Business Observer September 28 2017

INTERVIEW

Issue 78

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September 28, 2017

FRANK V. FARRUGIA, PRESIDENT, MALTA CHAMBER OF COMMERCE

Distributed with Times of Malta

TONY ZAHRA, PRESIDENT, MHRA

PAUL ABELA, PRESIDENT, GRTU

Finance Minister Edward Scicluna shares his thoughts on whether the economy is overheating, Malta’s infrastructural issues, and addressing long-term issues ahead of Budget 2018. see page 8 >

CASE STUDY Meet the gaming company that’s helping to clean up Malta’s seas and save the environment. see pages 12, 13 >

Constituted bodies express grave concern on lack of human resources ahead of Budget Marie-Claire Grima Concerns about human resource shortages, infrastructural deficiencies and the consolidation of Malta’s current financial and economic prosperity into long-term success, as well as worries that the ‘playing field’ of business is tilted towards foreigners and unscrupulous operators, are weighing heavily on the minds of

Malta’s business and employer bodies as the Budget draws closer.

“Once again the Malta Chamber is focusing its priorities on two over-arching goals which in the eyes of the Chamber, determine the sustainability of the economy’s growth,” said Frank V. Farrugia, President of the Malta Chamber of Commerce. “We are calling on government to exploit the current positive standing of public fi-

nances to rectify structural issues that threaten long-term fiscal sustainability, whilst encouraging government to further enhance the factors that contribute to Malta’s competitiveness with emphasis on overcoming the severe labour shortages and modernising ageing infrastructure through sustainable long-term planning.

“Certainly the biggest challenge for our businesses will be the re-

cruitment of human resources.

The state of ‘full-employment’ has led Malta’s private sector to experience large difficulties to fill vacancies that arise in order to meet the demand for goods and services. We envisage that this labour gap, which exists both in terms of quantity and quality, is expected to persist well into 2018. The soContinued on page 3

STOCK MARKET REVIEW Highlighting the main principles of successful investing in order to generate adequate returns. see pages 20, 21 >

NEWS Could Government’s pro-employee pledges and policies have long-ranging negative effects on the economy?

See page 25 >

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NEWS

Identifying the industries of the future Continued from page 1 lutions to this issue are multifaceted. Furthermore, we believe that we need to start looking seriously at our infrastructure which is growing dated by the year, and see how this can be updated. Our economy has grown impressively in the past years, and this has meant that we have had an influx of people who are exerting an unprecedented strain on our infrastructure. We need to make sure that we have a road network that can support the country’s needs, as transportation in a small island remains a grave concern. We need to invest in a proper integrated multi-modal transport system which will in theory reduce the number of private vehicles on the road,” he continued.

“As I have already remarked, Malta’s economy is doing remarkably well. This however burdens us with a great responsibility towards our future and what we want it to look like. We need to look at the long-term to fully cater for the sustainability of our sectors in order to safeguard their future.

We also need to have a holistic strategic plan that will identify the industries of the future, such as Fintech and Blockchain that will sustain the growth of our economy in 10 or 15 years’ time.”

“The last two budgets brought the deficit down and indeed for the first time in about 30 years, we have actually seen a surplus in the government budget.” Tony Zahra, President of the Malta Hotels and Restaurants Association (MHRA) told this newspaper. “This comes on the back of increased economic activity which has resulted in increased income for government; however, it has also meant increased expenditure. We are concerned that if there is a slow-

down in the economy, there will be a decrease in government income, which would mean that we might not be able to bring down the expenditure to match the decrease in income, thus going back to budget deficits. We should ensure that surpluses are used to decrease the overall debt level, so that when the economy slows down, we will be able to have deficits without creating pressures on the country.”

“Malta’s infrastructure is creaking under the weight of the economic activity and its age,” he added. “It’s time to seriously invest substantial sums of money to bring the infrastructure up to world-class – instead of the present third-class. We are looking at very serious investments over say a seven-year period, possibly going into the two billion euro mark.

We’re also facing a major challenge when it comes to human resources which, when coupled with illegal activities carried out by nonlicensed organisations, or organisations that are not compliant with employment and VAT regulations, is creating an uneven playing field.

This creates serious competition to the compliant organisations and hampers the level of service that they offer. As MHRA, we have already commented that we need to have a look at where the present boom is leading us. We need to have a vision of where we want to get to in 20/30 years’ time and then plan accordingly. We believe that now is the time to talk beyond growth and to start talking about development – the two should not be confused.”

“Certainly one of the challenges being faced by employers is a shortage of labour supply. This is creating wage inflation which is not being necessarily matched by productivity and harms the com-

petitiveness of many companies, particularly in lower value-added sectors,” said Doris Sammut Bonnici, President of the Malta Employers’ Association (MEA). “The influx of foreign employees is alleviating this pressure to an extent, but in turn it is also a major cause of rent and property inflation which is leading to demand for higher wages to compensate for this effect. Government should take measures to increase resources – human and capital – to enable the private sector to continue to grow. It should also design a direction for the country to prioritise among different economic activities in the coming years whilst retaining the diversity of our economy, which is one of our major strengths. It is important to introduce measures for a faster processing of applications by foreign workers to work in Malta. We have also made recommendations about social housing, the engagement of persons on positions of trust, and professional assistance to micro companies. We would also like to see a convergence between commercial and household energy rates.”

Mrs Sammut, although wary of stating that the economy is overheating, warned that ‘boom situations’ like Malta is experiencing do not last forever. “Boom situations tend to be temporary and government should take the opportunity to restructure its expenditure to ensure that the surplus will be sustainable even if economic growth loses its momentum. Capital expenditure and infrastructure should be given precedence over increases in recurrent expenditure. However, the strange thing about the economy at the moment is that inflation has, thus far, reContinued on page 5

DORIS SAMMUT BONNICI, PRESIDENT, MEA

“e biggest danger is the emergence of a gold rush mentality which may result in an eventual collapse unless growth is managed.” – Doris Sammut Bonnici, President, MEA

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NEWS

Upgrading infrastructure to maintain growth and quality Continued from page 3 mained relatively low, which is unusual in boom situations; inflation is normally one of the signals of an overheating economy. Yet we need to brace ourselves for the reality that, for example, construction cannot be sustained at the current level of activity unless this activity is diverted to capital and infrastructural projects. Also, we need to think medium to longterm and take into consideration the externalities involved in having accelerated growth, such as the socio-cultural impact of a multicultural population, the environment, traffic congestion and others. I believe that the economy will cool down to a normal level of growth which will still see a rapid convergence between Malta’s and the EU’s average income and standard of living. The biggest danger is the emergence of a gold rush mentality which may result in an eventual collapse unless growth is managed. This is why we are urging government to proceed with caution before placing burdens on employers.”

“The biggest challenge ahead across the board will be the lack of human capital available to work in Malta,” Paul Abela, President of the Malta Chamber of SMEs (GRTU) concurred. “GRTU is proposing a specific measure in this regard that would facilitate the sourcing of people from abroad, both EU and non-EU. Whilst our proposal is somewhat unconventional in a country like Malta, we believe that we have to overcome the way we are pre-conditioned to be as an island state, overcome our fears of something that is inevitable, and focus instead on mitigation and solutions. Sourcing workers through official and state-facilitated channels is the answer. Should we fail to get something rolling by early next year we will end up with a human resource crisis.”

“We do not believe that the current positive economic figures should encourage unsustainable spending the current surplus that we are enjoying should be considered in the light of the tax and cost burdens carried by businesses, so that Maltese businesses are strengthened in a sustainable manner. We need to take stock of where we are at and consolidate; otherwise progress will exceed infrastructural limitations. Adjustments that require more from businesses in terms of taxes and running costs in times of economic slowdown and deficits should be adjusted. GRTU is specifically referring to the exaggerated expansion of the Excise Tax, the cost of electricity and also re-distribution of wealth through lower general tax on businesses.

In terms of consolidation, the government should look into the necessary upgrades in infrastructure necessary to maintain a good level of quality, continue catering for private sector economic growth and also address areas that we have fallen back on as a country. In the upcoming Budget we would like to see a drastic retraction on SISA, which in GRTU’s opinion was a big mistake made in the last few budgets, as well as a serious and tangible enforcement plan to tackle unfair competition and realignment of tax incentives that favour any foreign business relocating to Malta at the detriment of local businesses.”

“Malta is currently in a situation where there’s more work and more investment than we’ve ever seen in the past 50 years. The only challenge is that the workforce is very limited – there are barely enough people to keep up with the demand as it is,” warned Sandro Chetcuti, President of the Malta Developers Association (MDA). “With the ongoing projects as well as the ones in the pipeline, there’s more than enough for the next five to ten

years, as long as the authorities work prudently and do not come up with some white elephant project that continues to put extra pressure on our country and human resources. Projects which attract direct foreign investment are most welcome, but they have to be on a level playing field with other private projects. Look what happened with Smart City, for example – the foreign investors promised a huge IT village and public land was sold to them for peanuts. Now that the project has failed to materialise, it’s being sold back to Maltese investors.”

