Economic Vision 2016 by Content House

Ec o no mic Visi on 20 20 Business. Finance. 16 Economy. Â¤7.50 (where sold)

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An official publication of the Malta Chamber of Commerce, Enterprise and Industry

“Leading an amazing

team in great

technological

times” Microsoft Malta’s new Country Manager Panayiotis Ioannou discusses his role at the helm of Microsoft’s local operations and outlines his vision for the company. What is your background and how long have you been working for Microsoft? I started my career with Microsoft in 2006 as a Partner Sales Lead for Cyprus and Malta, and then in 2008, moved to the post of Small and Midmarket Solutions & Partners (SMS&P) Lead for Cyprus. I was responsible for developing the company’s Small and Midmarket Enterprises and Corporate Accounts strategy, and driving the overall channel engagement for the Microsoft partner community. Prior to Microsoft, I was based in Maryland, United States where I held a series of project engineering and project management roles. I hold a Masters degree in Mechanical Engineering from The Catholic University of America, Washington DC. After having worked for Microsoft Cyprus for such a long time, how do you feel about transitioning to Microsoft Malta? Through my work, I’ve been linked to Malta and followed the Maltese operations since Microsoft established itself in 2003. I find Malta as a natural evolution and progression in my career, and an opportunity to lead an amazing team in great technological times. Of course, quite a few things have changed in the island since I first joined the

company nine years ago. Technology and innovation have gained a lot of importance in Malta in recent years notably, and as Microsoft, we offer a remarkable portfolio of services and solutions that are powerful to support the evolution on the island and further enhance our connection with our customers and partners. As Microsoft, we seek to bring better changes to the world with what we do and Malta has all the potential to shine in an era where technology is moving at a breakneck pace. Social, mobile, analytics, cloud, and increasingly the Internet of Things, have become driving forces behind the rapid evolution of digital businesses. What do you think are the key strengths of Microsoft in Malta? Thanks to a great local team under the leadership of Adrianna Zammit, the previous Country Manager, and the Country Manager before her, Microsoft Malta has established a very strong presence here, over the past few years. The first strength lies in the fact that we have built a very interesting partner ecosystem. Being a small country with excellent proximities helps a lot as this breeds better familiarity and therefore, closer and more effective working relationships. We are constantly in touch with our partners and customers, and this helps us service them better. We are also a prominent player in the development and strengthening of Malta’s education sector. Our ‘Partners in Learning’ programme delivers training and resources for educators to help their students develop 21st century skills for enhanced employability. In this regard we are constantly supporting local state and church schools in the application of technology for better education. In recent years, we have also found an excellent partner in Malta’s Government, particularly the Ministry for Education. This year in fact was a milestone year where we have signed a Memorandum of Understanding with Government which will also see the extension of the current Student Advantage Scheme extended to cover a new Teacher Advantage Scheme as well as a number of important initiatives by Microsoft aimed at strengthening the local education sector. What do you think are the main bets for Malta and how will Microsoft Malta help in achieving them? One of Malta’s most important challenges for the coming years is going to be a redefinition of its competitiveness and this is going to need a thorough exercise to identify in which sectors Malta should invest in the coming years to ensure more economic growth. As such, we will be here to assist the country in the direction it opts to take its economy. As our VP Salcito stated in his visit in Malta, MS can be a lighthouse for the continuous evolution in ICT in the region. We’re here to build on this and assist in taking Malta to the next level.

“We’re here to assist in taking Malta to the next level” What is more, Malta should be no exception when it comes to cloud momentum. Delivery of public and private services has a considerable potential for economic and social development. As Microsoft Malta, we understand that those first steps toward building cloud and hybrid practices can be the most challenging, requiring our partners and customers to make new investments and shift their business model. Therefore, we will strive to make our partnership more valuable; provide support during this technology passage and make it easier and simpler to do business with Microsoft. Another challenging sector is going to be education and how to equip today’s students with the skills that will be needed tomorrow. Markets are changing very fast and so is the demand for specific skills. What students are learning today will not necessarily be valid for tomorrow and for when they enter the job market. This is where Microsoft becomes an important player by assisting the education sector with the latest technologies and resources to be able to equip today’s students with the skills they will need to succeed. Microsoft Malta set up the Microsoft Innovation Centre three years ago. What do you think of the results achieved so far and what plans do you have for its future? Inaugurated in February 2013 the Malta MIC is one of only 120 MICs that Microsoft has established around the world with the intent of offering a contact point where youths, entrepreneurs and businesses can meet Microsoft and explore new opportunities that could be leveraged into concrete business projects. The MIC was set up as a catalyst to bring Microsoft and Maltese specialists and business entrepreneurs into closer collaboration and today, this facilitates the collaboration between Government, academics and industry participants to generate innovative research, technology and software solutions. Two years down the line, the MIC has been delivering what it had promised. To date, more than 500 developers and IT specialists have participated in over 100 events organised at the MIC, 3,000 students have been hosted as part of Microsoft’s YouthSpark events and around 1,000 jobs are now tied to the Microsoft partner ecosystem. But perhaps the MIC’s biggest achievement is that it has been an incubator for 80 start-ups which have been expertly mentored and supported by Microsoft’s local team. These local start-ups are also amongst the ones that are are exploiting our cloud technology most when compared to similar start-ups in other countries. If these figures are sustained, the future looks very bright for the MIC and those who come to use our resources. Our plan in fact is to keep supporting local entrepreneurs so much so that this year, the MIC will be granting ¤1 million worth of cloud services to Maltese start-ups. At a time when most countries are looking at youth and innovation as powerful economic drivers, Microsoft is prepared to leverage and boost the great potential that local start-ups have to offer.

ECONOMIC VISION 2016: BUSINESS. FINANCE. ECONOMY.

CONTENTS 11 14

MALTA IN 2016 While being cautiously optimistic about 2016, the Malta Chamber of Commerce, Enterprise and Industry warns that Malta must continue to build on the successes achieved in the last years and capitalise on the momentum garnered.

ON THE RISE

SOLID FOUNDATIONS FOR THE LONG TERM

A CENTRAL VISION FOR 2016

Prime Minister Joseph Muscat discusses why he is optimistic about Malta’s prospects in 2016.

EXPORT-LED, INVESTMENTDRIVEN REAL GROWTH

“WE CAN’T REST ON OUR LAURELS”

2016: PROJECTIONS AND FORECASTS

Leader of the Opposition Simon Busuttil outlines his vision to increase Malta’s economic potential.

Malta Chamber President Anton Borg tells Marie-Claire Grima that while the Maltese economy is doing well, it would be a mistake to become complacent.

Sarah Micallef speaks to key industry leaders from a variety of sectors to discover their projections and forecasts for 2016.

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Finance Minister Prof. Edward Scicluna speaks to Marie-Claire Grima about the importance of laying the groundwork for the next phase of Malta’s economy.

Jo Caruana speaks to Central Bank of Malta Governor Prof. Josef Bonnici to discover what he believes is in store for Malta’s economy in 2016.

MAKING HAY WHILE THE SUN SHINES, OR SAVING FOR A RAINY DAY? Leading economist Gordon Cordina provides his forecast for Malta’s economy in 2016, emphasising the need to focus on generating sustained and sustainable growth over the long term.

MALTA IN 2016 – THE VISUAL PERSPECTIVE Is Malta doing enough to protect and enhance its visual identity? Jo Caruana questions three experts to find out.

2016 AT A GLANCE A selection of Malta’s industry leaders share their vision for the year ahead in a single sentence.

ECONOMIC VISION 2016: BUSINESS. FINANCE. ECONOMY.

Publisher

Mallia Building, 3, Level 2, Triq in-Negozju, Mriehel BKR3000 Tel: +356 2132 0713 Fax: +356 2132 0714 info@contenthouse.com.mt www.contenthouse.com.mt In conjunction with the Malta Chamber of Commerce, Enterprise and Industry, the organisation behind the Economic Vision 2014/2020

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“IT IS NO COINCIDENCE THAT OUR ECONOMY IS DOING SO WELL” Farsons Group Chairman Louis Farrugia discusses the future of Malta’s manufacturing industry, the fate of Air Malta and Farsons Group’s ambitious plans with Martina Said.

FROM HERE ON UP Corinthia Group Chairman Alfred Pisani believes that a nation-wide holistic and concerted effort is required to elevate Malta’s profile. He shares his ideas, together with his predictions for the coming year, with Martina Said.

NO SLOWDOWN IN SIGHT While highlighting the best of the banking sector’s achievements in 2015, BOV Chairman John Cassar White talks to Jo Caruana about what can be expected in 2016.

ASSURING THE FUTURE OF INSURANCE MSV Life CEO David G. Curmi tells Jo Caruana how he thinks the insurance sector will continue to shape up in the years to come.

RAPID ECONOMIC CHANGE, LAGGING CULTURAL CHANGE Professor of Sociology at the University of Malta and President of the International Small Islands Studies Association Prof. Godfrey Baldacchino discusses whether our society is changing as a result of a fast changing economy.

The Malta Chamber of Commerce, Enterprise & Industry The Exchange, Republic Street, Valletta VLT1117 Tel: +356 2123 3873 Fax: +356 2124 5223 info@maltachamber.org.mt www.maltachamber.org.mt Editor Kevin J. Borg Editorial Coordinators Edward Bonello Sarah Micallef Advertising Sales Manager Petra Urso Advertising coordinator Lindsey Ciantar Creative Director and Design Nicholas Cutajar Content House Ltd and the Malta Chamber of Commerce, Enterprise and Industry would like to thank all the protagonists, contributors, advertisers and the project team at Content House and at the Malta Chamber that have made this publication a success. Articles appearing in this publication do not necessarily reflect the views of Content House Ltd or those of The Malta Chamber of Commerce, Enterprise and Industry. All rights reserved. Reproduction in whole or in part without written permission of the publishers is strictly prohibited. The publication is being distributed to all leading businesses members of the Malta Chamber of Commerce, Enterprise and Industry by the Malta Chamber, and is also available to purchase from leading newsagents.

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ECONOMIC VISION 2016: BUSINESS. FINANCE. ECONOMY.

Malta in

By the Malta Chamber of Commerce, Enterprise & Industry

2015 was a good year for Malta’s economy. The economy grew at a steady rate as the country enjoyed a climate that encouraged investment. Private enterprise has reported positive prospects for the years to come. Inflation remains in check and unemployment is at its lowest in several years.

“Malta must continue to build on the successes achieved in the last years and capitalise on the momentum garnered.”

As the Malta Chamber said on numerous occasions however, the country cannot allow itself to fall victim of its own successes. We cannot allow any slippages that may give rise to unnecessary shocks, and competitiveness remains the top priority as new sectors of growth need to be identified to attract investment. In 2016, the country needs to remain vigilant to keep its finances in check. Government must attain the fiscal targets set at the last Budget by mainly addressing abuse in undeclared economic activity and social benefits. Government must remain vigilant to eliminate wastage, abuse, bad planning and mismanagement of public resources, as well as do away with amnesty schemes to evaders, while lowering tax burdens on those who honour their tax obligations. 11

ECONOMIC VISION 2016: BUSINESS. FINANCE. ECONOMY.

“2016 will bring the country closer to Malta’s first Presidency of the European Union – an important period for Malta as it offers an unprecedented opportunity to influence policy at a European level.”

Competitiveness shall remain the top priority for the Chamber even in 2016. The country must remain attractive for investors to set up shop on our shores. We must continue to exploit our strengths whilst mitigating and addressing the disadvantages inherent in our micro economy and geographic insularity, particularly economies of scale, while at the same time refraining from imposing burdens on businesses of our own design. The Malta Chamber remains committed to continue championing this cause and to point out policies and measures that we know can be detrimental to future economic growth and prosperity. The Malta Chamber shall also continue to call on all involved to step up the country’s effort in Research Technology Development and Innovation (RTDI). RTDI is one of the foremost pillars upon which our country’s lasting economic

growth rests, as, independently of operating costs, innovation can provide Malta with a competitive edge over other regions and states. Establishing an RTDI Strategy for start-ups provides a vital avenue that leads to improved long-term competitiveness and enhanced business growth. In 2016, the Malta Chamber shall continue to push RTDI higher on the national agenda. With the need of better traffic management becoming more apparent, the Malta Chamber augurs that 2016 will be the year in which the country will see a credible and substantial move towards easing this conundrum, which is raising costs for business thereby leaving a noticeable effect on the country’s competitiveness and productivity. The country needs to invest in better holistic planning that allows people and supply chains to flow with ease. At the same time, the public transport system needs to put commuters’ minds at rest that they will be ferried to and from their destinations in an efficient and reliable manner. The Malta Chamber welcomes any innovative approaches that allow better communication.

2016 will also bring the country closer to Malta’s first Presidency of the European Union. This will mark an important period for Malta as it offers an unprecedented opportunity to influence policy at a European level. The Malta Chamber shall also once again be taking a central role during this process, as it will host the biannual Business Europe Council of Presidents meeting that will see Presidents of Business Europeaffiliated business organisations from all over Europe gathered in Malta to discuss growth and competitiveness. This will be an unparalleled opportunity for Malta to forward its priorities, in a number of sectors, and put limitations experienced in the economy at the top of the European agenda. In conclusion, the Malta Chamber is cautiously optimistic for 2016. Malta must continue to build on the successes achieved in the last years and capitalise on the momentum garnered. It must however remain vigilant at all times against the volatile and highly unpredictable international scenario. Above all, recent economic progress must not make us complacent. Competitiveness and subsequently economic growth are goals that are never reached. They are indeed a process that needs to be invested in constantly. The Malta Chamber remains committed to work towards supporting the growth of business, employment and prosperity in Malta. EV

ECONOMIC VISION 2016: BUSINESS. FINANCE. ECONOMY.

