Economic Vision 2018 by Content House

Economic Vision Business. Finance. Economy.

2018

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

a special edition of The Commercial Courier

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ECONOMIC VISION 2018: Business. Finance. Economy.

Economic Vision BUSINESS. FINANCE. ECONOMY.

Economic Vision is an official annual publication of the Malta Chamber of Commerce, Enterprise and Industry, published as a joint venture with Content House Group, focusing on the business, financial and economic outlook for the coming year. This special edition commemorates Valletta’s role on the international stage as European Capital of Culture 2018, so in addition to its annual economic, business and financial projections, the publication this year focuses on the impact the capital’s tenure will have on the island, as well as the people that live and businesses that operate within it. In keeping with celebrating Valletta as European Capital of Culture 2018, which will feature the involvement of around 1,000 local and international artists, curators, artist collectives, performers, workshop leaders, writers, designers, choirs and film-makers, this edition of Economic Vision features an original cover illustration by talented local designer and illustrator Nadine Noko, commissioned for the occasion by Content House Group, as well as a selection of the artist’s Valletta-themed illustrations gracing the pages within.

ECONOMIC VISION 2018: Business. Finance. Economy.

ontents

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KEEPING UP THE MOMENTUM

As 2017 comes to a close, the Malta Chamber of Commerce, Enterprise and Industry considers the last 12 months positively, and looks forward to 2018 with optimism.

IN FIGURES: A LOOK BACK AT 2017 A look into the figures related to business and the economy in Malta this year.

SIX FACTORS THAT WILL HAVE AN IMPACT ON MALTA’S ECONOMY IN 2018

A GENERATIONAL CHANGE

FACING OUR CHALLENGES

Marie-Claire Grima takes a close look at key issues that will affect Malta’s economic performance in 2018.

Prime Minister Joseph Muscat sets his sights on the future, tackling the challenges ahead and focusing on Malta’s place on the global stage.

Opposition and Nationalist Party Leader Adrian Delia looks ahead at the strengths and challenges facing Malta’s economy in 2018.

“THE SKY IS THE LIMIT, BUT WE HAVE TO WORK HARD TO REACH IT”

2018: INDUSTRY PROJECTIONS AND FORECASTS

Malta Chamber President Frank V. Farrugia speaks with Sarah Micallef about how local business has fared in 2017, and looks forward to a productive year ahead.

Martina Said speaks to leaders across a range of industries to find out what the coming year holds.

LET US NOT BELITTLE MALTA’S SURPLUS

Finance Minister Prof. Edward Scicluna speaks out about the dangers of taking Malta’s surplus for granted, stressing the importance of tackling the areas that need it most.

HOUSE OF CARDS

AT A GLANCE: WHAT WILL 2018 HOLD?

Shadow Finance Minister Mario de Marco warns of the risks that come with resting on our laurels, emphasising the need for Malta to work hard to maintain its growth and protect its reputation.

Malta’s industry leaders share their vision for the year ahead within the local business landscape, in a single sentence.

ECONOMIC VISION 2018: Business. Finance. Economy.

’Victoria & the Bicycle’ illustration by Nadine Noko for DeVilhena - Boutique Hotel

Publisher

79 87 97

FORGING AHEAD WITH INTERNATIONALISATION

Corinthia Group Chairman Alfred Pisani speaks with Jo Caruana about what we should expect from the Maltese economy in 2018.

ON THE DOORSTEP: ONE OF THE MOST SIGNIFICANT EVENTS IN VALLETTA’S HISTORY

Sarah Micallef garners thoughts by key players on the significance of Valletta’s upcoming tenure as European Capital of Culture 2018.

FARSONS: APPROACHING THE NEXT MAJOR MILESTONE

As Farsons gets ready to celebrate 90 years of brewing in 2018, Chairman Louis Farrugia talks Jo Caruana through the strengths and challenges facing the company, and Malta as a whole.

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 & Industry, the organisation behind the Economic Vision 2014/2020

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

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THE 2018 ECONOMIC FORECAST

As we set our sights on economic trends for 2018, economist Gordon Cordina talks Jo Caruana through his predictions, suggestions and expectations.

THE BANKING SECTOR: RAISING THE BAR FOR 2018

Buoyant economic figures, local investment opportunities and increased international regulation have kept local banks busy in 2017. Rebecca Anastasi speaks to the industry’s leaders to find out what lies ahead.

Advertising coordinator Lindsey Napier

Creative Director and Design Nicholas Cutajar Content House Ltd and the Malta Chamber of Commerce, Enterprise & 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.

On the cover: Illustration by Nadine Noko

ECONOMIC VISION 2018: Business. Finance. Economy.

eeping up the

momentum

As 2017 comes to a close, the Malta Chamber of Commerce, Enterprise and Industry considers the last 12 months positively, and looks forward to the coming year with a good dose of optimism.

In fact, 2018 promises to be a good year in economic terms, and growth is expected to remain within the same streak as the previous year. Nevertheless, there is no doubt that these expectations will be dampened by recent events if they are not dealt with in a timely and effective manner.

Basing oneâ&#x20AC;&#x2122;s projections on the recently published EY Maltaâ&#x20AC;&#x2122;s Malta Attractiveness Survey, Malta is bound to remain an attractive country for investment, although this attractiveness in certain aspects is diminishing. The economy is also expected to grow as more businesses are seeking to capitalise on numerous opportunities in a variety of sectors. The Chamber recently conducted a survey to assess headline business indicators for 2018. According to this survey, sales, exports, employment and investment appear to be on an upward trajectory as businesses are optimistic about their future.

ECONOMIC VISION 2018: Business. Finance. Economy.

Another recently conducted survey by the Malta Chamber carried out among its members concluded that businesses were ready to create around 3,000 jobs in the next three years. Within this context, the country has, in the past years, struggled to generate the necessary labour force to keep up with this accelerated rate of growth. Skills gaps across virtually the whole economic spectrum and employment categories are becoming more and more evident as labour costs are on the rise. This is expected to remain the primary challenge for businesses in 2018. Apart from this, the country needs to safeguard all aspects of competitiveness. Systematic attacks on Malta’s reputation and its fiscal regulatory framework need to be dealt with immediately. This framework is open and transparent – it is EU compliant, and it is our duty to defend it.

’Catatonic’ illustration by Nadine Noko

2018 will also be the year in which the EU’s state aid regulations are up for renewal. This is a process which the Malta Chamber has followed closely and is in the process of actively influencing to the benefit of the manufacturing industry. In 2018, the country should also tackle the dire situation traffic has degenerated into. The country needs to come up with an integrated, long-term solution that will ultimately reduce the use of private cars on the roads by providing an efficient and cost-effective public transport system. Like the European Presidency this year, 2018 will see Valletta hosting the title of European Capital of Culture for the first time – a title the Chamber has proudly supported, having housed the Valletta 2018 Foundation from the very start.

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The year promises to be another exciting one that will undoubtedly bring with it a host of opportunities.

The challenge for the next 12 months will be to keep up the momentum the country has achieved in the past few years. The country must make sure to be able to sustain the growth that it has generated and diversify its economy further so as not to depend on one sector exclusively. Finally, the Chamber is preparing to celebrate its 170th anniversary in 2018, the year promises to be another exciting one that will undoubtedly bring with it a host of opportunities. It all depends on how effectively and efficiently Malta will be able to take all of them on. EV

ECONOMIC VISION 2018: Business. Finance. Economy.

I N F I G U R E S A l o o k ba c k at 2 0 1 7

Watch Your Stepâ&#x20AC;&#x2122; illustration by Nadine Noko for DeVilhena - Boutique Hotel 16

ECONOMIC VISION 2018: Business. Finance. Economy.

The fiscal surplus recorded in Malta for the first nine months of 2017. Eurostat declared that Malta had the highest surplus-to-GDP ratio within the EU.

The number of people gainfully employed in full-time jobs in both the private and public sectors.

The amount that the minimum wage will increase per week by 2019, according to an agreement signed in April.

6.3

The percentage increase in the number of full-time employees in the private sector (up by 8,430 from 2016).

5.6%

The forecast rate of real GDP growth in Malta for 2017.

4,390

The unemployment rate in Malta as of November. It remains the third lowest in the EU, preceded only by the Czech Republic and Germany.

1.76 million The number of tourist arrivals from January to September 2017 – an increase of 16.3 per cent over the same period in 2016.

The number of new companies registered this year with the Malta Financial Services Authority till end October 2017.

5.6 4.1

€8

The percentage of energy used in Malta that comes from renewable sources. Although it is gradually improving, it is the lowest amongst the countries of the European Union, and needs to rise to 10 per cent within two years to achieve the EU’s 2020 energy targets.

€1.5 Billion Total tourism expenditure in Malta from January to September 2017, 13.6 per cent higher than that recorded for 2016.

Sources: NSO, Eurostat, European Commission, Central Bank of Malta

€56.4 million

187,977

ECONOMIC VISION 2018: Business. Finance. Economy.

’OPM’ illustration by Nadine Noko for DeVilhena - Boutique Hotel

F A C T O R S

that will have an impact on Malta’s economy in

Although all signs seem to indicate that 2018 will be another strong year for Malta’s economy, complacency does no good, and the writing is already on the wall when it comes to what needs to be done. Marie-Claire Grima takes a closer look at key issues that will affect Malta’s economic performance in 2018.

2018

Business confidence As far as the economy is concerned, 2018 promises to be a good year that is expected to continue in the current growth streak. Basing one’s projections on EY Malta’s Malta Attractiveness Survey, Malta is bound to remain an attractive country for investment, although this attractiveness in certain aspects is diminishing. The economy is also expected to grow, as more businesses are seeking to capitalise on numerous opportunities in a variety of sectors. In a recent Chamber-conducted survey assessing headline business indicators for 2018, businesses said that sales, exports, employment and investment appear to be on an upward trajectory as businesses are optimistic about their future. Another recently conducted survey by the Malta Chamber carried out among its members concluded that businesses were ready to create around 3,000 jobs in the next three years. This positive sentiment augurs well for business in Malta, yet 2018 will certainly hold its own challenges which will require serious and thorough solutions.

Malta’s HR challenge and its ability to retain staff Malta has one of the lowest unemployment rates in Europe, but it’s facing an employment crisis of a different sort – finding enough people to fulfil the roles that need to be filled. In 2016, Malta registered a net increase of 10,500 jobs over the previous year, a trend that shows no signs of abating, and employers are growing increasingly desperate to find people to fill crucial positions, leading to fierce competition, poaching of valued employees and price gouging, especially from foreign firms. Clyde Caruana, Chairman of Malta’s state employment agency JobsPlus, has stated that despite the fact that more than 20,000 foreign workers have come to the island over the past few years, even more are needed simply to keep the economy running. There is also the question of whether Malta is attractive enough for foreign workers to settle down permanently. According to employment statistics compiled by JobsPlus, the majority of foreign workers who entered in recent years ended up leaving the country relatively quickly, with less than a tenth of the thousands of foreign workers who arrived in Malta up to 2010 remaining on the island today. While temporary workers are good and necessary solutions for short-term projects, companies that are planning to build a permanent base in Malta will certainly not read this as good news. 19

ECONOMIC VISION 2018: Business. Finance. Economy.