“The MDA’s priorities are decreasing bureaucracy, increasing efficiency and helping the most vulnerable members of society, so that nobody is left behind. It’s in nobody’s interest to see poverty growing in Malta – the ripple effect will be negative on all areas of society. We’re also interested in helping first-time and second-time buyers as well as those who want to make adjustments to their property, or extend it. We’ve submitted proposals to the Housing Authority to encourage it to create schemes for more reasonable rental opportunities, without touching the private property sector. The government should continue to prioritise the building industry, while remaining cautious not to create oversupply.”

“We believe that Government should consider incentivising clean energy and clean building projects,” he stated. “Contractors invest lots of money in new machinery for excavation and demolition which uses modern technology and is less of a nuisance. In other industries, such as manufacturing, there are plenty of tax credit schemes available for investors to make use of; there should be a similar scheme for our industry, which is so important for Malta, in order to level the playing field.”

SANDRO CHETCUTI, PRESIDENT, MDA

“With the ongoing projects as well as the ones in the pipeline, there’s more than enough for the next five to ten years.” – Sandro Chetcuti, President, MDA

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NEWS

Malta Industrial Parks and Malta Enterprise to move to proposed Mrieħel tower Manuel Zarb Malta Industrial Parks (MIP) and Malta Enterprise (ME) will both be relocating to a newly proposed Government-owned tower development in a prominent area in Mrieħel, MIP CEO Karl Azzopardi confirmed to this newspaper.

“Both agencies, which currently operate within the same building, will be relocating from the premises shortly,” said Mr Azzopardi. “The new development will house both agencies.”

Asked if the proposed tower, which is to include offices, retail and food and drink outlets, would fall within MIP’s remit of managing the Government’s industrial parks, Mr Azzopardi said that MIP and ME intend to adopt a public-private partnership (PPP) configuration. “This configuration would be subject to a competitive public call,” he said.

“In accordance with the PPP model, the administration and maintenance of the eventual premises would be determined by the PPP cooperative agreement. This in turn would have been determined by the market conditions following the competitive public call.”

MIP’s application, submitted last August, proposes the construction of a 17-storey tower, with five additional storeys of underground parking space, on the site of a car park in Triq is-Salib.

The site, composed of 1,583 square metres of land according to the application, is the most prominent part of a larger area within the industrial area off the Mrieħel bypass, which had been

“is configuration would be subject to a competitive public call. In accordance with the PPP model, the administration and maintenance of the eventual premises would be determined by the PPP cooperative agreement.” Karl Azzopardi, CEO, MIP previously earmarked for the building of a ‘corporate village’

by Malta Enterprise in 2010.

Malta Enterprise at the time planned to use the area for office and retail space, although the corporation later abandoned the project. Much of the earmarked area has since been given to factories and industrial space.

Malta Enterprise and MIP have been operating from premises in St Luke’s Hospital since 2010. No reason was given by Mr Azzopardi for relocation. However, this is likely related to the agreement reached between the Government and Vitals Global Healthcare in March 2016. Under the terms of this deal, VGH took over St Luke’s Hospital and two other public hospitals for a 30year period.

In 2012, then-Opposition Leader Joseph Muscat had pronounced himself against the use of a prime industrial site for offices and showrooms. Dr Muscat also criticised the idea of Government providing office space and so competing with the private

sector. The decision to earmark the site for a tower with office and retail space, therefore, indicates a reversal of policy by the current administration.

The MIP application also follows the 2016 approval of a highrise application by Tumas and Gasan Holdings, which will be building four towers ranging from 19- to 14-storeys high in Mrieħel.

Mrieħel was approved as an area for high-rise development in 2014 amid controversy over a lack of public consultation. In comments to the business portal MaltaChamber.org.mt in July, Central Business District CEO Keith Fenech said the controversy surrounding the Tumas and Gasan project showed the need for a plan for the Mriehel area.

Before moving to premises at St Luke’s Hospital in 2010, ME and MIP were located in the San Gwann industrial estate. The agencies were forced to move to make way for the construction of the Life Sciences Park.

ARCHITECT JOHN RIZZO NAUDI’S IMPRESSION OF THE PROPOSED TOWER

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INTERVIEW

“An economic boom would be at the top of the cycle, waiting for it to fall – I don’t see it like that as yet.” – Finance Minister Edward Scicluna Sarah Micallef With Malta’s economy growing at an impressive rate – a staggering 6.4 per cent compared to the eurozone average of 2.2 per cent in the second quarter of 2017 – the question on many lips is clear: are we currently experiencing a boom, and how long can this last?

“In Malta, we have a situation where you have high growth and low unemployment, without the asyet inflation in the labour market, and this, due to availability of labour,” said Finance Minister Edward Scicluna, who defines a boom as the opposite of a recession or depression, but also underlines that it implies a lack of resources for further growth, along with high inflation. Pointing out that while there are certain industries in which recruitment has become harder, he affirmed, “it is not a closed market in which those who require labour need to raise the price in order to obtain it.”

“The inflow into the labour force from abroad is giving room for growth without causing an inflationary boom. If you want to call it a boom in the sense of full employment, you may do so, however, a boom would be at the top of the cycle, waiting for it to fall – I don’t see it like that as yet,” he continued.

As sectors like construction, tourism and financial services experience prominent growth, I asked whether it is time to contain the acceleration, or put further measures in place to continue encouraging growth. “I think it would be irresponsible to look at the growth per se and stop there. You should always be watchful for signs which would indicate a slowdown,” the Fi-

nance Minister said, explaining that while government is keen to discuss issues relating to the labour market with businesses in order to address the issue and make it easier for them to recruit, it is also admitting that there are other issues, such as traffic congestion costs and shortage of office space, that need to be tackled.

And while Minister Scicluna denies that the local economy is close to overheating, he believes that the infrastructure needs to grow in line with the economy. “It’s no use talking about traffic congestion unless you find ways of relieving it. There are a number of measures within the electoral programme that will be addressed in the Budget. Firstly you should monitor, secondly admit that there is an issue, and thirdly make your intentions to address it clear. These elements are there. government is not in denial – we are admitting that when the economy grows at a high rate, it will incur extra costs. We intend to address them,” he said.

Linked to this, I asked whether he feels that Government should accelerate the pace of planned infrastructural projects – an area in which many perceive Malta to still be lagging behind. To this, Minister Scicluna said that, more than accelerating, it’s a question of maintaining. “Maintenance is a hallmark of the best countries. Our infrastructure needs to be maintained, our roads need to be maintained – we need to reach that level of development at which roads and other areas of infrastructure are ritually maintained on a continuous basis, and not just when a pot hole appears. This is complicated because it’s not just about money – it’s about management and mentality… it’s

FINANCE MINISTER EDWARD SCICLUNA. PHOTO: LIONEL GALEA

complex, but it’s truly a reflection of one’s development.”

Reacting to reports that finding human resources to keep up with demand is becoming a serious problem in industries such as construction, the Finance Minister highlighted the importance of segmenting the labour force. “It’s ironic

“I think it would be irresponsible to look at the growth per se and stop there. You should always be watchful for signs which would indicate a slowdown.”

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INTERVIEW

to have unemployed people in a segment for which we are using foreign labour. There’s an inconsistency there. In spite of the success of various measures like free childcare centres, tapering of benefits and so on, labour force participation is still low compared to other European countries, particularly among over 45-year-olds, so there is still room to entice these,” he said.

“Foreign labour is participating at all levels – definitely at the top end when it comes to the gaming and financial services sectors, but also at an unskilled level. How long has it been since you’ve seen a Maltese person cleaning the streets, for example? We know that a number of unemployed persons lack basic skills and qualifications, but are not ready to participate in the labour market at this level, often arguing that the pay isn’t enough. Our neighbours, meanwhile, are ready to accept the job at the going rate.”

However, unemployment levels are still at an all-time low, classifying as very near rock bottom, in economic terms. “So there are two sources to fill resources required – unemployed locals and foreign labour. It is not our intention to artificially pump the economy.

Rather, we must ensure that the growth is consistent; in other words, that it will continue at this rate,” he continued.

Moving on to the sticky situation that was the Panama Papers, Minister Scicluna believes that it was the dividedness of government and the Opposition when it came to protecting the country from foreign competition and attacks which enabled the attack on Malta’s taxation system to hit us where it hurts, our competitiveness. “We are in compliance with the latest OECD Council recommendations, and co-operate with other member states in the EU to reduce tax avoidance – we are not interested in encouraging it. Many measures to this effect were even passed during our EU Council presidency,” he affirmed. Asked whether the scandal has affected the perception of Malta, he admitted that, “for a while, yes. Luckily, things are changing all the time, and it has very much quieted down.”

