INTERVIEW
Issue 9
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September 11, 2014
Distributed with Times of Malta
NOT ALL RENTED FARMHOUSES IN GOZO ARE AS BEAUTIFUL AS THIS ONE – MORE INSPECTIONS ARE BEING CARRIED OUT IN AN EFFORT TO STAMP OUT SUB-STANDARD HOLIDAY ACCOMMODATION. PHOTO: DANIEL CILIA WWW.VIEWINGMALTA.COM
They say that ‘justice delayed is justice denied’, and that ‘time is money’. This is why everything possible should be done to speed up court procedures for businesses. What is Justice Minister Owen Bonnici doing about it? see pages 7 and 8 >
NEWS Only one hotel applied for extra storeys under the original MEPA policy but around 20 could apply under the revised one. Silvio Farrugia explains why the new policy should be more popular. see page 3 >
INDUSTRY FOCUS
MTA steps up spot-checks on holiday accommodation in Gozo Matthew Xuereb The tourism watchdog has had a busy summer as it stepped up spot-checks on substandard accommodation in Gozo, The Business Observer has learnt. Tony Coleiro, chairman of the Malta Tourism Authority’s Enforcement Directorate Board, said when contacted that the authority’s enforcement officers had carried out over 4,000 inspections so far this year. This is half the 8,000 carried out last year but does not include the
figure for August – which is expected to be high. He said enforcement officers carried out spot-checks in Gozo regularly throughout the year, intensifying surprise visits in summer and other specific holiday periods. In 2012, the officers carried out around 2,800 spot-checks, almost seven times the 417 inspections carried out in 2011. Mr Coleiro said statistics on action taken were not kept as owners were immediately ordered to refurbish their properties and then followed up regularly.
Mr Coleiro was contacted over reports filed with the board and also received by this newspaper of substandard accommodation in Gozo which is offered for rent. Martin Galea said he was “shocked and incredulous” when he walked into a farmhouse he had rented for a five-day stay in Gozo with his family. There was a thick layer of dust on the floor, the water heater in the bathroom was rusty and leaking rust into the underlying bath, only one of the two hand wash basin taps were working,
three of the five kitchen chairs were broken and the oven knobs were missing. “There were cobwebs everywhere and the television wasn’t working. We had foreign friends with us. “The place was a disgrace, there’s no other way to describe it,” he said when contacted. He uploaded photographs on Facebook and the matter was immediately dealt with by the Malta Tourism Authority’s enforcement division. Continued on page 5 >
Private education providers were originally there to complement public institutes but many of the 120 accredited ones are creating a completely new economic sector for foreign students seeking further and higher education. see pages 12 and 13 >
CASE STUDY It is useless having something worthwhile to sell if no one knows about it. Why are we spending hundreds of millions of euro on properties but then holding back on the few millions needed to market them overseas? Chris Grech of Dhalia wants to know. see pages 14 and 15 >
e Business OBSERVER
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September 11, 2014
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NEWS
THE RADISSON BLU BAYPOINT IS ONE OF THE FIRST 5-STAR HOTELS TO APPLY FOR THE EXTRA STOREYS.
20 hotels likely to get extra storeys Around 20 hotels are expected to apply for extra storeys to be built as a result of Mepa’s new policy on the permissible height of hotels. The new policy replaces one which failed to attract any investors because its conditions were too stringent. In fact, only one hotel – the San Antonio –actually benefitted from the previous policy. The original Hotels Height Limitation Policy introduced in May 2013 allowed only two extra floors – and only on existing hotels. It was also limited to hotels in the designated tourism zones – and there was also a formula which meant that you had to compensate for the volume of those extra storeys elsewhere on site. “Numerous hotels had come forward but they soon realised that it was not what they had in mind and that they would not be eligible,” Mepa deputy director for planning Silvio Farrugia said. “When the government realised that its objective – encouraging investment in the tourism product – was not being reached, discussions started once again.” The new policy made some important changes. For example, it can also be applied to new hotels – and more importantly for
existing hotels which are to be demolished and completely rebuilt, which was not allowed under the wording of the old policy. “There were two hotels in Sliema that wanted to do that so that they could upgrade their operations, as well as the infrastructure like water energy conservation systems, waste management provisions and disability access. All these are now required by the Malta Tourism Authority in relation to their classification,” he said. “You have to remember how many of the smaller hotels still have room keys! But the investment has to be recouped from room revenue – and the prices cannot be raised beyond the market – so the more rooms you have, the more revenue you can generate. Since they can very rarely extend horizontally, the only way is up.” Hotels – particularly 5-star ones – are also anxious to be able to cater for very high net worth individuals by increasing the number of suites and things like family rooms. The new rules specify that hotels can add two floors over and above the limit for that area if the site area is under 5,000 sq.m. If it is larger, then more than two floors can be added, as long as the hotel is surrounded by planned or existing roads, or stands alone.
Another clause attempts to impose good design, saying that blank walls will not be allowed and that the result must be a “landmark design” – which Mr Farrugia agreed was somewhat subjective. He stressed that the policy does not give hotels the automatic right to the extra floors – but only sets out the eligibility criteria. Although it is no longer restricted to tourism zones, the policy cannot be applied in urban conservation areas, ruling out the Xara Palace in Mdina, the Capua/Palace Hotel in Sliema, the Phoenicia and the Excelsior in Floriana. It also cannot be applied
outside development zones, which knocks out the Kempinski and Ta’ Ċenċ in Gozo and the Seabank in Mellieħa. Of the eight remaining 5-star hotels, the Corinthia in Attard might also be affected as its extension could have an impact on nearby San Anton Palace. The Radisson BayPoint and the Intercontinental have already applied while two others are expected to apply soon. There are 37 4-star hotels which could be eligible of which only around 10 have showed interest so far. And in the 3-star category, so far five out of the 48 potential ones have come forward.