Solid foundations for the long term Prime Minister Joseph Muscat details why he is optimistic about Malta’s prospects in 2016. We have every reason to be upbeat about Malta’s prospects in 2016. As a country we are recording some of the best figures in Europe: for economic growth, deficit reduction and job creation.

“We have every reason to be upbeat about Malta’s prospects in 2016.” Official figures show that in the third quarter of 2015, the Maltese economy continued to register robust growth, with a GDP growth of 5.4 per cent in real terms and 8 per cent in nominal terms. This growth rate, besides being the highest rate, is three times as much as the 1.6 per cent average growth rate in the Eurozone. The growth registered in GDP in the third quarter of this year is the highest growth rate ever registered since Eurostat has been collecting statistics for Malta. All sectors are succeeding. Financial services continue to grow at a rapid rate while traditional areas, such as manufacturing and tourism, have recorded impressive figures too. We are an open society and it’s important that we continue to put out the red carpet for potential investors. We will continue to welcome entrepreneurs, offer start-up incentives, cut red tape and put conditions in place for business to succeed. It’s important that all of the country benefits from economic success. We’ve made good progress attracting investment and creating jobs in Gozo in the past year, with the new St Barts Hospital yet to come. The South will get a similar boost with the arrival of the American University.

ECONOMIC VISION 2016: BUSINESS. FINANCE. ECONOMY.

“The growth registered in GDP in the third quarter of this year is the highest growth rate ever registered since Eurostat has been collecting statistics for Malta.” These are solid foundations for the long term. We reject ‘quick buck’ opportunities in favour of building a sustainable economy. Malta has a reputation as a respectable jurisdiction with robust regulation where business can grow, and we intend to keep it that way. On the international stage, we have demonstrated that, despite our size, we can take the lead in Europe, with innovative measures such as universal free childcare and groundbreaking legislation on family businesses. The childcare policy has increased female participation in the workforce while the Family Business Act is very much part of Government’s long-term thinking because it will make it easier for businesses to survive over generations. It’s important that we make ingenuity part of our modus operandi. It’s encouraging to see that ideas expressed at the University of Malta are being placed in ‘incubators’ and supported with seed money, so that Maltese talent becomes Maltese business success. And our pro-technology strategy is paying dividends too. We can never be sure of what is coming next in the digital age but we are

determined that, whatever it is, we will be part of it. The International Monetary Fund recognised that Malta’s economy was growing strongly, helped by policy initiatives, with risks balanced. It also said that high growth could not be taken for granted and that is right. There is still much to do. We must seize the opportunities of globalisation, attract more business, develop new sectors, advance Malta as an energy hub, and ensure that our education system deals with the skills gap. The future of Malta has to be prosperous business, rising living standards and more skilled jobs. 2016 will take us further down that road. EV

“There is still much to do. We must seize the opportunities of globalisation, attract more business, develop new sectors, advance Malta as an energy hub, and ensure that our education system deals with the skills gap.”

ECONOMIC VISION 2016: BUSINESS. FINANCE. ECONOMY.

Export-led, investmentdriven real growth

Nationalist Party Leader Simon Busuttil voices his concerns on an economy which, he believes, is not reaching its potential real growth. Looking towards 2016, he outlines his vision to increase Maltaâ&#x20AC;&#x2122;s economic potential.

Photos by Lionel Galea

ECONOMIC VISION 2016: BUSINESS. FINANCE. ECONOMY.

“Our economy should be doing well, but it is not reaching its potential real growth.” Our economy should be doing well, but it is not reaching its potential real growth.

bloated Government wage bill has increased by ¤200 million a year.

We should be doing well as we reap the fruit of past investment in new economic sectors and efficient energy generation and supply; enjoying the injection of ¤900 million in European funds in our economy in these five years; while the world economy is doing relatively well after the great recession of 2008 onwards and while oil and commodity prices are substantially down.

Despite a substantial increase in public sector employment, Government’s own Economic Survey and Eurostat figures show we are in the bottom third of EU member states’ increase in the rate of employment. Moreover, the latest Economic Survey published by Government shows real wages are lower than they were in 2012, thus reducing consumers’ real purchasing power.

However, a good part of our economic growth is down to Government consumption, which has increased by ¤350 million in two years – this is evidently unsustainable. Exports have dropped by more than ¤700 million; manufacturing has reduced the value added to our economy in every single year since 2012.

Another concern is that Government has increased its revenues mainly through one-offs but its increased

On the employment front, Government has reversed a 25-year reducing trend in public sector employment. Public sector investment is down while recurrent expenditure on a

“We have to account for our competitors’ increased productivity after years of imposed economic reforms and the lower energy prices their businesses are enjoying.” 20

ECONOMIC VISION 2016: BUSINESS. FINANCE. ECONOMY.

“Exports are the only way for our economy to enjoy real growth as our market is simply too small.” expenditure is permanent. Public debt has increased by ¤500 million in absolute terms. Energy and fuel prices are higher than they ought to be for consumers and industry. Government is fuelling higher inflation through higher fuel prices. We now have the highest inflation rate in Europe. Government has entered into an 18-year agreement obliging it not to buy the cheapest electricity it can. We need to be doing much better at this stage in the economic cycle. Externally, we have to account for our competitors’ increased productivity after years of imposed economic reforms and the lower energy prices their businesses are enjoying. This list of weaknesses and challenges for our economy is not insurmountable. Last year, the Malta Chamber published its Economic Vision for Malta 20142020, which we wholeheartedly endorsed. And as we enter the second half of the political cycle, 22

my party will be publishing its own economic blueprint, which will be a holistic vision for the Maltese economy. We shall discuss and seek a multi-stakeholder consensus on this vision well before the next general election. Our blueprint will revolve around these key themes: • A shift to higher investment in our infrastructure, businesses, and human resources to achieve a quality leap in our economy • Incentives for savings to fuel higher investment • Economic growth led by much higher exports • Incentives for manufacturing to go up the value chain in terms of production and skills • Attracting FDI in new areas where we have a comparative advantage • Enabling Maltese enterprises to flourish and access new markets, not least through better access to finance • A leaner, open and more effective public sector imbued

with professionalism • A liberal orientation towards business regulation coupled with a stronger enforcement of a level playing field • Enhancing Malta’s reputation, the basis for our vibrant services sector • Open government fighting corruption tooth and nail Let me emphasise particularly investment, exports, openness and the fight against corruption. Investment is how we increase our economic potential. Exports are the only way for our economy to enjoy real growth as our market is simply too small. Corruption is not just bad for politics; it is bad for business. Open government creates the best pro-business environment. I’m under no illusion that this needs nothing short of a culture change. I’m ready to deliver this real change because it will bring greater benefits for all the people of Malta. EV

ECONOMIC VISION 2016: BUSINESS. FINANCE. ECONOMY.

“We can’t rest on our laurels” The President of the Malta Chamber of Commerce, Enterprise and Industry, Anton Borg tells Marie-Claire Grima that while the Maltese economy is doing well, it would be a grievous mistake to be complacent and neglect to lay the foundations for future business success.

Photos by Alan Carville

ECONOMIC VISION 2016: BUSINESS. FINANCE. ECONOMY.

President of the Malta Chamber of Commerce Anton Borg affirms that general business sentiment in Malta reflects the fact that the economy is doing very well. “Prospects are positive across the board, and the level of optimism is unprecedented. The results of EY’s Malta Attractiveness Survey, published in October, proved this – interest from foreign direct investors in Malta is higher than it has ever been before, and the number of companies operating in Malta that believe that they will still be in business here ten years on has risen since the last time the survey was carried out.” Malta’s economy has diversified over the years, and Mr Borg mentions several sectors which are fuelling the current positive business climate, including the flourishing remote gaming industry, which, as the second-largest contributor to the national economy, is at the helm of the current economic boom, bringing in 12 per cent of the GDP. He also mentions back office service providers and financial services operators, which continue to be steadily successful earners. Meanwhile, tourism keeps on breaking records year after year, and the film industry is experiencing an unprecedented boom. While Mr Borg acknowledges that there are ups and downs in all sectors, he adds that overall, the results being produced are outstanding.

ECONOMIC VISION 2016: BUSINESS. FINANCE. ECONOMY.

“Retail is producing some patchy figures, but that’s to be expected. People nowadays would rather shop online or in a big, modern shopping mall, or on the high street where there is plenty of choice, rather than have to seek out an isolated shop in their own village. As a result, smaller, stand-alone shops are falling behind — but it’s a natural consequence of progression.” The excellent business results Malta is producing are certainly cause for celebration, and projections for the foreseeable future are positive too. However, Mr Borg sees no point in resting on one’s laurels. On the contrary, he believes that the time to strike is while Malta’s economy is experiencing one of the biggest crests in its history, and he has used the Malta Chamber’s clout to try to propel the Government to take action.

“There’s no doubt that Malta is doing very well, but it’s no longer the only healthy man in southern Europe.” “This year, the Malta Chamber put forward a Budget proposal for more wealth to be invested in R&D, which would ensure that Malta remains a competitive place to do business. Not only are we adamant that there needs to be more investment in R&D, we also believe that many companies are not identifying certain processes within their firms which qualify as such. This is what led us to put forward to Government the proposal that fiscal incentives for operators in the private sector who do so be increased. The proposal said that Government should match the investment that firms make in this area twofold in capital allowance, and it was put forward to

ECONOMIC VISION 2016: BUSINESS. FINANCE. ECONOMY.

the MCESD before it was tabled in front of Government, and they too were in agreement. However, when the Budget was announced in October, there was no sign or mention of our proposal at all.” Mr Borg goes on to express frustration at the fact that Malta seems to have become a victim of its own success. “We have to work very hard to make sure that Malta retains its present attractiveness for business investment. Thanks to a strong foundation laid in more prosperous times, Malta weathered the 2008 financial crisis and the resulting fallout very well, while countries all around it were staggering and gasping. But since then, those countries have taken reparative measures which are finally paying off. They’re getting back on their feet with renewed strength, more ready to compete than ever before. There’s no doubt that Malta is doing very well, but it’s no longer the only healthy man in southern Europe.” “Government is not acknowledging that there is a sense of urgency in all this. When we put the proposals forward, they agreed with us – but it’s very easy to nod and concur,

and then sit back and do nothing. Every economy functions in cycles, and mark my words, there will be a downturn at some point. It’s true that right now, we’re riding a very strong wave, but that’s exactly why we have to act immediately. We don’t need to implement any

published in July 2014 after 18 months of intensive research and collaboration with several captains of industry and enterprise. This included the launch of Trade Malta, a public-private partnership between the Malta Chamber and Malta Enterprise, which is

“We don’t need to implement any austerity measures, but there are economic and fiscal strategies that we have to start sowing now, as they will only mature and come to fruition several years down the line.” austerity measures, but there are economic and fiscal strategies that we have to start sowing now, as they will only mature and come to fruition several years down the line. If we leave the problem-solving for when we’re in the middle of a crisis, it will be ten times as hard to pull off.” 2015 saw the Malta Chamber implement some of the measures listed in the Economic Vision for Malta: 2014-2020, a document

responsible for the promotion of trade and internationalisation of Maltese business. Further work with Trade Malta will be carried out in 2016, as well as other components of the plan of action outlined in the document. This includes preparation for the first six months of 2017, which will see Malta taking over the role of EU Presidency for the first time. Other significant events which the Malta Chamber needs to set the scene for include hosting the bi-annual

ECONOMIC VISION 2016: BUSINESS. FINANCE. ECONOMY.

“By profiling companies and individuals on our portal, we will help identify potential alliances and bring about knowledge transfer partnerships.” Business Europe Council of Presidents between April and May, and gearing up for the next review of EU eligibility and aid intensity in 2018. The Malta Chamber will also be launching a new digital portal in partnership with Content House, which Mr Borg says will add a new dimension to membership within the Chamber. “The portal will be a unique tool which will help local entrepreneurs and businessmen do business more efficiently. By profiling companies and individuals on our portal, we will help identify potential alliances and bring about knowledge transfer partnerships. Knowledge transfer partnerships (KTPs) are part government-funded programmes which are very common abroad and highly effective when it comes to helping businesses grow. They are particularly beneficial for SMEs which have an idea but cannot develop it to its full extent, due to a lack of access to finance or research. KTPs help them realise these ambitions to their full potential. We hope that this portal will assist us in adding value to members of the Chamber, attracting new membership and fostering growth in the years to come.” EV

viewingmalta.com

ECONOMIC VISION 2016: BUSINESS. FINANCE. ECONOMY.

PROJECTIONS AND FORECASTS As many will attest, 2015 has been a good year for the local economy, with a variety of sectors continuing to flourish and experience growth. But will the coming year be the same? Sarah Micallef speaks to several industry leaders from a variety of sectors to discover their projections and forecasts for 2016.