Malta’s transparency and good corporate governance issues The economy has reached new heights and the strong economic output can be felt across industries as well as within society at large. It’s an indisputable fact however, that no matter how well the economy has been doing, issues of transparency, whether real or perceived, require urgent addressing. Though the appetite for investment appears to remain healthy as our businesses continue to register optimistic traits, the country must also consider the sustainability of Malta’s reputation as a legitimate business hub in the long term. In the present economic climate, the country must endeavour to dissipate any uncertainty. Any insecurity will, no doubt, impact business confidence negatively in 2018, and the country’s reputation in its various sectors. Malta must preserve its international reputation as much as it must safeguard good governance and stability. In order for these expectations to truly materialise, it is critical for the country to realise that good corporate governance is not optional.

Malta’s ability to keep up with regulatory changes

Malta’s nimbleness and agility when it came to emerging sectors such as igaming and financial services, transformed the economy in the early to mid-2000s, from one that was far too heavily reliant on tourism to the one we have today, where sophisticated tertiary services form the backbone of the economy. However, Malta’s ability to keep up with global regulatory changes seems to be losing some of its momentum in nearly all fields except for igaming. While igaming is crucial to Malta’s economy, generating more than 12 per cent of its annual economy, other sectors that require just as much focus cannot be neglected. Government has already announced plans to develop a sound regulatory framework for blockchain and FinTech, putting it ahead of other countries in this regard, but will this be enough to keep it ahead of the game, and has enough been done to lay the groundwork for the development of sustainable future industries? Only time will tell.

’A Selfie & a Prayer’ illustration by Nadine Noko for DeVilhena - Boutique Hotel 20

ECONOMIC VISION 2018: Business. Finance. Economy.

Malta’s tourism product Malta is currently breaking record after record when it comes to tourism figures, and there’s no doubt that the marketing and promotional aspect is being handled with great skill, but unless stricter safeguards are placed upon Malta’s touristic offering, our sustainability might be at stake on a long-term basis. The proliferation of generic, unsightly buildings and the general overurbanisation of the country risk destroying Malta’s unique heritage, while the littered and overcrowded beaches will stop being so appealing unless swift action is taken. Furthermore, the HR problem that currently exists across all industries

is particularly pronounced when it comes to sectors directly related to tourism, such as hotel and catering work – it’s harder than ever to find people who want to do an excellent job in such a tough industry. Finally, there’s the issue of Air Malta. It is encouraging to note that Government has maintained that the airline will remain one of the key pillars of Malta’s tourism industry. Details of how the fortunes of the ailing airline will be turned around are slowly emerging, boding well for the long-term sustainability of the airline that must be quickly ascertained for a successful economy in 2018.

’A Tulip & a Prayer’ illustration by Nadine Noko for DeVilhena - Boutique Hotel

Whether Malta will manage to update its ageing and outdated infrastructure

Malta’s population has risen by about 25,000 in the space of 10 years, boosted by expats who now live and work on the island. It’s evident that the current capacity of the present road network is just not enough to handle the huge flows of traffic, particularly to central areas of the island where hubs of industry and commerce are located. According to EY Malta’s Malta Attractiveness Survey, more than a third of respondents (36 per cent) believe that the current transport and logistics infrastructure is not attractive from an FDI standpoint, and 63 per cent supported investment in major infrastructure and urban projects. And with 43 new vehicles being added to Malta’s roads every single day, the situation is bound to get worse. The 2018 Budget focused heavily on ways to fix Malta’s infrastructure, with the €700 million, seven-year road project, which was a central tenet of the Labour Party’s electoral manifesto, scheduled to begin in 2019. A new agency which will be working hand in hand with Transport Malta will be set up to plan, oversee, and implement the development and improvement of the country’s road network, and an additional 25 projects on arterial roads and 160 residential roads are expected to take place over the next year. However, while it was acknowledged that the traffic problem will not be solved just through investment in better roads, and that the congestion problem could be attributed to a cultural dependence on private cars, there was no mention of the introduction of a rapid mass transport system. EV 23

ECONOMIC VISION 2018: Business. Finance. Economy.

generational

Rather than reminiscing on past successes, Prime Minister Joseph Muscat sets his sights firmly on the future, tackling the challenges ahead and focusing on Maltaâ&#x20AC;&#x2122;s place on the global stage.

change

indsight is a wonderful thing. The easiest way for us politicians to deal with the tasks ahead of us is to reminisce on past achievements. That approach is only as good as the next challenge for the country. It is why at the end of 2017, instead of reminiscing I prefer to focus firmly on the future, the challenges that lie ahead and how our country will take its place on the global stage.

ECONOMIC VISION 2018: Business. Finance. Economy.

We are heading into 2018 with a six per cent growth rate, a budget surplus for the second consecutive year and with the biggest challenge for our employment sector being the lack of human resources available in the labour market. The year ahead of us will begin with no increase in taxes and around €35 million injected into social initiatives to ensure that our country’s prosperity is reaching those who need it most, and that on the journey Malta is headed into, no one is left behind.

’The Audience’ illustration by Nadine Noko for DeVilhena - Boutique Hotel

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This is our economic vision, to change the mindset of our people, to have the ability to see opportunity where others see challenges, and to see failure as part of the road to success.”

None of this came about by chance. This Government used its first legislature to focus heavily on fixing the proverbial leaking roof so that we could be in a position to prepare for future challenges rather than wait passively for the skies to clear up. Now we can finally start to implement our vision for Malta’s future and consequently, our economic vision. This Government has always maintained that the next generation should no longer feel the need to leave Malta to seek wider opportunities, but that they would return to Malta as the place that breeds them. This is

ECONOMIC VISION 2018: Business. Finance. Economy.

our economic vision, to change the mindset of our people, to have the ability to see opportunity where others see challenges, and to see failure as part of the road to success. We hope to reach a point where the Maltese workforce is no longer content with merely finding a job, but to be able to adapt, re-skill and upskill where necessary. Our focus is to ensure our workforce is nimble and quick to learn in this fast paced, fast changing world. Our workforce has already proved it is up to the challenge.

“

We believe it is time for everyone to join forces to keep making Malta an ongoing success story.

’Take Flight’ illustration by Nadine Noko for DeVilhena - Boutique Hotel

As a Government we believe that success lies in investing in people – it is for this reason that we have flown to every corner of the world to attract not just investment but also ideas. We have chased talent, completely removed borders to ideas and see Malta as a perfect global hub where things are happening – the big debates, the innovative conversations, and the creation of talent. By changing the mindset and instilling the concept of adaptability in our people, Malta can finally take its place on a global stage.

“

By changing the mindset and instilling the concept of adaptability in our people, Malta can finally take its place on a global stage.

That is where we stand at this important moment in the development of our country. We have moved beyond thinking outside the box. It is time to think without the box. From the introduction of coding lessons to young students and taking the leap to lead in disruptive technologies, Malta can be ahead of the game in sectors that are new not only to Europe, but to the world. When we talk about investing in new economies, it is not Blockchain technology we are adapting to, or start-ups we are investing in – but the ideas themselves and the ‘butterfly effect’ that innovation and creativity have not just on economies but society and human progress. People and their ideas are relevant to every conversation – they are the families of consumers, the business owners, and ultimately the ones who are affected by the decisions that Government takes. This Government has proven that by focusing on people, the country can only win. This is why we are committed to keep working even harder, pushing forward more than ever and to continue opening our borders to ideas, to eventually see Malta reach new levels of success and prosperity. The potential is there. Our energy and commitment are guaranteed. The power lies in taking that leap and creating a generational change. We believe it is time for everyone to join forces to keep making Malta an ongoing success story. EV 29

acing

ECONOMIC VISION 2018: Business. Finance. Economy.

our challenges

Opposition and Nationalist Party Leader Adrian Delia looks ahead at the strengths and challenges facing Malta’s economy in 2018, offering a blueprint for future quality growth.

As we look forward to 2018, we can see an improved international and European economic environment in which we can build upon our economic strengths and face our challenges. We are reaping the fruits of past public and private investments. European Union membership, an open economy, the euro and EU funds (to the tune of €128 million in 2018, €152 million in 2019, and €155 million in 2020) gave us the framework and impetus to focus on economic sectors where we succeed in creating a comparative advantage.

Photos by Alan Carville

ECONOMIC VISION 2018: Business. Finance. Economy.

These new and developed sectors – igaming, aviation, financial services, ICT, the maritime sector, pharmaceuticals – are contributing hugely to our economic growth. With them, low-cost airlines, infrastructural projects with EU funds, and the entrepreneurship of Maltese business add value to our traditional sectors. The economic stability now offered by all political parties is a far cry from the times when we had a fundamental political divide on the very basics of our economic policy. In this, EU membership has hugely helped. The advantageous tax environment we have created in Malta has also been especially useful.

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In this atmosphere, we need to look ahead.

’Il-Kerrejja’ illustration by Nadine Noko for DeVilhena - Boutique Hotel

In this atmosphere, we need to look ahead. First, to defend what we have achieved in the last decade or so. We came out of the big recession after 2008 relatively unscathed. But we have to acknowledge that our advantageous tax environment is under attack. We cannot let our reputation threaten this huge advantage we have built for ourselves.

“

Let’s work together to strengthen our institutions and the rule of law in Malta. These are basics for our politics and our businesses. We have lately been making the international news for the wrong reasons. Let’s work together to strengthen our institutions and the rule of law in Malta. These are basics for our politics and our businesses. We have to keep attracting investment and creating new sectors too. In an age of rapid technological change, we need to be on the cutting edge of new developments. We have to keep up the tempo, developing the physical, legal and educational infrastructure for new sectors.

ECONOMIC VISION 2018: Business. Finance. Economy.

â&#x20AC;&#x153;

Our economy is not instant coffee. It is a long process of vision, the right decisions, investment, implementation and keeping close to the ground.

This can help us aim for quality and better incomes, both as profits for business and as salaries for well-prepared and welltrained Maltese workers. Construction and the rental market also need stability, as they are now important contributors to our economy. We need to plan ahead for times when foreign workers will not be increasing by as much yearly as they have done in the past few years. This is where infrastructural projects come in. Even at the level of large cities in advanced countries, they have infrastructural plans spanning a decade or two ahead. We need to plan likewise and this can encourage businesses in the building sector to develop, invest and improve their productivity with a sense of purpose, aiming towards our vision for the future. And we need to plan for our local funds to be deployed to invest in our infrastructure, rather than just EU funds. Our infrastructure is creaking under the strains of a larger population and traffic volumes. Mobility, or lack of it, is costing us hundreds of millions and is a threat to our future economic growth. Air Malta is an urgent challenge we need to overcome. We cannot lose this linchpin of our tourism sector. Our economy is not instant coffee. It is a long process of vision, the right decisions, investment, implementation and keeping close to the ground. The Nationalist Party is ready to contribute from Opposition and to offer a blueprint for quality growth in future. EV

ECONOMIC VISION 2018: Business. Finance. Economy.