I go on to draw his attention to recent proposals related to public holidays falling on weekends and IVF leave – measures which could be interpreted as socialist or left leaning, from a pro-business and liberal government which has often been accused of lacking centre-left-policies. “This is a government with socialist traditions, but which is very much at the centre, where common sense lies,” the Finance Minister said. “Being a Labour government, some may have been surprised at how pro-

“It is not our intention to artificially pump the economy. Rather, we must ensure that the growth is consistent; in other words, that it will continue at this rate.” business it is, and criticised that we are in the pockets of businessmen and developers, but at the same time, we’re fighting for what is right and what was promised to workers,” he argues, referring to ‘giving back’ public holidays which fall on a weekend.

“We are always weighing up our options and trying to find a balance. After this economic growth and after we have convinced both members of many families to go into the labour force, making less time for recreation, I think it’s fair for the country to translate its new wealth into hours quality time for the family,” he continues, marking a preference for weekend public holidays to be given as a bank holiday while affirming that there is not yet agreement on the issue. “The unions have their own opinions, so we will see what the upshot is and decide how this promise will be translated and implemented.”

Levelled with criticism that Government is trying to implement such policies without utilising its money but at the expense of the private sector, he asserted, “the business sector wants something back, such as a subsidy or benefit, but I don’t see it like that. It’s a package which you’re going to give to your workers. Where do wage increases come from? From productivity.

Given time, the company can afford a wage increase. It can also afford, instead of a 100 per cent wage increase, an 80 per cent wage increase and 20 per cent more free time. So I believe that what businesses and firms need is time to adjust, and I expect it to be gradual over these five years.”

Looking ahead, I asked what is to be expected from this year’s Budget.

“People want government to look at things in the long-term, and talk more about quality of life rather than quantity of money. While money will always be an important

medium, there are also public goods to consider – things like cleanliness, the environment, free space and less traffic congestion – this is where people expect government to find solutions. While it would be unfair to expect this government to wave a magic wand and fix all the issues, I believe that people do expect government to start addressing them. If they see that we are doing our best, they will be pleased, and I hope that with this Budget, you can look at it and say, this is the Budget we expect for 2018.”

Asked whether we will be closing this year with a surplus, Minister Scicluna declared that this will definitely be the case. “We expect to have a good surplus. Once times are good, you have to use that time to protect yourself against worse times. We’re doing that on three fronts – first by reducing the national debt; second by creating a wealth fund which we’re doing from the IIP, and putting people in charge of investing that wealth; and third by generating investment which will put us in good stead in the future. Now is the time to save for a rainy day. The biggest saving is certainly reducing the national debt, which is a scourge and a burden. We’ve seen countries that went under as a result of it – looking at what happened with Greece, for example, is a lesson for one’s life.”

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

Editorial Coordinator Marie-Claire Grima

EDITORIAL

Publishers Allied Newspapers Ltd. Content House Group Ltd.

Fair play The National Holidays Act that was amended in 2005 by Lawrence Gonzi’s Nationalist administration ruled that public holidays falling on a weekend would not be given as an extra day of leave. It was a measure meant to improve competitiveness, and it was – like many other sensible and long-sighted financial decisions – among the reasons that Malta survived the 2008 financial crisis and subsequent global recession relatively unscathed. The issue re-emerged earlier this year when both main political parties began offering heaven on earth in a desperate attempt to lure voters; in fact, one of the Labour Party’s more popular promises was to “give public holidays back to the workers”, as if Ebenezer Scrooge himself had taken a fat red marker and struck through all 14 public holidays in Malta’s calendar.

And that’s not all. There have been no shortages of measures that favour employees – who make up most of the voting public – that employers have had to shoulder the cost of. Of course, we’re all in favour of measures to help employees and most right-thinking business people would want to help their employees in cases of sickness and family health, even if it is not a legal obligation. But we’re noticing a trend that the government is aiming to score goals with employees, but is asking businesses to fork the bill. “This is a government with socialist traditions, but which is very much at the centre, where common sense lies,” Finance Minister Edward Scicluna says in our interview on page 8. “Being a Labour government, some may have been surprised at how pro-business it is, but at the same time, we’re fighting for what is right and what was promised to workers.” The reality is that using the private sector’s money to introduce measures which will favour employees whilst taking credit for it is neither socialist nor pro-business. It’s a slippery slope.

It is a well-known fact by now that employers in Malta are facing a number of challenges of their very own, the most pressing of which is a shortage of human resources. The sheer scarcity of people avail-

able to fill positions has led to salaries increasing across the board, making both finding and retaining people an uphill battle. With Malta doing so well economically, the cost of production is going up, adding to the strain on the private sector, and exerting fresh pressure on its ability to compete. Working conditions have to be good enough to keep the workforce happy, productive and motivated, and surely there are other ways to do so rather than just dangling the carrot of extra leave days in front of them. Any social measures that will be introduced should be discussed thoroughly with employer bodies, and countermeasures should be designed to make up the extra costs to employers, if they are to be implemented. Furthermore, their feasibility and sustainability has to be accounted for, not just for Malta’s crests, but also for its troughs.

The percentage of public holidays that fall on weekends is actually quite low, and reversing the amendment to the National Holidays Act is little more than a mise en scène that will earn a few extra brownie points from the public while continuing to put unnecessary strain on Malta’s businesses. The government doesn’t need extra popularity points – at the helm of a booming economy while the Opposition flounders amid its own internal strife, the positive feeling is at a high. We also recognise the logical and sound-minded economic influence that Prof. Scicluna has exerted as the Chief Financial Officer within Government. He is sensible and pragmatic, and his input has been instrumental, including demystifying Budget announcements ahead of the day itself. We’re confident that common sense will prevail and the right balance will be found between supporting the worker while benefitting the employee, making sure that the feelgood factor remains steady, even if Malta were to come across more difficult waters in future.

Advertising Enquiries Tel: 2132 0713 Email: info@contenthouse.com.mt Advertising Sales Petra Borg Urso Brand Manager Advertising Sales Coordinators Lindsey Napier Marvic Cutajar

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BUSINESS OPINION

Ensuring transparency and accountability for the public’s tax money

Dr Mario De Marco

“Over the past years we have seen a drastic increase in indirect taxation, which is having a negative impact on the standard of living of the more financially vulnerable members of society and eroding the competitiveness of some of our small and medium-sized businesses.”

Malta’s economy is reportedly performing well, driven by the positive performance of our tourism, financial services and iGaming sectors. This is encouraging news and vindicates the efforts taken by past governments, entrepreneurs and Maltese workers who strove hard to build up from scratch these all-important sectors which today underpin our economy. The global economic outlook is also significantly more favourable than it was ten years ago, when the world was approaching a colossal economic meltdown. However even in this overall positive scenario, there are questions that need to be raised.

From a political perspective, one has to ask: what is govern-

ment doing to ensure that our economy continues to evolve?

What new business sectors are being targeted to deliver economic growth in 10 or 15 years’ time?

From a fiscal perspective it is important to question how government is raising its tax revenue and how it is spending the taxpayer’s monies. Over the past years we have seen a drastic increase in indirect taxation, which is having a negative impact on the standard of living of the more financially vulnerable members of society and eroding the competitiveness of some of our small and medium-sized businesses. A significant per-

centage of the increase in taxes is going to fund political favours and jobs for the boys. Public sector jobs over the past four years increased, pushing up in the process the public sector wage bill. Government’s recurrent expenditure during the last administration increased at faster rates than it did during past administrations. That expenditure is financed through our taxes.

Government is quick to reply to any criticism by pointing to positive GDP, labour and Government finance statistics. These statistics tend to paint an overly rosy-rather than a full-picture.

The Opposition is calling for a serious discussion that looks be-

yond these headline statistics.

The number of people living in Malta permanently or as visitors is growing. This has both positive and negative effects that need to be carefully studied.

Over the past two years, we have highlighted the problem of increasing poverty which Government initially refused to acknowledge. Certain sections of our society are not benefitting from the economic growth. The Opposition is concerned with a new middle class poverty as the dividing line between the haves and have-nots in our society becomes bolder. The steep increase in property and rental prices is going to push more and more people towards the poverty trap.

This situation needs to be tackled head-on sooner rather than later.

The latest official statistics on poverty show that poverty amongst people aged 65 and over increased significantly between 2014 and 2015. This highlights the need for an urgent discussion on the plight of pensioners of today and tomorrow.

As an Opposition we will continue to insist on transparency, good governance and accountability because they are fundamental values and principles, more so when dealing with the public’s tax money. We will keep

insisting for the proper functioning of state authorities which are paid to protect the interest of all of us and not of the government of the day.

