INTERVIEW
Issue 10
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September 25, 2014
Distributed with Times of Malta SIX BIDS FOR THE TRANSFORMATION OF THE MARSA SHIPBUILDING SITE INTO A MARITIME HUB ARE BEING EVALUATED BY THE GOVERNMENT. PHOTO: CHRIS SANT FOURNIER
Chamber of Commerce president David Curmi is in favour of ‘making work pay’ initiatives as long as these are affordable and non-distortionary within the labour market. see pages 4, 5 >
NEWS
Six bids for shipbuilding site Kurt Sansone Six bids for the transformation of the Marsa Shipbuilding site into a maritime hub are being evaluated, according to the Ministry for the Economy. One submission proposes using the whole of the 175,000 square metre site as a service centre for the oil and gas industry while the other submissions concern particular plots for the servicing of yachts. The “tentative target date” for the choice of the preferred bidder was the second half of October, a ministry spokesman told The Business Observer. In March, 28 consortia had shown interest in the government’s idea to transform the strategically located site used by the former State-owned shipbuilding company into a maritime hub. The Privatisation Unit had identified four categories under which interested parties could submit bids: the oil and gas industry and logistics; ship repair, heavy indus-
try, yachting and logistics; super yacht refit and repair facility and an offshore energy regional support base; and servicing of yachts, supply of hard-standing facilities and other services. In the case of the first three categories, the projects had to make
Unit as one with the biggest potential for effective use of the site. This category would see the setting up of a rig-servicing centre and an academic institution for teaching and training. The ministry spokesman said two technical sub-committees
“In November the large shed will be the venue of the Junior Eurovision Song Festival” full use of the site while projects submitted under the fourth category could make use of plots within the area. The categories provided the best space for added value opportunities, investment in human resources and the creation of a significant amount of jobs, Economy Minister Chris Cardona had said. The oil and gas industry category was identified by the Privatisation
were appointed to help the evaluation and adjudication committee that will recommend the preferred bidder. “One sub-committee has experts related to financial matters and the other is made up of experts in maritime technical affairs. They are currently preparing individual reports focusing on their respective expertise,” the spokesman added.
The shipbuilding site was hived off from Malta Shipyards when the former State-owned ship repair facility was privatised four years ago. The area is made up of a dry dock, extensive queues, two large cranes and a big shed that used to serve as a ship building workshop. Past attempts to privatise the site always fell flat, including a bid under the previous administration when the government turned down a proposal by Valletta Gateway Terminals, a port management company, to use the area to stack containers. Since last year the road that runs through the site was temporarily opened for traffic to ease the burden on Aldo Moro Road but different areas of the site have also been leased out on a temporary basis for one-off jobs, including the servicing of a rig earlier this year by a private company. In November the large shed will be the venue of the Junior Eurovision Song Contest as Malta plays host to the rest of Europe.
e payment of moral damages could have a detrimental effect on the economy , according to the head of the commission set up to change the way compensation is awarded . see page 3 >
CASE STUDY PKF Malta recently conducted a survey among tourists for their views on what Malta has to offer. e hotel industry fared well but bus schedules got the thumbs down. see pages 6, 7 >
INDUSTRY FOCUS e healthcare manufacturing sector employs 2,118 full-timers and exports over €295 million per year, but it also faces a number of challenges. see pages 12, 13 >
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NEWS
Moral damages ‘could affect economy’ Vanessa Macdonald The payment of moral damages could have a detrimental effect on the economy and needs to be handled with great sensitivity, according to Paul Cachia, the head of the commission set up to recommend changes to the way in which compensation is awarded by the courts. “In Malta at present, moral damages are only awarded in exceptional situations – such as when there is a breach of human rights. There were two judgments recently which awarded moral damages but they are still subject to appeal,” Dr Cachia said. “This is a very thorny issue. Should you compensate for moral damages at all? How do you quantify pain and suffering? And what about the effect of moral damages on the economy? At the end of the day, policyholders will end up paying for any compensation awards through their motor insurance premium, for example. It is not in the interest of Malta to go to the extremes seen in other countries.” The commission, which was set up in April, is taking as a starting point the Bill presented by the previous government, which had some very controversial aspects as well as some very positive ones. Dr Cachia intends to do much more than just present a Bill. As an academic, he is preparing a comprehensive report to accompany the commission’s suggestions, outlining international practice and case law, among other things. The government opened up a consultation process to run in
parallel with the commission’s work. Dr Cachia said one thing that clearly emerged was that the amount of the compensation was not nearly as important as the time it took to actually get it – often years and years. He gave two examples: a claimant who ended up in a wheelchair and a mother with three children whose husband was killed in a traffic accident. “The man was self-employed and lost his income. He had to use up his savings for ramps and stairlifts inside his house. After some time, the bank started pressing him to pay his mortgage and he may lose his house. By the time he gets compensation, he will be completely ruined. “The woman’s children are in a private school. What is the use of getting compensation once they have grown up?” Dr Cachia believes that there are solutions. One of these is the concept of provisional damages, which would only be awarded in extreme cases, but where a minimal amount is given to when there is prima facie liability. The commission wants other ways to reduce delays. “Should there be an obligation on an insurer to reply to your claim within a specified period of time? And if they do not, should there be consequences?” he said. There are also many pleas filed by insurers that he thinks are time-wasting tactics. “The insurer tries to escape liability because the driver was drunk, or because a car was leased against the conditions applied to the policy, or because there was a transfer of interest when a car is sold.