Over the years, Maltaâ&#x20AC;&#x2122;s economy has been largely driven by servicebased industries including foreign direct investment in the ICT, financial services, electronics and software development sectors â&#x20AC;&#x201C; industries that have continued to flourish in 2015. Other sectors that have a major effect are foreign trade, manufacturing and tourism. But what is on the horizon for these industries in the coming year? What considerations must be taken and what investments made?

ECONOMIC VISION 2016: BUSINESS. FINANCE. ECONOMY.

“We remain confident that our financial services sector will continue to experience steady growth and retain a competitive edge.” – Dr David Tonna, MAMO TCV Advocates

Year on year, the financial services sector has continued to achieve rapid growth since Malta’s 2004 accession to the EU. Dr David Tonna, Partner at MAMO TCV Advocates notes that an analysis of the 2015 key economic indicators and government policy responses towards the local financial services sector reveals that Malta appears to be well poised for the challenges which 2016 will bring. “The motto ‘the culture of getting things done’ has definitely become synonymous with Malta and the sector has risen to the challenge,” he says, asserting that Malta is fast becoming the jurisdiction of choice for a growing number of international clients, and is following fast on the heels of other well-known jurisdictions, albeit with a tangible dose of caution. “Consolidation, innovation and longterm planning should be the main driving forces for 2016,” he continues, pointing out, however, that the challenges facing the sector cannot be ignored. “2016 may also see measures to clamp down on aggressive tax planning and the introduction of measures to ensure greater

harmonisation between the local tax authorities. Automatic exchange of information is a reality which the sector will be faced with, both on an EU and worldwide level,” he continues. As for his forecast for the coming year, Dr Tonna affirms, “despite the modest global economic growth forecasted for 2016, we remain confident that our financial services sector will continue to experience steady growth and retain a competitive edge. Nevertheless, it must be admitted that the challenges which lie ahead are undoubtedly present and only a focused collaborative effort between the Government, the MFSA and the local players will enable the sector to overcome these challenges.” Meanwhile, Bank of Valletta Chairman John Cassar White feels that in 2016, the main effect on local banking will be the continued rolling out of Banking Supervision by the European Central Bank on local banks. “In November 2014, the larger Maltese banks fell under the jurisdiction of the ECB as far as banking supervision is concerned,” he explains, adding that this is bringing about great changes in the way banks

ECONOMIC VISION 2016: BUSINESS. FINANCE. ECONOMY.

“In Malta we have a tradition of prudent banking practices that need to be reinforced from time to time to avoid bank leaders becoming complacent.” – John Cassar White, Bank of Valletta conduct their business. “I see substantial advantages to these changes as our banks will become even safer. But it could also lead to banks shying away from riskier lending as this may demand more capital. This may not be all that good for the economy,” Mr Cassar White warns. “Banks will also need to invest more in their infrastructure in 2016,” he continues, making particular reference to banks’ IT systems as well as human resources that are specialised in certain areas like internal controls, risk management and IT security. “Banking is certainly becoming more complex and it is amazing how some people have a rather simplistic view of how a bank works in reality,” he says, going on to add that, “luckily, in Malta we have a tradition of prudent banking practices that need to be reinforced from time to time to avoid bank leaders becoming complacent.”

ECONOMIC VISION 2016: BUSINESS. FINANCE. ECONOMY.

“The bank believes there are significant prospects for its customers to grow internationally as a result of the increasing opportunities resulting from global trade.” – Andrew Beane, HSBC Bank Malta

Another of Malta’s largest banks, HSBC, will be facing 2016 under the governance of new CEO Andrew Beane. Looking towards the immediate future for both HSBC and the local banking sector, Mr Beane states that despite the fact that 2016 is expected to be another challenging year for the banking sector, HSBC Bank Malta looks forward to the potential that the new year will bring with it as the bank connects its customers to growth opportunities. “While continuing to play a key role in supporting the Maltese economy given the increasing number of projects, new businesses and FDI, the bank believes there are significant prospects for its customers to grow internationally as a result of the increasing opportunities resulting from global trade, as well as the funding being made available by HSBC Malta through the ¤75 million Malta Trade for Growth Fund launched in June this year,” he continues. Within the insurance sector, Keith Mallia-Milanes, Assistant General Manager at Mapfre Middlesea p.l.c. explains that for years, the Maltese insurance market, along with the rest of Europe, has been preparing and organising itself for the introduction of Solvency II. “After almost 15 years since its inception, January 2016 will see this regulatory and reporting framework finally introduced and implemented. This will primarily be the latest legislative tool that measures and ensures the capital adequacy of insurance carriers in Europe,” he maintains.

“January 2016 will see Solvency II finally introduced and implemented. This will primarily be the latest legislative tool that measures and ensures the capital adequacy of insurance carriers in Europe.” – Keith Mallia-Milanes, Mapfre Middlesea

ECONOMIC VISION 2016: BUSINESS. FINANCE. ECONOMY.

Mr Mallia-Milanes goes on to explain that the buildup to this regime has cost the industry a substantial amount of time and money in developing governance structures and resources including reporting frameworks that will prove their effectiveness or otherwise in 2016 and beyond. “By now,” he continues, “insurers operating in the domestic market should have revised and established their future business model and operating policies, and ensured that the executive and non-executive boards have the competence and experience to meet the new regulatory demands.” Looking towards the future of the Maltese market in general, he believes that it has maintained a gradual momentum in growth, and feels that this will be maintained in 2016 and later years. Despite this, he goes on to highlight areas in which there is room for improvement, stating, “although the life sector has by far outgrown the non-life one, the latter needs stabilisation, particularly in the motor and private medical insurance areas. Pricing models should be clearly indicating the need for upward corrections to rectify the recent strong appetite for growth in

“Instead of flooding the country with many more beds and keeping prices low, the demand which has now surpassed the supply will push the rates of our properties up.” – Alfred Pisani, Corinthia Group

market share and defensive positioning with the aim of improving margins and technical returns.” Elsewhere, Corinthia Group Chairman Alfred Pisani affirms that demand in the tourism sector is on the increase. Having said that, he feels that this increase in demand will see our approach towards it experience a shift in the coming years. “We always had a subdued attitude towards the value of what we possess in Malta, and if a foreigner came and gave us their opinion on something, we have always tended to give it more value, but still undervalue what we have. We have underestimated all along what Malta consists of, and we are now waking up to this,” he explains. According to Mr Pisani, tourism numbers will be higher next year, but because we have reached saturation point in terms of the number of rooms, he predicts that prices will go up, maintaining that this is the best thing that can happen. “Instead of flooding the country with many more beds and keeping prices low, the demand which has now surpassed the supply will push the rates of our properties up. What

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we need to do now is improve the product, the service and our attitude for improving the whole island. This will be something phenomenal for our children over the next 10 years,” he adds. Meanwhile, Farsons Group Chairman Louis Farrugia believes that while manufacturing was never the largest economic contributor to the local economy, recent years have seen it become even less so. Looking toward the future, he maintains, “the services industry has shot up, so the challenge is to ensure that manufacturing stays relevant because it employs a lot of skills, and it would be very sad if we had to lose these skills.” In fact, he continues, “we also need to ensure that we hang on to the schools and institutions that pass on these skills such as MCAST, Lufthansa Technik and Methode.” Speaking on behalf of Farsons, Mr Farrugia explains that the company needs a skilled workforce to operate the hightech machinery it has invested in. “Without the skills, we simply cannot operate them,” he laments.

“A lot of our manufacturing also depends on the world economy: we understand that the European economy is recovering, so I think we should continue achieving steady progress in this sector. I don’t envision exponential growth, but I believe it will be steady.” – Louis Farrugia, Farsons Group While acknowledging the fact that manufacturing has received a boost in terms of energy tariff reductions which he feels has helped, the Farsons Chairman stresses the importance of continued investment so as to

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“For the next year I expect that Government and the business community in general will continue to work together to ensure that Malta sails safely in these troubled waters.” – Karl Micallef, Classic Group

improve productivity and competitiveness. Finally, he adds, “a lot of our manufacturing also depends on the world economy: we understand that the European economy is recovering, so I think we should continue achieving steady progress in this sector. I don’t envision exponential growth, but I believe it will be steady.” According to Karl Micallef, CEO of Classic Group, the retail sector is another field in which competition is rife – becoming fiercer over the years with greater penetration of retail business conducted over the internet. “In 2016, I expect consumers to increase their volume of business over the internet as new habits of purchasing challenge what used to be the standard modus operandi,” he says, maintaining that the local retail sector is being confronted with competition from operators outside our shores, which results in huge pressure on profit margins. “In this ever-changing scenario, the retailer must embrace change and learn to survive in the new environment. Today we talk a lot about omni-channel retailing referring to the seamless experience of shopping across multiple channels: be it from standard retail shops, online channels, mobile app stores, telephone sales or any other means of selling. At the end of it all, what we want to ensure is that we have satisfied consumers and a reasonable return for retailers who must provide a pleasant shopping environment,” he continues.

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“The Gozitan economy in 2016 is expected to continue to improve on 2015.” – Joe Cordina, Gozo Channel Company Limited

Despite the threat from online stores however, Mr Micallef states that he continues to believe in retail shopping, as most people still enjoy the experience. “In a very challenging political environment across Europe, North Africa and the Middle East, Malta has fared extremely well,” he adds, going on to warn that we must not take matters for granted. “For the next year I expect that Government and the business community in general will continue to work together to ensure that Malta sails safely in these troubled waters. I believe that despite these great challenges the retail sector in 2016 will continue to enjoy another successful year,” he asserts. And what of how our sister isle is faring? Joe Cordina, Chairman of Gozo Channel Company Limited feels that 2015 was a year in which a lot of preparatory work was laid as a foundation for more work to be done by Government in 2016. “Tourism in Gozo is moving at a very good pace and we expect it to continue to rise, and this also goes for internal

tourism – we’re expecting the boom to continue. As for construction, which was a bit lax but has started to pick up in 2015, I expect it to continue rising in 2016,” he maintains. Meanwhile, Mr Cordina makes reference to the job market, asserting that even though there has been a reduction in people who are registering for work, there is still room for improvement. “The creation of jobs in Gozo was slow in 2015, and it is expected that it will pick up in rhythm in 2016, especially when it comes to unskilled labour,” he says. Moving on to the manufacturing sector on the sister isle, Mr Cordina believes that it is going through a slow phase, and there is room for further support from Government so that jobs within this sector are not lost. As is the case in Malta, the IT sector has also seen a steady development over 2015, he continues, and 2016 should see more jobs created within this sector. Overall, he concludes, “the Gozitan economy in 2016 is expected to continue to improve on 2015.” EV

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On the

Rise Economies move in cycles, and Finance Minister Prof. Edward Scicluna believes the best way to avoid a downward spiral is by preparing to attract industries which are still on the rise. He tells Marie-Claire Grima all about laying the groundwork for the next phase of Maltaâ&#x20AC;&#x2122;s economy.

Photos by Lionel Galea

ECONOMIC VISION 2016: BUSINESS. FINANCE. ECONOMY.

Finance Minister Edward Scicluna is understandably proud of the successful economic results Malta has been producing over the past two years. However, he is equally keen to provide assurance that despite Malta’s indisputable success on all economy-related fronts, there is to be no kicking back and relaxing. “Malta’s positive results can only be undermined if our efforts slacken. Ensuring the strength and sustainability of our nation’s economy, and making our country an appealing location for foreign investment is not a one-time thing – it is an ongoing task.” Part of the task includes investing in industry sectors which are still on the rise, a strategy Prof. Scicluna says will shield Malta’s currently-booming economy from hitting a plateau or going downhill. “Let me give you an example. When a drink manufacturer sees that their core product has grown stale, and that there’s no longer a high demand for it, they have to diversify to survive. So they spin out a new kind of drink and start fuelling demand once again. That’s the approach we’re adopting with our economic strategy, and it’s a tried-and-tested formula.”

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“If you look back at Malta’s economic history throughout the past century, you can easily identify a number of phases with one or two industries as their focus. First it was factories and the maritime sector. Then it was hotels and tourism. Our current phase is heavily based around iGaming and financial services provision, which has helped us attract and nurture talent in accountancy, law and IT, reaching the most stringent international standards. Consequently, when the potential of those sectors has been thoroughly exhausted, we’ll be ready and fully equipped to start branching out into the next phase of Malta’s economy, which will see the medical field and tertiary education taking up the mantle as the force in Malta’s economic driving seat. “I imagine Malta not quite as a business hub but more as a base camp, in the mountaineering sense of the word. Politically, socially and geographically, we’re very well-positioned to serve as a safe haven for people who want to operate in more risky parts of the world which are still quite close to us, including North Africa and the Middle East. We can provide everything that destinations like London can offer, except we’re in the Mediterranean, which is both closer to and more like home for these investors, offering the same level of service at a more reasonable price. This is something that potential clients from the markets I mentioned find very appealing – there’s a big demand for it. “I believe that promoting Malta as a destination for medical tourism and tertiary education will also help make up for an endemic deficiency in Malta’s tourism industry – the lack of interest during offpeak months. An academic year is nine months long, and treating a chronic condition can take years. Furthermore, an investment in these sectors will

“Making our country an appealing location for foreign investment is not a one-time thing – it is an ongoing task.”