T he sky is the limit but we have to

work hard

to reach it

Malta Chamber President Frank V. Farrugia speaks with Sarah Micallef about how local business has fared in 2017, and looks forward to a productive year ahead.

Photos by Alan Carville

s we close another successful year for business and the economy in Malta, Malta Chamber President Frank V. Farrugia looks toward 2018 as a new year that is not without its challenges. â&#x20AC;&#x153;The biggest challenge I see for businesses as we move into 2018 is the lack of skilled workers,â&#x20AC;? Mr Farrugia says, emphasising the need for the education sector and industry to work together to tackle the issue. In fact, the Chamber is involved with the Ministry of Education in the formulation of certain courses for businesses, he reveals.

ECONOMIC VISION 2018: Business. Finance. Economy.

Brexit poses another potential challenge moving forward, though the situation remains unclear. “We don’t really know what’s going to happen – the situation is changing every day. Brexit will certainly affect our country – a change in the rate of exchange, for example, will affect us favourably or negatively,” the Chamber President maintains, going on to make reference to the issues that have arisen within the EU among other member states like Spain and France. “Locally, I don’t see a threat in the immediate future, but we need to look at the longterm, within the next two to three years. Our economy is not dependent on one sector, but we have to be careful to remain competitive,” he asserts, highlighting elements such as energy prices among local businesses: “according to Eurostat, we are paying about 46 per cent more for energy than any other European country. We have prepared a study which we’ve presented to Government, and have made propositions such as the introduction of night tariffs.” The Chamber President also warns that care must be taken when it comes to Government’s introduction of certain measures which can affect businesses. “Increasing the amount of leave in relation to public holidays falling on weekends over the next five years is going to be a cost to our competitiveness,” he says, affirming that in Malta, we already have more holidays than our colleagues elsewhere.

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We need to formulate a plan to tackle the infrastructure while protecting our tourist industry at the same time.

ECONOMIC VISION 2018: Business. Finance. Economy.

And while there’s been an overall boost in various areas of the islands’ economy, with a distinct rise in the number of foreigners coming to work here and new businesses setting up shop, it is also true that the country has also become somewhat chaotic as a result, with more construction, traffic and road congestion. Looking at this development from a tourism standpoint, Mr Farrugia believes that we may be falling victims to our own success, and emphasises the need for a balance to be maintained. “Government has announced a seven-year project to tackle Malta’s road infrastructure. We as a Chamber are ready to participate and offer our

know-how should it be needed,” he maintains, affirming that it isn’t simply a question of building or fixing roads, but also taking several factors into consideration, including charging outlets for electric vehicles, proper planning when it comes to passing services and maintenance of existing systems.

“

If we want to succeed, we have to abide by the laws of the country.

As for the impact on tourists, Mr Farrugia continues, “we need to formulate a plan to tackle the infrastructure while protecting our tourist industry at the same time,” going on to emphasise the importance of attracting the right type of visitor. “We need to improve the quality, not just the numbers. We need tourists that appreciate what is going on,” he explains, pointing to Valletta’s role as European Capital of Culture in 2018. “A lot of investment has gone into Valletta, and we need to make sure that the same thing happens all around Malta, so that tourists can experience something here that they won’t find anywhere else.” Finally, he quips, “the general cleanliness of the island needs to be tackled, and enforced with heavy fines.” Looking back at 2017, Mr Farrugia assesses the major milestones and achievements, and feels that a lot has been achieved over the past year. Speaking of Malta’s EU Presidency throughout the first six months of 2017, he says, “I feel that Malta has scored very highly. At a recent European Economic and Social Committee conference in Brussels, we had delegates from different countries standing up and praising Malta’s Presidency, saying that we had organised it well and that they were impressed by all that was achieved.” Finally, he goes on to point out that despite it being an election year, “the economy has done well, we’ve increased our GDP and had a surplus – so in general I think we have done well.” 41

ECONOMIC VISION 2018: Business. Finance. Economy.

’Teatru Rjal’ illustration by Nadine Noko

Building on 2017’s success, I ask, what would the Chamber President like to see achieved in 2018? Apart from further investment in Research and Development, which he believes is an area which requires players from different spheres to take on a more pro-active approach, Mr Farrugia further stresses the importance of enforcement and abiding by the rule of law: “if we want to succeed, we have to abide by the laws of the country.” Moving on to Valletta’s role as European Capital of Culture in 2018, Mr Farrugia believes it will certainly serve to boost businesses in Malta. “Cities which have held the title in the past experienced

between 10 to 15 per cent increase in visitors. Next year, we will have over 400 different events taking place all around Malta and Gozo, so there’s truly something for everybody. If we do it well, I think it will be very positive,” he says. Moving on to his priorities as Chamber President in 2018, Mr Farrugia aims to further consolidate the work that the Chamber is doing to reach and provide help to its members. “Through TradeMalta and Enterprise Europe Network, we are helping businesses to market their products and internationalise. Our aim is for every member, whether small or big, to know about all that we can offer and how we can be of help,” he maintains, fostering a communication system through which members can share their challenges and seek out help. Finally, the Chamber President affirms, “the most important thing I’d like to see going in to 2018 is commitment from the Council Members and all our Sections. I believe that together we can succeed where individually we can’t. I’ve always believed that the sky is the limit, but in order to reach it, we have to work hard.” EV

ECONOMIC VISION 2018: Business. Finance. Economy.

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2017 was a good year for Malta’s economy, which is expected to register a surplus for the second year running. Despite a strong economic performance, however, concerns persist over the sustainability of Malta’s rapid growth, and the country’s current lack of human resources. What will 2018 hold for some of the country’s strongest business sectors, and will Valletta’s role as European Capital of Culture play a part? Martina Said speaks to leaders across a range of industries to find out what the coming year holds.

Industry

Projections and Forecasts

SO statistics published just before the announcement of the 2018 Budget last September showed that Government registered a surplus in excess of €31 million during the first eight months of 2017, an improvement of more than €110 million in Government’s financial accounts over the same period last year. That Malta’s economy is running at full steam is no news, but many wonder how long it will be until the wave we’re currently riding comes down, if it will at all. Michael Psaila, Managing Partner at Mamo TCV Advocates, says that the pace of their business is mainly dictated by the business requirements of their clients and the transactions they are involved in. “On the corporate and banking sides, while the number of domestic and international merger and acquisition deals and loan transactions kept the pace of the previous year, we are

“

In a market that is becoming increasingly complex, it is fundamental for us to recruit lawyers of the highest standards. Michael Psaila, Managing Partner, Mamo TCV Advocates

seeing more activity in capital markets, with a number of issues of securities (mainly debt) on both the Malta Stock Exchange’s main market, but also on the Prospects MTF.” In financial services, Dr Psaila says that Malta is being considered one of the potential alternative jurisdictions for UK licence holders who intend to continue operating in the EU following Brexit. “It appears that the sector that was quickest to react and actually go ahead with licence applications as a consequence of Brexit was the insurance sector, but we are expecting similar reactions in the fund management and banking industries as the March 2019 deadline approaches. Another very topical matter that is keeping us busy is the General Data Protection Regulation (GDPR), which comes

ECONOMIC VISION 2018: Business. Finance. Economy.

into force on 25th May 2018, and which will apply across the board to operators on all levels and in all sectors of the economy. The timeframes are rather tight and we are encouraging our clients to intensify their efforts to conduct an internal analysis with a view to identifying the current gaps and introducing the necessary changes to ensure full compliance with the GDPR.” On the downside, one of the primary challenges the firm, and industry, are currently facing relates to recruitment. “In a market that is becoming increasingly complex, it is fundamental for us to recruit lawyers who are not only of the highest standards, but who are also specialised in their respective areas of practice. Due to the limited pool of available resources locally, we have recently started looking beyond our shores.” Dr Psaila continues that while the current momentum will likely be maintained during 2018, more Brexit-related decisions are expected to be taken by UK financial services companies that need to establish an entity within the EU. “Recent economic studies also point towards further growth on a domestic level, and this should translate into more work for us, particularly on the transactional side. Furthermore, the Government’s adoption of a Blockchain Strategy and its intention to harness the technology with a legal operational framework is expected to lead to the formation of an ideal ecosystem for those willing to invest in blockchain technology. We also believe that the related ‘new’ industries such as FinTech and RegTech will continue to reshape the traditional ways underpinning the provision of financial services by making use of advanced software and modern technology.”

Beyond the legal industry, when asked for his views on Valletta’s role as European Capital of Culture in 2018, Dr Psaila commented that this will be a unique opportunity for both the city and the country to shine and showcase Malta’s rich cultural heritage. “Apart from the strong cultural programme that is expected to see Valletta buzzing with activity throughout the year, there have been a number of infrastructural projects and improvements that will last way beyond 2018. These improvements will no doubt contribute to enhancing the attractiveness of the country as a whole in years to come.”

Among the challenges he’s foreseeing in the year ahead, Dr Psaila asserts that the firm will be closely following the discussions on international measures to clamp down on aggressive tax planning and the introduction of measures to ensure greater harmonisation between local tax authorities. “Here, it is important that, insofar as possible, we pre-empt and immediately adapt to any changes that may take place at an international level in order to maintain our competitiveness in this area.”