SHOULD THERE BE AN OBLIGATION ON AN INSURER TO REPLY TO ONE’S CLAIM WITHIN A SPECIFIED PERIOD OF TIME? AND IF THEY DO NOT, SHOULD THERE BE CONSEQUENCES?
“You have to balance discretion and the uncertainty that this causes with the need to ensure justice. You cannot impose hard and fast rules”
“But both Maltese law and EU law say that these kinds of pleas cannot be raised against the victim. It should be up to the insurer to sue the insured person for breach of policy,” he said. The amount of compensation is currently calculated on the basis on a formula created in the 1960s which has since then been repeatedly refined and expanded. However, there is always an element of judicial discretion. “The loss of three fingers would be more serious for a pianist than for a teacher, for example,” he said. “You have to consider the individual circumstances of the claimant as otherwise there could be injustice.” The problem is that discretion results in uncertainty for the insurance company trying to calculate its risks and makes it much
more unlikely for out-of-court settlements to be reached. “You have to balance discretion and the uncertainty that this causes with the need to ensure justice. You cannot impose hard and fast rules,” he shrugged. The issue is complex and relies on informed guesses. For example, how do you quantify future medical expenses? “What if you are awarded compensation for 10 years of nursing care but die after five? Could you refund the balance? No!” he explained. “We must never forget that the justice needs to be done not only with the claimant but also with the defendant. And we also have to look at the broader impact on the economy.” The commission is due to complete its report by the end of the year. The other members are Charmaine Cristiano and Frederick Zammit Maempel.
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e Business OBSERVER
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INTERVIEW
Eyes on competitiveness Buoyed by another positive credit rating, Malta still has to keep its feet firmly on the ground, David Curmi, president of the Chamber of Commerce, Enterprise and Industry tells Kurt Sansone.
Although the latest credit rating agency report by Fitch has painted a generally positive picture, the Chamber has opted for caution. Why? The Chamber expressed satisfaction at Fitch’s ‘A’ Rating coupled with a stable outlook for Malta. The agency has once again acknowledged the country’s relative economic resilience despite Europe’s fluid situation. However, this does not give reason for complacency especially in the light of other recently-published reports. Firstly, Fitch itself acknowledges that Malta’s rate of economic expansion was generally attributable to domestic demand. In itself this is a note of caution because domestic demand on its own cannot sustain long-term growth. Lasting economic growth needs to be driven by export-led activity and this requires the country to be competitive. It is also worth noting that the Pre-Budget document recently published by the Finance Ministry states that in the first half of 2014, Malta’s main productive sectors, namely financial services, manufacturing and agriculture, all recorded negative gross value added contributions to the economy.
“e Chamber believes caution is paramount, especially as the government is preparing the country’s 2015 Budget” Industrial production figures for July 2014 also record a significant drop when reviewed over a onemonth or 12-month basis. The Chamber also notes the World Economic Forum Competitiveness Rankings in which Malta slipped six places. Malta scored weakly in terms of ease of doing business, innovation, labour market efficiency and certain aspects of infrastructure including roads and electricity supply, according to this report. In light of all this, the Chamber believes caution is paramount, especially as the government is preparing the country’s 2015 Budget. What can be done to help those sectors, particularly manufacturing, that are doing badly? Manufacturing is facing everincreasing challenges. The country is gradually losing cost-competitiveness and is not effectively addressing issues such as energy rates, productivity, labour market conditions, transport costs and investment incentives. The present
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and future of manufacturing is not looking bright. Public sector employment has increased over the past year. The Finance Ministry argues that part of the increase is a spike as a result of the temporary nationalisation of public transport and insists government employment has retained the same level as last year when taken as a percentage of the labour force. Is the Chamber satisfied with these explanations? We understand the importance of ensuring enough resources to fulfil the roles for which the public sector is responsible. However, all this must be balanced against the impact on public finances and in turn, the effect on national competitiveness through the added tax burden generated. In our Economic Vision for Malta 2014-2020, we strongly propose that the government should carry out a manpower survey and gap analysis so as to take stock of the skills available in the public service. This will enable it to deploy its present and future resources more efficiently and effectively while assisting in recruitment decisions. Employment with the government should only take place to enhance the productive capabilities of the department or entity concerned. In any other unjustified circumstance, employment with the public sector must be discouraged. What are the most important measures you would expect in the Budget to enhance competitiveness and boost growth? Energy plays a crucial role in this department. Malta’s energy costs remain grossly uncompetitive when compared to the EU. The government’s proposed reductions are not enough to at least equal the average rate available in the EU28 which, while low by domestic standards, is still uncompetitive when compared to an average rate in the US. The Chamber also believes that the Cost of Living Adjustment (COLA) mechanism requires a revision to serve the economy better in all scenarios. Besides the change in the formula, the Chamber insists on the urgent need for a clear definition of the term ‘exceptional circumstances’, which is already contemplated in the law. Education and training also play a paramount role in the competi-