“e investment has to be recouped from room revenue, so the more rooms you have, the more revenue you can generate. Since they can very rarely extend horizontally, the only way is up”
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e Business OBSERVER
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NEWS
Research on tourism sustainability under way Results of research conducted on the sustainability of tourism in Mdina will be released in the coming weeks, paving the way for a nationwide exercise. The research was conducted by the Institute for Tourism Travel and Culture of the University of Malta as a pilot project before setting up an European Tourism Indicator System (ETIS) in Malta. ETIS was set up by the European Commission, which created a ‘toolkit’ and roped in 100 volunteer destinations to try it out. The first phase ran from July 2013 to April 2014, while the second is running from April 2014 till December 2014. “Nowadays all tourist destinations are called to tackle social and cultural, economic and environmental key challenges. Being able to effectively measure their sustainable performances has become essential. “Measuring these performances and monitoring its own results will
TOURISM INDICATORS FOR MDINA WERE COLLECTED AS PART OF A NATIONWIDE PROJECT COORDINATED BY THE INSTITUTE FOR TOURISM, TRAVEL AND CULTURE AT THE UNIVERSITY OF MALTA.
make it possible to local authorities to: get improved data for informed policy decision making; establish an intelligent approach to tourism planning; identify areas that need improvement; prioritise action projects; manage risks effectively; and create benchmarks of performance,” the Commission said. Sustainability has become a core issue in the tourism sector. According to the UNWTO, indicators allow decision-makers to reduce the possibility of making poor business decisions unconsciously. There are 46 different indicators, grouped around five
“We started with Mdina but the intention is to apply the system to Malta as a whole, as it has been accepted as one destination by the European Commission” categories: management; economic; social; environmental; and cultural. “We started with Mdina but the intention is to apply the system to Malta as a whole, as it has been accepted as one destination by the European Commission,” institute director Nadia Theuma explained.
However, this actually turned out to be a real challenge as there is considerably more information collected for Malta as a whole than for just Mdina. “We want to analyse other zones too as they may have issues that are not reflected on a national basis,” Dr Theuma said.
“The important thing is that once we have the indicators, they will be used to direct policy – and they will be reviewed regularly to pick up trends. “We don’t want to collect data just for the sake of it; this is not going to be a purely academic exercise.”
Finnair to operate direct Malta route Finnair has decided to operate a direct flight from Helsinki to Malta, which could operate all year round, Ambassador Michael Zammit Tabona said. Mr Zammit Tabona, who was appointed Malta’s Ambassador to Finland in May, said that the direct air links will pave the way for many other economic exchanges – from tourism to real estate purchases and foreign direct investment. Until now getting to Helsinki took most of a day. He also sees the route as being potentially of great interest to Chinese tourists to Malta, as they could fly over the pole rather than via Dubai, saving several hours. The Finnish government holds over 55 per cent of the airline shareholding. It made a pre-tax profit of €27 million in 2013, a considerable turnaround from a loss of €111 million just two years earlier. Mr Zammit Tabona said that a direct flight could boost
A FINNAIR AIRPLANE DOCKED AT THE CHOPIN INTERNATIONAL AIRPORT IN WARSAW. PHOTO: PETER ANDREWS/REUTERS
property purchases – replicating the success of the rest of the Scandinavian market. “Spain and Portugal were taking a lot of that market because of tax incentives but I believe that the European Commission – prodded by us – intends to bring them in line with the rest of the member states. So Malta will be competing with Spain and Portugal on a much more level playing field,” he said.
“However, we also offer an English-speaking environment which will be much more attractive to Finns,” he said. There are already two Finnish banks in Malta – Nemea and Ferratum – as well as numerous Finns working in i-gaming. Mr Zammit Tabona said that he was talking to the banks, encouraging them to set up loan packages to help Finns wanting to buy property here.
The main problem he faces is overcoming the lack of awareness of Malta and what it offers. He plans to address this through a seminar in Helsinki on September 22, to which top representatives from fields as diverse as financial services, real estate, tourism and i-gaming will be invited. The line-up of Maltese speakers includes representatives from Finance Malta, the Malta
Tourism Authority, the Malta Scandinavian Business Forum, and the Federation of Real Estate Agents. The guests will also be briefed on Malta’s Individual Investor Programme which may be of interest to the many Russians living there. “Organising an event like this is a financial risk but we are confident that we will get sponsorships. However, the important thing is for the Maltese companies who attend the seminar to follow up contacts – and our PR agency will certainly be at their service for this,” he said. He admitted that being a nonresident ambassador has its drawbacks as it becomes so much harder to set up networks. However, the PR agency has arranged numerous meetings for him which have already reaped rewards. “Once you meet people, you find a connection. For example, the President had been to Malta and had toured Malta on one of my company’s open-top buses,” he said.
e Business OBSERVER
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September 11, 2014
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NEWS
CMA CGM signs three major shipping agreements The CMA CGM Group, the world’s third largest container shipping company, which operates the Malta Freeport, has signed three major agreements with China Shipping Container Lines (CSCL) and the United Arab Shipping Company (UASC). Called Ocean Three, the agreements concern the following maritime trades: AsiaEurope, Asia-Mediterranean, Transpacific and Asia-United States East Coast. The agreements (a combination of vessel sharing agreements, slot exchange agreements and slot charter agreements) will complete the CMA CGM offering on the biggest global maritime markets: On the Asia-Europe trade: four weekly services, which complete the two existing services, thereby offering six departures per week. On the Asia-Mediterranean trade: four weekly services, two to the Mediterranean, one to the Adriatic and one to the Black Sea the only one on this market. On the Trans-Pacific: 4 weekly services to California and 1 service to the Pacific Northwest (United States and Canada). On the Asia-US East Coast trade: 1 service via the
PHOTO: CHRIS SANT FOURNIER
Suez Canal and 1 service dedicated to the Gulf of Mexico. The agreements on the transatlantic trade are being finalised and will soon be announced. This new offering will combine both speed and reliability. Rotations will be optimised with calls in all the biggest Asian, European and North American ports, using transshipment hubs common to the three partners. The number of weekly calls proposed and the transit times will be among the best on the market, thereby responding to the expectations of our clients. Rodolphe Saadé, CMA CGM vice chairman, said: “We are very pleased to have signed these three agreements with such reputable partners, whom we both know and appreciate. This will allow us to propose to our clients a high quality and reliable alternative to existing services on the market. CMA CGM will continue its global development.” CMA CGM has a fleet of 430 vessels and serves more than 400 ports around the world. In 2013, the group carried 11.4 million TEUs (twentyfoot equivalent units). It had a turnover of $15.9 billion in 2013.
THIS WAS THE SCENE THAT MET SOME MALTESE WHO WERE PLANNING TO STAY AT THIS FARMHOUSE.
