whilst the agreement enhances the financial and nonfinancial aspects for all employees, MUBE

will also continue to work with management on finding innovative ways of providing further flexibility in the working environment.”

HSBC Malta is one of the largest employers on the islands with over 1,200 employees.

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Global B2B online directory Companies can obtain direct access to Kompass’ EasyBusiness solution through TradeMalta’s platform. EasyBusiness contains profiles of 11 million B2B companies from over 70 countries.

International trade statistics database The ITC Trade Map is available on the platform to allow enterprises to identify potential trade partners in 133 countries and view data on 5,300 products.

Market and sector insights The platform contains numerous articles and reports conveying opportunities in sectors such as food and beverage, education, oil and gas and ICT. Industries, economies and consumers database TradeMalta has access to data on 40 geographical markets on Eu-

romonitor International’s Passport database. Passport is not directly accessible via the platform, however interested companies may contact TradeMalta to arrange a one-to-one meeting to view the database.

TradeMalta’s Platform and its contents form part of ERDF Project 03.007 and are part-financed by the EU through the European Regional Development Fund. Register for free access to the platform’s content at www.trademalta.org

e Malta Business OBSERVER

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March 28, 2019

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BUSINESS UPDATES

Acumatica Cloud ERP – for all your distribution management needs tion to make the best decisions.

That’s why the Acumatica pricing structure lets you add casual users, suppliers, and customers without paying for additional licences. Therefore, the cost to you is based on the features and resources that you choose to utilise, not on the number of users who access the system.

Distribution management is an overarching term that refers to numerous activities and processes such as packaging, inventory, warehousing, supply chain and logistics.

Distributors of any size face many of the same global challenges, including rapidly-changing customer demands, complex inventories, and fluctuations in the supply chain. The main task of distribution management software is to help companies manage their distribution activities.

Acumatica Cloud ERP offers a distribution management solution that integrates and automates the entire cycle, from quoting to cashing. It enables businesses to simplify complex distribution processes involving multiple products and suppliers. Here are a just a handful of reasons to choose Acumatica for your distribution management needs:

Real-time inventory management With the Acumatica inventorytracking feature, business owners can control system-wide inventory to efficiently manage the distribution process from beginning to end. The best part is that inventory is accessed in real-time, so you can stay on top of everything – from viewing available stock and expiration dates to reordering quantities across multiple warehouses.

Minimise investment costs Everyone in your company needs up-to-date and accurate informa-

Improve customer satisfaction Through Acumatica’s availability of accurate real-time information,

any situation needing attention can be identified and addressed immediately, thus allowing you to provide customer support anytime, anywhere. With its fully-integrated financial management, customer management, and distribution management modules visible across the entire company, customer satisfaction can easily be improved.

Reduce order times With the Acumatica sales order management feature, you can improve the order process and eliminate delays by means of integrated workflow and automated sales order processing.

Acumatica allows you to set rules to optimise the sales management of multiple warehouses from a single screen. You can split orders, verify credit limits, and drop shipments.

Furthermore, with Acumatica’s notifications and alerts, you can always keep on top of your distribution business.

Know your true profitability Apart from enabling you to keep track of costs in real-time, Acumatica allows you to control costs across the entire supply and distribution chain, determining profitability by ware-

house, product line, and location. Start making the shift to Acumatica Cloud ERP today. For more information visit www.computimesoftware.com/ acumatica-erp; T: 2149 0700; E: info@computimesoftware.com

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e Malta Business OBSERVER

| March 28, 2019

BUSINESS ??UPDATES

Turkish Airlines’ ‘Great Move’ to Istanbul Airport begins

Turkish Airlines’ ‘Great Move’ to Istanbul Airport will begin on the night of Friday 5th April at 3am. The first stage of the move towards Istanbul Airport started back on 29th October 2018. The moving operation will take 45 hours in total and will be concluded on the night of Saturday 6th April at 11.59pm. In order to conclude the Great Move successfully, Atatürk Airport and Istanbul Airport will be closed for all scheduled passenger flights between 2am and 2pm on 6th April.

The farewell flight from Atatürk Airport The last flight carrying passengers from Atatürk Airport will be the Atatürk Airport – Singapore flight. Operations will restart in Istanbul Airport on 6th April at 2pm, with the Istanbul Airport – Ankara Esenboga Airport flight. The number of flights from Istanbul Airport will be increased in stages according to plan.

5,000 trucking rigs worth of freight to be moved During the Great Move, equipment weighing approximately 47,300 tonnes will be carried to Istanbul Airport, from aircraft towing apparatus to extremely sensitive materials. The distance covered by the trucking rigs carrying this load is calculated to be 400,000km – equal to circling Earth 10 times! Over 1,800 personnel will be working during this operation.