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“I imagine Malta not quite as a business hub but more as a base camp, in the mountaineering sense of the word.” also supplement other industries, including the hospitality, housing and retail sectors.” Prof. Scicluna seems affronted when the criticism that has been levelled at Government for not doing enough to ensure future sustainable business growth is mentioned. “I don’t agree with that at all. When a patient is haemorrhaging, you have to stop the blood loss before tending to their headache. And we have been making it a point to address the areas where Malta is weakest and most vulnerable before we start flinging business-boosting incentives every which way and hoping that they stick to something. First on our list was the energy problem. Wasting fuel on old and inefficient plants at the cost of industry had to be stopped. Second, Malta still has one of the lowest rates of female participation in the workforce in Europe. Having so many economically inactive women is a terrible waste of potential, and while we have already seen changes for the better, there is far more work to be done to encourage women to seek work outside the home. “Third, we need to keep strengthening the skills and capabilities of Malta’s workforce as a whole. If fresh graduates are equipped with the kind of skills that are currently in demand, we can stop having to bring in foreign talent, and companies will be able to employ capable Maltese people instead. We also have to make the education system more inclusive, especially for those whose talents and abilities are not in line with traditional University standards, as they still have much to contribute. I visited MCAST a few days ago and was delighted 53

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to see that the institution is educating all kinds of students – even those who in previous decades may have fallen by the wayside – and providing them with an excellent and useful tertiary education. We’re also encouraging young people to find stable and productive employment through our Youth Guarantees and Apprenticeship Schemes. “Fourth, we need to cut down on bureaucracy and inconsistency. Malta is still terrible in this regard – we’re even worse than Italy, whose miles of red tape are the stuff of legend. It’s a quirk of this country that we’re so advanced in some areas but still lagging far behind in others. We’re working on reducing the waiting times for procedures such as public procurement, company resolution and liquidation, and will soon be announcing new legislation to this effect.”

Other matters which need to be addressed include infrastructural issues, which have led to Malta becoming over-clogged with cars, putting tremendous pressure on the roads and making life very difficult for commuters. “It’s not normal for a country within Malta’s income bracket for car ownership to be so high, and part of our task will be to reverse the poor decisions taken over the past 20 years which forced it to become this way. We need to implement an efficient public transport system which is attractive to use, which meets the demands of its client base and which reduces traffic bottlenecks.”

well as challenger nations that feel undeservedly entitled to a bite out of Malta’s success. However, he remains upbeat and optimistic. “Our plan is to keep monitoring Malta’s progress and ensuring that the economy grows at a steady rate, eventually leading to a convergence with the European average income. While there will always be obstacles and threats to be faced, I am confident that Malta has enough resources and talent to face these challenges and surmount them.” EV

Despite Malta’s best efforts to combat its own shortcomings, Prof. Scicluna concedes that there will always be forces beyond the nation’s control at play, including the changing regulatory landscape within the banking industry, as

“We need to keep strengthening the skills and capabilities of Malta’s workforce.”

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A Central Vision for 2016 Will Malta’s economy continue to thrive in the year to come? Here Jo Caruana speaks to Central Bank of Malta Governor Prof. Josef Bonnici to discover what he believes is in store for Malta’s economy in 2016. Photos by Alan Carville

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At the core of Malta’s economy is the Central Bank. It is here that so many decisions are taken for the future of the island’s financial world, and, at its helm, Governor Prof. Josef Bonnici is eager to give his predictions for how Malta will fare in the coming year. But first, I enquire as to whether he thinks the island’s economy has fared well so far. “In the broader recent past, the Maltese economy has shown remarkable resilience, despite its small size and its dependence on foreign trade,” the Governor says. “Resilience has been reinforced by EU accession, which intensified cross-border trade. Diversification accompanied the expansion of the services sector as new areas of activity emerged and grew, ranging from internet-related activities and computer programming to aircraft maintenance.” Prof. Bonnici explains that manufacturing has climbed up the value chain towards more skilled and technologically based activities, while sectors such as pharmaceuticals and precision engineering have also become more important. “The shift towards a service-oriented economy has increased demand for labour that, in turn, has accommodated the rise in female participation and in inward migration,” he continues. “This expansion of the labour supply has prevented the emergence of resource bottlenecks.”

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Prof. Bonnici also praises the sound management of public finances and the stability of the market, for Maltese Government debt has also contributed to economic resilience. “Public debt is financed almost entirely locally by resident financial corporations and households,” he says. Turning to 2015 in particular, Prof. Bonnici notes that the Maltese economy outpaced the euro area average of 1.5 per cent, expanding by 5.1 per cent in the first half of 2015. “This was mainly on account of higher domestic demand, particularly private consumption and investment. This buoyant activity is reflected in the labour market, with employment expanding at around three per cent per year and the unemployment rate currently standing at 5.4 per cent, the second lowest in the euro area, after Germany. The annual rate of HICP inflation was at 1.6 per cent in September, comfortably above a deflationary scenario. On the external side, the current account of the balance of payments remained in surplus in the second quarter of 2015,” he explains. Moving straight on to 2016, Prof. Bonnici states that preliminary Central Bank projections indicate that, following the strong expansion of 2014, GDP growth in 2015 will keep up its momentum and is projected to reach 4.1 per cent, before easing back to 3.4 per cent in 2016. “Economic activity in the rest of 2015 and 2016, meanwhile, is expected to be driven by domestic demand, particularly private consumption and private investment,” he says. “Government consumption is also likely to support growth, but to a lesser extent. The labour market is expected to retain its momentum, with a slight moderation in 2016. The unemployment rate is expected to stay low in the region of 5.4 per cent in 2016.” Then, on the fiscal front, the deficitto-GDP ratio continued to decrease and stood at 2.1 per cent in 2014. This is projected to fall further in 2015 and 2016, to 1.6 per cent and 1.1 per cent respectively. The debt-to-GDP ratio is estimated to fall from 68 per cent in 2014 to 65.2 per cent by 2016. 58

“We need to focus on ensuring the properties being built match the standards that buyers are looking for.” Asked about the economic challenges and opportunities ahead, Prof. Bonnici explains that external developments are likely to be a major source of vulnerability, particularly for any small and open economy like Malta’s. “The fragility of the global economic recovery, the deteriorating outlook for key emerging markets, and the continuing geopolitical tensions around us could weigh on external demand and, hence, exports. An important part of Malta’s exports is sold outside the euro area such that the recent depreciation of the euro has boosted external competitiveness,” he explains. “Thus, measures that enhance labour market participation have to continue. The incentives for female participation in the labour force are bearing fruit, as the gainfully occupied population has been increasing at an average rate

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of three per cent per year in the past three years – well above the average in the euro area. “Measures that improve basic skills and that further enhance higher education attainment would contribute to deepening human capital and, hence, raising productivity and potential output. In this regard, Malta has been making good progress, with the European Commission projecting potential output growth in 2015 in excess of 3.5 per cent, the second highest in the euro area.” Beyond that, the Governor explains that the current economic environment of low interest rates provides an opportunity to better manage the fiscal burden and create the room for fiscal manoeuvre when this is needed for stability. “An efficient budgetary policy must continue to be built around structural reforms, fiscal responsibility and productive public investment,” he says. Asked about whether he feels Malta’s economy will continue to become more and more global, Prof. Bonnici explains that, just like our big continental neighbours, the Maltese islands have never been truly cut off from the rest of the world. “Global interaction, and especially with the European mainland, has intensified thanks to easier and cheaper transport to and from a rising number of cities and regions. Other contributing factors are the heightened interaction in terms of emigration, two-way tourist traffic and a greater degree of participation by our industries in global value chains. “I would say that Malta’s resemblance to a city has increased owing to a rising intensity of economic activity on a small land area. However, prosperity does not require land-intensive production.” Explaining how the banks are gearing up for increased business and economic activity, Prof. Bonnici explains that Malta’s sound banking sector has contributed to the overall economic resilience, as opposed to what happened in other countries where the banking sector was the source of instability. “The type of business model adopted by the core domestic banks was key to the resilience of the financial system especially during the financial crisis,

as conventional bank management practices limited contagion. Going forward, the Single Supervisory Mechanism will further reinforce financial stability and mitigate risks,” he says. As for the evolution of Malta’s property industry, Prof. Bonnici starts by explaining that the advertised property index compiled by the Central Bank showed an increase of 6.7 per cent in house prices in 2014. “This was the highest growth rate reported since 2005. It was followed by a rise of five per cent in the first half of 2015,” he says. “Still, the affordability of housing is broadly back to pre-peak levels. Whilst the affordability measure based on a single income recipient in the household has been eroding, the same is not true when property prices are related to household income, which has been rising on account of higher female participation. The increase in inward migration exerts some further pressure on the demand for residential house prices. The perceptions of real estate agents – based on a Central Bank survey – are that residential properties are ‘correctly’ priced. “Other indicators of the prospects for the property market include an increasing number of permits issued by MEPA and the growing confidence in the Maltese real estate market, as reflected in the construction confidence index published by the European Commission. That said, I feel we definitely need to focus on ensuring the properties that are being built match the standards that buyers are looking for, and are not substandard to industry demands.” Asked about whether the increase of non-performing loans (NPLs) could be seen as worrying, Prof. Bonnici replies in the negative. “First of all, the proportion of NPLs fell from nine per cent at end-2014 to 8.6 per cent by June 2015,” he says. “Both the European Central Bank and Maltese authorities are actively monitoring credit risk in the local banking sector and if needed, further action will be taken to curtail further vulnerabilities emanating from credit risk.”

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Banks, the Governor explains, have taken a number of actions to address this issue. These include tightening of lending standards, lower concentration in their loan books, and a higher provisioning level, thus increasing their coverage ratio. “The Joint Financial Stability Board set up jointly by the Central Bank and the MFSA deals with financial stability issues. Major initiatives by the Board include amendments to the Banking Rule 09. By requiring banks to set aside from distributable profits a specific reserve for credit risk, BR09 gives the banks an incentive to decrease their NPLs.

“But positive prospects stem from the Government’s Budget document for 2016. The Budget included measures that incentivise small business start-ups and the expansion of already existing ones. The Budget also envisages a number of business-friendly measures, such as a further decrease of the income tax rate, various pro-environment measures and a number of public investments in infrastructure projects, particularly transport networks.

“Moreover, the rule requires institutions to set up appropriate governance structures, internal control and sound reporting systems in this area. The amended BR09 came into force as of 2013 and was spread over three years so that by end 2015 it will strengthen the coverage ratio by around an additional three points. Taking into account the collateral backing such facilities (adjusted for haircuts) and the provisions, NPLs would be fully covered,” he says. Finally, Prof. Bonnici reiterates that external developments could be a major source of uncertainty, and flags that as something for the local market to keep an eye on. “The weakness of the global economic recovery, the deteriorating outlook for key emerging markets, and the continuing geopolitical tensions around us could weigh on external demand for Malta’s product,” he says.

“Malta has been making good progress, with the European Commission projecting potential output growth in 2015 in excess of 3.5 per cent, the second highest in the euro area.” 62

“These factors could provide the necessary impetus to maintain the momentum in growth and to continue strengthening economic resilience,” Prof. Bonnici adds. EV

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Making hay while the sun shines, or saving for a rainy day? Is Malta’s economy AT an all-time high? Will the economic cycle reach its peak in 2016? Leading economist Gordon Cordina provides his forecast for Malta’s economy in 2016, emphasising the need to focus on generating sustained and sustainable growth over the long term.

Building upon the momentum of previous years, the Maltese economy grew by 3.5 per cent in 2014, a rate which is higher both when compared to that of the previous year as well as the 1.4 per cent growth registered across the EU. Based on forecasts recently issued by the European Commission, Malta is expected to grow even further, by 4.3 per cent in 2015, 3.6 per cent in 2016 and 3.1 per cent in 2017. In effect, for every ¤100 earned in 2013, Malta will be earning ¤118 by 2017. An investment in the Maltese economy is thus on average expected to yield 3.4 per cent in real terms, which compares very well against the negative real interest rate obtainable nowadays on bank deposits.

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Economies go through periods of expansion and contraction known as cyclical fluctuations. The cycles reflect the alternation of excessive optimism and pessimism affecting expenditure in relation to the growth that an economy can in reality afford over a long period of time. Is the Maltese economy currently subject to an irrational exuberance boom, destined to peter out under the constraints of the productivity of its resources? Or can such growth be reasonably expected to be sustained and continue to be sustainable over the long term? A brief review of a number of indicators can shed some light on this issue. The deficit and debt to GDP ratio are declining and are well below EU averages. Government debt is essentially internal, averting the possibility of unsustainable capital outflows

“Malta is a net lender to, as opposed to being a borrower from, the rest of the world.” from the economy. This is sustained by a surplus in the external current account which amounts to around three per cent of GDP, indicating that Malta is a net lender to, as opposed to being a borrower from, the rest of the world. Further evidence of the economy’s growth is provided by real estate prices, which have picked up in 2014, but not in a manner which is disproportionate to economic growth. With regard to the labour market, activity has increased and the unemployment rate has declined across all age brackets, especially amongst youths. Yet, this did not translate in excessive increases in inflation. On the basis of this quick 66

overview, we can conclude that there are no immediate signs that the Maltese economy is a bubble waiting to burst. This still leaves the question on whether growth can be expected to be sustained and sustainable. Conclusions on this aspect are much more difficult to reach, as it essentially depends on the quantity and quality of investment being undertaken. Narrowly defined, investment is the creation of productive assets today with the intention of yielding a higher output in future. In this regard, the Maltese economy is doing relatively well, with an investment to GDP ratio of 18.9 per cent in 2014, up from 17.8 per cent in 2013. It is worth

noting that this ratio is lower than the EU average which has tended to exceed 20 per cent. In addition, a broader view of investment, which is very much relevant in the present context, would consider other important aspects including human capital, environmental capital and social capital. The discussion would thus more usefully focus on the nature and quality of investment which the Maltese economy requires for sustained and sustainable growth. A wish list regarding the desirable characteristics of investments in the Maltese economy is readily compiled, involving projects which: • Focus on stable international markets which are not heavily subject to economic, regulatory and operational risks • Provide jobs for highly skilled workers, suitably mixed

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“There are no immediate signs that the Maltese economy is a bubble waiting to burst.”

with others which can provide opportunities for less skilled persons, who remain pervasive in the Maltese labour force • Provide significant multiplier and input-output leakages with other activities in the Maltese economy, as well as the possibility of labourforce upskilling and multiskilling • Make the best use of our most scarce resources, especially land, while valorising our as yet unexploited resources, including sea space • Make up for the creation of congestion and other resource bottlenecks not only through mitigating but also through compensatory measures • Are conducive to the upscaling of micro and small business to a level which renders them more competitive for internationalisation • Are not only compatible with but also enhance the promotion of the environmental and social dimensions of development.