As an Opposition we strongly feel that the taxpayers should be fully aware of all commitments entered into by government on their behalf. This government has entered into long-term commitments, particularly in the health and energy sectors the details of which remain under wraps. Government’s feeble excuse of protecting commercially sensitive information does not apply in these cases.

As happened in the past three years, the Opposition is not simply criticising or raising questions. We are putting forward our proposals.

We will be doing this through the pre-Budget document and during the Budget debates. We hope that through our contribution, the country can have a more sensible discussion on our economic and fiscal performance. Our aim is to ensure that Malta’s economy works for the common good and delivers benefits to every member of society.

Dr Mario De Marco is the Shadow Minister for Finance and Deputy Leader for Party Affairs within the Nationalist Party.

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CASE STUDY

‘Green gaming’ company takes on customer and environmental responsibility challenges “Although some people say Malta is overcrowded with gaming companies, I like that we’re all in the same place together,” said Jesper Kärrbrink, CEO of Mr Green. “When you cluster companies together, the industry grows faster – you can see it in places such as Silicon Valley. It makes the industry more competitive, even if it’s tougher for us as operators, but I like the challenge.”

Mr Green, which was founded in 2007 as an online casino, now holds gaming licences in Malta, Italy and the UK, a casino licence in Denmark and sportsbook licence in Ireland. It offers around 700 premium casino games, of which about 450 are available on smart phones and tablets. It has been in Malta since 2010 and now operates in 12 different markets. Mr Kärrbrink, who has been the company’s CEO for a year and a half, but has been a key player within Sweden’s gaming industry since 2004, said that many of the gaming companies in Malta look and feel the same. “We really want our brand to stand out, to differentiate ourselves from other companies and to provide our clients with a better user experience. We want to find out what the next generation of gaming customers want, and give it to them. To

JESPER KÄRRBRINK, CEO, MR GREEN

succeed in this industry you have to be sharp, extremely competitive and dare to do new things.”

At the heart of the brand are the values of responsibility and sustainability. “Responsibility is part of our DNA,” Mr Kärrbrink said. “Gaming is a fascinating industry: it’s one of the largest entertainment industries in the world, with people all over the globe using our products around the clock. An important part of what we do is taking care of our customers – we don’t want them to play more than they can afford, lose all their money and burn out. We realise we have this problem, and try to address it in different ways, while making sure we continue to grow and improve the business.”

Consequently, all of Mr Green’s 200-strong employees are trained in responsible gaming; the company also has responsible gaming specialists and a dedicated responsible gaming manager. The company also created the Green Gaming predictive tool, which helps clients control the level of risk they take when gambling. “The tool involves a self-assessment test, developed by a psychologist, which analyses whether you’re an at-risk player or not. Coupled with the data we have from the client’s game

“An important part of what we do is taking care of our customers – we don’t want them to play more than they can afford, lose all their money and burn out.

We realise we have this problem, and try to address it in different ways, while making sure we continue to grow and improve the business.”

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play, we form a more thorough image of what level of risk they are at. As a tool, it’s very intuitive and straight-forward, and has been getting a lot of industry attention. If you’re not an at-risk player, we’ll recommend that you continue playing as you are, and check back every so often to make sure you’re still on the right track. If your risk level is more elevated, we’ll recommend that you set a limit, and if you’re a high-risk player, we’ll recommend that you stop and even talk to a counsellor if necessary. If we have a player at risk, we stop all sales communication with them – we don’t push them to play more.

In many modern cars, a coffee cup will flash on the dashboard if the sensors detect that you’re driving erratically and need to take a break – this works on the same principle.”

The values of sustainability and responsibility at Mr Green do not just extend to its clients but also to the company’s employees and method of working – which is evident, as it is consistently rated as one of the best gaming companies to work for. “All Mr Green employees are granted up to two weeks paid leave to work for a cause of their choice. This can be anything from working with schools in India to looking after stray animals.

We’re also taking up a new floor in the building which will be designed

to make our work practices more environmentally-friendly, including reducing our packaging and recycling.”

One of the causes closest to Mr Kärrbrink’s own heart is cleaning up Malta’s beaches and the sea that surrounds it. It all started one day when he was out paddling with his family and they came across a beautiful sandy beach – at least, it looked beautiful from a distance. As they drew closer, they were horrified to realise it was choked with plastic waste. All four of his family members collected a bag full of rubbish each, during those two hours paddling alone.

This inspired him to launch the Clean The Sea initiative, in conjunction with the University of Malta, under the direction of noted environmentalist Prof. Alan Deidun, Director of the International Ocean Institute – Malta Centre. Through this initiative, two students – one from the University of Malta and one from the University of York – who are studying Marine Environmental Management, went around Malta in a rib boat, taking samples of the water, collecting data on the health level of the ocean to use in their studies and clearing up the rubbish they came across. In two months, they collected a shocking amount of plastic – more than 100kg.

“The Mediterranean is one of the most beautiful things imaginable, and it’s treated so carelessly.

We love this island and we want to be here, but beaches are part of what makes Malta so appealing, and if they get too clogged with rubbish, people may not want to come here anymore. And the solution is so easy – just don’t litter.

We’re hoping to drive awareness by sharing the knowledge we obtain from the studies, and we hope this project has a real educational effect. As I said, it’s in Mr Green’s DNA to take responsibility. We can’t save the sea all by ourselves, but we can start somewhere.”

“People understood the importance of the programme even though it’s very small, and we’ve found a lot of support from the authorities. I believe that all companies should give back as much as they can to society, not just through taxes and employing people, but also by engaging in sustainable practices – things that aren’t sustainable just don’t live long,” Mr Kärrbrink concluded. “In the future, it will be difficult not to be sustainable because customers will expect it from companies. Indeed, I believe that the fastest-growing companies in the future will be the ones that are creating sustainable solutions.”

IN TWO MONTHS, THE CLEAN THE SEA INITIATIVE HAS COLLECTED MORE THAN 100KG OF WASTE.

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Choosing the best partner for freight forwarding Engaging the right freight forwarder can impact the future of your business, particularly in the transportation of specialised freight.

Martina Said The transport of goods from one destination to another is a complex and intricate process, and every industry has different expectations from the freight company they choose to entrust their cargo with. For some, it might simply mean transporting cargo from one point to another at a competitive rate but for others, it might be more than just a forwarding operation, and choosing the best company to get that job done might be a game changer for the success and future of that company. Three industry leaders within Malta’s thriving logistics sector discussed how choosing the right partner for the job could make or break a business.

THOMAS SMITH

Joe Gerada Managing Director What kind of value does a reliable freight and logistics provider add to the client’s business?

“A freight forwarder is a middleman ‘plus’. Like many middlemen in other disciplines, a good freight forwarder needs to know his client, and what the client is most sensitive to. He needs to have enough market knowledge to be able to bring forward the best solution, or a number of options for a solution, to the customer. Once that is done, then the ‘plus’ is that the freight forwarder also has to execute the plan and deal with any physical challenges involved.

A good freight forwarder should be seen as an integrated player

within the customers’ strategy, providing cost-effective solutions and constantly exploring opportunities for better fine-tuning. The relationship between a freight forwarder and client will be a long-term one when the proper service and value is provided to the customer.”

EXPRESS TRAILERS

Jesmond Mifsud Senior Sales Manager What services are available for the handling of specialised freight such as dangerous goods and fragile goods, and how are they handled differently to regu-

lar freight? How can choosing this right partner for the handling of such goods affect one’s business?

“At Express Trailers, we can move specialised freight by air, road or a combination of both depending on the weight, dimensions and requested transit time. We cover

mainland Europe with direct deliveries and where not possible, we connect with a network of reliable approved partners in the field with a fleet of temperature-controlled vehicles which are ATP-certified and mapped for temperature hot-spots Continued on page 16

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INDUSTRY FOCUS

Providing service and value to the customer Continued from page 15 to deliver the cargo in the right condition and temperature without affecting the supply chain. We also source air freight by using reliable airlines that offer temperature-controlled environments and warehousing and fast airport handling.

We also handle hazardous cargo, following the IATA Dangerous Goods regulations for air shipments, and the ADR Dangerous Goods regulations for road shipments, having our own DGSA (Dangerous Goods Safety Advisor) qualified to handle such commodities.

When it comes to sea shipments we carefully choose our shipping lines and partners abroad, offering 24/7 assistance to expedite customs clearance, release from port and delivery to customer. When specialised or dangerous cargo are not handled properly, very serious repercussions may follow. Express

Trailers is a company that is trusted for its years of experience in the handling of specialised freight and sensitive shipments, and also because it has built a strong team of qualified and experienced employees who are accredited to handle such shipments. Customers should seek to work with a company that can handle all the risks involved because this ultimately also safeguards their own reputation.”