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I believe we need to focus more on service rather than bringing the best value to the customer – the Maltese client deserves a better service and we are currently working to deliver it. Felipe Navarro, President and CEO, MAPFRE Middlesea

Within the local insurance industry, Felipe Navarro, President and CEO at MAPFRE Middlesea says that the main challenge in 2017 related to the new level playing field created by the implementation of Solvency II. “It has brought about a new way of observing and catering for the capital needs of insurance companies. The risk, compliance and actuarial approach is being given more importance, and the industry has had to invest a lot to be in line with Solvency II. The advantage within our Group is that we have sufficient capital to deal with this – the two companies within our Group are financially stable, and we are leveraging the control functions already active in the Group, which has made the adaptation quite smooth for us.” Another challenge stems from the application of the Insurance Intermediaries Directive, which Mr Navarro says will change the way insurance reaches the client. “It will cater, among other things,

ECONOMIC VISION 2018: Business. Finance. Economy.

for the intermediary to advise on the right insurance cover for the special and individual needs of the client, and will allow for insurance policies to be simplified and better understood by the end-client.” Despite such challenges, however, MAPFRE Middlesea experienced major growth in 2017. By the end of 2016, the company had a 35 per cent share of the non-life market, whilst MAPFRE MSV Life now has a market share of over 70 per cent in the life insurance market. Looking towards further developments next year, Mr Navarro anticipates that the market of home insurance and home contents cover will continue to grow, as home owners invest serious money into refurbishment projects, as well as their home’s interiors. “Other areas I believe will grow are life protection, moving beyond the purchasing of a life protection policy only due to mortgages, as well as pension plan schemes. Private and occupational pension plan schemes are still new products to the market, and locally, we are the leading Group in marketing a satisfactory final solution for the client in this area. However, there’s a need for greater awareness about this, so that young people can plan ahead for the future when joining the labour market.” At company level, Mr Navarro says that in 2018, the aim is to make MAPFRE Middlesea profitable in all lines of business in

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which the company already operates. “We need to organise the company to make it more client-oriented by improving the service provided, and finding new ways of servicing the client. I believe we need to focus more on service rather than bringing the best value to the customer – the Maltese client deserves a better service and we are currently working to deliver it. We have gradually adopted the MAPFRE name over the years and it is gaining significant recognition.” As for Valletta’s role next year, Mr Navarro is glad that Fundación MAPFRE will be contributing towards V18’s calendar of events by bringing a remarkable exhibition of work by Picasso and Miro to Malta. “The office of the President has kindly offered the Grand Master’s Palace to host this exhibition, and we are very excited because it is a great opportunity to have both artists portrayed together in the same exhibition. Valletta’s title as European Capital of Culture next year will certainly have ripple effects on all sectors, and will also help strengthen Malta’s image abroad.”

On the property front, CEO at RE/MAX Malta Kevin Buttigieg says the company is currently operating in an exceptionally vibrant market in all of its industry sectors, namely buy-to-let investments, investments by individuals and companies that are new to the market, as well as buying and renting of properties by foreigners and locals. “These sectors exclude the significant influx of foreign workers requiring accommodation when settling in Malta. The economy is doing well, which is allowing the Maltese to invest even more,” says Mr Buttigieg. “Maltese clients are the main players in the industry, which is a clear sign of a strong property market and a somewhat unique scenario when compared to other countries, where the market is based on foreign capital, and therefore a glitch on the horizon can cause their whole market to crash.”

Maltese clients are the main players in the industry, which is a clear sign of a strong property market and a somewhat unique scenario when compared to other countries. Kevin Buttigieg, CEO, RE/MAX Malta

On the downside, however, Mr Buttigieg asserts that one of the company’s greatest daily struggles, one which persists at industry level, involves the way local banks operate. “The amount of needless red tape anyone with an eye on investing has to wade through is incredible. This is hindering the property market from reaching its full potential, and a lack of availability of rental properties especially in certain areas on the island, as well as upmarket properties, is also a trial for our industry. This is causing a ripple effect as obviously, if demand is constantly outstripping supply, a hike in prices is expected.”

On the forecasts for the property industry for 2018, Mr Buttigieg asserts that the outlook is looking promising. “The first-time buyers’ scheme introduced last year as well as the new schemes announced in the last Budget will continue to buoy the market to unprecedented levels. At RE/ MAX Malta, we are working to add to this initiative in order to further encourage and make it easier for our clients to get on the property ladder. 51

ECONOMIC VISION 2018: Business. Finance. Economy.

This year, we opened four new offices and envisage that six more will be open for business by the end of next year, which would obviously entail substantially increasing our manpower.” Mr Buttigieg adds that 2018 will be a landmark year for the company. “We’ll be working with RE/MAX Montenegro, and also opening an overseas department which will cater for the UAE, Chinese, African, South African, Asian, Turkish and Israeli markets. It will be a one-stop shop for clients emanating from all over the globe, wherein all their requirements, be they investments, citizenship or a holiday home, are taken care of.” Sharing his thoughts on Valletta’s European Capital of Culture title next year, the RE/MAX CEO says the event poses a unique opportunity to advertise our capital city, and one which we should all strive to ensure is a success. “A good dose of positivity and co-operation by all will ascertain that the country will keep on reaping the benefits long after this oncein-a-lifetime event is over.”

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With a stream of budding and talented companies locally, staying ahead of the game is a constant exercise in development, both at a company level but also at an individual level in our system. Kevin Norville, Director of Human Resources, Tipico

Gaming company Tipico, which started out as a small betting shop in Karlsruhe, Germany, and today is present in nine locations with over 1,100 betting shops worldwide, has established a solid presence on the island. Focusing on the company’s recruitment efforts, Kevin Norville, Director of Human Resources at Tipico, says “with a stream of budding and talented companies locally, staying ahead of the game is a constant exercise in development, both at a company level but also at an individual level in our system. We nurture that cycle to yield the best each person has to offer.” Mr Norville asserts that being a market leader is about attracting the most talented professionals out there. “Over 235 people from 30 nations have taken that step in Malta alone. The entire Tipico Group and associated franchise network spread over Germany, Malta, Austria, Croatia and Gibraltar employs over 6,000 people. That’s some talent to manage. Such a large community comes with its own challenges and opportunities. It has always pushed us to think outside the comfort zone of our existing structures. Consequently, restructuring our teams and the modus operandi became a major focus to sustain efficiency and keep people happy. That must be one of our best qualities.” As Tipico’s processes became streamlined and its customer base skyrocketed, the company’s need to develop and maintain

its systems encouraged further investment in its human resources complement both in Malta and overseas. “In Malta alone, we recently recruited administrative staff, system analysts and data analysts to provide the necessary insight while growing complementary internship programmes to nurture the system,” says Mr Norville. Expanding on their internship programme, he adds “the Tipico internship programme provides prospective talent the opportunity to get on the job experience in over 12 departments, from acquisition to tech, compliance to legal. In conjunction with the Graduate Development Programme, we oversee that journey to ensure continuity in development of skills accrued during academic formation. Our employees are our best spotters for talent, and with an encouraging referral bonus of €1,500, we ensure the pipeline is populated with prospective talent year-round.” With an eye on the future, Mr Norville anticipates that 2018 will be an exciting year for Tipico, as the Group will continue to expand its workforce, with a particular emphasis on beefing up the product and technology department. “The industry today is stronger than ever in Malta, and together with the support from Government, we look forward to seeing further growth both in business and employment in years to come. Malta has become our main hub and we continue to work closely with the authorities to make sure this industry continues to strengthen its core here.”

ECONOMIC VISION 2018: Business. Finance. Economy.

Turning towards Malta’s thriving logistics industry, Franco Azzopardi, Chairman and CEO at Express Trailers, says that sustained economic growth in recent years has attracted new operators in different sectors to Malta’s market, namely in the gaming, maritime, aviation, construction and real estate sectors, which also brought a marked increase in Malta’s population, besides an increased number in tourist arrivals. “Naturally, a rise in population levels also brought about an increase in importation, consequently causing a growing imbalance when it comes to export. The market’s reaction saw two new players entering the transport sector in the form of shipping lines carrying RO-RO trailers, which provided more possibilities in terms of sailing times and port destinations and hence, more competitiveness,” says Mr Azzopardi. “Today, the main challenge for operators is finding the right tradesmen and skilled workers for the job. Resourcing the right human capital is turning out to be a major obstacle, even for a company like Express Trailers, which enjoys a good degree of attractiveness as an employer.” Sharing his forecasts for next year, Mr Azzopardi asserts that growth is both a function and a measure: “it is a function of investment and development. Our key business drivers are space, equipment and people, and we shall sustain our investment in all three with the interesting projects we’re currently working on. Our industry is a key link in the supply chain of almost everything we can see and touch – with accelerated activity in the construction sector, we anticipate a significant demand in the importation of building materials. However, I reiterate that the challenge of an ever-widening gap in the imbalance between import and export persists, increasFranco Azzopardi, ing the pressure Chairman and CEO, on import costs Express Trailers to finance the freight to export empty trailers,” he asserts. “If we manage to attract more northbound hubbing of cargo imported from, for instance, the Far East, this will lighten the problem. This was one of the main reasons that led Express Trailers to invest in more warehousing space, better racking and more equipment, in order to push for more growth in the field of managed warehousing.”

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Our key business drivers are space, equipment and people, and we shall sustain our investment in all three with the interesting projects we’re currently working on.

Sharing his thoughts on Valletta’s role next year and its impact on Malta as a whole, Mr Azzopardi states that V18 is a great opportunity to shine a light on the Mediterranean’s, as well as Malta’s, crown jewel. “We have an opportunity to outshine the negativity in the media with a heritage and culture that is truly

hard to match. In a year when Malta will be showcasing itself as a cultural hub, we should also look at 2018 as an opportunity to take the concept of hubbing to the next level. Just as Malta’s role as European Capital of Culture invites us to rethink Malta’s cultural legacy beyond 2018, we should look at this pivotal year as an opportunity to think of where Malta is heading economically. There is a serious need to tackle our major infrastructural challenges, namely roads, connectivity, mobility and alternative modes of transport – a different mind-set needs to be adopted if we are to remain competitive over the next 10 to 20 years.”

ECONOMIC VISION 2018: Business. Finance. Economy.

Maria Micallef, Managing Partner at RSM Malta, asserts that the audit, accounting and advisory practice across the board continued to expand throughout 2017, mainly due to Malta’s improved economy. “That’s not to say that there aren’t economic sectors that are experiencing downturns, wholesale being one such example, however, by and large, the picture is positive all around, especially in sectors such as tourism, energy, construction, remote gaming and financial services.” However, in line with the sentiments expressed by other industry leaders, the biggest issue RSM’s industry is currently facing is the scarcity of human resources, and as

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We need to keep up our efforts to attract more students to the profession, and Government on its part needs to step up its efforts to encourage more students to continue their tertiary education. Maria Micallef, Managing Partner, RSM Malta

approach to adopt in order to exploit these opportunities. As a firm, we are expecting further growth next year than that achieved in 2017.” In fact, it is the lack of human resources and not the lack of opportunities that is likely to impede growth in 2018, she adds. “We need to keep up our efforts to attract more students to the profession, and Government on its part needs to step up its efforts to encourage more students to continue their tertiary education,” says Ms Micallef. “The current lack of local resources meant that we’ve had to recruit from overseas to be able to deliver the services required. Through its agencies, Government needs to improve its work permit and related processes to facilitate the recruitment of non-EU professionals and staff. There seems to be a focus on this as Government has set up a unit for Reforms, Citizenship and Simplification of Administrative processes within the Office of the Prime Minister, with a parliamentary secretary appointed to run it.”

a consequence, wage inflation. “This is not unique to our profession alone; the annual number of graduates is simply not enough to cater for the number of dropouts from the profession – mainly females who seek a career break for family reasons – and fill the posts created by economic expansion.” So long as Malta’s economy continues to grow, however, Ms Micallef maintains that the sector RSM operates in will continue to benefit. “The 2018 national Budget is envisaging further economic improvements and new areas such as Blockchain. Brexit is also likely to provide opportunities for Malta, and it is up to us to identify the better

“Our economy depends a lot on foreign direct investment,” Ms Micallef continues. “The level of FDI is directly proportionate to (among other things) our good reputation as a civilised country. We cannot take this for granted, and all the different stakeholders, through the proper execution of their diverse responsibilities, have to work hard to safeguard our reputation.” As for Valletta’s turn to carry the torch as European Capital of Culture next year, Ms Micallef believes that the event should have a positive impact on Malta in terms of commerce, culture and the arts, and should give more exposure to local talent and the integration of cultures within Europe. “It should also help to make historical and cultural Malta better known within Europe. A lot will depend on the programme of activities that will be put together – however, Malta has had more than five years to prepare itself, so we expect nothing but the best from the organisers.”