< Continued from page 1 The owner of the farmhouse in question, in the quaint village of Qala, was ordered to carry out improvements to the property before renting it out again. Another traveller, who preferred not to be named, also recounted his experience when he found out that the Gozo farmhouse he had booked online some months back was adjacent to a construction site, with a tower crane towering over the pool area. Although no work was being carried out while they were there, the water in the pool was covered by a layer of dust and the outdoor furniture was filthy. He said he called the farmhouse owner who initially said this was the first complaint he had received all summer. There was also a considerable amount of dust inside the residence. The owner did not have another property to offer the guests, some of whom had travelled from overseas for a short holiday with their friends, but agreed to give them a full refund. Mr Coleiro said that during the past five years, rented accommodation in Gozo had increased by 27 per cent, amounting to an extra
He called the owner who said this was the first complaint he had received all summer
1,055 beds in licensed self-catering bedstock in Gozo. Currently there are more than 900 units, apartments, farmhouses and villas licensed with the MTA. Its enforcement officers carry out surprise visits to ensure the units being rented to Maltese and tourists meet standards.
A PHOTO POSTED BY A WOMAN YESTERDAY AFTER SHE SPENT THE WEEKEND AT A FARMHOUSE IN GOZO WITH HER FAMILY AND HAD TO DEAL WITH A DRAINAGE OVERFLOW PROBLEM THAT WAS ALSO SEEPING INTO THE POOL.
e Business OBSERVER
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September 11, 2014
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INTERVIEW
When justice means time and money... Court delays are always cited in surveys on Malta’s attractiveness as a place to do business. Justice Minister OWEN BONNICI explained to VANESSA MACDONALD how these are being tackled – but also looked at the bigger picture: offering services to the international community. Has the average time it takes to complete a commercial case gone down? The need for an ‘expedited procedure’ for commercial cases is felt more than for most other civil cases. This is a fundamental issue – and not just at the local level. If you have a case in court which pits a French company against a Maltese one, it is as much of interest to the French Justice Minister as it is to me. There is now an element of unofficial specialisation where commercial cases are concerned. There are two judges – Mark Chetcuti and Joe Zammit McKeon – who are doing a brilliant job. This was started by the previous government and we have continued to build on it. The hearing of commercial cases is probably the most efficient part of the Civil Courts. But when compared to the rest of Europe, we clearly need to do more. Whether this arrangement should be formalised into being a fully-fledged commercial court is another issue, but the most important thing is that cases should not drag on. You cannot have the fourth largest maritime registration in the world but then have cases drag on for four or five years. And some of them – like the sale of ships – generate revenue which can be spent on improving other areas. What else can we do to speed things up? Clearly we have to increase the resources. Even if we wanted to, there was not enough space before but now we are using the new €1.5m building in Strait Street, and can consider adding judges. There is an acute problem in the Court of Appeal and we need more judges there too. The Court of Appeal is blocked up by frivolous cases. It seems to be a foregone conclusion that an appeal will be filed any time someone loses a tender, for example.
JUSTICE MINISTER OWEN BONNICI.
If you do not agree with a tender decision, you go to the Public Contracts Review Board, and appeals from that go to the Court of Appeal. And those cases must be concluded within four months. But if they are given priority, it means that others on the pending list are delayed even more. Apart from these ‘fast track cases’ – mostly the PCRB referrals and Constitutional cases – cases take an average of three years and four months. It has become the practice that anyone who loses a case and want to play for time, files an appeal. I am talking to the Chief Justice and we are trying to find a way to attack this backlog. One is to introduce disincentives for appeals, so if there is an appeal which is very clearly frivolous, it will be heard and judged straight away. This suggestion is being considered and the Chief Justice seems to be in favour of it. There are also procedural changes: when a case is eventually heard the lawyers once again argue the case – but that is not always necessary. We are proposing that this should be left to the discretion of the court; it would save considerable time. Also there are currently two compositions of the Court of Appeal – each chamber has two senior judges and both are presided over by the Chief Justice. We are now considering having two more judges in a third chamber, which could take over straightforward cases – for example, where a company is owed money and there are no points of law involved. This would also bring down the waiting time. There has been an Arbitration Centre for years but it never really got off the ground... Why? We imported the model we used in the court into the Continued on page 9 >
e Business OBSERVER
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September 11, 2014
INTERVIEW
< Continued from page 7 arbitration system, along with all its good and bad parts. We should have created a new system which avoided the pitfalls. We need specially trained arbitrators with experience in best practice in Europe. It is pointless to rely on retired judges. I have spoken to three lawyers I consider to be the leaders in commercial arbitration and have asked them to identify people who can give training in Malta, people who have set up successful arbitration centres elsewhere. I also spoke to the Malta Chamber of Commerce, Enterprise and Industry – and they liked the idea so much that it was actually included in their recent policy document. We would be able to attract international cases, say a Chinese company against a Russian one. This would generate considerable revenue. But we cannot do this if we rely on the court model. Cases have to be started and continue without a break until they are concluded, as happens with jury cases. Otherwise the centre is doomed to failure. There is also scope for private enterprise to be involved in the administrative side – without affecting the legal side – as it could be profitable. An international arbitration centre should not be run as a government department. I am looking into this. The Malta Employers’ Association also want a tribunal – rather than the courts – to hear cases involving unfair dismissal and industrial disputes. This sector falls under Minister Helena Dalli so I prefer not to comment. There are various sectors which are seeking specialised solutions outside the court framework. I have no problems with slimming down the courts but experience has shown that – in spite of all its problems – it guarantees a better quality of justice, thanks to its centuries of experience. I believe that the solution is to speed up cases, not to have more specialised courts. Let us channel the energy into this. There is another point: I originally contacted the courts when I wanted to set up an interview but ended up interviewing you... This highlights the fact that we do not have a justice department. The courts have been bogged down by functions that should not fall under its remit. Its function should be to administer cases. We need a strong justice department to look after legal aid, asset management and recovery, general policy and also revenuegenerating projects for Malta. We have started by appointing Natalino Attard as its director and are looking at a fully-fledged department. You mentioned asset recovery. Does the system for court seizures work? I am not completely happy with it. The government needs to offer this service but there is room for plurality. If there are companies which want to offer a debt collection service, they would be welcomed. The justice department should regulate the market and issue licences to any private agency that would like to do the job. I have spoken at length to the Chamber of Advocates and they are thrilled by
the idea. They have made a number of proposals. There is also the Giovanni Bonello report which suggested procedural changes. One which I am going to implement is on ex tempore judgments. Normally the judgment gives all the details about the claims made by the defence and the prosecution, then all the arguments and observations and the judgment itself. In the ex tempore system, the judge can give the judgment there and then and only gives the full judgment in the case of an appeal. This practice is widespread in other jurisdictions. We will now need to decide which categories of cases would be eligible for this system.