EXPRESS LOGIGROUP Jonathan Vella CEO

How can a freight provider, tangibly speaking, really impact the success or otherwise of a business?

“One has to be extremely careful when considering the assignment of responsibility onto a

carrier/freight forwarder or operator, commonly referred as the freight forwarder. The most notorious situation is that the assigned party is incapable of delivering on the agreed terms. Using the right freight forwarder can save time, money and establish a more competitive base for the product being delivered. Before engaging the assistance of a freight forwarder, one should ask whether the company has the appropriate network which services the location of pick-up or delivery; whether it has experience handling the type of product and shipment within the market place; whether it has experience with the type of carriers required; its shipping rates and delivery schedules; and whether it has a reputation for friendliness, competence, efficiency, reliability, cost-effectiveness, trustworthiness and using fair business practices.

To this end, Express Logigroup offers a diverse portfolio of services which converge into a freight and logistics powerhouse. Our experience is coupled by our flexibility to meet every customer requirement, be it a small-sized package to the

transport of large exhibition events and valuables. Our principles are based on trust, quality and economical value, which are represented by a management team which brings decades of experience in the field of transport and logistics.”

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CASE STUDY

BOV issues new equity, strengthens corporate governance Rebecca Anastasi Bank of Valletta p.l.c. (BOV) is issuing €150 million in equity following the increase in their authorised share capital, from €500 million to €1 billion, as approved during the bank’s Extraordinary General Meeting and recently by the European Central Bank (ECB).

Existing shareholders will now have the option to participate in the issue and subscribe to the additional shares at a discounted price, or they can sell the right to other current and interested investors. Thus shareholders will be allowed to buy additional shares beyond the number offered with the basic subscription privilege, if those additional shares are available. Shares not acquired by existing shareholders will be available to the general public.

Miguel Borg, Chief Risk Officer (CRO) and Executive Director at BOV, said this increase in capitalisation is required to help the bank build more capital buffers, necessitated by its status as a systemically important bank (O-SII). “We are systemically important for the local economy, so if something happens to BOV, this will impact Malta’s financial stability.”

BOV is classified as an O-SII based on its size, business model and resident interconnectedness.

As a result, it is required to have a higher loss absorbency capacity than other less significant financial services providers and requires higher capital buffers in addition to the other normal buffers.

“We operate a full-service bank,” Mr Borg explained. “We don’t only accept deposits and offer lending, but we provide a variety of products and services. The more services you offer, the more capital you

MIGUEL BORG, CHIEF RISK OFFICER (CRO) AND EXECUTIVE DIRECTOR, BOV

need to hold, depending on the risk, the structure and the business model of the institution.”

The increase in share capital followed the recently approved amendments to the bank’s Memorandum and Articles (M&A). The changes were part of a multi-year programme of initiatives aimed at strengthening the bank’s corporate governance framework. The bank reviewed its corporate governance system with a view to adopting a system which is more

aligned to the nature of its business and the control of the inherent risks in that business. The modifications relate to the composition of the board of directors and their rotation. It has been determined that directors will now be elected for a term of three years. The introduction of the posts of executive director and the creation of a nominations and governance committee were also confirmed. “In having good corporate governance, the bank

“We are systemically important for the local economy, so if something happens to BOV, this will impact Malta’s financial stability.”

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makes sure it has a governance framework built on trust, transparency and accountability,” Mr Borg emphasised.

“One of the fundamental aspects is the establishment of an appropriate risk culture embedded across the whole organisation. In fact, the bank’s systemic importance has informed its risk management strategy and practices, an area which became increasingly important in the wake of the 2008 global financial crisis,” Mr Borg said.

“There are a number of steps which were taken in our effort to adequately manage risk, even before the crisis, but which have continued to be developed,” he asserted. The bank’s risk management function, headed by Mr Borg, oversees the Enterprise Risk Management (ERM) framework, a system of controls, policies and procedures governed by the Risk Appetite Framework as defined by the board. “The unit has also developed several forward-looking models to pre-empt risk and opportunities, rather than simply looking at past, static data,” the CRO explained.

The bank will continue to strengthen its control functions driven by the strategic priority of ensuring stability and long-term sustainability. “While BOV is adequately placed to absorb the im-

pact of expected and unexpected events, we need to continue to train our people and strengthen our systems. We think risk management will continue to transform and strengthen in the coming years,” Mr Borg said. “Internationally, from an ECB perspective, cyber risk is a primary area of concern. And, even in that area, we are increasing our control systems and resources, with the recruitment of IT and risk management specialists, as well as through risk assessments and internal audits, which enable us to manage any potential cyber threats.”

The bank’s anti-financial crime unit is also increasing its human resources, with the staff comple-

ment expected to more than double over the next two years. “Since the local economy has become more internationalised, we are exposed to more risk,” Mr Borg explained. “There is more liquidity in the market which means that the bank is experiencing a higher inflow of deposits, so we had to increase our anti-money laundering capabilities.”

The bank is also replacing its core IT system, the Core Banking Transformation System, a significant investment which will help boost efficiency, improve customer service and increase the control functions monitoring capabilities.

“Having the ECB as our financial regulator has also increased our ef-

“We are succeeding in finding an adequate balance between developing the business, increasing profitability, maintaining strong capital buffers and giving a good return to our shareholders.

We will continue to service the Maltese economy by protecting our long-term sustainability.”

fort in risk management,” Mr Borg said. “This regulation is needed to make the bank safer and stronger by safeguarding our corporate governance and our controls as well as finding new and effective ways to enhance our business.”

This drive towards greater risk management, and regulation, comes at a cost. Yet, Mr Borg, insisted, this expenditure is an investment and will not significantly affect the pricing and charges to retail customers. However fees for larger international corporate clients had to increase to absorb the cost of more enhanced monitoring and supervision of these clients.

“It affects the bank’s profitability more than the fee and charges structure, but the board has developed a strategic plan to maintain a good Return On Equity (ROE), despite the cost of regulation,” he emphasised. The plan focuses on a number of areas including a digitalisation strategy, the promotion of asset management and investment services, as well as further focus on consumer financing.

“Indeed, the €150 million equity issue will ensure continued growth and further development of new products and services for retail customers while, at the same time, providing adequate dividend to the bank’s shareholders,” Mr Borg said.

He emphasised that the upper limit

of €1 billion did not represent the amount of capital which would be ultimately issued, but would allow some flexibility, particularly for the issue of bonus shares.

“In the past, the bank has also issued bonus shares to its shareholders. This, as well as the dividend, is proposed by the directors following intensive discussions with the ECB. The shareholders vote at the Annual General Meeting (AGM) on the proposed dividend. The bank targets a competitive dividend payout which is determined with reference to a forward-looking capital ratio as agreed with the regulators,” he said.

This drive to enhance the business, and provide a strong ROE to its shareholders, is expected to continue. “The bank is going to focus on generating more longterm stable revenue streams to ensure stability and long-term sustainability. The bank focus is the long-term and not short-termism. We are succeeding in finding an adequate balance between developing the business, increasing profitability, maintaining strong capital buffers and giving a good return to our shareholders.

We will continue to service the Maltese economy by protecting our long-term sustainability,” Mr Borg concluded.

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STOCK MARKET REVIEW

e principles of successful investment

Adrian Gafà The investment world may confuse many individuals, either because they do not understand the mechanics and how to start investing, or due to disappointment with the results achieved. This article attempts to highlight the main principles of successful investing.

Before an investor begins building an investment portfolio, the first thing that needs to be established is the investment objectives. The investor should define the reason behind the investment and the target that is being sought.

The objectives vary widely from one person to another, given the differing financial situations and unique circumstances of each person. The most common objective is to save money throughout one’s working life to subsequently sustain a certain lifestyle upon retirement. Other objectives may include investing to acquire a property in the future or investing to generate additional wealth from idle savings over time. The objective set must be realistic and congruent with the other considerations described below.

The investor must also establish the time horizon within which the investment objective must be reached. Ideally, the time horizon is of a long-term nature as a longer timeframe would probably yield the best outcome. In fact, various studies over the years have confirmed that longer-term investment strategies have yielded superior returns that have been partially attributed to the re-investment of income on the portfolio (including dividend, interest, and

realised profits) which in turn leads to compounded returns.

When setting one’s objective, an investor needs to also take into consideration the human capital as well as financial capital. Human capital is a measure of the potential earning power of a person’s skill-set whilst financial capital is the amount of money a person has managed to save. As such, a university student who has just graduated has a higher level of human capital as he is still starting his career as opposed to another person approaching retirement. On the other hand, it is likely that the person approaching retirement has a higher level of financial capital. Therefore, as human capital decreases, one should be more cau-

“Investment decisions impacted by emotional biases could lead to excessive risk which in turn may lead to undesirable outcomes.

In certain circumstances, investors must be patient and not be disheartened by unfavourable short-term market movements, as long as the underlying investment case is still valid.” tious in his investments as the ability to recoup any losses is limited.