It is a fact of the economic history of Malta that the economy was successful only when it was capable of reinventing itself, its main sectors and principal businesses every decade or so. Within the context of the current growth performance, we have the opportunity and the need to devote more resources to investment, and above all to specifically focus on projects with the appropriate characteristics to effectively generate sustained and sustainable growth over the long term. It is indeed a case of making hay while the sun shines by saving for a rainy day. EV

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Malta in

The Visual

Traditional residences dwarfed by high-rise apartments. Intricate stonework placed shoulder-to-shoulder with cheap aluminium. A spliced skyline of buildings belonging to different eras, possessing entirely different styles. Cohesion is not a word that springs to mind when describing the appearance of the Maltese Islands today â&#x20AC;&#x201C; but how did this come to be? And moving forward, is Malta doing enough to protect and enhance its visual identity? Jo Caruana questions three experts to find out.

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2016

Perspective

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“The growing concern with sustainability will automatically create a sound basis for the preservation of our heritage.” – Konrad Buhagiar

There is no debating that Malta is a hotchpotch of visual styles: Baroque beauties and colonial landmarks stand only short distances from 80s eyesores and stark modern structures. Looking back on the history of our visual identity, Konrad Buhagiar, director at Architecture Project, explains that there is always a romantic, nostalgic feel to a painting or photograph of Malta before the 60s building boom, which turned out to be the physical symbol of our nation’s economic growth. “This was a time, however, when society was class-ridden, habitation was limited to cities in the harbour region and the small village cores separated by tumoli of countryside, and connections to mainland Europe were scarce and only the privilege of high-income earners,” he explains. “Our reality today is totally different. Isolation has disappeared, society has evolved, influences from the outside are multifarious and intense, and omnipresent digital technologies have aligned us with the rest of the world.

This transition has taken its toll on the visual qualities of the island, especially as a result of the vast consumption of rural land that was necessary to cater for the housing requirements of the 70s and 80s.” Mr Buhagiar believes that planning laws initiated in the early 90s have controlled, to a great extent, this unprecedented transformation of Malta’s image. “Accession to Europe has consolidated it further and facilitated new directions, like sustainability and heritage preservation. I guess, from now on, development will be more careful thanks to the rising awareness of the benefits, including commercial paybacks, of good design and, especially, of the new collective understanding of Malta’s authentic visual and architectural qualities,” he says.

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“We have become visually desensitised.” – Prof. Alex Torpiano However, when asked about how Malta is doing, visually, at the moment, Prof. Alex Torpiano, the Dean of the Faculty for the Built Environment at the University of Malta, is quick to reply: “badly”. “I am not referring to the design of new individual buildings, as there are some very interesting examples of those,” he says. “I am referring to the overall environment: what we really see when we travel along our roads or walk along our streets. It is everything from the quality of our street furniture to the advertising structures that dominate our roads; from the hanging wires delivering power and data that festoon our streets, to the photovoltaic panel structures that dominate our skylines; from the poor-quality boundary walls to poor-quality pavements. If we really stopped to ‘see’ we would be horrified… But the problem beyond that is that we have become visually de-sensitised.” Asked whether he thinks there is improvement in sight, Prof. Torpiano says that there is nothing in the pipeline to suggest that. “Look at the new Parliament; even beyond the controversy of the monti (market) stalls next to it, there’s the proliferation of the

ugly police barriers, the clumsilysupported signs and so on. There are too many people who are insensitive to this visual mess, and therefore things cannot get better.” Architect Chris Briffa, meanwhile, believes that, in general, things are improving when it comes to our awareness of what looks good and what doesn’t. “Greenery is very lacking, though,” he says. “There is still a long way to go in terms of how green areas affect quality of life, and we need to safeguard them. Unfortunately this is very difficult, and all we can do as architects right now is to plan the planting of big trees around every development. Sadly though, this planned greenery often ends up being little pots of shrubs rather than trees.” Mr Briffa also thinks that it is vital for us to place the upkeep of our heritage at the top of our national agenda for the future. “There is so little of it left,” he says. “And that’s not only in Valletta, but in the village cores where a lot has been destroyed. This is our identity and, if we lose that, we will simply become just another blank canvas, much like what has happened in Spain and Cyprus.”

Asked about whether it is business and economic growth that could be jeopardising the look and feel of our island, Prof. Torpiano stresses that it is incorrect to cast the ‘business’ world as contrary to ‘heritage’ and ‘environment’. “On the other hand, though, if the term ‘economic growth’ means a short-term growth in ‘profit’, as expressed in financial accounts, then it is not a sufficient criterion against which to judge development on the island.” Prof. Torpiano believes business can be harnessed to provide the right quality of development, particularly in the context of a long-term vision. “I think the problem is that too many businesses think they can only succeed if their costs are minimised to the bone and, hence, quality has to be minimised to the bone too. The problem is that, when this happens, you end up with skeletons rather than beautiful people.” “Thus, we need a more enlightened vision of the environment in which we live. In 2006, Sao Paolo in Brazil banned all outdoor advertising, including billboards, signs and shop fronts. Despite the warnings of the economic losses that would be incurred by such a decision, today the city thrives and its citizens have rediscovered the beauty of their buildings. A similar decision was taken in Grenoble in 2014, replacing signs and billboards with trees. People are much happier with the results, and business has not really suffered. So is that economic growth or recession?” Mr Briffa agrees that it isn’t ‘business’ as such that is jeopardising our environment, but the way that we do business. “Most developers have a short75

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term approach and vision to building. They want to get in, make quick money and get out. However, if this attitude is allowed to keep going unchecked, we run the risk of ending up like Ireland, where a lot of investment from the banks was made available, but then it all collapsed. We need to be very careful and have clear guidelines about how and where to build. “This is also important for our identity. We are still a relatively young country and still struggling culturally to understand what makes us and our island ‘Maltese’. Apart from Maltese stone, our identity is fragile and we definitely need to bear this in mind when we are planning and building for our next generation and beyond. We do not want to be in the situation where our children and our children’s children confront us and ask why we didn’t work harder to preserve, protect and enhance our Maltese identity.” Looking to the future, Prof. Torpiano believes we need to embark on programmes through which individual areas, one by one, are brought into an enlightened vision of what our urban and nonurban areas could look like. “The only way this could succeed is by grass-roots education, so that we combat the desensitising we are suffering from,” he says. “We also need proper leadership from our politicians, and not short-sighted populism. Developing a vision is what one could call planning; but, in Malta, we have lost the real meaning of the term.” Mr Buhagiar, meanwhile, believes that architecture has been taking a downturn internationally. “It has become the domain of the so-called ‘Starchitects’ on the one hand and real-estate developers on the other,” he says. “Commercial considerations are paramount, and form and image are the greatest concern, which leaves little room for the evolution of the philosophy and theory of architecture that characterised the architectural profession all the way up to the 70s. “Few treatises and manifestos have seen the light of day since then, and even a famous 76

“We do not want to be in the situation where our children and our children’s children confront us and ask why we did not work harder to preserve, protect and enhance our Maltese identity.” – Chris Briffa architect like Rem Koolhaas has turned to conservation as an architectural life-saver. I think that architectural growth will have to be the result of the marriage of both contemporary trends and conservation. Besides, the growing concern with sustainability will automatically create a sound basis for the preservation of our heritage.” With this in mind, Mr Buhagiar believes the time-honoured sayings of our grandparents will slowly become relevant again. “‘A stitch in time saves nine’. ‘A penny saved is a penny earned’. ‘Waste not, want not’. ‘Cut your coat according to your cloth’, and so on. They will all become increasingly important in the future,” he says. “And to demonstrate that, I do also think that there are some good examples of a positive architectural approach in Malta, including Renzo Piano’s new entrance to the capital city. In my opinion it is the best illustration of how this is a recipe for success – architecturally, socially and culturally – and it shows

the integration of two worlds: architecture and conservation,” Mr Buhagiar adds. Finally, Mr Briffa stresses the importance of looking into our historical and urban centres, and encouraging incentives – whether tax incentives, permit incentives or banking incentives, to help create awareness of what we can renew rather than build from scratch. “I think we are doing alright when it comes to the number of restoration projects on the go, but we are then failing to give those restored buildings a function,” he says. Without a function, these buildings will often fall into disrepair again over the years and need to be restored all over again. “While some NGOs, like Din l-Art Ħelwa, regularly restore and protect old buildings and then give them an active purpose, more needs to be done. As my final message, I would invite the Government to do the same – if this approach is achieved, I believe it will make a big difference to the future of Malta’s visual value,” Mr Briffa concludes. EV

ECONOMIC VISION 2016: BUSINESS. FINANCE. ECONOMY.

2016 at a Glance The end of the year is a time to take stock, reflect and gear up for the next 12 months ahead. Prospects for 2016 seem to be busy, bright and forward looking, with many sectors brimming with potential just waiting to be tapped, according to some of the industry leaders within Maltaâ&#x20AC;&#x2122;s business landscape. In one sentence, they share their vision for the year ahead.

ECONOMIC VISION 2016: BUSINESS. FINANCE. ECONOMY.

“In 2016, Malta needs to consolidate its economic results and prioritise the acceleration of our economic diversification, focusing more on the creation of high valueadded sectors which will create more quality jobs and improved export performance.” Claudio Grech, MP, Shadow Minister for the Economy

“2016 will see Malta continue on its path of high growth and low unemployment as Government cements sustainability into the economy.” Chris Cardona, Minister for the Economy, Investment and Small Business

“2016 will be an exciting year for Valletta Cruise Port as we embark on new developments to prepare for further growth in the future, with an expected record number of passenger movements in excess of 700,000.”

“The strong dollar trend of 2015 will continue throughout 2016 in view of the US economy still picking up; that will result in a 1:1 ratio for USD/EUR currency pair closer to the second quarter of 2016.” Julia Chatard, Executive Director, FXDD

Stephen Xuereb, CEO, Valletta Cruise Port

“Political, social and economic developments have been and continue to occur around us, and like most other years, 2016 requires us to adapt to new realities – as modern business becomes increasingly fast-paced, it will be the year to make things happen, the year to put current strategy into action and relevant plans into play.” Dean Micallef, Managing Director, Firstbridge

“Creating resources from waste will remain at the heart of everything we do in 2016, most notably through a focus on organic waste separation and its treatment as a source of renewable energy.” David Borg, Chairman, Wasteserv

“2016 will be neither the beginning nor the end, but another step forward.” Mario Vella, Chairman, Malta Enterprise

ECONOMIC VISION 2016: BUSINESS. FINANCE. ECONOMY.

“2016 will see the Malta Gaming Authority launching its new regulatory framework with a clear focus to regulate for innovation by implementing policies and mechanisms which are innovative, evidence based and business friendly, whilst consolidating Malta’s position as the world’s leading gaming jurisdiction.” Joseph Cuschieri, Executive Chairman, Malta Gaming Authority

“Looking forward to 2016 as a year of measured sustainable growth within the industry but at the same time ensuring that we consolidate and focus our attention to quality and added value on products and services offered to all types of customers, locals and tourists alike.’’ Paul Bugeja, CEO, Malta Tourism Authority

“2016 will see FIMBank Group funding and facilitating global economic trade and development whilst growing its presence across its existing product lines and markets, thereby boosting business growth and the Group’s financial performance.”

“2016 bears the hallmark of another successful year for Maltese tourism. However we cannot afford to take tourism’s resilience for granted and need to continue working hard to retain our successes and build further on them.” Gavin Gulia, Chairman, Malta Tourism Authority

John C. Grech, Chairman, FIMBank Group

“As the leading fund management company in Malta, we at VFM will aim to further strengthen our position in the market with innovative investment solutions to suit individual investors at all stages of their financial life cycle, whilst continuing to promote and support investor educational initiatives in 2016, as we recognise that financial literacy is key to the success of the industry.” Mark Agius, Executive Head, Valletta Fund Management

“2016 will be the year when technology and connectivity will dramatically change the way we do banking.” Tony Zahra, Chairman, Alpine Holdings Ltd and Malta Industrial Parks

ECONOMIC VISION 2016: BUSINESS. FINANCE. ECONOMY.