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e Business OBSERVER
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e Business Observer is a new business newspaper distributed with Times of Malta every fortnight. Editorial Vanessa Macdonald, Head of Content (Business), Times of Malta.
EDITORIAL
Down six places in competitive index When the government stops patting itself on the back and decides to look a bit deeper into some of the problems facing the economy, it will find that not everything is going so well as it invariably says in the endless tit-for-tat kind of political debate that goes on in the country. On the same day the Ministry of Finance launched the 2015 pre-budget document, announcing robust economic growth, a global competitive index by the World Economic Forum gave Malta a wake-up call. In just one year, Malta slipped six places in the ranking and found itself back to where it stood in its 2012–2013 report, in 47th place out of 144 countries. In one blow, therefore, the index robbed the ministry of the fine words it used to describe Malta’s “biggest improvement in its ranking” for 2013-2014. Not a fine advertisement for Malta at all, but what particularly jarred was the remark made in a government statement that “the slightly-lower score followed a record high position” in the previous year. Unwisely, the government made it sound as if losing six places in one go does not matter since the country is only back to where it was a year before. What kind of an argument is this? The country ought to have worked harder to move forward, not backwards. It is true that the economy has made further progress, that the government is managing to cut the deficit to below the three per cent threshold allowed under EU rules, and that the country is doing well in economic growth, but, if living standards are to be improved further, it would have to do even better all round.
To do better, the country would have to make a greater effort at removing obstacles to growth and to make it easier to do business. There are indications that the government is taking the task of cutting bureaucracy seriously enough, and one index in the global competitive index, that for the ‘burden of government regulations’, shows that improvement is being made, with the ranking improving to 76 from 86. This is a significant advance. But other indices are not so encouraging. In an index indicating ‘favouritism in decisions of government officials’, Malta has slipped to the 72nd place, from 60th. This is damaging, and ought to serve as an eye-opener to the government. In the ‘wasteful of government spending’, another important indicator, Malta slipped two places, from 32nd to 34th place, confirming the criticism the government is getting in this regard. Also somewhat disquieting are the indices for ‘transparency of government policy-making’, from 60th to 65th; basic requirements, from 34th to 35th; institutions, from 37th to 40th; health and primary education, from 15th to 20th; labour market efficiency, from 43rd to 54th. As it happens, Malta did not place well in another important index, called ‘Doing Business’, a report for local firms done last year by the World Bank. In the ‘ease of doing business index’, it placed 102nd, out of 189 countries. So, while the overall picture is not bad, there are grey patches that would need to be removed if the island is to remain attractive as a destination for foreign investment.
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BUSINESS OPINION
e risks of low inflation
Philip von Brockdorff When launching the pre-budget document, Edward Scicluna, the Minister of Finance, “expressed concern about the low inflation rate that could create pressure for wage cuts, which he insisted were not acceptable”. That, in my view, is an honest reference to one of the risks associated with the low inflation rates registered by the National Statistics Office since March 2013 but there are other risks which were not men-
tioned and which could impact our economy in the medium term, especially if the period of low inflation or disinflation is a prolonged one. According to the minister, economic growth target is on track. One cannot argue against Malta’s growth potential but whether it always translates into real economic growth remains to be seen – especially given our reliance on the eurozone economies, where growth recovery remains slow. Though we have seen positive signals, the collective GDP in major eurozone economies has virtually stagnated. The effect of harsher sanctions on Russia will act as another drag on the eurozone economies. On top of this, the eurozone is experiencing extraordinary low inflation rates with bond yields falling below one per cent in some cases. This, of course, is an indication of falling prices unlike (it must be said) Britain where the economy is showing encouraging signs of recovery
after very bold political decisions on structural reforms. The same cannot be said of most eurozone economies where commitment to structural reform has been sidelined by an EU lacking the leadership and appetite for farreaching changes. The eurozone’s tight monetary policy hasn’t helped either. Whereas it has been argued that loosening the reins of fiscal policy would stimulate economic growth, I’m not sure that will come about automatically if eurozone leaders are swayed by public
opinion and are not committed to structural reform. This brings me to the risks of disinflationary expectations where households across the eurozone are seemingly delaying purchases with retail sales dropping 2.5 per cent in July when compared to the same month last year – although it must be pointed out that the latest figures on consumption show an increase in volume terms.. Disinflationary expectations could also cause local companies to delay investment if they believe cheaper finance would be available
“ere needs to be a stronger commitment to structural reform to enhance our economy’s competitiveness”
in the future. Though the Maltese economy doesn’t have the same slack as say Italy or Spain, the risks of disinflation cannot ignored. Of course, consumers would welcome lower prices but, as stated by the Minister of Finance, the risks of falling income are a matter of concern since falling incomes would raise debt burdens on households thereby reducing spending on goods and services at a time when economic growth is to a significant extent dependent on consumption. Deflation risks are, of course, greater in major eurozone economies, especially in the weaker economies. To mitigate the risks of low rates of inflation or disinflation, new policies and initiatives are needed locally to further encourage investment. There needs to be a stronger commitment to structural reform to enhance our economy’s competitiveness. The forthcoming Budget should set some light on initiatives aimed at reaching this objective.