This leads onto another important consideration – risk tolerance.

It is important to highlight that investing means taking a risk for a potential return. Given that every

person has his own set of circumstances, one must assess the willingness as well as the ability to take risk. Willingness to take risk is a personal choice and largely depends on the investor’s character. It also depends on the investor’s time hori-

zon, expected income and the level of personal borrowings compared to the level of wealth. The two assessments might be conflicting. For example, an investor might be willing to take on more risk but is unable to do so or vice-versa. In this

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case, it is always best for an investor to abide by the assessment indicating the lowest risk tolerance.

Once the investment objective and risk tolerance levels have been established, an investor can start building his investment portfolio within these set limits. At this stage, an investor must understand the different asset classes and their respective characteristics. The most popular asset classes are equities (or shares), bonds and cash.

Through an investment in equities, an investor acquires a share of the company and therefore participates in the company’s success or otherwise. Meanwhile, when acquiring a bond, an investor would be lending money to a company and in return, receiving interest periodically. Therefore, the portfolio must be apportioned accordingly across the different assets classes in line with the investor’s objective. In general, equities are more adequate for higher risk tolerance investors with long-term objectives. Meanwhile, bonds are more suitable for investors with lower risk tolerances and shorter time horizons.

Another important principle for successful investing is diversification. In fact, apart from apportioning your investable sum across different asset classes, an investor must then also diversify across

companies, sectors, industries, geographies and possibly also across currencies. Financial theory dictates that 25 to 30 uncorrelated securities should provide the most effective reduction of ‘unsystemic’ risks specific to each investment in the portfolio. Financial theory also dictates that once a portfolio exceeds 30 securities, the diversification benefits from each additional security are minimal and could also be outweighed by trading costs.

Nowadays, diversification can also be obtained through certain instruments like Exchange-Traded Funds. These are commonly referred to as ETFs and allow investors to acquire exposure towards multiple companies through one security. There are numerous ETFs nowadays which can assist investors to diversify across sectors, geographies and also asset classes (equities, bonds or commodities). Some ETFs reinvest any dividends immediately (accumulators) while others distribute a dividend periodically (distributors).

Furthermore, it is also important to highlight that no portfolio can ever be risk-free as ‘systemic’ or market risk, including risks related to inflation, political uncertainty and military actions, can never be completely diversified away, especially in today’s glob-

alised world. Investment decisions must not be taken lightly and without due consideration to various factors. Investors with limited knowledge and experience in finance should always seek guidance from a professional.

Ultimately, investors should always base investment decisions on fundamentals and not on market chatter or simply mimic the investment decisions of a relative, friend or colleague. Investors must always be conscious of the fact that different people have different objectives and risk tolerance levels. Therefore, investors should abide by their own investment plan and reach a rational conclusion based on facts.

An investment portfolio needs to be reviewed periodically. Investors must follow developments in the companies in which they have invested and act accordingly. In certain cases, investors must overcome the ‘loss-aversion’ bias and sell an investment at a loss if the investment case is no longer valid. On the other hand, investors must not be too greedy and challenge the ‘status-quo’ bias by selling a profitable investment which is now being considered overvalued. These are just two emotional biases which, through experience, investors must learn to control – a very difficult task indeed. Invest-

ment decisions impacted by emotional biases could lead to excessive risk which in turn may lead to undesirable outcomes. In certain circumstances, investors must be patient and not be disheartened by unfavourable short-term market movements, as long as the underlying investment case is still valid.

Additionally, investment portfolios must also be rebalanced in line with any changes to the investor’s objectives, time horizon or risk tolerances, as the investor’s circumstances and financial situation may change over time.

Although there is no guarantee of success on each and every investment undertaken, a well-diversified portfolio should generate adequate returns for investors over the long-term. As such, investors should be diligent in their approach to investments and abide by the principles highlighted above whilst seeking professional assistance when necessary.

Adrian Gafà is a Research Analyst at Rizzo, Farrugia & Co (Stockbrokers) Limited.

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

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“Intelligent, innovative solutions can transform customer experiences” Martina Said “While Apco Limited is hardware-intensive, the drive of the company is to provide innovative solutions to businesses, changing work processes through the use of technology,” said Benson Bosman, General Manager of Apco Limited. “Intelligent, innovative solutions can transform customer experiences, while at the same time, drive growth for businesses.”

Apco Limited, which was conceived in 1987 as a family business and acquired by Hili Ventures in 2014, is a broad automation and security solutions provider primarily for the banking, retail and hospitality sectors, as well as the fuel industry.

In 2015, the year Mr Bosman was appointed to lead the team at Apco Limited, the company became a separate entity within Harvest, Hili Ventures’ technology division.

“When I started, Apco was mainly a banking industry solutions provider, primarily offering ATM machines, cash handling

machines and queuing systems.

Today, within just two years, we’ve more than doubled our business in the market, and are now active in retail, hospitality, still very much active in banking, and have also moved into the area of security. We are constantly looking to offer new solutions to different industries,” said Mr Bosman.

On the automation side, which is Apco’s core business, one of the company’s flagship products is ATMs, however, the company has also ventured into a range of innovative products and solutions. “Cash systems automation is one of our specialisations,” Mr Bosman said. “We offer traditional coin counters, but also cash recycling systems, back office cash devices which serve the retail, banking and hospitality industries, automated deposit machines and queuing systems.

In purchasing a range of these solutions, a bank can completely transform the customer experience in their branches.”

Similar automation technology can be applied to the retail industry – Mr Bosman explains

BENSON BOSMAN, GENERAL MANAGER, APCO LIMITED

the way the process of shift changing between one teller and another can be completely automated. “Once the cashier is done from their shift, they take their cash drawer to a device and put all the money in, which the machine will count, sort and validate, and issue a receipt that shows how much that teller deposited for the day. They will then hand that over to their manager and the next teller can walk up to the machine, enter their staff code, take their cash float and move on to their station for their shift. Our clients see significantly reduced shift changeover timing once the systems are in place.”

Some solutions, such as intelligent queueing and self-service,

“Retail is one industry we’re looking to expand significantly over the coming years, and advances such as self-checkout will play a big part.”

can be adapted to suit various industries. With intelligent queueing, for instance, one can join multiple counters at the supermarket via their mobile phone, and rather than physically wait in each separate counter queue, their phone will

alert them when their turn is coming up. “The same solution can be applied to the banking sector, allowing customers to do other things while waiting their turn, knowing that they’ll be alerted on their phones when their turn comes around.”

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Apco is also looking to change the game in the self-service sphere. “Retail is one industry we’re looking to expand significantly over the coming years, and advances such as self-checkout will play a big part, allowing businesses to remain open after traditional shop hours without extending the regular working hours of employees. We’ve already introduced McDonald’s self-service kiosks locally – and similar innovations can be applied to the hospitality industry, with hotel check-in and -out, for example. With regards to the hospitality industry, we’re also introducing advanced security systems to hotels through room keys, Wi-Fi capable door locks and number plate recognition, for instance, again personalising and enhancing the customer’s experience.”

Underlying all the products and services of Apco Limited is the security side of the company’s operations, offering a host of products such as access control and CCTV, as well as heatseeking cameras, 4G wireless cameras and physical security products such as bollards and high-speed gates, ensuring a fully-fledged security solution is available for the company’s core industries, such as banking, as

well as new ones they’re looking to attract. “A big part of our business is that we are the main importer and distributor of credit cards on the island. Even here there’s technology involved and advances to be made locally – the whole of Europe is adopting the use of contactless credit cards, an innovation that we will bring to Malta.”

Apco has also long been involved in the fuel market. Today, the company supplies 11 fuel stations, managing their outdoor payment terminals, and combining this with sophisticated security solutions. “Other than solely managing the payment terminals, there are other advances that we’re looking at in order to grow our fuel footprint. One aspect of our fuel solution which gives us a competitive edge, however, is the software we offer, which was developed inhouse for the Maltese fuel market. Malta’s fuel market is much smaller than the rest of Europe – we have smaller premises, mainly privately-owned stations, and different needs to the bigger players, which led us to tap into this home-grown software solution. The hardware devices we sell are by the world-rated brand Gilbarco, but what makes the hardware unique is the software

“We don’t want to be just a supplier to our clients; we want to be their trusted, strategic partner to help their business grow.”

that complements it, making it an ideal solution for the local market.”

In spite of its intensive hardware product offering, a significant part of Apco’s business is the servicing and maintenance of every solution and piece of equipment they put on the market. Apco represents only the best brands – Diebold-Nixdorf, Gemalto and NemoQ for banking, hospitality and retail products, and Gunnebo, Pacom and Hikvision in the area of security.

“Hardware is not infallible and serious problems may arise, however, we’re stringent about the brands we choose and promote, meaning the incidence of technical issues are minimised.