tiveness of the country. Low labour market participation and the skills challenge have to also be tackled. A campaign needs to be undertaken to restore pride and professionalism in a host of jobs and careers that are nowadays being frowned upon by Maltese workers. The education system needs to create a generation of young people who are in love with what they do. This can only be achieved through proper career guidance, apprenticeship and internship schemes. If offered the right conditions, employers and students can benefit from internship schemes that benefit both sides, especially since a bond can be created between the student and the workplace very early in the student’s life. When people love their job, they will be at work instead of finding excuses to remain home. Better regulation and reduction in administrative burdens will also contribute to the country’s competitiveness. The vast majority of Maltese companies are micro-firms which are disproportionately affected by overregulation and bureaucracy. The Chamber is proposing a new national competitiveness watchdog to ensure the economy is not hampered by new measures, regulations and taxes that negatively affect competitiveness. An extensive process of legislative simplification is to be undertaken and where the need arises amend or repeal unnecessary laws. Investment in port infrastructure and competitive rates for related operators’ services need to be secured. In addition to inadequate shipping services and high shipping costs, domestic port charges are also very high, making the cost of getting shipments from port to factory disproportionately high. The government says it wants to cut welfare dependency and encourage people to work. How confident are you that these words will translate into action? Malta’s overall labour participation rate remains relatively low when compared to EU figures. This means the economy is not firing on all cylinders because certain productive resources remain idle. Work is a duty and a right. Consequently, people should not be given a choice as to whether they would like to work or otherwise. People
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PHOTOS: DARRIN ZAMMIT LUPI
“is being the second serious conflict in the span of a few years, certain foreign companies may consider relocating completely to Malta, leaving only the extremely necessary parts of their operation behind in Libya”
who do not work automatically become a financial burden on those who do and this creates social injustice as well as economic imbalances. The Chamber is in favour of “making work pay” initiatives as long as these are affordable and do not distort the labour market. The situation in Libya has caused problems for Maltese operators there. What is the extent of the damage and has the situation created opportunities for others? We are following the unfolding of the unfortunate developments in Libya closely. In July the Chamber reconstituted its Libya Action Committee to monitor the developments and business interests of the region and make recommendations accordingly. The way the situation is unfolding, for the second time in less than four years, has affected our members because a sudden halt to normality took place, bringing about an abrupt suspension of business. Companies have had to suspend their operations haphazardly with very serious repercussions. Payments into companies have stopped, but commitments to suppliers in third countries still hold. This is leading to great strain on the companies that want to deliver, but in many cases cannot. If the situation persists, tougher decisions may need to be taken. Companies are keen to hold on to their valuable human resources as they will certainly be required once business resumes after the conflict. The unfolding of the situation is tricky at best, and we remain hopeful that a political long-term solution is found for the benefit of Libya and the welfare of its people. Malta and Maltese businesses, as they have done in the past, will surely step in when the time is right, to support the Libyan people in the rebuilding process. With important infrastructural needs still missing, Malta could also step in as a support hub for the country. Missing an air link, a constant maritime link between Malta and Libya may come in handy for businesses. This being the second serious conflict in the span of a few years, certain foreign companies may consider relocating completely to Malta, leaving only the extremely necessary parts of their operation behind in Libya.
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e Business OBSERVER
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CASE STUDY
Tourists’ views on what Malta offers PKF MALTA recently conducted a survey among tourists. THE BUSINESS OBSERVER asked the team who conducted the survey to highlight its main findings. How was this survey conducted? The survey covered a vast range of services including hotels, restaurants and public transport. It was conducted over a span of two weeks in Valletta, Sliema and St Julian’s. The survey asked tourists to assign ratings to the services under consideration together with any additional comments they might have. What does PKF Malta aim to achieve through this survey? The survey aims to highlight which tourist sectors are doing well and which ones need to be improved. This could help serve as a guide to the tourism industry. Could you give us a basic overview of the sample structure? The sample was made up of 205 responses with respondents coming from the UK (10 per cent), followed by Spain (nine per cent), Germany (nine per cent), France (seven per cent) and Italy (six per cent). The remaining countries were grouped accordingly based on their geographical location. The sample was roughly equally distributed among males and females, with 51 per cent and 49 per cent respectively. Seventy eight per cent of the respondents arrived in Malta in August while 12 per cent arrived in September. The remaining 10 per
cent arrived during other months. The main reason for visiting Malta was for a holiday (77 per cent), while 10 per cent said they came to Malta on work, studies or training and 6.4 per cent came to Malta to visit relatives or friends. The remaining six per cent came to Malta due to other reasons such as diving. This year has been a successful one in terms of tourist arrivals. In relation to this, how did the hotel industry fare? Overall the hotel industry fared well with over 50 per cent of the responses obtained giving a rating of ‘good’ or ‘excellent’ when asked about the quality of rooms, food, service and the helpfulness of staff. However out of these four, the quality of food seems to be the least satisfactory. There were some complaints including the lack of hygiene in hotels, noise pollution and the fact that some rooms had no windows. The prices charged by hotels turned out to be the least satisfactory, with only 40 per cent of respondents assigning a positive rating. Thirty six per cent of the entire sample found the prices to be ‘average’, 13 per cent gave a rating of ‘poor’, and one per cent rated the prices as ‘very poor’. It should be stressed that when compared to last year’s results, the quality of service was rated much better, registering a 14 per cent increase.
THE SURVEY TEAM AT PKF MALTA, FROM LEFT: JAROMIR SANT, LYNSEY SCHEMBRI, LUCA SACCO AND MALCOLM ATTARD.