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e Business OBSERVER
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INDUSTRY FOCUS
Education: a lesson in economics What started out as a few institutes trying to fill in the gaps for locals seeking further education not catered for by the university has turned into a thriving economic sector. Within just over a decade, the further and higher education sector has 120 accredited institutions – described by the commission responsible for accreditation as “a massive explosion”. The previous government had set itself a target to establish Malta as a regional hub of excellence for education by 2020. But this meant moving away from the idea of providing education for locals and creating an environment which would attract foreign students. The development of this sector lies in the hands of the National Commission for Further and Higher Education, which was formed two years ago, merging the National Commission for Higher Education – which helped with the policy perspective – and the
Malta Qualifications Council, which handled the recognition of overseas qualifications. “As the sector grew, the emphasis had to be put on new roles. Apart from the roles of the previous entities, we are also responsible for the accreditation and licensing of institutions setting up shop in Malta,” commission chief executive officer Edel Cassar explained. The University of Malta, Mcast and the Institute for Tourism Studies are the only self-accrediting institutions in Malta, a process they handle through internal structures. Anyone else – including the private sector, the Employment and Training Corporation and the Lifelong Learning Department – need the commission’s green light. If everything is in place, an institution is granted a five-year licence, which is then reviewed before renewal. A one-year
“As the sector grew, the emphasis had to be put on new roles. Apart from the roles of the previous entities, we are also responsible for the accreditation and licensing of institutions setting up shop in Malta”
temporary licence is granted when there are minor shortcomings – which have to be resolved within a year. The criteria have been set out in considerable detail in legal notice 296/2012, which covers everything from Mepa approval from the premises to teachers’ qualifications and from the need for an internal quality assurance system to the need for at least one accredited programme. Things are changing. Originally, local institutions were set up as franchises for foreign universities or certification bodies; now, satellite campuses are being set up. They do not only provide different modes of study and different subjects but have become a new economic sector in their own right, renting premises and creating jobs, as well as bringing students to Malta. The latest to open its doors is the London School of Commerce Malta, joining seven other schools
which are part of the LSC Group of Colleges. Its 750-square-metre premises in Europa Centre in Floriana will be able to handle 250 students at any time – up to 500 in all. It will start off by offering MBAs aimed at full-time foreign students and part-time locals but plans to offer courses in numerous other subjects. “There are many other MBA providers but we offer them at much lower cost as this is what PSC tries to do in its centres, such as in Malaysia, India and Columbia. Other programmes cost between €8,000 and €10,000 a year, but we are offering it for under €6,000. “We already have 30 people signed up for the first intake,” centre manager Maurice Rizzo said, adding that there was interest from Russia and North Africa as well as further afield in China. “The UK has been shooting itself in the foot as it is making it very difficult for students to get
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INDUSTRY FOCUS
visas. This leaves hundreds of thousands of foreigners seeking alternative countries in which to study.” Partnerships with certifying bodies can be very effective. Ask the Malta Institute of Accountants. After decades offering its own courses, it joined up with the ACCA in 2003 to offer a joint examination scheme and had 1,558 enrolled students in 2013 – representing growth of 10.5 per cent per annum since 1995. “We approached the ACCA fully prepared for rejection but they welcomed our proposal with open arms as it coincided with their international expansion plans,” MIA head Noel Zerafa explained. “We knocked on the door and it swung open. For students, it meant that they could attend parttime courses instead of the ACCA’s distance learning. We had 400 students within the first year.” One factor behind its success is that the course can be followed by students while they are in full-time employment, giving them the advantage of career progression and experience-gathering even while they improve their qualifications, he said. It is not only the number of institutions which is growing but also the number of courses for which accreditation is being sought. “Public appreciation is growing as people can see the added value of knowing to which level a course has prepared you, whether for further studies or for a job. And accreditation is also a quality seal,” Ms Cassar said. Mr Zerafa highlighted the importance of complementary diplomas in various specialisations. “The profession has become incredibly complex as it covers tax, risk, regulation and audit, to name but a few. So it is very important for other institutes – such as the Malta Institute of Taxation – to offer specialised courses,” he said. One advantage of the private sector is that it is more aware of what industry wants – and it can also react faster to fill the gaps than state-owned entities like the university.
The managing director of Business Leaders, Morgan Parnis, said there were too many students who have a wealth of experience and industry knowledge but often few qualifications. “With a job market becoming ever more competitive, students are now approaching organisations like ours to help them tap into better career opportunities that require such qualifications. Joining accredited programmes also gives students the opportunity to consolidate their business networks, tap into new skills and knowledge acquisition. “I believe that the local market is the tip of the iceberg and that local academies and institutions should work together to improve this industry and attract nonresidents to study in Malta,” he said. The commission would like to get a more scientific view of the current situation and it is planning a comprehensive skills gap analysis in the first quarter of 2015. As with any sector, there are obstacles and bottlenecks. For foreign students, the current cap on the amount of hours they can work – a visa condition – is considered to be too strict, especially since they could be in Malta for years. There are also still delays and problems getting visas. A more serious issue is protecting the sector’s long-term reputation and standards. In the past, an institute was closed because it was not up to standard and the foreign awarding body had to transfer the students to another provider. Sometimes, the problem is that students did not do their homework before signing up to a course – only realising when it was too late that their qualifications were not accredited and would not be recognised either by other educational establishments or employers. “It is always be surprising that people will do many checks before buying a car but will spend that same amount of money on a course without even basic checks!,” commission director for quality assurance Sandro Spiteri said.
“We have had cases of people trying to persuade us to speed up the accreditation – even by attempted bribery – because they want to get started. But the due diligence revealed gaping holes in the quality and provision. You have to be fast and efficient – but not hasty!”
“The vast majority of providers are bone fide but you will always find the exceptions. Our job is to keep them out... We do get applications from abroad asking for accreditation and it is sometimes very obvious that there would be problems. We do turn down applicants – although we do not make a lot of noise about it,” Mr Spiteri said. “We have had cases of people trying to persuade us to speed up the accreditation – even by attempted bribery – because they want to get started. But the
due diligence revealed gaping holes in the quality and provision. You have to be fast and efficient – but not hasty! It takes a long time to build up a reputation but just one incident to tarnish it.” The commission does external audits and spot checks, as well as following up complaints. “The vast majority of cases are sorted out fairly quickly. There are only very few cases where we have to impose a formal sanction, as the law gives us to the right to do,” he said.
The commission is also aware of the need to protect students in case an institute closes for financial reasons. The law establishes the rights and duties of both provider and student but so far there is no system to implement it. This should hopefully be in place by October, following national consultation with stakeholders on various aspects of the law. “We are going to pilot a student agreement with one college, which will help other institutes when they come to prepare their own,” Mr Spiteri said. The Ministry of Education said that in line with the National Reform Programme issued by the Ministry for Finance, the Programme Implementation Directorate within the Ministry for Education and Employment offers various scholarship schemes for those pursuing studies at higher levels of education. “Being aware of study trends, like studying/carrying out research while leading a family life, and of the needs of the local economy in a global perspective, these scholarship schemes are highly proactive by responding and adapting to exigencies. “Their aim is to increase opportunities for further specialisation, as well as availability and employment of high-level graduates in the priority sectors of the knowledgebased economy in Malta,” the ministry said. The fourth call for applications under the ‘Master it!’ Scholarship Scheme is open, and the application deadline is October 31 at noon. The ministry added that the 2014 call for applications for the Malta Government Scholarship Scheme for Undergraduate Courses will be issued in the near future while the Commonwealth Scheme may be issued depending on the direction provided by the Commonwealth Commission in the UK. Updates regarding future schemes as well as regulations and information on past calls for applications may all be viewed on the website www.myscholar ship.gov.mt.