“It is no coincidence that our economy is doing so well” With an economy as diversified as Malta’s and a flexible and adaptable workforce, Farsons Group Chairman Louis Farrugia believes lots of different forces are contributing to Malta’s success, but its current growth rates won’t last forever. He discusses this, as well as the future of Malta’s manufacturing industry, the fate of Air Malta and Farsons Group’s ambitious plans with Martina Said.

Photos by Alan Carville

ECONOMIC VISION 2016: BUSINESS. FINANCE. ECONOMY.

For just under 90 years, Farsons has intrinsically formed part of Malta’s manufacturing sector – the company has witnessed the sector’s evolution, its growth as well as its decline, and continues to be a frontrunner in its field. Farsons Chairman Louis Farrugia, whose father founded the Farsons Group, says that while Malta’s manufacturing sector is not, and never was, the largest contributor to the islands’ economy, it is still relevant, and the biggest challenge lies in ensuring that it continues to be so. “Manufacturing has become even less of an economic contributor since the growth of other sectors such as financial services, gaming and IT,” asserts Mr Farrugia, “but we need to ensure that this sector stays relevant because it employs a range of skill sets. Malta has done well in manufacturing over the years, because of our adaptability as a workforce as well as the availability of technical employees to service some of the multinational companies that have operations here. It would be a tragedy to lose these skills, together with the schools or institutions that teach them, such as MCAST, Lufthansa Technik and such multinationals. If we do not retain such skills, the manufacturing base will disappear.” Using Farsons to illustrate an example, Mr Farrugia says that the company needs skilled employees to operate the hightech machinery that the company has invested in, 83

ECONOMIC VISION 2016: BUSINESS. FINANCE. ECONOMY.

and the same goes for numerous other companies hailing from different niches. “The manufacturing industry has received a boost with the reduction in energy tariffs,” he adds, “but investments must continue if we are to improve productivity and competitiveness. A lot of our manufacturing depends on the world economy – we understand that the European economy is now in recovery, which should have a positive knock-on effect on the local manufacturing sector.” Moving away from this industry alone, Mr Farrugia notes that while Malta’s economy is certainly doing well, it is also a changing one, and is not the same economy as that of a few years back. “The services sector is growing at a rapid rate, which in turn increases our population growth – not through indigenous birth but through incoming economic migrants – and that in turn is an engine for further growth in other sectors,” asserts Mr Farrugia. “The growth we are experiencing today will not continue forever, especially not when we reach saturation point in terms of the number of people we can reasonably accommodate.” With an economy growing at a rate as healthy as Malta’s, there is the plausible risk of overheating. This could come in the form of wage inflation leading to a loss in competitiveness. On the last point, Mr Farrugia says it is important to listen to what the major players have to say, such as multinational companies, which often flag issues that undermine their competitiveness, such as

ECONOMIC VISION 2016: BUSINESS. FINANCE. ECONOMY.

cargo and port handling charges. Simultaneously, however, Mr Farrugia believes that one of the reasons why Malta boasts such a successful economy is because a number of its sectors are in competitive mode, such as the hospitality, communications, ICT and banking sectors – “these are some of the areas where a client can look around for best prices, and that helps Malta become more competitive. It is no coincidence that our economy is doing so well.” Does the exponential growth of some sectors nonetheless hint at a dangerous overreliance on them? “If you take a look at other islands in the

“I think Malta’s been quite clever at carving out a diversified economy, which is perhaps what distinguishes us from other island economies.”

Mediterranean, very few have an economy as diversified as Malta’s,” asserts Mr Farrugia. “Most islands depend on tourism and agriculture, but we have successful tourism, gaming, financial services, manufacturing, shipping and maritime sectors. Since we do not form part of a larger nation like other islands do, I think we’ve been quite clever at carving out a diversified economy for ourselves, which is perhaps what distinguishes us from other island economies. Malta has a reputation for being a safe haven too which helps attract funds, especially with economic instability around us. These are all the forces at work.” Next year will be a decisive one for Malta’s national airline, which reportedly recorded a loss of ¤16.4 million for the year ending March 2015 – a figure announced last October at Air Malta’s Annual General Meeting. As the former chairman of Air Malta, I ask Mr Farrugia where he thinks the airline’s future lies. “Air Malta needs private capital – not just because it needs the cash (which it does too), but because it needs the culture of a private initiative, which gathers people who invest money in it around the boardroom table, and will therefore want to look after it.” Mr Farrugia adds that while it was important in the past that the national airline was owned by Government, times have now changed. “In today’s world, we are competing with very commerciallydriven competitors, and it is clear that existing working practices cannot continue to support and are not suitable for today’s tough commercial world.

ECONOMIC VISION 2016: BUSINESS. FINANCE. ECONOMY.

This does not mean that Air Malta needs to be privatised, but it needs funding from people who will demand commercially-driven decisions. I always believed that we need a strategic partner to bring this kind of culture to the company.” The next few years will also be momentous ones for Farsons Group – last October, it announced an after-tax profit of ¤4.6 million for the first six months of this year, exceeding last year’s record by a staggering 14 per cent. Mr Farrugia says that Farsons is certainly also benefitting from the country’s thriving economy, but one of the reasons for its success is its continuous investment for the last 15 years. “We’ve evolved from working in a protected environment – when one required an import license to buy imported beer and where there was total protection on soft drinks because we could only produce them in returnable glass – to operating in an environment of open competition. In the current environment, you have to offer the right products at the right prices in a competitive way, and that is what we’ve done.” With around 11 per cent of the parent company’s turnover derived from exports, Mr Farrugia says Farsons Group has been encouraged to continue investing, and the new ¤27 million beer packaging hall, bedecked with state-of-the-art machinery and currently under construction, is testament to this. At the same time, Mr Farrugia adds, the Group is breathing life into a new property plc through a ¤50 million investment in its redundant old brewery building, now replaced by new buildings to the south of the original brewery building. However, being a scheduled building that cannot be demolished, the company has had to rethink how to utilise the space. He points in the direction of an intricate model in the meeting room, demonstrating what the administrative part of the Farsons estate will eventually turn into.

“Air Malta needs private capital – not just because it needs the cash, but because it needs the culture of a private initiative.”

“We are retaining the façade but also building seven blocks of offices of six storeys each with gardens in between as well as a 700-car multi-storey car park to service them. This will comprise 18,000 square metres of office space for rental. The old brewhouse, on the other hand, which is also a scheduled building, will be converted into a visitor centre, including a museum on the company’s history, a brew pub, coffee place, retail section and much more. It will service the occupants of the new offices as well as other employees around Mriehel. This investment will be spun off as a separate public company in 2017.” “This is the direction in which Farsons Group is moving,” Mr Farrugia concludes. “Towards exports and internationalising our business on the one hand, and towards a separate business altogether on the other, but utilising property assets that we already have. It is a very exciting time in our history.” EV

ECONOMIC VISION 2016: BUSINESS. FINANCE. ECONOMY.

From here ON UP While the islandsâ&#x20AC;&#x2122; tourism industry continues to flourish, its infrastructure continues to slide. But Corinthia Groupâ&#x20AC;&#x2122;s Chairman and, until a year ago CEO, Alfred Pisani, believes that a nation-wide holistic and concerted effort can elevate our profile tremendously. He discusses his ideas, together with his predictions for the coming year, with Martina Said.

Photos by Alan Carville

ECONOMIC VISION 2016: BUSINESS. FINANCE. ECONOMY.

“Allow me to give your question a slightly different slant,” says Alfred Pisani, Chairman of Corinthia Group, when asked to identify the missing link between Malta’s burgeoning tourism industry and its lacklustre infrastructure. “I think our infrastructure needs to move forward and achieve European standards independent of tourism or business growth. We should raise the quality of life not for the visitor, but primarily for those of us who are living here for 12 months of the year.”

Mr Pisani’s claim, which comes in the wake of an overall positive assessment of Malta’s economy at large in this year’s Budget speech, places the Maltese, and not the visitor, at the centre of it all. It also places the responsibility for an overall improved infrastructure squarely on our shoulders. “We need to re-focus and see where our infrastructure stands – it needs a tremendous amount of attention, primarily for our own need, and if we believe in ourselves and aim to improve it, this will also be seen by visitors.” There are numerous related issues begging to be addressed – among them, inadequate roads and a general lack of cleanliness, as well as discernible wiring systems and the erection of billboards anywhere and everywhere. Mr Pisani asserts that, if in the quest for more development, more industry and more tourism we endeavour to improve the islands’ appearance concurrently, we will be heading in the right direction, and enticing visitors to keep coming back.

The crux of his argument, however, is to aim to achieve all this for ourselves as nationals first and foremost. “I don’t want to do all this for visitors so that it affects me – I want to do it in reverse. It is a pity that we talk of improving our infrastructure for the outsider.” I ask whether this stems from our tendency as a small island nation to revere the opinion of, and seek to please the foreigner more than the local – Mr Pisani does not disagree, but adds “we should be conscious that we should be living in a better, cleaner and more conducive environment for us, and let the visitor share it with us, not the other way round.” One of the company’s most ambitious projects to date – the six-star hotel which will take over the site currently occupied by the San Gorg Corinthia, the Corinthia Marina and the Radisson Blu hotels in St Julian’s – ties into Mr Pisani’s belief that the country needs to elevate its standards across the board. The Group is investing a staggering ¤400 million and more in its development. Is Malta ready 91

ECONOMIC VISION 2016: BUSINESS. FINANCE. ECONOMY.

“We should raise the quality of life not for the visitor, but primarily for those of us who are living here for 12 months of the year.” to house a hotel of such high stature? “Whether Malta is prepared or not is more of a mental state than merely a physical one,” he says. “If as a nation we appreciate that we can do and achieve much more to improve our islands, we will automatically do something about it.” The luxury six-star property will offer bigger rooms and, in line with today’s needs, much bigger bathrooms. “When I look back at what we did with the San Gorg Hotel, I see that the space allocated to the bathrooms was in fact very small. Modern concepts require a lot more space.” There will be fewer rooms than the current hotels have, but each room will have a minimum floor area of 45 square metres, compared to the current average floor area of 32 square metres, together with an uplifted standard of service. Mr Pisani adds that everyone has a part to play in the upkeep of our country, and a culture of understanding needs to be shared between every member of society in order for there to be scope for improvement. Developing a six-star hotel in Malta should move hand-in-hand with this. “The process should be aimed at developing a five- or six-star destination, not just one property.”

“We have made tremendous progress through the years, and will continue to do so. But we should raise the bar on a national level – it isn’t about Corinthia building the first six-star hotel in Malta; it is about recognising that we need to lift the general standard, in our attitudes, behaviour, cleanliness, respect, and more,” he asserts. “There are countries that are far worse off than we are but there are ones that are better than us – let us look at those that are better than us and move towards them. Collectively, I believe it can be done.” On to the future of Malta’s tourism industry, Mr Pisani agrees that the dramatic increase in connectivity in recent years has had a direct effect on the number of tourist arrivals in Malta. He says, however, that this phenomenon is not exclusively limited to our country, as tourism is growing at a very strong pace internationally. “We have to appreciate that huge countries are coming into this game, namely China, the Far East, and Africa. “More people are becoming capable of and interested in travelling, and there is more money around – not only is the middle bracket getting bigger, but the higher bracket is getting richer. What

ECONOMIC VISION 2016: BUSINESS. FINANCE. ECONOMY.

we have to decide is whether we want to sell what I believe is a precious gem, once we polish it, to the masses, or whether we want to fill our maximum capacity with a higher-paying customer,” explains Mr Pisani. “Since Malta is so small, we will never aim to accommodate 30 million visitors as larger countries do. Therefore, because our ultimate target number will always be limited by the size of our country, we should take a very conscious decision and work to attract the higher net income earner. We will always have a range of two- to five-star hotels, but everybody will charge a higher rate, which will also benefit the wages and quality of life of our labour force.” Asked whether recent efforts to rejuvenate Valletta ever piqued his interest to set up a hotel in its heart, rather than on the outskirts, Mr Pisani replies that the company would not consider it because a large hotel in the capital would upset the city’s atmosphere – traffic alone would be a nightmare – and Corinthia Group would not consider a hotel with less than 100 to 150 rooms. “Boutique hotels are ideal for Valletta, however, such hotels have to be owner-managed. As Corinthia, it would be too difficult for us to operate a small hotel of this kind, as we have a different management structure and it doesn’t fit our style of operations.”

Looking ahead to 2016, Mr Pisani believes that visitor numbers will continue to increase, but because we have reached saturation point in terms of the number of rooms, prices will go up to accommodate this demand, which is a positive step forward for the island’s tourism industry and economy. This will also give us the necessary nudge to up our efforts to improve the quality of our country.

“The process should be aimed at developing a five- or six-star destination, not just one property.” 95

ECONOMIC VISION 2016: BUSINESS. FINANCE. ECONOMY.

On a more personal note, 2016 will mark Mr Pisani’s 54th year as Chairman of Corinthia Group. He stops briefly to reflect on this, “it’s a long time isn’t it?” he laughs. “Being at the helm of this company for so long, I feel that, as time passes, it only

help others better themselves too. “To this day, employees that have left us still refer to Corinthia as theirs,” he states. “In some small way, I feel I have brought out the best in others, and that is the greatest success to me.”