“Overall the hotel industry fared well with over 50 per cent of the responses obtained giving a rating of ‘good’ or ‘excellent’” What about restaurants? The restaurant industry seemed to fare quite well, with the best area being the quality of the food. With 72 per cent of all responses yielding positive ratings, it is evident that tourists are quite satisfied with the quality of food on offer. When comparing the ratings between age groups it emerged that respondents aged 18 to 47 seemed to be more inclined to give a positive rating than those aged 47 and over. The quality of service was also quite well met with 71 per cent giving a positive rating. Furthermore, males were slightly more inclined to give positive ratings than females. One should point out that only seven per cent of the entire sample gave negative ratings to the quality of service. With regards to prices, 52 per cent gave positive ratings, 37 per cent rated prices as
‘average’ and 10 per cent found prices to be expensive. Also, a number of respondents pointed out their disappointment at the expensive restaurant prices while a couple of respondents had some nice words to say on the service and staff. Public Transport has been somewhat of a controversial issue locally. Do tourists show any particular resentment to this sector? Public Transport received a rather mixed reaction from respondents. Certain areas such as driver helpfulness and prices were very well received and praised, however when it came to the bus schedule and buses in general, there were large problems. With 53 per cent of the survey responses giving positive ratings to driver helpfulness, only 15 per cent gave negative ratings. An even better performance was
recorded for ticket prices, with 64 per cent of all respondents finding the prices to be very satisfactory. With only 10 per cent giving a negative rating it is evident that the current bus fares are very popular with tourists. The ratings obtained for buses were rather mild. In fact 42 per cent gave a positive rating, 20 per cent gave a negative one while 26 per cent found the buses to be ‘average’. With bus schedules it was a completely different scenario. With as many as 42 per cent of all respondents giving this service negative ratings this was the worst response in the entire survey. Only 25 per cent gave positive ratings to the bus schedule while 22 per cent found them to be average. When viewing the additional comments, one could not help but notice the dissatisfaction most respondents showed with
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regards to bus tardiness and overcrowding. Moreover the disorganisation of the bus schedules as well as the rude manner of certain drivers were highlighted by a number of respondents. When comparing percentages for this year with those obtained for last year it becomes evident how the situation with regards to bus schedules has deteriorated, with an increase in negative ratings and a decrease in positive ratings. On the other hand, bus driver helpfulness fared much better this year than last year in terms of positive ratings. Were positive results recorded with regards to cleanliness, archaeological and cultural sites and activities and entertainment? Archaeological and cultural sites, activities and entertainment fared quite well. With a percentage of positive responses slightly above the 50 per cent mark, it seems that the services offered are satisfactory. Unsurprisingly, when it came to entertainment, the younger respondents, aged 18 to 27, gave the highest percentage of positive responses. As opposed to most other sectors, respondents found entertainment prices to be very reasonable. The older age groups, those respondents aged 58 and over seemed to be very satisfied with the information and cleanliness of the archaeological and cultural sites they visited. Cleanliness on beaches, roads and cities was not as positive as the above mentioned sections. Cleanliness on beaches garnered a mere 35 per cent in positive ratings while cleanliness in cities and roads garnered 33 per cent and 30 per cent positive ratings respectively. Many respondents further commented on the large amounts of rubbish at beaches and the lack of dustbins available in a number of places. Respondents were also asked to rate their overall stay in Malta. How did that section fare? What about the upcoming V18 event? Did respondents know about it? Positive ratings were recorded for respondents’ overall stay. When asked how they rated their stay in terms of what they expected, 63 per cent gave a rating of ‘good’ or ‘excellent’ while 25 per cent stated that it was ‘average’. Of the remaining 12 per cent, only three per cent gave negative ratings. Males and females shared similar views on this matter
“e disorganisation of the bus schedules as well as the rude manner of certain drivers were highlighted by a number of respondents”
while the most dissatisfied group seemed to be respondents aged 48 to 57. On the other hand, when asked to rate their stay in terms of the money they spent, a smaller percentage of positive results was recorded, 50 per cent to be exact. Thirty seven per cent found their overall stay to be ‘average’ in terms of the money they spent while only five per cent found it expensive. A number of respondents further voiced their dissatisfaction at the prices charged. When asked about the V18 event, 79 per cent of the sample had not heard about it and the remaining 21 per cent had.
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Public Transport Bus Scheduling 15%
21%
23%
20%
Average Don’t know
2014
12%
2013
Excellent
20%
14%
Good Poor
19% 3% 21%
27%
TOURISTS’ VIEWS ON BUS SCHEDULES HAVE DETERIORATED SINCE LAST YEAR’S SURVEY.
4%
Very poor
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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
Charting a new economic vision A business agenda to the government – that is how the Chamber of Commerce, Enterprise and Industry has, quite appropriately, described its recent document setting out an economic vision for Malta. It is by far one of the most important reports to be published in recent times and ought to serve as a blueprint for development. With the help of no fewer than 20 chairpersons and chief executive officers from leading firms, the Chamber has managed to knock into shape a set of recommendations that ought to help the country’s administration and Malta focus on what is urgently needed to get the economy moving to a higher level of development. Maybe in some instances the Chamber is aiming far too high considering the stage in which the country is in at present, but in quite a number of other areas, the way ought to be clear for a steady improvement if only a greater effort is made by the administration and all the government agencies and regulatory bodies. For Malta to serve as a hub of economic services, it would need to upgrade its facilities even further. Taking just one example, to establish Malta as a global and regional health provider of excellence, as the Chamber is recommending, the island would first need to have adequate facilities. As the situation stands at present, its general hospital is not even big enough to meet the country’s ordinary needs. However, generally speaking, the Chamber has put its finger on the right weaknesses, picking three particular areas in which the country is losing its comparative advantage – human resource capital, English and the multilingual skills base, and agility through smallness.