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CASE STUDY
Blowing our trumpet about property CHRIS GRECH, the chief executive officer of Dhalia, has decades of experience in the real estate sector. He told VANESSA MACDONALD that, while he sees very positive policy direction being given by this government, a concerted marketing drive is needed. The number of permits issued has gone down from a peak of 11,700 to around 3,000 last year. Is this the end of the construction industry? Until a couple of years ago, there was no confidence in the development and construction sector. But this government changed that. I don’t want to be political but the present administration voiced out loud that it wants to revive these sectors and to fine tune the present products on the market, such as the residency schemes. There are now five schemes, ranging from the Global Residence Programme to the Individual Investor Programme, and all of these have been made more marketable. The government made it clear it wants more foreign investment, more people to come from all over the world to set up more businesses here. They want people to come and create jobs, to retire here, to buy passports and to buy or rent properties. These investors spend money in diverse sectors of the economy. In the past year and a half, we have also seen the government taking the initiative on government projects like Dock One, where there is considerable room for entertainment, residential and mixed use development. They are looking at more marinas and more hotels, for example. But it does not happen overnight. It takes years to build up. And you have to make sure that the projects are financially feasible. There should be a lot of study and research before these projects are implemented.
It is pointless if the construction industry makes the same mistakes it did before, adding unsellable apartments to an already excessive supply... Have they learned their lesson? We are still dealing with the ‘old’ product at the moment. We are still at this stage where the excess supply accumulated until two years ago is being sold. At what price though? Given the excess supply, did they have to slash their prices? Not as much as you might think. There has been a huge increase in demand in the past one and a half years for a variety of reasons. Take first-time buyers: 2014 has been an exceptional year for them. They save €5,000-€6,000 on stamp duty if they buy by the end of this year – so many couples planning to marry decided to bring forward their purchase plans. This has had a big impact of the developers’ cash flow. And it was also an incentive for single people looking to move out of the family home who decided to buy instead of rent. Apart from first-time buyers, there are also all the foreign companies that set up in Malta who need offices and whose employees require places to live... And in turn the demand for rental properties created a new market for the small investor who buys a property with rental in mind. The situation has stabilised and prices have stabilised. What will the developer do with that cashflow? There were so many dilettantes who only
DHALIA CHIEF EXECUTIVE OFFICER CHRIS GRECH. PHOTO: CHRIS SANT FOURNIER
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CASE STUDY
became involved with construction when the boom was under way... Developers have learned from the experience of the past 10 years. It would be commercial suicide to invest in a piece of land because it is cheap, or to build a product which is not of good quality and design. That era is behind us. I am very confident that developers will adopt a more professional approach. And there will be much more emphasis on design – which is costly per se and costly because it imposes higher standard materials and details, for example. Without them the property will not sell because the buyers have become a lot more demanding. We are seeing a lot of projects coming up. Mistra has a permit for around 700 units. There is also the marina in Gozo being proposed which can help the island – and I would hope that there might be a few more good hotels there. A marina and hundreds of apartments are planned where the Jerma hotel was and there is a proposal for land reclamation on which hotels, residences and marinas could be built. There is also the Savoy Hotel at the top of Rue d’Argens and of course White Rocks. These are projects rather than random apartments on random streets. Is this what the market needs? I wish I had the answer – but without research, you cannot say for certain. Small projects, redevelopment and infill projects will continue. You will always find developers ready to pull down a few houses in Swieqi and build apartments there, and those who get their hands on a piece of land in the middle of a village which is still being farmed. There are a lot of good locations but it depends on how well they fit into the context. Isn’t that why projects may make more sense? They are built with a much more holistic approach...
A HOLISTIC CONCERTED MARKETING DRIVE IS NEEDED FOR MALTA’S REAL ESTATE SECTOR. PHOTO: DARRIN ZAMMIT LUPI
Yes, they look at utilities, parking, waste, transport. But there are ways to resolve these issues. What I do not agree with is the way we are ignoring the opportunity to ensure that the Maltese islands prosper... We have a unique product but our competitors in the Med also have very good products with much better conditions than we offer. We need to approach the market and come up with a really incredible marketing strategy and worldwide awareness campaign. It will need a very high budget. If we are committed to all these projects, we have to brand ourselves. How? We need to bring all the entities involved – from the banks, to the developers, real estate agents, Malta Enterprise, Malta Tourism Authority,
FinanceMalta – and of course the government on board and work as one team. This is what other countries have done. I have voiced this opinion many times over and my major concern is that we are not laying the right foundation and we are underestimating the power of selling our lifestyle and the incomparable Maltese experience. To achieve this, we need a very professional structure in place with a powerful team of around 12 people to run it, corporate people, who are paid well, who take ownership of it and who are willing to travel the world with it, who can walk into a boardroom and present Malta with passion. We are talking about hundreds of millions being invested in these projects – but we will not
“We have a unique product but our competitors in the Med also have very good products with much better conditions than we offer”
spend a few million to ensure that we do not make very expensive mistakes and that these projects are a success, whether this success comes from Japan, South Africa, Russia, America or EU member states. I went to Prime Minister Joseph Muscat after he
was elected and I mentioned this to him but I stopped after a few minutes as we were clearly not on the same wavelength. Now, the government seems to have a vision for the construction industry and it needs to get it right.
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STOCK MARKET REVIEW
e demise of the ACL bond market “e demise of the ACL bond market should reignite the thought process behind the relaunch of another junior market”
Edward Rizzo On August 29, Melita Capital plc announced that it will be opting for an early redemption of its €25.9 million 7.15% bonds on September 30. Two months earlier, Pavi Shopping Complex plc announced that it will be redeeming its €9.5 million 7% bonds on the first optional redemption date falling on October 26. In both instances, these companies will not
be issuing fresh bonds to finance their redemptions and therefore bondholders will be receiving their capital back and would need to seek alternative investment options. Melita Capital plc and Pavi Shopping Complex plc are the only bond issuers that currently feature on the Alternative Companies List. Previously, Mediterranean Investments Holding plc
also had two bonds on the ACL but these had been upgraded to the Official List in 2010 when the company issued another bond and by that time it had the required track record to qualify for the main market. In earlier years, there were another four issuers that utilised the ACL bond market, namely Hotel San Antonio plc, Bay Street Finance plc, Big Bon Finance plc and GAP Developments plc.