ECONOMIC VISION 2018: Business. Finance. Economy.

Michelle Farrugia, Managing Director at VFGroup’s Fashion Retail Division, says the division’s long-term strategy is to service the ever-growing demand for a premium and luxury category product in Malta. “The opening of HUGO BOSS in 2011 was the first premium category mono-brand store for men, which until then was non-existent on the market. Our firm belief in the Maltese market’s readiness for brands in this category has thankfully been proven right. With BOSS and Samsonite, VFGroup now operates four premium-category mono-stores, and Sarto, which is probably one of our biggest achievements to date, has given Malta its first multi-brand concept store dedicated solely to luxury fashion for men and women.” Since opening its doors in 2012, Sarto has gone on to exclusively represent some of the world’s most successful fashion houses, and boasts a varied portfolio which continues to grow. “Sarto now represents brands like Burberry, Maison Valentino, Dolce&Gabbana, DSquared2, Ermenegildo Zegna and Jimmy Choo among others. In 2017, we launched the iconic Parisian brand Saint Laurent, and readyto-wear by Alberta Ferretti, a renowned Italian brand which specialises in beautiful evening gowns. It is often claimed that the road to success is not easy to navigate, and never has this been truer than with our luxury portfolio; we initially received much resistance from the brands as the purchasing power of the local market was perceived to be limited.” However, 2017 was not without its fair share of challenges. “There was consensus on this, particularly from the macro environment point of view. The snap election and political turmoil which ensued played heavily on public sentiment, which expectedly impacted typical consumer behaviour, particularly where lifestyle commodities are concerned. Another challenge being experienced in the service industry is inadequate resourcing of manpower due to rapid economic growth. Sourcing talent has become a major challenge.”

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Despite the challenges, 2018 is looking bright for VFGroup, which has secured more brands and will be launching new projects in the coming months. “This ambitious expansion is a clear reflection of our economic climate, and the aspirations of the people who are now visiting, living and working on our islands,” says Ms Farrugia. “We will therefore be focusing on further developing the premium and luxury portfolios, with further points of sale earmarked for the new year. Should Malta manage to sustain the economic growth achieved in recent years, as a nation we need to clearly identify the products and services which are being developed and offered, who is being targeted, and how to reach maximum potential through cohesive planning.” At company level, Ms Farrugia adds that the Group will continue to prioritise customer experience and the way it engages with its target consumers. “The digital era remains the persistent game-changer, with social media playing a pivotal role in tying the customer journey together. It has revolutionised the way in which we interact with customers, giving us constant real-time opportunities to showcase our brands. While the in-store experience is the peak of the customer journey, we now have to cope with many more instances along the way where the customer ultimately decides whether or not they want to associate with the brand, and this presents us with more opportunities than ever to create a meaningful experience with the client. With every opportunity, however, comes a threat, and in order to be successful, an organisation needs to have the right resources, skills and capability, which is no mean feat.” On a personal level, Ms Farrugia adds that she aspires to further engage with the public in order for there to be a better understanding of the concepts of luxury, craftsmanship and heritage, three elements that underpin the Group’s business. “Luxury belongs to us all, and is a personal concept which inspires positive emotion. Luxury to me is the emotion achieved through these very brands which I feel so honoured to represent locally. Our company message is that our doors are open to anyone who appreciates the art of fashion, regardless of intent to purchase.” As for Valletta’s starring role next year, Ms Farrugia asserts “Valletta being the 2018 title-holder of European Capital of Culture has resulted in an overdue cosmetic face-lift for the city, combined with investment in entertainment and leisure facilities. This, I hope, will be just the beginning. Valletta 2018 should be the catalyst through which true social, economic and cultural development are achieved, and not only for the capital, but for the country. Valletta 2018 will present boundless creative opportunities – art and fashion regularly collide, with designers, photographers and stylists regularly borrowing inspiration from the artistic world; in this respect, V18 is already proving to be a true meeting of the minds.”

The snap election and political turmoil which ensued played heavily on public sentiment, which impacted typical consumer behaviour, particularly where lifestyle commodities are concerned. Michelle Farrugia, Managing Director, VFGroup

ECONOMIC VISION 2018: Business. Finance. Economy.

Bjorn Azzopardi, CEO and Founder of digital agency Think, says 2017 has been a year of consolidation for the company. “In 2015, Think embarked on a drive to create three different products aimed at solving a number of issues our customers face on a daily basis. These products are currently being finalised and the plan is to have them up and running by the end of 2017. Part of the development process involved re-thinking our development strategy to operate as a start-up, so as to minimise development costs and come up with minimum viable products. All three projects are currently being validated in their respective industries and we are eagerly responding to the comments and suggestions being raised. This marks a great achievement for all the team at Think.” Simultaneously, however, Think continued its core operations of delivering digital products to its customers. “This, I believe, was our biggest challenge and success this year, since this part of the business flourished and we superseded our targets for the year. I strongly believe that the team understood that it had to become more efficient in its internal operations so as to reduce the time required to deliver products, without jeopardising our reputation for quality. This was made possible through the imple-

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mentation of internal procedures which made our work more streamlined.” To this end, one of the biggest challenges for the company next year will be to commercialise the three products developed, both in the local and international markets. “We’ve received positive feedback on all three products from the respective industries, however, we are aware that there is more work to be done in order to meet our customers’ expectations, and their feedback is key for us to develop our products further.” Think is currently also in the process of beefing up its resources, so as to further enhance the company’s knowledge and capacity. “This can pose quite a challenge at times, since formulating the right team and striking the right balance is no easy task. We’ve had to adjust by working remotely with foreign nationals and managing the projects locally using collaboration tools.” With the spotlight on Valletta next year, Mr Azzopardi says “I believe Valletta is one of the most beautiful cities in the world. It has come a long way in the last couple of years, and there is still room for improvement, however, the establishment of new restaurants, cafes and bars in the city has helped increase the capital’s vibrancy significantly. Being the European Capital of Culture puts a lens on our island – and this can only be positive. We are a small nation, however, we are making a big impact on the international stage proven by the local start-up community and the successes they’re enjoying. I believe Valletta’s role will positively affect Malta’s reputation, and it will help Maltese businesses when pitching their products internationally, while also helping to attract foreign talent to our shores.”

Formulating the right team and striking the right balance is no easy task. We’ve had to adjust by working remotely with foreign nationals and managing the projects locally using collaboration tools. Bjorn Azzopardi, CEO and Founder, Think

2017 was a challenging yet rewarding year for Tommy Diacono, founder of New York Best and Fat Louie’s, who expects certain challenges to spill over into 2018 with the current business climate on the island. “Our biggest challenge this year was the launch of our new brand, Fat Louie’s – we pride ourselves on doing things differently, which makes our work more challenging. At Fat Louie’s, we smoke our own meat and import our own wood, so operationally, launching this new brand was not easy, but it was a big hit and we expect that to continue next year.” One of the biggest issues at industry level, however, is the sheer lack of human resources available, or lack of willingness to work in the F&B sector. “The human resources issue in our industry has reached crisis level. Unfortunately, the real estate and gaming markets have taken a large chunk of capable workers, who are lured into making more money for easier work. In this industry, people need to be willing to work nights and weekends, and as a business owner, I cannot compete with the wage offering of industries the likes of real estate and gaming,” says Mr Diacono. “The industry is also reaching saturation point. New places are constantly popping up, and although competition is good and healthy, it’s still a challenge that we must deal with as it eats away 10 to 15 per cent of your expected growth.” On a national level, Mr Diacono asserts that bigger and more serious problems persist. “Politically, there’s a bad and unhealthy energy on the island, no matter what side of the fence you’re on. The divide that exists is harmful, especially in a country as small as ours, exacerbated by the fact that Malta’s economy appears to be dependent on a handful of industries, particularly the gaming industry, which has become the heroin of our economy.” Looking ahead to 2018, Mr Diacono says there are plans to diversify the New York Best brand through micro outlets spread across the island, as well as plans to tighten and consolidate their menus. “Despite this political turmoil, the F&B industry has improved exponentially in recent years – what with expats living here as well as locals’ access to social media, as well as cheap flights which are encouraging the Maltese to travel more. Slowly but surely, we’re reaching the standards of our neighbouring European cities. Many charming little coffee places are setting up shop locally, bringing new ideas to the market and really pushing the envelope with the look of the place

ECONOMIC VISION 2018: Business. Finance. Economy.

and their product offering, which in turn encourages other businesses to learn and improve. New York Best was the first to serve pink burgers, and it’s now become an industry standard – I think the same will happen with other trends as business owners get motivated to do things differently.”

responsibility include our recycling efforts this year – we partnered with Green MT, the first multi-outlet company to do so, and recycled all our waste in 2017, including plastic, cardboard and aluminium. We also partnered with a garden centre to make all of our spaces as green as possible, and we hope to take that a step further this year by using only indigenous plants in our outlets.” EV

Besides introducing a new brand to the market this year, Mr Diacono asserts that a number of company-wide measures were introduced at New York Best with the aim of contributing positively to the local environment, and which he plans to maintain going forward. “This year, we introduced a new chicken section to our menu as well as the new falafel burger; chicken has a lower carbon footprint than beef, and by giving it more prominence on our menu with its own dedicated section, it might steer people away from beef,” he Tommy Diacono, Founder, explains. “Other plans New York Best and Fat Louie’s in relation to our social

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The human resources issue in our industry has reached crisis level. Unfortunately, the real estate and gaming markets have taken a large chunk of capable workers, who are lured into making more money for easier work.”

ECONOMIC VISION 2018: Business. Finance. Economy.

et us not belittle

Malta’s surplus Finance Minister Prof. Edward Scicluna warns about the dangers of taking Malta’s surplus for granted, stressing the importance of spending it wisely and tackling the areas that need it most.

Photos by Lionel Galea

t should come as no surprise that I am disappointed in those who try to belittle and derogate the fiscal surplus obtained last year to the point of making it sound trivial – as if the surplus had been the order of the day at the end of each year. It is crystal clear that this downgrading attitude lacks sincerity, is fake and has the paw prints of a politically partisan spin.