Its assessment on the first provides some disturbing facts. In its view, the economy’s demand for competencies and skills in all economic sectors is not being adequately supplied by the higher and further education institutions. The country has been aware of this for quite some time now, but what is equally very worrying is that the new supply of human capital and talent in the market is lacking in terms of discipline, work ethos, soft skills, and diligence when compared to workers of a previous generation of workers. This is bad for the economy and for the country, and special efforts would need to be made at all levels of the educational system to correct the trend. Such serious shortcomings go diametrically against the Chamber’s wish to see the country working harder to cultivate a culture of excellence. Many abroad have the impression that, since English is an official language in Malta, the people can speak the language well. This is not quite correct any longer, and “this added edge over competing countries” is fast being lost. Another damaging factor is that, “despite years of investment in public service reform, e-government and better regulation improvements, the Malta business climate has become more, rather than less, ponderous”. If the government sticks to its present determination to get to grips with bureaucratic bottlenecks, the country can expect some tangible results in this direction and, maybe, be able to climb back a few places in competitiveness indexes. However, there is much to be done to make Malta a more efficient operating base than it is now.
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BUSINESS OPINION
Malta energy conference: a new process
Bruno Lescoeur Europe has the great challenge and opportunity to take advantage of the energy inputs – in particular for natural gas – and to put the Mediterranean at the core of future energy solutions. This was discussed at an international conference organised by the Maltese government in collaboration
with Cyprus and the European Commission. The European Union is facing the hard challenge of securing its current and future gas supply and for this purpose has to work in two directions that are strictly related and interconnected. First of all, maximising Europe’s domestic resource capital is crucial not only for energy supply, but also to build a virtuous circle between investments, growth and job creation. The right framework with the adoption and implementation of the ‘offshore safety directive’ is of paramount importance, but the crucial factor ought to be a vast confidence-building exercise. We shall showcase the EU’s strict environmental provisions, the strong and articulate monitoring performed by national authorities, the high end technological capabilities
of our industry, and the benefits for our communities. Secondly, it is essential to increase the diversification of European supply by reaching out to new suppliers and safeguarding already existing relationships. A clear vision of the gas role in our future energy mix, as well as solid policies to mitigate investment risks is of great importance. Europe has to strengthen its negotiating position towards Russia, opening up new routes. This is why we fully share the vision of the Italian government that the South Stream pipeline can play a crucial role, opening an alternative route from Russia to Italy though Bulgaria and Balkans. Besides safeguarding existing relationships, reaching out to new suppliers is crucial. New infrastructures, especially those that will go East-bound to Caspian and Middle
Eastern countries, will enable European countries to diversify the supply portfolio beneftting at the same time from some among the world’s largest deepwater gas discoveries of the last decade: the Tamar and Leviathan fields in Israel. In the east of the Mediterranean, recent large scale offshore gas discoveries have opened up a new deepwater province and hence a gas bonanza in Israel, Lebanon and Cyprus. The OME (Observatoire Méditerranéen de l’Energie) expects Israeli gas production to reach 24 billion cubic metres (bcm) by 2030. This means that Israel has the potential to become a significant gas exporter in the next decade. In the next 10 years Cyprus could also begin to export gas thanks to a total of 1,700 bcm of gas which the Cypriot authorities expect to be discovered offshore. Finally, Lebanon, with a
gas resource potential of between 700 bcm and 2,000 bcm has been eager to jump into the gas bonanza train in the region, although not a single well has been drilled in Lebanese waters yet. It appears clear that the Mediterranean is endowed with high potential of natural gas. The regional cooperation is definitely one of the most important answers to overcome the challenges ahead. In this regard a Euro-Mediterranean platform on gas as suggested by Malta and the European Commission and agreed to in principle by delegates at the recent ‘Malta Energy Conference’ would facilitate such needed enhanced cooperation. Bruno Lescoeur is chairman of the Observatoire Méditerranéen de l’Energie, CEO of Edison and senior executive VP Gas and Southern Europe of Électricité de France.