Therefore, as a result of the repayments of the Melita and Pavi bonds, the ACL bond market will cease to exist in the coming months. The ACL had been launched in October 1999 as a junior market to promote listings of smaller companies which do not qualify for listing on the Official List of the Malta Stock Exchange. Continued on page 18 >
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STOCK MARKET REVIEW
< Continued from page 16 Like all junior markets in overseas jurisdictions, the listing obligations were naturally less onerous. As an example, an issuer required a three-year track to qualify for the Official List while a start-up company could obtain a listing on the ACL. Moreover, while the size of a bond issue to qualify for admittance to the Official List was of a minimum of €1 million, the minimum bond issue for a company being admitted to the ACL was only €200,000. Essentially, the ACL was promoted as a second-tier market primarily for companies to which a higher investment risk than that associated with established companies tends to be attached. Unfortunately, over the past 15 years, the ACL market only attracted one equity listing (Loqus Holdings plc previously Datatrak) and six bond issuers. Probably in view of the lack of success achieved by the ACL market, it was publicly documented between 2006 and 2008 that the Malta Stock Exchange intended relaunching the ACL market as an Exchange-regulated
“A more proactive stance by the Malta Stock Exchange management to attract more bond and equity listings would seem in place” market (XRM). The chairman of the MSE at the time had explained to the media that the XRM rules were being based on the highly successful AIM market in London. However, these plans never materialised and in recent years no further information was provided by the MSE in this respect. While the junior market did not reach the desired objectives and market participants as well as investors still remain in the dark on any fresh plans in this respect as a result of the imminent demise of the
ACL bond market, on the other hand, the main bond market has seen a resurgence in listings in recent months following the amendments to the Listing Policies in March 2013. It is worth noting that so far in 2014, six corporate bond issuers tapped the market, offering investors a total of €196 million. The large majority of the issues were heavily oversubscribed and the most interesting statistic is the significant increase in the number of investors participating in this year’s bond issues. While in the previous wave of bond market issues, the average investor base was in the region of 3,000 applicants, a number of the corporate bond issues that took place earlier this year saw the number of applicants rise to over 5,000. One must also mention that apart from the €196 million in corporate bond issuance, the Maltese government tapped the market on three occasions this year and what was surprising was that the large majority of the new Malta Government Stocks were taken up by retail investors and not by banks or other institutional investors as some observers generally assume. In fact, in
the latest MGS issue during the last three days of July, retail investors crowded out the institutions with the latter not being able to participate at all. Although the July issue took place only a few weeks following the previous MGS offering, there were 5,654 retail investors who applied for over €193 million worth of MGS, mainly the 20-year bonds. In fact, for the first time in many years, the Treasury had to scale down a number of applications and refunded a total of €13 million to the retail market since the maximum amount that could have been accepted in terms of the Prospectus was €180 million. The huge demand evident for the new corporate bond issues and MGS offerings this year had never been experienced in the past. This growing investor base is essentially a result of the historic low interest rate environment and the wider acceptance by the general public of the need to invest in other financial instruments rather than traditional bank deposits. In view of the significant increase in investor participation in the bond market which is likely to be maintained given the fact that interest
rates in the eurozone have dropped again last week and are expected to remain very low for an extended period of time, it is necessary for the MSE to promote its services more widely and encourage more companies to offer debt instruments to the public. Although the recent momentum of offerings on the Official List could persist in the coming months with a few other issues expected by the end of the year, the demise of the ACL bond market should reignite the thought process behind the relaunch of another junior market to encourage a growing wave of younger companies to consider the use of the exchange to finance their operations. A more proactive stance by the Malta Stock Exchange management to attract more bond and equity listings to satisfy the growing investor appetite for such investment opportunities would seem in place. Although the Exchange has been in operation for over 20 years, the success in bringing companies to the market has been lukewarm. As an example, many family-owned companies moving into their third or fourth generation probably view the public route with some scepticism. The benefits of listing a company’s shares on a public exchange need to be explained to such companies in greater detail since there are many advantages that may not be evident at first glance and could be the key to survival for some companies when dealing with succession planning. The MSE would do well to take a more business-oriented approach. In this respect, many overseas stock exchanges had indeed been privatised to facilitate this process. The present administration has yet to air its views in this respect despite its willingness to privatise other sectors of the economy. As such, there should be no major opposition in attracting the involvement of a strategic partner (such as a foreign stock exchange) to expedite the development of the local capital market. Edward Rizzo is a director at Rizzo, Farrugia & Co (Stockbrokers) Limited. Rizzo, Farrugia & Co. (Stockbrokers) Ltd, “RFC”, is a member of the Malta Stock Exchange and licensed by the Malta Financial Services Authority. This report has been prepared in accordance with legal requirements. It has not been disclosed to the company/s herein mentioned before its publication. It is based on public information only and is published solely for informational purposes and is not to be construed as a solicitation or an offer to buy or sell any securities or related financial instruments. The author and other relevant persons may not trade in the securities to which this report relates (other than executing unsolicited client orders) until such time as the recipients of this report have had a reasonable opportunity to act thereon. RFC, its directors, the author of this report, other employees or RFC on behalf of its clients, have holdings in the securities herein mentioned and may at any time make purchases and/or sales in them as principal or agent, and may also have other business relationships with the company/s. Stock markets are volatile and subject to fluctuations which cannot be reasonably foreseen. Past performance is not necessarily indicative of future results. Neither RFC, nor any of its directors or employees accept any liability for any loss or damage arising out of the use of all or any part thereof and no representation or warranty is provided in respect of the reliability of the information contained in this report. © 2014 Rizzo, Farrugia & Co. (Stockbrokers) Ltd. All rights reserved www.rizzofarrugia.com
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APPOINTMENTS
Daly made Medserv director Oil logistics and trading consultant Charles Daly has been co-opted to the Medserv board as a nonexecutive director. He will be replacing Johannes Jacobus van Leeuwen who is retiring from the board after 17 years of service to the Medserv Group. Mr Daly gained substantial experience in the downstream oil business working for many years in BP and Ultramar, initially in research then in logistics and refinery supply and subsequently in developing business internationally. As well as working in the Netherlands, USA and Canada, he has in more recent years been based in London, where he has held senior management positions in a number of companies in the refining, supply/logistics, shipping and oil trading sectors.