However, when and if they do

arise, we have a highly skilled team available to service and maintain all devices. We offer a fully-fledged maintenance agreement which includes preventative maintenance, so minor tweaks aimed at keeping the system healthy are done regularly and in accordance with the vendor’s requirements.”

The benefits of automation are varied and extensive, but the main one, Mr Bosman highlighted, is that every product introduced to the market is aimed at improving company efficiency and enhancing cost effectiveness. “Everyone wants to do more while spending less, and I engage a lot with business leaders to understand their needs and KPIs first and foremost, in

order to ensure that the products we can offer them are suited to their business needs. We don’t want to be just a supplier to our clients; we want to be their trusted, strategic partner to help their business grow.”

Aware that one of the greatest obstacles businesses face when looking to adopt such technological solutions is the cost, Mr Bosman said that Apco has developed a leasing scheme with no capital outlay for the company, only operating expenses.

“We’ve built a model where we combine a number of our solutions into a bundle, and offer it as a solution to a store or business – a so-called starter kit for small businesses, coupled with a regular payment scheme.

This is a way of catering for smaller businesses that don’t have the cash flow of large corporations, but still want to innovate and push their business forward,” said Mr Bosman. “Innovative solutions are picking up pace locally, and there’s still a lot we can do to get Malta in line with international trends. At Apco, we’re leading conversations for new innovations to be adopted locally, and with an eye on the future, we’re continually keeping ourselves at the edge of technology.”

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NEWS

“Government is being generous with other people’s money and taking the credit for it” Government’s pro-employee pledges and policies, such as the promise to add an extra day of leave for public holidays that fall on a weekend, or granting couples undergoing IVF treatment to 100 additional hours of leave between them, may be leading credence to the Muscat administration’s ‘A Government That Listens’ slogan, but many employers and heads of constitutional bodies are concerned that these measures will have longranging negative effects on the economy.

“Government should avoid adding burdens to employers and this is why, in a country which already has amongst the highest number of leave days and public holidays, we oppose the addition of the public holidays falling on weekends to the leave entitlement, unless there are compensatory measures to retain competitiveness,” Doris Sammut Bonnici, President of the Malta Employers’ Association (MEA) told this newspaper. “[The IVF law] in itself is a positive measure which will help many married couples. The issue we have is that government is being generous with other people’s money and taking the credit for it. We disagree that the cost of social services – as is the case with IVF – should be carried by employers.

This is why in our recommendations to the Budget, we have said that there should be discussions to agree on the social measures that are going to be introduced during this legislature, and design countermeasures to compensate employers for any added costs.”

“While the Chamber expressed itself in favour of Active Labour Market Policies, it warned that continuous extensions to leave allowances, the potential introduction of parental sick leave and the compensation for public holidays falling on a weekend were considered a ‘grave concern’ which would only serve to further erode Malta’s competitiveness,” said Frank V. Farrugia, President of the Malta Chamber of Commerce. “As I have pointed out previously, the country is facing a serious problem with filling its vacancies with the necessary talent. In this sense we need to make sure that working condi-

tions are good enough to keep a happy, motivated and productive work force. On the other hand, we cannot miss the forest for the trees. We need to keep in mind that Malta’s operating costs when compared to the EU average on the rise and this may start exerting fresh pressures on our country’s competitiveness.”

Paul Abela, President of the Chamber for Small and Medium Enterprises (GRTU) confirmed that employers are growing increasingly concerned with the trend of announcing “purely worker-targeted proposals. Social measures should be a win-win for workers, employers and the economy, and therefore should be well studied and discussed prior to announcements made. In addition, measures should be sustainable not just whilst the economy is booming but also when we experience slow-downs.”

“The reality is that we are going through a human resources crisis and we are asking our businesses to forgo four days of productivity per employee at a time when they already do not have enough employees,” he argues. “This has to be taken also in the context of all the other measures being proposed and recently implemented.

This fragmented approach to social measures is having an unidentified impact on the cost of employment. Each one of the measures implemented adds to the basket that makes up the cost of employment and nobody is measuring the value of this basket and how competitive we are compared to other countries.

Business should not be the only door we knock on to cover it.”

“It seems that there are hours, days or weeks off for everything under the sun nowadays,” Tony Zahra, President of the Malta Hotels and Restaurants Association (MHRA) fumed. “Malta has an average of 38 working days of holidays in every year. We believe that there are enough working days off and individuals should use these days off to do whatever they feel is necessary. But please let us ensure that we remain competitive.”

On the other hand, despite complaining about the drought of human resources in the construction industry, President of the

Malta Developers’ Association (MDA) Sandro Chetcuti was relatively laid back about the public holiday dilemma. “We were the first people to suggest that the minimum wage should increase, and we have no qualms with giving public holidays that fall on a weekend back to the worker. As long as the feel-good factor that a strong economy generates is maintained, everyone will benefit.”

“Social measures should be a win-win for workers, employers and the economy, and therefore should be well studied and discussed prior to announcements made.”

– Paul Abela, President, GRTU

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(FROM LEFT) HSBC MALTA COMMERCIAL BANKING HEAD MICHEL CORDINA, BHARATI CHANDRASHEKAR, MANFRED GALDES AND ANDREW BEANE DURING THE PANEL DISCUSSION

HSBC Malta helps customers turn compliance into business advantage HSBC Malta hosted a first-of-itskind customer event in Malta focused on financial crime risks and associated compliance obligations, which have increased markedly from the past. A packed hall of business and corporate customers learned about how these changes to the banking landscape are affecting them and the opportunities and risks they present for their companies.

The event was opened by the bank’s Chief Executive Officer Andrew Beane, who spoke about the importance of achieving international compliance standards to support Malta’s long-term economic growth and reputation in the global economy. He compared modern-day financial crime compliance requirements to airport security, explaining that security in the financial system is achieved because everybody needs to comply in order to have access.

Featuring HSBC’s Europe Financial Crime Compliance Head for Commercial Banking Bharati Chandrashekar and Malta-based ARQ Group’s Risk and Compliance Partner Dr Manfred Galdes, the business breakfast then examined strategic risks and advantages from compliance requirements within the Maltese and global financial systems.

A number of topics were covered, including Malta’s specific compliance risks, the impact of the various local and global regulations, as well as the role of correspondent banks and their relation to financial crime risk management of cross-border payments, particularly in the US dollar.

“CEO Andrew Beane compared modern-day financial crime compliance requirements to airport security, explaining that security in the financial system is achieved because everybody needs to comply in order to have access.”

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BUSINESS UPDATES

Cugó Gran brings Macina Grand Harbour to life Senglea’s iconic Macina Bastion will come back to life as an exclusive Cugó Gran - Macina Grand Harbour luxury accommodation, under the dedicated management of IBB Hotel Collection.

IBB Hotel Collection CEO Vladimir Saal said: “Our Cugó Gran - Macina Grand Harbour enjoys an unrivalled historic location. The splendid and beautiful façade lighting will be an additional welcoming feature for the most discerning traveller looking for a memorable experience.”

Following weeks of preparation, creative lighting installations have now transformed the historical Macina building’s façade into a page of luminous history by using new LED lighting technology in a design concept highlighting the timeless prestige of this historical architectural structure. Lighting historical buildings involves the achievement of a fine balance between showing the historical fabric without floodlighting it, while revealing the features without dramatising them.

THE STRIKINGLY LIT FAÇADE OF THE CUGÓ GRAN MACINA - GRAND HARBOUR IN SENGLEA

Built in 1554 during Grand Master Claude de la Sengle’s reign, the Macina derived its name from the sheer crane struc-

FIMBank provides developers with solutions through property development loans FIMBank is geared to provide established developers with financing solutions for property development projects with competitive terms and pricing.

The bank’s Developer Suite includes a range of facilities which provide funding on a pro rata basis for the purchase of land and development into residential units or commercial buildings. FIMBank offers terms which vary depending on the nature of the project, whilst the repayment is typically structured to coincide with the sale of property, or from the proceeds of the rental or the business activity.

The cornerstone of the bank’s business model is the personalised long-term relationships developed with clients. FIMBank offers quality banking, with a dedicated team delivering personalised customer service beyond standard office hours. “We see ourselves as a reliable partner working hand in hand with our clients to achieve their business objectives. One of our main, and unique, selling propositions is our level of service and efficient decisionmaking process, enabling timely execution,” said Jason Zammit, Head of Real Estate.

For further information contact FIMBank’s Real Estate team via email on E: realestate@fimbank.com or T: 2132 2100.

ture (macchina in Italian) used to hoist masts and heavy cargo.

This structure was dismantled in 1864.

IBB is a subsidiary of Von der Heyden Group, an investor based in Malta, currently operating 11 hotels in Germany, Poland and Spain.