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e Business OBSERVER
| September 25, 2014
INTERVIEW
Demand of high-end properties outweighs supply GRAHAME SALT, director of Homes of Quality, met up with MARTINA SAID to discuss the current stateof-play in the high-end property market segment. In spite of a shortage of high-end properties on the island, Grahame Salt, director of Homes of Quality, which forms part of the Frank Salt Real Estate Group, says that this market segment always seems to fare well, and is not as temperamental as the rest of the market because there will always be people around willing to spend money on such types of properties. “In the last year or so, the property market at large has picked up. Sales in Malta this year are up by around 40 per cent, and in the case of our company by around 60 to 65 per cent over last year. I would say the high-end market has experienced growth at a similar ratio.” Homes of Quality is a specialised estate agency, focused on serving a specific customer segment in the market. A number of criteria must be satisfied in order for a home to qualify as one of quality, he says. “It is not a case of ‘if the property is expensive, then it is a home of quality’, but rather the evaluation is based on the quality of the property itself. We take a look at the Frank Salt real estate database, which enlists thousands of properties, and shortlist a few hundred based on the quality of the property itself, the location, the value for money and saleability of the property. “It could be a studio apartment, but if it is a top quality studio apartment, it would qualify. We
also deal with very high-end properties such as palazzos and villas, but those need to be marketed in a slightly different way, whereby for instance we produce brochures for them and market them overseas.” Mr Salt says the demand for high-end properties in Malta is split down the middle between locals and foreigners. “We get a lot of locals who are looking for good quality properties and want to be treated perhaps with a little more discretion, but then through the website we attract a lot of interested foreign clients too. The majority of foreign buyers in Malta are British, but there are also a number of French and Italian buyers, Russian buyers due to the citizenship scheme as well as Dutch and South Africans, but it heavily depends on where we’re promoting at a particular point in time.” In terms of demand, Mr Salt explains that upmarket apartments always sell more than houses, primarily because the demand for apartments is greater, and so is the supply. “For many, apartments are more affordable, and in the case of foreign buyers, one can simply lock up and leave an apartment, but a house requires more work. I would say that those opting for more permanent residency go for houses of character and villas, but those planning to stay for four or five months of the year tend to opt for an apartment.”
GRAHAME SALT: “WE GET A LOT OF LOCALS WHO ARE LOOKING FOR GOOD QUALITY PROPERTIES AND WANT TO BE TREATED PERHAPS WITH A LITTLE MORE DISCRETION.” PHOTO: CHRIS SANT FOURNIER
“In the last year or so, the property market at large has picked up. Sales in Malta this year are up by around 40 per cent, and in the case of our company by around 60 to 65 per cent over last year. I would say the high-end market has experienced growth at a similar ratio” High-end apartments on the island are predominantly concentrated in the Sliema and St Julian’s area, but villas and houses of character are more dispersed across the island. “In the case of villas, the most popular locations are close to the seafront, such as Victoria Gardens, High Ridge, Madliena, San Pawl tat-Targa, Birguma, Mellieħa, as well as along the seafront of Marsascala. There’s a very limited
supply of good quality villas, and whenever there is a concentration of them in an area, that area is generally sought after. “As for houses of character, they are a bit less location-sensitive, because people tend to focus more on the house itself rather than on the location. Having said that, however, the areas of Għarghur, Lija, Balzan, Attard, Naxxar and Żebbuġ are still very popular.”
Due to the shortage of upmarket properties, Mr Salt says that the company is always on the lookout for good quality homes. “There is a very limited supply of them, and we always have a steady stream of clients looking, so people who own a home that might classify as a ‘home of quality’ should contact us and we will in turn will visit the property and help them with the valuation, and help them market it.”
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e Business OBSERVER
| September 25, 2014
INDUSTRY FOCUS
Health manufacturing: a key pillar of Malta’s industry Anthony Manduca The Maltese healthcare manufacturing sector, which consists primarily of the production of pharmaceuticals, pharmaceutical ingredients and medical devices, is an important part of the country’s industrial set-up which generates significant economic activity and employment. There are over 30 of these companies, most of which are established international brand names, including Amino Chemicals, Combino Pharm, Watson, Pharmacare, Actavis, Starpharma, Siegfried, Solea Pharma, Sterling Pharmaceutical Services, Medichem, Baxter and CardinalHealth. The sector employs 2,118 fulltimers (1,464 employees directly in pharmaceutical production) and has an annual global export turnover of over €295 million per year. The companies are certified to good manufacturing practices according to European Union requirements and most companies are also accredited by the United States Food and Drug Administration. Malta’s accession to the European Union in 2004 and the eurozone in 2008 without doubt made the country more attractive for the manufacturing sector primarily due to the single market’s fundamental pillars of free movement of goods, services, capital and people. The EU’s regulatory framework ensures practices and products are not only effective and efficient in producing the desired results, but the operation of companies is also safe and reputable. Malta’s tax system is very attractive to the entrepreneur wishing to carry out activities in the pharmaceutical sector. Income tax paid on trading income and income generated by licensing and sub-licensing of patents and trademark are eligi-
“e sector employs 2,118 full-timers and has an annual global export turnover of over €295 million per year” ble for refunds of up to six-sevenths of income tax paid. The government offers various further incentives in the form of investment allowances, investment aid incentives, research and development incentives and access to other potential funding opportunities under the relevant and applicable funding programmes within the EU’s multi-annual financial framework. Malta is also one of the few EU member states that in 2003 fully recognised the Roche-Bolar Provision, where generic companies are allowed to undertake development work prior to patent expiry – held by originators – but excluding any product commercialisation. The wide manner in which the Maltese Patent and Designs Act has been adopted allows generic companies to carry out testing and trials for the purposes of earning the required regulatory approvals
prior to the expiration of the patent in question. Therefore, a generic pharmaceutical company in Malta may manufacture a drug, complete all the mandatory testing requirements, obtain the necessary approvals and, upon expiration of the competitor’s patent, release their product onto the market without undue delay. All obligations arising from the Patent Cooperation Treaty and European Patent Convention are also incorporated into Maltese legislation, ensuring that property rights registered in Malta are automatically extended to the territories of all other signatories. The six main advantages Malta offers the pharmaceutical manufacturing industry are: a strategic geographic location; EU and eurozone membership; an attractive tax system; the authorisation of registered products is mutually recognised in EU; a highly skilled, qualified, dedicated and multilin-