Rector appointed to HSBC board Juanito Camilleri has been appointed a non-executive director of HSBC Bank Malta with effect from September 5. Prof. Camilleri is vicechancellor and rector of the University of Malta. In this role he is also chairman of the Centre for Entrepreneurship and Business Incubation, chairman of the Centre for the Liberal Arts and Sciences, chairman of the Centre for Molecular Medicine and Bio-Banking and chairman of the University of Malta Group of Companies. Prof. Camilleri is a former chief executive officer of Mobisle Communications and former group chief executive officer of Melita Cable.
Glen Warren has been appointed as chief executive officer of FortyTwo Telecom and Theresa Caruana Saydon as chief financial officer of the FortyTwo Group. Over the past decade, Mr Warren has worked in various industries including education, travel, automotive, gaming and most recently food manufacturing, distribution and retail. He also has a strong background in business consultancy and public tender procedures. Ms Caruana Saydon previously occupied the role of head of finance. She will now be taking over the management of the finance function and all related matters for the group and its subsidiaries. She has extensive experience within the finance industry having worked in financial institutions, IT hardware and software services as well as manufacturing sectors, both at a local and international level.
Focal Maritime new manager Focal Maritime Services has appointed Jesmond Abela as manager for its agency services. Mr Abela has 27 years of experience within the shipping industry, and joined the company in 2006. For one year he was also based in Libya where his duties concerned running Focal Maritimeâ&#x20AC;&#x2122;s office and monitoring all the maritime activity, handling the vessels calling at Libyan ports and oil terminals. Mr Abela specialises in ship husbandry, cargo operations, bunkering, crew changes, and supplies, among other services.
New appointments at Corinthia
MATTHEW DIXON
Matthew Dixon, formerly general manager of Corinthia London, has been appointed commercial director at Corinthia Hotels. He will be based in London but oversee the commercial operations for hotels in London, Portugal, Hungary, the Czech Republic, Malta, Russia and Africa. Mr Dixon is being replaced by Renaud Gregoire, formerly hotel manager Corinthia London. Mr Gregoire was director of food and beverage at The Dorchester and 45 Park Lane from 2009 to 2012. He is being replaced by Mirko Cattini who joins the Corinthia from the ShangriLa Singapore where he held the position of executive assistant manager, food and beverage.
Top team for FortyTwo Group
RENAUD GREGOIRE
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e Business OBSERVER
| September 11, 2014
BUSINESS UPDATE
HSBC commercial banking With the notion of the Asian Century beginning to take shape, economies that conduct business in renminbi (RMB) – the Chinese currency – hold the advantage for their exporters, according to a recent HSBC Commercial Banking survey. The 11-market survey notes that while two-thirds of companies in mainland China and Hong Kong said that foreign firms doing business with China gain financial and relationship advantages from using RMB, awareness of these potential benefits varies widely overseas. Overall, 59 per cent of decisionmakers surveyed said that they plan to increase their cross-border activity with mainland China over the next 12 months, rising to 86
per cent in the UK, 73 per cent in the UAE and 63 per cent in France. At the same time, only 22 per cent said that their company currently settles business in RMB.
The survey further notes that RMB adaptability outside of China is the highest in France (26 per cent) and Germany (23 per cent) respectively.
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tax, prevention of money laundering and public sector accounting are also expected to affect the local accountancy profession. Matters have come to a point where members of the profession should have the courage to question themselves. The conference coincides with Malta’s 10th anniversary of EU membership. For accountants, the EU poses a twofold challenge: firstly, they need to understand how the key forces emanating from the EU will shape the future around us. Secondly, they need to assess how these changes and developments will impact the profession. Over the years, the conference has grown in stature and delegates have grown accustomed to a high quality event that attracts a large number of prominent local and foreign speakers.
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For your business, the implications are clear: encouraging physical activity translates to fewer health issues and improved employee performance – a fact that many large companies figured out long ago. One key action you can take to achieve this goal is to find a way to motivate your employees to start – and keep – exercising. FlexiFit offers different fitness programmes that your employees are going to be more likely to stick to, working on posture and reducing back pain, keeping employees active at work and injury-free.
The Malta Institute of Accountants will be holding its eight biennial conference, entitled ‘Defining new frontiers – translating vision into value’, on Thursday, November 6 and Friday, November 7 at the Hilton Malta. This conference is held every two years and attendance is open to all MIA members (currently 2,300). This year’s conference assumes a particular importance in view of the recent accounting and auditing reforms that have been approved by the EU, which will affect the Maltese business sector profoundly. The accountancy profession has been heavily affected by EU legislative initiatives, and these changes are also affecting local enterprises. The new developments in audit and accounting are not the only developments, as other changes in
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e new Mercedes-Benz C-Class Sheer attraction The all-new C-Class heralds a new chapter in the Mercedes-Benz success story and sets new standards in the premium medium-size category. Thanks to an intelligent lightweight-design concept boasting weight savings of up to 100kgs, excellent aerodynamics and new economical engines, the C-Class establishes new efficiency benchmarks in its segment. In terms of appearance the new CClass adopts a progressive approach with its clear yet emotional design and its high-class interior. Many other innovations and equipment features underscore the Saloon’s energising comfort and refined sportiness. The high-class appeal of the new C-Class feels like an “upgrade to a higher class of vehicle”. On a visual level, the new C-Class rep-
resents a bold departure from its predecessor. Its striking, dynamic design exudes sensuous clarity and arouses emotions. The designers have created minimalist, purist forms for the C-Class which emphasise its intelligent technology and engineering. The MercedesBenz designers have also styled the interior on a level which is rarely encountered even in higher vehicle categories. With starting prices of €37,000 for the C180, and €41,500 for the C220 CDI BlueTEC, the C-Class offers value for money at an affordable price. You may view the new Mercedes CClass at Kind’s showroom at Auto Sales Ltd (Kind’s) in Mosta Road, Lija. For more information visit ww.autosales.com.mt or book a test drive by calling 2331 1138.