“What we have to decide is whether we want to sell what I believe is a precious gem, once we polish it, to the masses, or whether we want to fill our maximum capacity with a higherpaying customer.” makes me simpler. When I stop and think about it, I realise we’ve done quite a lot.” Mr Pisani explains that the company instils a culture within its staff known as the Corinthian Spirit, a sentiment which encourages all members to do everything to the best of their ability, and to

you’re happy in the knowledge that he or she is one millionth of an inch better than they were before. If you had a little say in that, even unknowingly to you, it is the biggest gain. Life is not just about work, it is a philosophy.” I conclude our meeting by asking Mr Pisani for the secret to his success, but he is quick to assure me that there is no secret. “The key ingredient is to pursue an ideal in a wholesome and truthful manner. I hope I’ve done my bit to the best of my abilities – I tell everybody else to take it from here and do ten times as much.” EV

“You can build houses, hotels, whatever you want to build, but I think the energy that is left after you go is the energy you infuse into others. They will fertilise the knowledge you instilled or passed on and grow it. You don’t do it for the applause, you do it because

ECONOMIC VISION 2016: BUSINESS. FINANCE. ECONOMY.

Malta Chamber and Content House to launch new business portal in 2016 The Commercial Courier, the official publication of the Malta Chamber of Commerce, Enterprise and Industry. In the background: The Malta Chamber’s Economic Vision 2014-20120 and Malta Business Bureau’s Annual Report 2014.

2016 will prove to be an exciting year marked by new and ambitious digital projects for both the Malta Chamber of Commerce, Enterprise and Industry as well as leading media company Content House. Martina Said discovers what the two organisations have in store for Malta’s business community for the second quarter of 2016. There’s no mistaking that, until now, Malta lacked a robust and all-encompassing online presence in the local world of business-tobusiness. But this will all change in 2016, with the launch of a comprehensive digital platform spearheaded by two organisations – the Malta Chamber of Commerce, Enterprise and Industry and Content House – that, for over a decade, have collaborated on and delivered a range of successful media products. This new project, however, which is comprised of three different brands, will mark a new milestone

in their portfolios. Not only will it usher in first-of-their-kind products that had been missing on the market, it will also expand their business-to-business reach with a new online medium that complements all other media that they offer in this area. The project encompasses three autonomous but complementary areas: a fully-fledged business portal that will generate an extensive range of content; a business-to-business directory and a weekly digital newsletter. Kevin J. Borg, Director General of the Malta Chamber of Commerce,

ECONOMIC VISION 2016: BUSINESS. FINANCE. ECONOMY.

“It will feature news, developments and announcements related to the activities and work of the Malta Chamber, but for the first time it will also include local and foreign business content updated regularly through a pool of resources by the two organisations.” - Kevin J. Borg, Director General, Malta Chamber of Commerce, Enterprise and Industry

Business Agenda, the quarterly publication of the Malta Business Bureau.

Enterprise and Industry, says the Malta Chamber has long felt the need to move with the times while also ensuring that its communication strategy is both extensive and modern. “We have joined forces with Content House, our exclusive media partners, to extend our present range of print projects with three ambitious digital projects.” The first is the launch of a fullblown business portal, which is a first locally and will use the domain that currently houses the Malta Chamber website, www.maltachamber.org.mt. The function of the site as it is today will be included as a section within the new business portal. “It will feature news, developments and announcements related to the activities and work of the Malta Chamber, but for the first time it will also include local and foreign business content 100

updated regularly through a pool of resources by the two organisations.” Jesmond Bonello, Managing Director at Content House adds that the business portal will follow recent international trends where aggregate content is gaining popularity. “The portal will feature latest business and financial news as well as interviews, blogs and analysis. For the first time, business people can get up to speed with events in the business world by going through this official channel. There will be a range of lighter reads too for people to enjoy in their downtime, namely features on motoring, food and drink, art and design, and more.” The second project is an official business-to-business directory, branded as a B2B Directory. “In the past, we had a printed version of a so-called Trade Directory, but felt the need to launch an interactive business directory to serve the needs of many foreign businesses looking for partners or services in Malta, who frequently approach us to find out what Malta offers and how it can be of value to them. This will also help local businesses find the right partners, services or products,” explains Mr Borg. Mr Bonello adds “the idea here is to have an official source that will give foreign and local businesses not just a telephone number or a name, but extensive corporate and business knowledge about each company. It will be aimed at increasing the value added to both the businesses featured in the directory, as well as those that will be using it.”

will be given a new look and feel, using the latest technological as well as creative trends.” The revamped Chamber Link will be open for static banner advertising for the first time since its inception, which will complement animated banner advertising in various sizes on the main business portal. EV Pre-launch packages for all three products will be launched in January 2016, and for five full months, businesses will have the opportunity to come on board with discounted pre-launch offers until the projects go live in May.

The third area will involve the revamp and strengthening of Chamber Link, a tool launched by the Malta Chamber five years ago and which has enjoyed significant success since. “Chamber Link

“The portal will feature latest business and financial news as well as interviews, blogs and analysis. For the first time, business people can get up to speed with events in the business world by going through this official channel.” - Jesmond Bonello, Managing Director, Content House Group

ECONOMIC VISION 2016: BUSINESS. FINANCE. ECONOMY.

Estate planning

– Trusts and Foundations in Malta Foundations and Trusts play a fundamental role in today’s world since both are key instruments in asset protection and estate planning for and on behalf of high-net worth individuals and their beneficiaries. Since Malta has a mixture of both common law and civil law, it has been quite fortunate to cater for both. Trusts are considered to be more ‘secretive’ since they are established through a private contractual instrument which is not registered and remains with the Trustees. In contrast, a foundation is constituted by means of a public legal document and filed with a Government agency.

Furthermore, Foundation assets are placed to the Foundation’s name at the time of the transfer, while in the case of a Trust, it is the Trustee who receives the assets.

by devising the optimum solution for a secure and tax-efficient ownership structure in order to achieve the ultimate goals and objectives of the client.

Foundations set up for a charitable purpose are exempt from tax when their income consists of voluntary payments. Otherwise, a Foundation set up as a company benefits from the same favourable tax treatment as a trust when set up for the benefit of non-resident individuals.

BDO Malta is a Member Firm of BDO International, one of the largest professional service firms. Please contact us for your service requirements on T: 2131 3060; E: info@bdo.com.mt; W: www.bdo.com.mt

Through our trust management company, we will provide you with the highest level of protection and security

Microsoft investing billions in security to protect customers When it comes to security, Microsoft brings teams and technologies together to evolve its security posture, such as the recent setting up of the Cyber Defense Operations Centre (CDOC) and Enterprise Cyber Security Group, bringing together all of Microsoft’s security response teams to help protect, detect and respond to threats affecting customers, Microsoft and the industry. Microsoft’s built-in security technologies also work together to deliver a holistic, agile, security platform. All this forms part of Microsoft’s constant commitment to protect our customers. Microsoft in fact, invests more than a billion dollars a year in security-related R&D to help protect its customers.

Today enterprise customers need a new approach towards enterprise security and management, and Microsoft uses its unique insight into the threat landscape to help protect its customers. Built-in security solutions work in tandem alongside solutions from our partner ecosystem, to deliver a holistic, agile security platform for enterprise customers. Microsoft wants to highlight the fact that a new security approach is needed for today’s mobile-first, cloud-first world. Customers can improve their security posture by moving to the cloud, by adopting modern platforms and by embracing Microsoft’s comprehensive identity, security and management solutions.

HSBC economist outlines the reshaping of international trade corridors

Douglas Lippoldt, senior trade economist at HSBC Global Research Economics team, addressing business leaders at the HSBC Malta thought leadership event

Global trade corridors and their long-term implications and opportunities were tackled by Douglas Lippoldt, a senior trade economist at HSBC, at an exclusive HSBC Commercial Banking Business Meeting. Mr Lippoldt spoke to the audience about the findings from his latest research ‘Trade Chart Book – The Power of Corridors’, published on 15th September 2015. “From a quick review of our findings, the extent to which trade is dominated by the big three (US, EU and China) is striking. But, the increasing share of trade for emerging markets is notable. In some instances, one can readily discern China’s inter-linkages with its neighbours via global value chain production,” said Mr Lippoldt.

“The examination of trade corridors shows that some countries, notably among the emerging markets, are not yet reaching their trade potential. South-south trade is growing but remains ripe for further development, provided that further trade liberalisation can be achieved,” added Mr Lippoldt. HSBC Malta’s Head of Commercial Banking Michel Cordina said: “Mr Lippoldt brought to Malta in-depth insight of the world’s economic state of affairs. HSBC’s global network allows it to capture emerging opportunities from around the world and to bring unrivalled insight to its customers so as to allow more informed decisions.”

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Malta’s leading transport & logistics company With a dedicated and professional workforce of over 200 employees, a fleet of trucks and trailers worth over ¤7 million and a turnover of over ¤28 million, Express Trailers is today not only recognised as the leading transport and logistics company in Malta but also acknowledged as a strong economic player. Since the start of its operations in the transportation industry over 50 years ago, the company went on to become a major player offering services that range from cargo carriers, container and transport operators, customs brokers/agents, freight forwarders and groupage bond operators to haulage, hoisting services and equipment, insurance services, logistics storage and warehousing, lifting equipment, shipping agents, truckloading, air freight services, pick and pack services, and trailer operations. Express Trailers operates with leading international partners throughout Europe and the Far East with a modern fleet of fully monitored, temperaturecontrolled and GDP-

compliant vehicles, meeting all customer requirements in terms of regulation, security, quality and handling, especially for the life science and pharmaceutical industries. All drivers are trained and ADR certified to carry hazardous cargo from any point in Europe. Other services include car transportation, industrial relocation services, personal effects handling, third party logistics (3PL) and bonded warehousing. Express Trailers’ commitment is to deliver reliably and professionally, to ensure peace of mind and ultimately to Delivering Trust.

Delivering cuttingedge digital customer service We are more than just a company; we are four dedicated friends, who are also professionals in the field. We thrive on providing cutting-edge digital, superior customer service and making sure we get it right first time. And as a result, our customers come back to us time and time again. So how do we do it? Relationships are key to everything for us, so we only work with people with whom we feel we can build a strong, lasting relationship, who believe in their and our success, and for whom the experience is a fun and exciting journey with the destination being a win for all involved.

Franco Azzopardi

The Other Guys is based on four key areas of expertise: Web, Design, Online Marketing and Communications. In today’s

fast-paced online market this allows us to build the perfect solution and balance for your business. We pride ourselves on being competitively priced and fully engaged in our clients’ objectives, no matter how large or small the project. In 2016 digital cannot be about a website, an advert or a social campaign, it’s a journey that must be managed and executed by engaged professionals who understand your business. We work together as a team to ensure that all our web projects include responsive design so our clients’ online presence is always visible across the web, no matter what the device or the platform. Find out more at www.whytheotherguys.com or call us on T: 2750 0416 and let’s talk.

INTRODUCING CHIVAS 12 ‘MADE FOR GENTLEMEN’ BY GLOBE-TROTTER Craftsmanship, generosity and a passion for travel are at the heart of the new collaboration between British luxury brands Chivas Regal and Globe-Trotter. Renowned for handcrafting luxury luggage, GlobeTrotter has partnered with Chivas to design an exciting series of three collectibles for the whisky connoisseur and world traveller – the Chivas 12 ‘Made for Gentlemen’ by Globe-Trotter limited edition gift tin, a limited run of Chivas 12 ‘Made for Gentlemen’ by Globe-Trotter 20 inch carry-

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on cases and a made on request Chivas 12 ‘Made for Gentlemen’ by Globe-Trotter steamer trunk. The Chivas 12 Made for Gentlemen by Globe-Trotter limited edition gift tin houses a bottle of Chivas 12 blended Scotch whisky and showcases a vibrant tale of international travel. Inspired by the tradition of applying stickers onto one’s luggage to proudly showcase destinations visited, bespoke luggage stickers were hand-drawn by the British illustrator Andrew Davidson

to celebrate iconic cities and adorn the contemporary tin design. The launch event took place on 28th October at Quarterdeck Bar, Hilton. The evening, organised by Farsons Beverage Imports Company Ltd, was a great success and included a prize draw to win one of the limited edition Chivas 12 ‘Made for Gentlemen’ carry-on cases. Chivas cocktails were served throughout the night and included the signature Chivas-Globetrotter

cocktail, ‘The Maximilian’, to commemorate the collaboration.

ECONOMIC VISION 2016: BUSINESS. FINANCE. ECONOMY.

Versatility in an established express delivery service

A banking partner you can rely on Sparkasse Bank Malta plc was established in Malta in 2000 and has since built its reputation on understanding the needs of its customers, developing relationships and responding to them effectively and discreetly. The bank has a strong service culture, understanding that customers are discerning and expect professional and an efficient service from a banking partner. We at Sparkasse believe that clients choose to work with us exactly for this reason – our effective, responsive and proactive approach to business but above all, the bank’s willingness to listen and competence to act.