gual workforce; and the recognition of the ‘Roche-Bolar’ provision. Chris Cardona, Minister for the Economy, stresses that the healthcare industry is high on the government’s agenda. “There is room for further growth in specific areas within the industry sub-sectors, especially with regards to research and development, medical devices and life sciences projects. “With particular reference to the latter, the government’s strategic objective is to complete the Life Sciences Park which was intentionally located next to the University of Malta, Mater Dei Hospital and the new Oncology Centre. With an investment of over €24 million (co-funded under ERDF), Malta’s Life Sciences Park will provide many more growth opportunities within the healthcare manufacturing industry, promoting a
research and velopment cluster,” Dr Cardona says. Dr Cardona says Malta provides an ideal environment for enterprises engaged in healthcare activities, coupled with attractive and generous incentives. “A most important element is the English language, apart from the local skills and aptitudes of the Maltese workers. Indeed, our educational system including the vocational courses organised by the Malta College for Arts, Science and Technology (MCAST), in addition to the University of Malta and other specialised training, cater for the various skills requirements. Besides, the government’s policy is aimed at encouraging more students to take on science subjects.” Dr Cardona highlights that over the past three decades, Malta succeeded in attracting renowned industry players particularly in medical device manufacturing
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September 25, 2014
(Baxter, Cardinal Health), pharmaceuticals (Actavis-Watsons) and related ancillary services including the production of active pharmaceutical ingredients (Amino Chemicals, Sterling), product development and technologies, formulations and improvements, laboratory testing, batch release for EU market, repackaging activities, specialised packaging and printing (including blister lines) and logistics. He explains that the industry is supported by an attractive incentives package which includes investment aid primarily in the form of tax credits, access to finance by way of soft loans, interest subsidies or loan guarantees, access to custom made dedicated facilities (production areas and laboratories) through property development agreements, business development grants and training assistance. “Another local characteristic that has contributed towards the attraction of companies engaged in the healthcare manufacturing industry is the Malta Medicines Authority which acts as the regulator for the industry,” he points out. He says that Malta appeals in particular to the generic pharmaceutical sector in view of the fact that relatively few patents were registered in the territory prior to Malta’s accession in the EU. This, coupled with an established practice for many years of the RocheBolar Provision (where generic companies are allowed to undertake development work prior to patent expiry – held by originators – but excluding any product commercialisation), continues to generate interest from the industry. Other attractions for this sector include a very high standard of specialists who have studied, trained and qualified in the UK and the US, high medical standards that meet and exceed European requirements, with Malta ranking highly amongst nations in terms of health levels and overall health system performance (World Health Report 2007), a vast range of services and treatments, a variety of private clinics and hospitals providing five star ambiences, multilingual doctors and nurses, competitive pricing, excellent flight connections from all over Europe and beyond and short distances from the airport to the healthcare centres and accommodation facilities. Dr Cardona says the government is “constantly” looking at improving the general environment for enterprises to set up new activities and/or expand their existing operations locally. “The government, through Malta Enterprise is enhancing measures and the level of assistance to promote research and development projects, particularly those engaged in life sciences activities.
Many new opportunities are expected to arise from synergies with other sectors such as ICT and healthcare research. Incentives offered, he points out, include investment tax credits and cash grants for projects undertaken in industrial or experimental research. There are also incentives for feasibility studies, as well as collaborative research projects under European Union programmes – Eureka and Eurostars. Asked about the feedback the government receives from people in this industry about the
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Indeed Malta Enterprise has already approved a number of new and expansion projects in the health manufacturing sector. The majority of these involve the setting up of new pharmaceutical entities, research and development projects, medical devices manufacturing, laboratory testing and batch release. Altogether, these projects are expected to generate an investment of more than €21million and should generate more than 250 new job opportunities by their third year of operation.
He says Malta was not the only country to notice this window of opportunity; other countries with lower operating costs and more resources have also been active and their exports have increased – it is difficult to remain competitive purely on financial grounds and Malta has to discover and exploit its strengths in other areas, such as its geographical location and the quality of its human resources. “We are only now starting to see signs of recovery from the global recession a few years ago, which
“ese new projects are expected to generate an investment of more than €21million and should generate more than 250 new jobs” challenges they experience on a daily basis, Dr Cardona says that operators in this sector “face constant challenges which are common to all industrial concerns operating from Malta”. These, challenges, he says, are typical of island economies and include logistics (sea and air), human resource skills’ availability and managing operating costs. “Nevertheless, Malta still appeals for many as evidenced by the constant expansion projects undertaken by local operators within the healthcare manufacturing sector. Malta is also attracting new investments in this area from various localities, particularly Europe and Asia,” he says.
Claude Farrugia, chairman of the pharmaceutical manufacturing section of the Chamber of Commerce and Industry, says it is important to be constantly aware of the fact that this industry is highly global in nature. “The patent cliff that was seen as an opportunity for the expansion of the generic pharmaceutical manufacturing sector in Malta at the turn of the century reached its peak a couple of years ago, so although there are still opportunities for new products, these are experiencing a decline as we see the effects of the pharma innovation gap, when fewer new medicines came to market, in the same period,” Prof. Farrugia says.
means that many countries are very sensitive to the cost of medicinal products to their national healthcare systems and are continually seeking to reduce prices, even for generic products.” However, he points out, although generic medicinal products can be placed on the market at a lower price compared to the originator product, maintaining global good practice standards in this highly regulated industry to guarantee the quality and safety of products has a cost, and there is a limit to how much market prices can be decreased without becoming financially unsustainable, even for generic manufacturing companies.