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Demystifying blockchain Dr Vince Vella, CTO, Computime Software

When compared to other technologies, what are the key differences and benefits that blockchain technology can bring about?

Blockchain technology saw its origins in a paper published in 2008 by Satoshi Nakamoto (a pseudonym - no one really knows who the person is.) Rather than a new technology, it is more of an innovative way of combining existing technologies to implement solutions in a decentralised fashion.

Satoshi’s original vision was driven by the idea of creating more efficient systems that require minimal trust, allowing people, machines or software programs to exchange value between each other securely without the need of costly controlling intermediaries.

This also brings about less risk because of possible fraud or irregular maneuvers. For example, with existing approaches, if one needs to make a payment to a third party, the transaction typically needs to pass through many intermediaries such as payment gateways, card processing services, banks, interbank networks, etc. By proposing a solution that encourages fewer intermediaries, a transaction has less friction, resulting in more efficiency and a reduction in fees.

The idea of using blockchain technology for smart contracts is to create a technical platform to formalise and secure relationships that are typically governed by manual legal contracts. In simple terms, a smart contract can be described as a computer program that can define and enforce agreement clauses and obligations.

This can spark innovative business models. Can these be implemented using existing technologies? Yes, they can, however blockchain technology provides a neater technical approach that is innately secure, efficient, easily verifiable and transparent.

Another aspect is robustness.

One can imagine the blockchain network as a mesh of computer nodes, like P2P networks. A copy of the blockchain, or ledger, exists on all the nodes. Being distributed, it provides built-in redundancy and has no single point of failure.

Who controls the blockchain network?

No formal body controls the blockchain technology or else, to provide a more specific example, the Bitcoin network. Bitcoin is controlled by Bitcoin nodes across a decentralised network around the world and can only work correctly by reaching a majority consensus, programmatically, across these nodes. Hence, it cannot be controlled by any single entity.

Thousands of distributed nodes on the network collaborate to verify

the transactions, group them into blocks, and finally add them to the blockchain, a copy of which is kept synchronised on each node. This means that there is no physical intermediary in the traditional sense, like banks, controlling the validity of transactions, but this is done computationally in a decentralised fashion. One can imagine this as a self-auditing ecosystem.

In addition, one has to mention two important blockchain properties, transparency, because by definition all blockchain activity is securely logged and in many cases public, and the fact that it cannot be altered.

What are the main challenges ahead for wider adoption?

Firstly, from a technical perspective there are still a number of areas, like throughput, latency, interoperability, wasted resources for mining, hard forks and so on that pose challenges. The technology is evolving at a very rapid pace and a lot of research is being conducted by a wide community of technical experts globally. Secondly, the technology needs to be supported by governments and legal frameworks. Bridging the legal and technical perspectives is not an easy feat, and the wider adoption of both cryptocurrencies and blockchain applications, such as smart contracts, demands a harmonisation of both realms. A simple example is defining, in a legally binding manner, how manual contracts and smart contracts can co-exist, replace or complement each other. In this area, I remember that back in 2006, Malta went through a similar experience when MFSA adopted digitally signed documents as legally binding documents within the Registry of Companies. Malta was at the time one of the first in the EU region to adopt such an approach. A similar legal and technical harmonisation needs to happen in this regard, depending on the specific use case. Other regulatory aspects around Anti-Money Laundering, Know-Your-Customer processes, taxation structures and Initial Coin Offerings need to be clearly positioned.

Despite the challenges, I believe that the investment that is happening in the area, including the participation by the major global IT players, the attention being received by bodies like IMF and ESMA, and the activity happening in a number of countries will definitely not be futile. In addition, we are experiencing other parallel trends such as Internet of Things and Artificial Intelligence for which blockchain technology can offer a supportive role. In conclusion, at present there is a wide consensus on the possibilities of blockchain technology around smart contracts and distributed applications. I believe that in its current form or in an improved state, the paradigm around de-

centralised models will continue to evolve and increase in adoption. Questions and disputes around the future of cryptocurrencies are stronger at this stage.

About Computime Software Computime Software is a leading provider of standard and

customised business software and integration solutions to medium and large-sized organisations. We deliver industry focused solutions to various sectors such as energy and engineering, transportation, banking and finance, hospitality, professional services, telecom, retail,

and iGaming. Our customer base is immensely varied and ranges from local SMEs to large multinationals.

For additional information, visit www.computimesoftware.com or contact us on T: 2149 0700 or E: info@computimesoftware.com

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BUSINESS UPDATES

Planning Authority’s short evening lectures start again Planning Authority’s short evening lectures start again For the past few years, the Planning Authority has strived to empower and make the public and stakeholders gain more knowledge on a range of planning issues. What is our next step in this regard? Amid other initiatives, we are once again hosting a range of short evening lectures. These are aimed at gaining a better understanding and knowledge about different subjects directly related to planning.

What will they cover?

Following the lectures held in the past, we decided to keep the most popular ones. These include History of Architecture in Malta, Online Planning Services, Best Practices in Restoring Your Old Home, and Commercial Development - Planning and Practice,

amongst others. We are also introducing new topics which we believe will help keep you, as a customer or professional, adjourned with the trends and changes happening in the area of planning. The latest topics vary from The How, What and When of a Planning Application, Interior Design, Green Transport Plans, Planning for Sustainable Development, as well as Rehabilitation and Conservation of the Cittadella in Gozo.

Who will the speakers be?

As in previous years, the presentations will be delivered by key speakers from the Authority, as well as prominent names in the planning and interior design industry. These include Malta Architecture Awards winners Periti Martin Xuereb, Alexia Gingell Littlejohn and Sarah Zammit Calleja.

All lectures shall be conducted in

English and a participation certificate will be sent to participants.

When and where will they take place?

Lectures will be held between 6pm and 8pm on Tuesdays, starting from October, at the Planning Authority offices in Floriana. A limited number of first-come-firstserved spaces are available against a fee of €10 per lecture. All proceeds will be donated to Hospice Malta.

How can you apply?

Check out our user-friendly prospectus on our website www.pa.org.mt for further details about each and every topic, including their respective dates.

Send us an email on eveninglectures@pa.org.mt if you would like to book to attend one or more of the lectures.

MAPFRE Middlesea launches client portal MAPFRE Middlesea has launched its client portal, MyInsurance (myinsurance.middlesea.com), allowing customers to view and manage their insurance policies online, through a user-friendly and highly personalised interactive service.

The client portal will offer the ease of self-service to clients with regards to various insurance products. The service will offer an overview of the client’s policies and the status while also allowing them to submit a claim, track the status of that claim and pay the excess. If a policy renewal is pending, customers will get a notification and they will be allowed to renew the policy and pay online.

Customers also have access to the report library and will be able to download the policy certificate and schedule. MyInsurance also allows for personal details to be updated and for queries to be made online. The services are available for home, motor, travel, health and commercial insurance products.

Upon their first access to the portal, clients will be requested to enter a unique code, which they would have received with their renewal notice. A 24/7 call centre will be able to assist clients with the usage of the client portal. Customers who register and sign into the web portal enter the chance to win a weekend break.

AX Hotels and Cessani merge travel with fashion On Friday 29 September, AX Hotels and Cessani will be launching Cessani’s bow ties together with the new collection for this winter followed by the official opening of The Saint John Boutique Hotel in Merchants Street.

“I wanted to create something masculine but feminine at the same time, in its stylish ways – something bold but delicate too,” said AX Group’s Hospitality Director Claire Zammit Xuereb. “A brand which appeals to the true traveller, looking for luxury in a stylish ambience, yet fully functional in all practical ways. The bow tie is a symbol of a smart space for smart people. Smart in all ways, including its technical meaning.”

“It all started with The Palace, AX GROUP DIRECTOR CLAIRE ZAMMIT Sliema for me, when I launched The XUEREB AND FASHION DESIGNER Designer Suite Collection and the MARY GRACE PISANI detail we went into when creating the whole concept. As a result, it made it very attractive to the fashion industry for photography and style. So when doing up our next hotel, I could not help myself from introducing something original and fashionable. Each of our hotels has its own distinctive style and appeals to various niche markets,” said Ms Zammit Xuereb.

The fashion designer for The Saint John exclusive bow ties, Mary Grace Pisani, says that she was honoured and privileged to work on this project and she was sure that this would turn out to be a successful idea. “From the first time we met, Ms Zammit Xuereb and I could read between the lines in various aspects,” the designer said. Ms Pisani only had words of praise for Ms Zammit Xuereb describing her as an intelligent and down-to-earth person. “She has an eye for detail, a lady that takes decisions and her actions give you energy to work.”

Ms Pisani believes the concept is definitely going to be the talk of everyone as they already have very positive feedback. “Our aim is to bring together the fashion industry into another dimension. We can’t wait to launch and hope that it will be a true success.”