The bank delivers private, personal and efficient solutions to asset managers, corporate service providers and financial practitioners supported by a highly skilled and dedicated team of private bankers and professionals. We believe in relationships – both with our clients as well as with our institutional partners. Our core services include: Banking, Wealth Management, Depositary and Fund Custody, Securities and Capital Markets. Visit us at www.sparkasse-bank-malta.com

Fexserv – for all your financial needs In 1995 Fexco had just opened its doors and foreign exchange was its initial core business. Over the following 20 years it evolved and grew into one of Malta’s leading financial and investment services organisations providing a whole range of services through a branch network of offices in San Gwann, Valletta, St Julian’s and Victoria, Gozo. In October 2010 it was re-branded to Fexserv and this helped it forge ahead in a very competitive market place that was marketdriven and dynamic. Today Fexserv is focused on the challenges that financial and investment services will

bring in the future. As an organisation we have diversified in an intelligent way and whilst our portfolio has grown, we made sure it grew in a focused manner; the ultimate aim always being that of providing a service that is tailored to our customer needs. Among others we provide bureau de change, travel money, investment services, the renowned One4All gift voucher scheme, cash for cheques and the Western Union Money Transfer services. This portfolio of products is handled professionally, and we pride ourselves in launching only services that

In Malta, TNT operates an Associate office – proof of the importance that this global company gives to the country. For TNT in Malta, 2016 will be an important milestone given the start of its new daily air route last June from its main European air hub in Liege to Malta. “This development followed TNT’s intention to strengthen Malta’s link with Europe and beyond, to enable more business and investment towards our country and the economy,” explains Diana Cassar, Managing Director of TNT Associate in Malta. Through its global network, TNT delivers anything to anywhere, from documents and parcels to freight. Today TNT customers in Malta enjoy later departure times for exports, earlier arrival times for imports and reduced transit times for their unique economy service which is tailored for less urgent and heavier shipments. “In other words, we have enhanced the versatility and flexibility of our service. And since the introduction of the TNT aircraft on 1st June 2015, we have been able to

accelerate growth in our core business.” “Our long-term commitment is to keep improving our delivery services with stronger air and road networks. In Malta, TNT wants to continue supporting its customers. The more we enable export and import, the stronger the growth,” concludes Ms Cassar. The Monday to Friday service operates a flight that arrives in Malta in the morning and departs in the evening, allowing for afternoon pickup in Malta and next day delivery to all of Europe. C&C Express Ltd, part of the Cassar & Cooper Group, is TNT’s Associate in Malta. For further information contact T: 2558 4600; E: sales@tnt.com.mt; W: www.tnt.com

provide a ‘real’ benefit to our esteemed clients. This precept is in fact nicely summarised in our Mission Statement that reads as follows: “At Fexserv, we strive to provide the highest level of financial services in a friendly and professional manner, to provide value added to our customers whilst maintaining sound financial management practices in order to sustain earnings for our continued growth, and to provide our employees with a challenging and rewarding career”.

For more information: Fexserv Financial Services Limited, Alpine House, Naxxar Road, San Gwann. T: 2576 2576 E: info@fexserv.com; W: www.fexserv.com FEXSERV Financial Services Ltd is licensed by the Malta Financial Services Authority (MFSA) and is a founding member of the Association of Licensed Financial Institutions (ALFI). Fexserv Financial Services forms part of the Alpine Group of Companies.

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No slowdown in sight While highlighting the best of the banking sector’s achievements in 2015, BOV Chairman John Cassar White talks to Jo Caruana about what can be expected in 2016. Few industries know the critical importance of a strong economy like the banking sector does. And as the Chairman at the helm of one of Malta’s two largest banks, BOV’s John Cassar White constantly keeps a close eye on the minute developments within the island’s economic development.

economy continues to grow at a very significant rate, especially when compared to other eurozone countries,” he says. “Maltese businesses generally saw consumer spending flowing into their cash tills, so, all in all, I would consider this to have been one of the best years in the last decade.”

Mr Cassar White looks back on 2015 as a good year for Malta, from both an economic and a business perspective. “Malta’s

As for what’s in store for 2016, Mr Cassar White admits that it is, of course, hard to predict the future. “Geo-political risks

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ECONOMIC VISION 2016: BUSINESS. FINANCE. ECONOMY.

“All in all, I would consider 2015 to be one of the best years in the last decade.”

continue to lurk in the EU, with the refugee crisis threatening the social fabric of Europe unless it is well-managed,” he says. “If the price of oil starts to climb, and if interest rates start to rise, we may see a slow increase in inflation. Hopefully this will be the start of an upward trend in the eurozone economy.” In line with this, the Chairman believes the Maltese economy is expected to keep growing and says there is no slowdown in sight when it comes to private and public spending. “So both the economy and the business world should continue to prosper in 2016,” he says. That said, he is quick to add that he does not think we are in the midst of an economic boom as such. “Yes we are performing better than many other countries but that may not last forever. “However, I don’t see any reason why this shouldn’t continue if we address the issues that may impede our economic growth in future. The Maltese banking market is very lively and it should be able to continue to sustain the robust growth of the local economy.”

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At a European level, Mr Cassar White believes there could be challenges connected to the eurozone’s ability to grow economically at a more significant rate. “Unless the right political decisions are taken to consolidate fiscal and economic policy in the eurozone, economic growth may continue to be sluggish,” he says. “On the local front, though, there are various private and public projects that should create significant economic activity.” Finally, when asked whether he thinks the increase in non-performing loans could pose problems in the future, the Chairman has a word of advice for entrepreneurs. “Banks are now being more prudent in providing for non-performing loans,” he says. “I believe the main risk that banks take is financing companies that are under-capitalised. Thus, entrepreneurs must show more faith in their business by putting more of their own money in it rather than investing in property. Similarly, when it comes to property on the island, we have to be careful not to overexpose ourselves by encouraging speculative development,” he concludes. EV

ECONOMIC VISION 2016: BUSINESS. FINANCE. ECONOMY.

Assuring the Future of Insurance The motto that ‘prevention is better than cure’ rings true when it comes to solid insurance cover. Here, MSV Life CEO David G. Curmi tells Jo Caruana how he thinks the insurance sector will continue to shape up in the years to come. 113

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Protecting your assets and savings for the future is almost as important as protecting yourself today. This is the thinking that is driving the future of the insurance industry, especially in light of the fact that private pension plans have finally been launched locally, closely mirroring what is available internationally. At the heart of this development in Malta is MSV Life – the first local company to launch private pension plans onto the market. But there is more to the industry than these new pension plans, as David G. Curmi, MSV Life CEO and former president of the Malta Chamber of Commerce, explains. Asked about the potential growth that he sees in the insurance sector for 2016, Mr Curmi details that – following growth in Gross Written Premium of 14 per cent and 24

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per cent in 2013 and 2014 respectively, it is anticipated that 2015 will prove to have been another successful year for the life insurance sector. “This growth can be attributable mainly to the low interest rate environment and the Government’s incentives to help first time buyers enter the property market by removing stamp duty,” he explains. “Such strong growth is always challenging to retain, however we are confident that the life insurance sector is well positioned to maintain the momentum.” Mr Curmi also explains that this low yield environment encourages savers to look for alternative investments to traditional bank deposits, so as to increase their capital value and/or income. “The insurance sector has, for many years, developed products and

ECONOMIC VISION 2016: BUSINESS. FINANCE. ECONOMY.

investment solutions to suit all client requirements and will continue to innovate in such areas,” he says. Growth in the domestic economy, meanwhile, is important for the life insurance sector since it helps generate the demand for additional products and services. “While it is evident that more people are using life insurance savings products to save for the long term, the life insurance penetration in Malta is still only 59 per cent of the EU average,” Mr Curmi continues. “This implies that the Maltese are not saving as much as their European counterparts. Likewise, the life premiums per capita in Malta are around 37 per cent of the European average. This provides the sector with plenty more scope for growth.” Speaking about MSV’s recently-launched private pension plans specifically, Mr Curmi states that, compared to most developed countries, Malta’s state pension could be described as adequate, or even generous. “As a company, we have talked about the adequacy and sustainability of pension systems for many years now. To put it into context, the maximum state pension in the UK is ¤8,561 per annum (¤164 per week), compared to the maximum in Malta of ¤11,895 per annum (¤229 per week). That’s a difference of 38 per cent. Yet, in a recent study by Allianz, the UK ranked much higher than Malta in providing an adequate income in retirement.”

“The life insurance penetration in Malta is still only 59 per cent of the EU average.” Mr Curmi goes on to explain that the reason for this discrepancy is because the UK has long established and developed private and corporate pension industries. “Someone retiring in the UK today can expect a pension from their private pension and their employer’s pension, in addition to the state pension,” he says. “In Malta, we have developed an over-reliance on Government to provide our income in retirement, which as many studies have shown, is not sustainable. Adequate as it may be, it is not sustainable for future generations.” “Thus, reducing our reliance on the state and encouraging private savings, whether individually or through employment, is essential to ensure future retirement income is both adequate and sustainable. And, by introducing tax incentives on contributions to personal pension plans, the Government has taken the first step to help individuals take responsibility for their own pensions. This bodes well for the future,” Mr Curmi adds. EV

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Rapid economic change, lagging cultural change

Professor of Sociology at the University of Malta and President of the International Small Islands Studies Association Prof. Godfrey Baldacchino discusses whether our society is changing as a result of a fast changing economy. Are we risking our ‘island lifestyle feel’? Are we risking becoming a ‘Dubai’, which is recognised as a successful city but without the charm of an island state like Malta? Photo: www.viewingmalta.com

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Photo: www.viewingmalta.com

For those readers who are old enough, backtrack to 1965. At the time, Malta was still bracing for the full impact of independence. Less than a third of Maltese owned their own homes. 42 per cent of household expenditure was spent on food (a high percentage suggesting greater poverty). Mass outmigration sent thousands of Maltese to Australia and Canada in search of better prospects, since so few could be entertained at home; indeed, the resident population was falling. Medium-sized local industry

“Considering our location between dysfunctional Sicily and maverick Libya, we have come a long way.” consisted of a modest brewery in Hamrun plus some foreign, mainly British investment (remember Bailey Industries Malta?). ‘Foreign workers’ basically meant British sailors. The dockyard was still the largest employer after Government: it had been taken over by Bailey’s in that year. Its operation depended on British naval repairs, and British government loans.

The changes wrought by just 50 years are extraordinary. Food expenditure as a proportion of household income has dropped by half (to 21 per cent); home ownership is up to 80 per cent. Immigration has exceeded emigration systematically since the mid-1970s. Around six per cent of the resident population now consists of persons who were not born in Malta: think Filipino care workers, Bulgarian waitresses and Swedish e-gam(bl)ing staff, as well as Eritrean refugees. The brewery survives and has grown into one of a few large manufacturing firms (Methode, ST Microelectronics, and Brandstatter among others) with considerable investment and employment. Malta’s largest private employer is now the Corinthia Group. Accounting for inflation, consumer power has grown eleven-fold in 50 years: GDP per capita has shot up from ¤1,600 in 1964 to ¤17,300 in 2014. Malta Freeport is the third largest transshipment port in the Mediterranean. Tourist visitations per annum have grown nine-fold; yet, tourism is responsible for only 14 per cent of GDP: hinting at a healthy, diversified economic portfolio which 121

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also includes aquaculture, banking, entertainment, construction, retail and IT services. Considering our location between dysfunctional Sicily and maverick Libya, we have come a long way. But cultural change tends to lag behind rapid economic change. Few could afford a private motor car until recently, and now we have invested so heartily into individual auto-freedom so as to deliver hours of daily gridlock on our strained roads. Sedentary lifestyles usher in those hallmarks of modernity: obesity, diabetes and heart failure. Waste has proliferated alongside economic growth and consumption. Traditional frugality is over; loans and mortgage lending have gone through the roof. The post-war housing shortage has given way to housing glut and an excess of empty dwellings with no urgency of being sold: they are Malta’s premier longterm asset and yet are not taxed. Public infrastructure and street furniture have expanded, but installations do not always (continue to) work: most clocks located along main roads are smashed or broken; Malta Public

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Transport’s ‘electronic information boards’ have been blank and uninformative for months. A fake sense of nationalism threatens to drive dangerous cleavages between Maltese and presumed ‘aliens’. Most, if not all, of us may be richer than five decades ago; but inequalities have also grown. Most report being stressed, tired and rushed. Mediocrity and an abject fatalism that ‘we can’t hope for anything better’ threaten high standards of quality and pride. All along, we remain victims of geographical circumstance: an archipelago of barely 316 km2 of land area. Our main island is eight runways long. Opportunities for land reclamation are limited. We are not Dubai – which is neither country nor island – nor should we strive to be: our wealth is not built on the shaky foundations of oil reserves, nor is our attraction and success the result of some top-down, invented, brand management strategy. We are not Singapore, with its draconian rules, such as quotas on the amount of private cars on the road; and driving licenses that, when available are auctioned off to the highest bidder. Malta is its own

unique, bustling, cosmopolitan hub: no wonder it is hard to feel and remember that we are living on an island while on the Maltese ‘mainland’. Gozo is different: there, the ferry schedule regulates many aspects of private and public life. The pros and cons of a Gozo-Malta fixed link are being debated. Should such a link materialise, then Gozo will become another peninsula of Malta (just like Valletta, but larger). The justification for Gozo being an island region – with its own diocese, hospital, court, university and MCAST campuses, and minister – will be gone. For those looking for that ‘small island charm’, the only option would then be Comino. Unless we bridge that too. EV

Top left: Dwejra Tower - Joseph Zammit, viewingmalta.com. Top right: Sliema Seafront - Nick D’Ancona, viewingmalta.com

“Malta is its own unique, bustling, cosmopolitan hub: no wonder it is hard to feel and remember that we are living on an island while on the Maltese ‘mainland’.”