Prof. Farrugia says pharmaceutical manufacturing generates a significant amount of waste that has specific requirements for its disposal. This has to be sent abroad, and the process is demanding financially and logistically to ensure that the waste is properly handled. “The pharmaceutical manufacturing industry is not the only industry generating such waste, and therefore it would be beneficial to the industry in general if the government had to invest in a national strategic plan to coordinate the handling of hazardous waste.” Prof. Farrugia also says the industry would like to see educational initiatives to maintain the level of science and linguistic skills of the country’s human resources “that are a key component of the ability of this industry to function effectively”. He believes the health manufacturing industry in Malta does have a future; however he points out that there are many challenges and these will increase as biological medicinal products and their biosimilars (biopharmaceutical drugs designed to have active properties similar to one that has previously been licensed) play a more important role in healthcare. “This may mean that the pharmaceutical manufacturing industry may have to diversify its portfolio, but I think we have already shown in the past that we can rise to a challenge when the opportunity for growth of the pharmaceutical manufacturing industry in Malta presented itself, and I believe that we can do so again with the collaboration of all sectors involved.”
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| September 25, 2014
NEWS
Energy efficient lighting solutions
ESS - electrical goods and services specialist Electrical Supplies and Services Ltd, better known as ESS, is the brainchild of Duncan Agius, its founder and CEO who, anticipating the times which were prevalent in the late 1990s, in 2001 decided to embark on a new project which culminated many a year of operational experience. Electrical Supplies and Services Ltd was thus formed. ESS commenced operations from a 300-square-metre retail outlet, with warehousing facilities being provided from a mere house basement. Nevertheless, through hard work and perseverance, it did not take the company long to become recognised as a leading
stockist of a vast range of electrical goods and provider of related services, becoming in the process equally popular amongst commercial and domestic customers alike. The company’s vision would not have become a reality had it not been for the incessant support given by an array of foreign principals who soon started to turn themselves into pivotal strategic alliances. GE Power Controls (Italy), Fael Luce (Italy), MondiniCavi (Italy), Scolmore International Limited (UK) and MEGAMAN (Hong Kong) were amongst the first to show unconditional support in ESS’s operational endeavours.
FHRD 2014 HR Conference: Talent Retention In continuing its longstanding tradition, FHRD is proud to announce that it will be organising the Annual National HR Conference on Friday October 17. The conference has today culminated in the main Maltese event concerning the human resources, training and business management worlds. This year’s general theme will be related to talent management. Nowadays, organisations’ commitment to recruit, retain and develop the most talented and superior employees available in the job market has become all the more salient. This year’s conference will address some of these issues and how entities can deal with them in the face of rising challenges. The confer-
ence title “Talent Retention: Turnover into Tenure”, reflects the array of inter-related themes that will be the focus of the talks and workshops held on the day. As with previous years, FHRD is expecting around 300 participants from a wide range of organisations. The event will be held at the Radisson Blu Golden Sands and will include an exhibitors’ space.
Smart Light Systems is an energy efficiency company mainly focused on energy efficient lighting solutions. The company has developed several solutions such as casino wall lighting, park lighting solutions, illuminated street signage, hotel entrance lighting, aquarium lighting and display board lighting. Operating from Malta provides the advantage of personally meeting with customers which furthers the guaranteed reliability of their products – something which puts them at a cut above the rest. Smart Light Systems’ solutions can also be incorporated with renewable energy sources making most of their products completely autonomous from the national grid, using in-house developed inverter technology. This has not only given clients the opportunity to further save on energy and installation costs, but also to have lighting in areas where electrical supply was not possible, such as public recreational areas, historical building facades or areas still under urban development.
The company’s efforts have garnered two silver awards at the 2011 Living Labs Showcase, and “2014 Most Entrepreneurial Company of the Year” locally. Constantly investing in research and development to
push boundaries of energy efficient lighting innovation, they strive to deliver a unique energy-efficient product to their customers, while proudly creating green jobs and opportunities within the local economy.
An innovative online solution for eCommerce service providers Nowadays, consumers are spoilt for choice when it comes to selecting a store for their online shopping, making it increasingly important for companies to ensure that their websites stand out. This can only be achieved if traders can find the right expertise and support when setting up an online store or extending their business online. Finding the appropriate help in such cases is certainly no mean feat, and this often discourages businesses from taking the plunge to invest in digital technologies. The Malta Communications Authority (MCA) has broadened
its efforts to address such a gap by setting up an online directory branded ‘Blink’. This is the first of a host of initiatives stemming out of the National eCommerce Strategy covering a seven year period (2014–2020). Blink is a practical resource that provides easy access to the information required by businesses who wish to take their operations online. It is a directory specialising in eCommerce service provision and has been purposely designed around the different phases required to set up an online shop.
The MCA invites businesses and self-employed individuals who offer eCommerce-related services to submit their details online via www.mca.org.mt/blink to form part of this online tool. The listing in this directory is on a voluntary basis and completely free of charge.