Any wise government that registers a surplus should do everything possible to make sure that this is not a one-time occasion. Government has to persist in making a surplus become the norm and not a ‘one off’. It is, after all, what every upright, tax-paying citizen yearns for, that is, the reassurance that his tax revenue is spent in the best way possible.

ECONOMIC VISION 2018: Business. Finance. Economy.

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Government has to persist in making a surplus become the norm and not a ‘one off’.

The fact that we ended the year 2016 with a surplus, after 35 years of deficits, is significant. If anything, as a Government we have managed to change the direction without causing any upheaval in the lives of citizens. On the contrary, we have upgraded their standard of living in a period of four years. We reduced the deficit gradually and in a structured way, until we managed to not only balance the situation, but obtain a surplus. There have been many versions of this attack on the surplus. There have been those who said the surplus is a sham, an unrealistic possibility, a surplus from nowhere, or a surplus coming mainly from the Individual Investment Programme. One has to state that those behind such comments know that what they are proposing does not hold water, because today our financial performance is under ongoing scrutiny from high-ranking international credit rating agencies, the International Monetary Fund, the European Commission and the country’s own Fiscal Council. The honest truth is that the registered surplus is a very real one. Those genuine enough to want to verify this have all the facilities to do so, using whichever method, amongst them the accrual accounting system. We should be proud of the surplus our country has achieved. Another spin by those whose aim is to belittle the surplus is the impression that once this surplus is achieved, we can take this fact for granted that it will continue to repeat itself automatically. Such an attitude lacks the political reality and is dangerous. If ever the Ministry of Finance were to stop practicing its good economic and fiscal governance, it will find itself quickly slipping into a deficit situation 66

’Hello Sunshine’ illustration by Nadine Noko for DeVilhena - Boutique Hotel

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In my role as Minister of Finance I promise never to forget that Government money is taxpayers’ money.

ECONOMIC VISION 2018: Business. Finance. Economy.

which in turn leads to further debt. This is why, every single day, the Ministry of Finance is focused on its responsibility of containing Government spending and balancing its expenditure with its revenue.

due. So we have to be careful with the money, use it with care and prudently.

Then there is another version which says that because we have registered a surplus, we may now be extra generous and do all that comes to mind because our financial problems are over. I am daily inundated with ideas on what to spend the surplus on.

I feel it is also my duty to remind everyone how we have arrived here. We have registered a surplus because we broke a cycle, synonymous with past politics, that before an election, Government overspends like there’s no tomorrow and loses control over expenditure. It is no coincidence that our three excessive deficits were obtained around an election year.

In my role as Minister of Finance I promise never to forget that Government money is taxpayers’ money. It is coming from those upright citizens who pay the taxes

Such was the cycle, pinching pennies and cutting corners AFTER an election and overspending BEFORE an election. Such a cycle is not conducive to a surplus.

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We have a number of challenges within the infrastructure and environmental field which we cannot ignore. In meeting them, we must ensure that our public finances remain healthy.

Certainly, the contrary is the case. This is why as Government we have decided to do away with this cycle and embark on one that led to this success. Another measure which led to a surplus was the policy of ‘growth-friendly consolidation’ – decreasing the deficit and debt without freezing the economic climate and causing shocks to the rhythm of economic growth. Not only did Government pay attention to this, but it created an environment where economic activity flourished. However now we must look to the future. We have a number of challenges within the infrastructure and environmental field which we cannot ignore. In meeting them, we must ensure that our public finances remain healthy. EV

ECONOMIC VISION 2018: Business. Finance. Economy.

ouse OF

C A R D S

Shadow Finance Minister Mario de Marco warns of the risks that come with resting on our laurels, emphasising the need for Malta to work hard to maintain its growth and protect its reputation.

A Photos by Alan Carville

s I am writing this article, Euronews is streaming live coverage of the Catalan Regional Parliamentâ&#x20AC;&#x2122;s declaration of independence from Spain. Markets were quick to react with the impact being felt beyond Catalonia and Spain. Markets panicked, currencies tumbled and companies across the continent warned of possible job losses. By the time that this article is printed the situation in Spain will have changed â&#x20AC;&#x201C; hopefully for the better. Why is this of relevance to this article? Iâ&#x20AC;&#x2122;m highlighting the fragile nature of the economic reality we are living in. Despite the fact that the European economy is going through a continued recovery, the situation is still very delicately balanced. With frequent terrorist attacks, the election of populist far-right leaders, a flare-up of tensions between North Korea and the United States, and a possible downturn of the

ECONOMIC VISION 2018: Business. Finance. Economy.

’The Audience III’ illustration by Nadine Noko for DeVilhena - Boutique Hotel

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Despite the positive sectorial performances underpinning a booming economic phase, we cannot put our minds at rest. We cannot rest on our laurels. Chinese economy, we certainly cannot ignore the perilous state we live in. We also cannot forget the elephant in the room: Brexit. No one, not even British politicians and economists, seems to be in a position to figure out when and how this process is going to take place. The impact of the UK’s divorce from the European Union on the European and global economy is still an unknown quantity. The only thing everyone seems to agree on is that it will be messy and painful for international trade.

International trade growth over the past two years hovered between two and three per cent, a far cry from the average growth rate of seven per cent between 1980 and 2011.

This is the international context within which Malta needs to build the foundations for tomorrow’s economy. There is no denying that Malta is experiencing year-on-year economic growth. Our financial services, iGaming, tourism and booming construction sectors are ensuring the numbers are strongly in the black. However, despite these positive sectorial performances underpinning a booming economic phase, we cannot put our minds at rest. We cannot rest on our laurels.

ECONOMIC VISION 2018: Business. Finance. Economy.

I welcome the fact that the existing economic sectors are still generating new opportunities. The current economic model, built over the past decades, is working today. But it will eventually slow down, as one or more of our sectors loses its competitive edge. What economic sectors do we have lined up to ensure that the growth we are experiencing today is sustained in the years to come? The Opposition has repeatedly pushed for a discussion on the creation of new business sectors. We carried this message wherever and whenever we could: in successive Budget debates, in our pre-Budget documents and so forth, as we harped and continue to harp on the importance of adapting our education system. We must ensure that our education system is preparing our future generations to take full advantage of the job opportunities

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As a country, we need to put our public finances on more solid ground.

that our economy will create in the decades ahead. This is not happening today. By Government’s own admission, the best jobs created by our economy are going to imported labour. There is then the issue of fair distribution of wealth.

We need institutions that work tirelessly to protect our citizens and to uphold our rule of law.

Whilst important, economic growth on its own is not enough. Economic growth does not always tally with an overall better quality of life. It is a conundrum that many Western economies are experiencing with increased intensity. In many countries, ours included, economic growth was achieved at the expense of rising inequality, poverty and injustice. Faced with this reality, the World Economic Forum is recently pushing for human-centric economic progress: economies that serve the citizens rather than the other way round. The International Monetary Fund has also called upon Governments to lead a coordinated global initiative to do “what is required to transform inclusive growth from aspiration into action – into a new global growth agenda that places people and living standards at the centre of national economic policy and international economic integration.” As a country, we need to put our public finances on more solid ground. This year’s surplus was achieved through the Individual Investor Programme. This programme will eventually die out. When that happens, be it next year or in five years’ time, Government’s revenue will not be able to match its daily expenditure. Meanwhile, our national debt will reach €6 billion by the end of next year. This is unsustainable, and worrying particularly for future generations. It is within this context that we need to sit down together as Government, Opposition, industry and other economic stakeholders to plot the way forward for further success. There are opportunities out there. We need to make sure that our country is best placed to capitalise on these opportunities as we have done with great success in the past. For this to happen, we need to strengthen our state institutions. Malta stands to lose one of its main assets: its reputation. We need institutions that work tirelessly to protect our citizens and to uphold our rule of law. We need institutions that support legitimate businesses by fighting syndicate crime, corruption and money laundering. This is basic. If we do not get this right, the rest will fall like a house of cards. EV 75

A ECONOMIC VISION 2018: Business. Finance. Economy.

A G la nce

What will 2018 hold?

Representing some of Malta’s leading companies within their respective industries, seven directors and CEOs share their thoughts about the year ahead in a nutshell.

’Cappuccino?’ illustration by Nadine Noko

ECONOMIC VISION 2018: Business. Finance. Economy.

“We are looking forward to continued growth in 2018 after making significant investments in the product offering which is already seeing positive customer activity. Together with the roll-out of our new mobile sportsbook, this will see us in a favourable position for the World Cup this coming summer.” Jesper Svensson, Acting CEO, Betsson Group Malta

“With ever-increasing economic activity as well as the positive impact of Valletta as the European Capital of Culture, 2018 promises to be yet another exciting year for Malta and the real estate industry.” Alan Grima, CEO, Dhalia Real Estate Services

“For Medavia, 2018 will be another year of capability building for our maintenance, repair and operations and re-designing of the flight operations business model in the light of the prevailing growth of the Maltese economy.” Rammah B. Ettir, Managing Director, Medavia

“Following an expected record-breaking year in 2017, we see even greater opportunity in 2018 as businesses need IT infrastructure and software solutions which create a competitive advantage and comply with ever-challenging security, regulation and reporting requirements.” Tony Mahoney, Chairman, Computime Group

“As a true customer composite, we will continue to focus on protecting what’s important to our clients and delivering an excellent customer experience.”

“Foreign direct investment has helped fuel growth across a large number of industries, with real estate forming the primary underlying asset for most investments. The manner in which we react to maintaining and enhancing our national reputation shall be the singlemost important success factor for 2018.” Dean Micallef, Director, Firstbridge

“The Gozitan economy in 2018 will continue to prosper – significant increases are expected in the finance and IT sectors, the tourism sector and the property and rental market sectors. The lack of skilled labour will continue to be the major concern within the private sector.” Joe Cordina, CEO, Joe Cordina and Associates

Angela Tabone, Managing Director and CEO, Citadel Insurance plc

ECONOMIC VISION 2018: Business. Finance. Economy.

orging

with

internationalisation

he Corinthia Group is undeniably one of Malta’s best-known brands. With hotels from London to Budapest and several new properties in the pipeline, this once-small organisation has grown into an international hotel chain to be reckoned with.

Behind the Group is Chairman Alfred Pisani – the man who has been leading it since its first foray into the hospitality industry back in the 60s. Today the chain’s humble beginnings and resolute family values still underpin so much of what it stands for, despite the fact that many of its properties have grown to become destinations loved by celebrities, magnates and royalty alike. Now, Corinthia is forging ahead with ever more plans for expansion – this time in cities including Dubai and Brussels, and there is plenty planned to ensure the brand continues to move forward into the future.