Airport codes are changing Following the first stage, the additional passenger flights of the national flag carrier operated via Istanbul Airport were listed with ISL code. After the move, IATA codes will change and from 6th April at 3am, Atatürk Airport’s IST code will be given to Istanbul Airport. Atatürk Airport, which will be hosting cargo and VIP passenger flights, will use ISL code.

GO offers corporate clients new Business Infinity internet package GO is now offering an updated, value-packed Internet package for its business clients, with Internet speeds up to 1GB, helping them stay connected when it truly matters to their business through the new Business Infinity Pack.

The most competitive package on the market, the Business Infinity Pack, offers improved internet speeds, free telephony, as well as refreshed TV, making it the ‘go-to’ product for businesses of any size.

“Our aim was to simplify our products, whilst packing in additional value for our customers. We wanted to make their decision as easy as possible. Our streamlined products are the result of extensive analysis of our client feedback, as well as of the operational demands of businesses today. We looked at what businesses need, what they expect, and set an ambition of delivering exactly this and more,” said Nikhil Patil, Chief Executive Officer.

The Business Infinity pack is offered in three different tiers, at

three different Internet download speeds – 75Mbps, 300Mbps and 1Gbps – ensuring that the right tier is available for every business set-up, no matter what stage of business they are in.

Let GO handle your connections, while you get down to business!

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e Malta Business OBSERVER

| March 28, 2019

BUSINESS UPDATES

Express Trailers supporting Maltese Innovation in financial retailers to export globally at low cost services to be discussed at the FinanceMalta 12th annual conference

Maltese retailers are constantly facing competition from international online stores. The natural and most logical reaction to this foreign competition is to go global by selling online themselves.

One of their biggest challenges when they sell online – apart from investing in an e-commerce platform, having it updated with all their products, pictures and descriptions, and having the platform linked to an online payment gateway – is then how to ship orders abroad. Express Trailers has been working silently on an innovative logistics platform purposely designed to support retailers, and anyone selling online, in the export function of their online sale.

The platform is a redesigned ShipLowCost.com website that talks to the retailer’s e-commerce software, enabling them to ship their products abroad, and effectively allowing them to take their business global.

“Express Trailers has always worked very closely with Maltese retailers and few understand the needs of these retailers as we do.

We know that to operate and remain competitive, one needs to be backed up with the right logistics setup and even more, a robust IT platform. This is where our ShipLowCost service for businesses comes in, also supported by our managed warehouse services,” said Franco Azzopardi, Chairman and CEO of Express Trailers.

Businesses who want to sell their products abroad can now work with Express Trailers through the ShipLowCost.com

portal. They will enjoy a seamless experience ranging from simply booking a delivery through ShipLowCost.com portal after their own e-commerce website registers a sale, to going into a total solution through our warehousing services where we manage the warehousing of their stock. In such situations, ShipLowCost.com will tell the WarehouseManagementSystem what to pick, pack and deliver on behalf of the customer.

Innovation in the financial services industry is one of the key topics that will be discussed by industry professionals at the 12th FinanceMalta annual conference which will be held on 6th June at the Hilton Conference Centre, with an evening networking reception taking place on the eve of the event.

The two-day event will provide delegates with networking opportunities, insights into the market, and updates on developments within the financial services sector, both on a local and international level.

Titled Malta: A Platform for Innovation, the conference will include sessions on the innovations driving the sector forward, such as fintech and AI, and will also touch upon important issues that arose due to this innovation, such as cybercrime.

“The conference is timely and relevant at a time when AI and Blockchain technologies are starting to transform, if not disrupt, payment systems, core banking activities, portfolio and asset management and the insurance industry,” said FinanceMalta Chairman Kenneth Farrugia.

The conference will be chaired by Federica Taccogna from FTI Consulting and will see an interesting line-up of local and foreign industry professionals, including MFSA CEO Joseph Cuschieri, IFSP President Wayne Pisani, the Financial Times Live’s senior head of content Michael Imerson, Malta Stock Exchange Chairman Joseph Portelli, OECD advisor Loretta Joseph, Revolut’s Dimitris Litsikakis and the Malta Bankers Association’s Marcel Cassar.

Prime Minister Joseph Muscat will deliver the first keynote address, while Parliamentary Secretary Silvio Schembri will discuss Malta’s role as a leader in DLT technology and innovation.

Further information and registration details are available on www.financemalta.org/conference-2019