Photos by Alan Carville

As the Corinthia Group prepares to start work on another international property, Jo Caruana interviews Alfred Pisani to gain his thoughts on what we should expect from the Maltese economy in 2018.

AHEAD

ECONOMIC VISION 2018: Business. Finance. Economy.

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Our islands are moving steadily forward on all fronts of business activities, be it our financial services, construction industry, tourism, gaming and others.

“This year has seen us continue the consolidation and improvements in our operating results, and obtain the permits needed to proceed with the reconstruction of the Corinthia Hotel in Brussels,” begins Mr Pisani. “This hotel will match, and possibly outrun, the best of our collection. “Plus, over the course of this year, we have also opened new horizons in providing our hotel management expertise where it has been needed, and we feel bullish that the fruit of our discussions will flourish in the near future.” Looking into 2018, Mr Pisani explains that the Group plans to sustain its momentum both locally and overseas so as to continue diversifying its asset base. “Our plans for the year to come include our Brussels development, new hotel management agreements, and the development plans for both St George’s Bay and Hal Ferh,” he says. Meanwhile, the Chairman talks passionately about Malta’s progress over the last 12 months. “Our islands are moving steadily forward on all fronts of business activities, be it our financial services, construction industry, tourism, gaming and others,” he details. “However, it is now of great importance that there is a common consensus in our society that our country needs to upgrade its product, especially in the service we provide and with regard to our infrastructure.” In fact, Mr Pisani highlights a very urgent need for Malta’s infrastructure to be upgraded. “Unfortunately, this aspect of life on the island has not kept up with the private development currently taking place here – all of which is forging ahead at a very fast pace. Our country also needs to align its workforce with the needs of investors, especially as, in various sectors, the demand for skilled labour has continued to outstrip supply.” When it comes to the overall power of our economy, the Chairman believes that Malta has a number of inherent strengths, including its strategic location and stability. “However,” he says, “our cutting edge lies in our ability to attract the attention of our

’The Blue Box’ illustration by Nadine Noko for DeVilhena - Boutique Hotel

ECONOMIC VISION 2018: Business. Finance. Economy.

Alfred Pisani: Valletta 2018 as a tremendous opportunity “Any product, whether it is a tourist destination or service offering, needs continual promotion for people to become aware of the product. Malta, in particular, needs exposure since we are selling services in all forms. It is of paramount importance that we have a routine of events that constantly attract the attention of people worldwide, be they companies, associations and the like, so that they can know about our island and ultimately visit. Events like the Middle Sea Race and many others that are carried out yearly have a direct and indirect benefit for Malta. Valletta being the Cultural Capital for Europe in 2018 is certainly a very big event and will further portray our island as a destination with deep history and a special culture, bringing additional visitors to recognise the many advantages the island has to offer – not only in tourism, but also on all our business activities. I believe that Valletta 2018 is a tremendous opportunity for us to market our island and further consolidate our positive image internationally.”

neighbouring countries when it comes to entering our labour market. Nevertheless, unemployment is at a historical low and is being supported by low inflation. In addition, the current economic stability has also contributed greatly to instilling Maltese entrepreneurs with the confidence to constantly invest in their own businesses year after year.”

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It is now of great importance that there is a common consensus in our society that our country needs to upgrade its product.

But he stresses that there’s a lot that needs to be done to secure our future, too. “Aside from addressing our infrastructure challenges, we need to invest further in the sectorial diversification of our economy. In this regard, the country has made a commitment to invest substantially in this area – so, my advice would be for the Government to forge ahead with this programme.

ECONOMIC VISION 2018: Business. Finance. Economy.

“

It is important to seize the moment and not miss the opportunity to reach higher standards both at an economic level, as well as in relation to our quality of life in general.

“Concurrently, we need to become selective about the quality of visitors that we attract to our island. We should move away from the numbers game, since it is these numbers that cause the greatest burden on our infrastructure. We should focus on attracting quality.”

Thinking in the long term, though, Mr Pisani believes things look good for Malta. “Thanks to our diversified economy – which is providing the necessary security needed in case of any dip that will invariably take place as part of an economic cycle – the Maltese economic outlook is optimistic. “But we must not underestimate the fact that we are living in interesting times. It is important to seize the moment and not miss the opportunity to reach higher standards both at an economic level, as well as in relation to our quality of life in general. “As a Group, Corinthia is more than ready – as we have constantly been throughout our history – to actively contribute in this collective effort and to push our country another step forward,” he concludes. EV

ECONOMIC VISION 2018: Business. Finance. Economy. ’Tea & Bubbles’ illustration by Nadine Noko for DeVilhena - Boutique Hotel

the doorstep

one of the most significant events in Valletta’s history

Valletta’s story has been a rich and significant one in our islands’ history, yet, as is the case with vibrant cities, its story is still being written. The next chapter will see Malta’s capital embrace the title of European Capital of Culture 2018, and promises to be one of the most interesting ones yet. Sarah Micallef garners thoughts by key players on the significance of Valletta’s upcoming tenure.

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“With its uniqueness, rich history and imposing architecture, Valletta has always been a must-visit for those choosing our country either for pleasure or for business,” says Minister for Justice, Culture and Local Government Owen Bonnici, and next year, “as European Capital of Culture (ECoC), Valletta will continue to be a centre of attraction not only for these reasons, but also as a cultural venue, placing the Maltese islands on an international platform. This title has enriched our islands both culturally and economically, and I won’t hesitate to say that during 2018, we will be the envy of most.”

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Indeed, Valletta 2018 Chairman Jason Micallef believes Valletta’s title as ECoC marks an important milestone in Malta’s social and cultural development, providing the country with a unique opportunity to mobilise its resources and direct them towards placing culture at the forefront of national discourse. “In this way, the true significance of Valletta 2018 will be represented by its legacy and its ability to act as a catalyst for the further

We should protect our cultural heritage and on the occasion of Valletta 2018, it is the right time to enhance Malta’s cultural patrimony. Owen Bonnici, Minister for Justice, Culture and Local Government

ECONOMIC VISION 2018: Business. Finance. Economy.

strengthening of Malta’s cultural sector and the cultural participation of its citizens,” he affirms. “Valletta 2018 is a lifetime opportunity of regeneration through culture,” says Valletta Mayor Prof. Alexiei Dingli, maintaining that it is only in the past decade that Valletta has experienced real investment. “We estimate that the money spent on the city in these past 10 years is more than what has been spent in the previous decades put together. Furthermore, the injection towards culture is unprecedented. Because of this, I consider this title highly significant for Valletta – it is preparing the city for the challenges and opportunities it will be facing in the coming years.”

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The true significance of Valletta 2018 will be represented by its legacy and its ability to act as a catalyst for the further strengthening of Malta’s cultural sector and the cultural participation of its citizens. Jason Micallef, Valletta 2018 Chairman

Certainly, Valletta’s ECoC title is a year-long showcase of what the city and, by extension, the rest of Malta has to offer, says Malta Chamber President Frank V. Farrugia. “The title is an opportunity, and it all depends on us on how far we are willing to take it. Forming part of the Board of Governors of the Valletta 2018 Foundation on behalf of the Malta Chamber, I can assure everyone that the Foundation has worked tirelessly for the past seven years and the programme we have produced does not leave one undiscovered aspect of Malta’s milieu of realities,” he explains, adding that the Chamber is delighted to house the beating heart of this ambitious project – “the Exchange Buildings have welcomed the offices of the Valletta 2018 Foundation since the very beginning of the project, way back in 2011. We are enthusiastic to see this project come to fruition.”

Architect and founding partner of Architecture Project Konrad Buhagiar believes Valletta should be proud to participate in the tradition created around the yearly nomination of Capitals of Culture. “In many cases the event not only sees the injection of funds into the economy of these towns, international exposure and a renewal of the cultural resources of the community, but also witnesses the evolution of the identity of that town,” he asserts, explaining that ECoC is envisioned as an operation whose legacy will continue to sustain the economy of the city and catalyse the evolution of its identity as a centre for creativity and innovation. “With this in mind, Valletta’s nomination as ECoC is probably the most significant event in its history since a large percentage of its inhabitants abandoned it during WWII.” The European Capitals of Culture initiative has shown that the event is an excellent opportunity for regenerating cities and raising their international profile, as well as enhancing the image of cities in the

ECONOMIC VISION 2018: Business. Finance. Economy.

the city on the world stage where it will shine for years to come.”

eyes of their inhabitants, breathing new life into their culture and of course, boosting tourism. Speaking of how Valletta has fared, and is yet to fare, in accordance with this, Minister Bonnici affirms, “during the past few years we managed to make Valletta a cultural hub once again, not only via locals and tourists’ attendance to our museums but through a cultural calendar full of various events that managed to revive Valletta’s splendour and bring it back to life again. Statistics clearly show that local visitor numbers to our museums are steadily increasing, as is their participation in cultural events.” Meanwhile, businesses and shops in Valletta are also looking forward to the coming year, which, according to the Minister, is sure to give them a boost. “Residents are welcoming this year-long event, which will see their hometown booming in more ways than one. Restoration works are an ongoing project. Valletta has been changing and will continue to do so, for the better,” he says. This has, of course, not always been easy for the capital’s residents. “Having the title has not been easy for the residents. Let’s not forget what it means. It means more events together with access restrictions, more construction and more inconvenience,” the Valletta Mayor maintains, adding, “we’ve done our utmost to reduce the inconvenience as much as possible. Next year and the years after will be the time when the citizens will start reaping the benefits. I’m sure that after all these sacrifices, people will appreciate the beauty of their city more than ever, and people from Valletta will be proud of being part of such an important event. 2018 will place

Undoubtedly, the ECoC title carries with it an extraordinary opportunity to bring about social, cultural and economic change within Valletta. As the Valletta 2018 Chairman explains, “it has brought about an unprecedented wave of interest in the city, both at a local and international level.” Making reference to the upgrading of Valletta’s physical infrastructure and strong efforts to improve the quality of the infrastructure and provision of services for both residents and visitors throughout the past few years, Mr Micallef adds, “this goes hand in hand with the cultural and social development of the city, with various spaces being rehabilitated and used for cultural or social activities, and an unprecedented scale of cultural activity taking place in Valletta and across the Maltese islands.”

Konrad Buhagiar is in agreement, affirming that the upcoming programme of events that will mark Valletta’s tenure as ECoC has certainly generated much desired enthusiasm amongst the local population and interest from foreign visitors and journalists alike. “This has led to more determined private investments in projects especially connected to the hospitality and entertainment sectors with new boutique hotels, until recently totally absent from the capital, springing up in every corner and restaurants and bars throwing their doors open to the public. On the public front, MUZA, the new Museum of Fine Arts, promises to deliver a refreshing novel take on Maltese art as an expression of the evolving identity of the Maltese as a people and island state,” he says.

Indeed, the Malta Chamber President believes that the fact that Valletta has gone through a new renaissance in the past 10 years is no secret. “The deserted streets after office hours are no more, as more and more quality entertainment establishments open up shop in the capital. The

The Valletta 2018 Foundation is responsible for the implementation of the Cultural Programme: a collection of over 140 projects and 400 events taking place throughout 2018. Speaking of the recently-released programme, Minister

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2018 will place the city on the world stage where it will shine for years to come. Prof. Alexiei Dingli, Valletta Mayor

same goes for the extensive commercial activity taking place during the day as highend shops are opening for business, while from a city with very few accommodation solutions a few years back, Valletta now can offer tens of luxury boutique hotels,” he says, going on to affirm that Valletta’s title as ECoC is at least partly responsible for the new lease of life the city is currently enjoying. “Business opportunities coupled with incentives by Government are creating the ideal environment for commercial activity which is not showing signs of slowing down,” he continues.

Bonnici believes that it “will make all of us proud” adding, “we left no stone unturned to make sure that the cultural experience during the coming year will be one to last a lifetime. Indeed, Valletta 2018 Chairman Jason Micallef elaborates, “the Valletta 2018 Cultural Programme is an exciting and inspirational programme that reflects the core values that lie at the heart of Valletta 2018, namely inclusion, diversity, 91

ECONOMIC VISION 2018: Business. Finance. Economy.

Finally, asked what he’d like to see come out of Valletta’s tenure, and what more can be done to achieve his goals, Minister Bonnici ascertains that work is underway on a strategic investment exercise to achieve three pillars in the cultural sector: bringing culture to the people, increasing employment within the cultural sector and having this sector actively contributing to our GDP. “The coming year will see Valletta attracting people from the world over, to participate, watch, and be entertained. This will boost our economy and fits perfectly with what I envisage for the culture sector, as these priorities were also the basis of several events and initiatives taken up by Valletta 2018,” he maintains, pointing out that everything that is being done goes beyond Valletta 2018. “The vast restoration work going on is not only in Valletta but all over the island. There are 15 major restoration projects going on in Valletta alone, including Palazzo Ferreria, Palazzo Castellania and the building which will eventually house MUZA,” he says, adding that these projects will not only enhance visitors’ experience of Valletta 2018, “but our generation will also leave a legacy to future generations. We truly believe that we should protect our cultural heritage and on the occasion of Valletta 2018, it is the right time to enhance Malta’s cultural patrimony.” The Valletta 2018 Chairman echoes his sentiment, stating that the true measure of Valletta’s tenure as ECoC lies in its legacy and ability to stimulate long-term cultural, social and economic change. “This process consists of many complex and delicate issues, ranging from improving the city’s liveability and quality of life for residents, professionalising the cultural sector through international networking and audience development, and developing sustainable economic models for the city. The work being carried out by Valletta 2018 and other organisations augurs well for the legacy of the ECoC title, with these issues being addressed on various fronts,” he maintains.

dialogue, and the democratisation of culture. The programme takes the traditional Maltese festa as its conceptual starting point and main narratives, using this concept to reflect upon the complex and multi-faceted nature of contemporary life in Malta through a series of thematic ideas that paint a vivid picture of the sights, sounds and stories of life in Malta. We are extremely proud of the Cultural Programme and now more than ever, we are excited to be sharing it with the world.” On the part of the Chamber, Mr Farrugia is also proud of how the programme has turned out. With work on it starting several years back, he explains, “the Foundation led an extensive outreach programme in schools, towns and villages over the past years, to get as many people involved as possible. The result is a very professional and ambitious programme that promises to share aspects of our identity that we may take for granted or that we might not even be aware of. The programme, in my opinion, is truly worthy of the importance of the title of ECoC.”

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The title is an opportunity, and it all depends on us on how far we are willing to take it.” Frank V. Farrugia, Malta Chamber President

Sharing what he’d like to see come out of Valletta’s tenure, Prof. Dingli hopes for two main outcomes. “First, I hope that the regeneration of Valletta continues in such a way that the residents get the most out of it. There’s an imbalance between what has been invested in the city centre and what has been spent on the residential areas. I hope this is corrected. It is important that any regeneration touches the people who live in Valletta. Secondly, I hope that the push towards culture continues. I’m a strong believer that culture defines who we are. Because of this, it is very important to keep up the investment and not stop because we are no longer the European Capital of Culture.” On behalf of the Chamber, Mr Farrugia appeals to all involved to ensure that the title will not simply be a 12-month celebration that fizzles out on 1st January 2019. “The ECoC must become a catalyst that brings about the necessary changes that are carried forward into the future, for our next generations to see things differently,” he says, adding, “we should also make sure to keep up the momentum of investment and activity in Valletta well beyond 2018, so that when

ECONOMIC VISION 2018: Business. Finance. Economy.

Malta’s turn to host the ECoC comes round again, we won’t need to start everything afresh, but will find a good foundation on which to continue building.”

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Valletta’s nomination as ECoC is probably the most significant event in its history since a large percentage of its inhabitants abandoned it during WWII. Konrad Buhagiar, Architect

Finally, admitting that whilst everybody has, understandably, a different view on what culture is about, how it should be articulated by the authorities, presented in the institutions that are its home, and how it informs our lives, architect Konrad Buhagiar affirms, “having witnessed the evolution of the term ‘culture’ in the 1970s to include all forms of human activity that are specific to a particular time and community, as well as the socio-anthropological influences absorbed by this field of knowledge and research, I feel a bit nostalgic for the intellectual challenges culture can, and should, provide.” He attests to feeling strongly that “the authorities should not abdicate their role as educators and that the opportunities provided by an event like the ECoC in this respect should not be underestimated, let alone ignored.” Speaking of what he’d like to see come out of the capital’s tenure, he confesses to having always thought of Valletta

as a model Renaissance ‘Ideal Town’ which was its nature at its inception. “I am convinced that Valletta has what it takes to remain alive and valuable, and to be the crucible for a ‘new humanism’ that is growing out of the social and economic crises of the third millennium. The status of European Capital of Culture should go a long way to establishing the city as a container of these values, relaunching the idea that a good and beautiful city is the best basis for a good and harmonious society.” EV

ECONOMIC VISION 2018: Business. Finance. Economy.

A R S ON S Approaching the

next major

milestone As Farsons gets ready to celebrate 90 years of brewing in 2018, Chairman Louis Farrugia talks Jo Caruana through the strengths and challenges facing the company, and Malta as a whole.

The Farsons brand remains one of our island’s most iconic and – with a timeline dating back to 1928 – it’s also one of our most historic. 2017 has been a fruitful year for Farsons. Speaking to me from the beautiful new office block within the company’s compound, Chairman Louis Farrugia explains that one of the Group’s major milestones this year was the commissioning of its new beer-packaging hall, which was inaugurated at the end of 2016. “The first year of operation is always the most important one,” he explains. “You have to learn about the plant, understand its performance and make sure you can reach the efficiency levels that you hoped you could when you planned it. “We have been pleased with the results. This plant entailed a €27 million investment, and it has allowed us to roll out new packaging for a variety of products, including Blue Label and Double Red.”

ECONOMIC VISION 2018: Business. Finance. Economy.

Louis Farrugia: Thoughts on Valletta 2018 “Valletta 2018 is certainly a fabulous opportunity to showcase our jewel of a city to the wider world. Valletta has always been a fascinating place to visit and any visitor should be engaged by its intriguing history. However, the restoration work on the bastions and individual historical sites such as St John’s Co-Cathedral, Fort St Elmo, the Palace, and the embellishment of streets such as Merchants Street, have added much value to such a visit today as compared to the state Valletta was in throughout the ’60s until the ’90s. The opportunity to showcase this magnificent location and add value to Malta’s tourist attraction is there for the taking. As a result, this will certainly help business throughout the island, not just for 2018 but for many more years to come.”

Louis Farrugia standing in front of a portrait of his father, Lewis V. Farrugia

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I think Malta is bound to face an increase in wage inflation as a result of the depletion of available local employees.

The plant has also helped Farsons to focus on its ambitious export plans and the results of this have been a success – the company now exports its beers to 12 countries, including South Korea, China, Italy, UK, Australia and Gibraltar, and it recently also entered the Sicilian market. “We’re even selling to a number of pubs in the UK,” he says with a smile. “It’s one thing to put plans on paper but it’s another to see them coming to fruition, so we are very excited about these advancements.” Asked about the strengths of Malta’s economy at the moment, Mr Farrugia believes them to be our human resources and, unlike any other Mediterranean island, our diversified economy – with a mixed offering including industry, financial services, tourism, maritime, and new sectors like igaming. “If you look at other islands in the region, they tend to be very dependent on tourism and agriculture,” he explains. “So it’s our human resources that really sets us apart, as our skills are so diverse. Our education system produces a range of knowledge and which links into the diverse strengths of our economy.”

ECONOMIC VISION 2018: Business. Finance. Economy.

’Three Doors Down’ illustration by Nadine Noko for DeVilhena - Boutique Hotel

“It has become very difficult to hire people. If you want to retain your staff then you have to adjust your salaries, which, as an employer, one has to pay for either by raising prices or increasing efficiencies. It may also be necessary to increase our labour supply if we want to experience the same growth levels moving forward, however that also puts pressure on our infrastructure and creates problems, especially when it comes to pollution and congestion – two issues that the Maltese public are becoming increasingly aware of.”

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Mr Farrugia stresses that if Government’s objective is to take the population up to say 600,000 or 700,000 people, there needs to be proper planning. “It cannot be a vision that isn’t documented,” he says. “We’ve never been very good at planning yet we should be open to such a vision but debate the long-term effects.

We need an economy for all and an economy that rewards good ideas.

The Chairman also underlines the need for the rule of law to be observed. “A good economy is essential for investment but the country also needs a stable political environment where the rule of law reigns supreme. But we know that is under duress and that has to be addressed. We cannot ignore these challenges and pretend they don’t exist – if people perceive them to be an issue, they are an issue.” Reverting his attention back to Farsons, Mr Farrugia switches to the future of the company and an exciting milestone that is fast approaching – 90 years of brewing. “It was 1928 when my father set up the first Farsons brewery in Hamrun at the age of 27,” he smiles. “So we will be celebrating that,

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ECONOMIC VISION 2018: Business. Finance. Economy.

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followed by the fact that Simonds joined Farsons a year later and Cisk was also launched that year. We have a lot to celebrate and it is obviously a huge satisfaction to know that Farsons has succeeded in operating for all these years. I am also proud of the fact that, throughout that time, we have been of service to the community by employing thousands of people. We have also been leaders in the commercial community and have constantly tried to set international standards.” As for his longer-term view of the Maltese economy in general, Mr Farrugia is positive but underlines that we must face the issues at hand. “We need an economy for all and an economy that rewards good ideas,” he says. “It should be a force for good and not one that rewards greed.” He also stresses that business owners need to care about the state of play and to make their voices heard. “If we deteriorate in terms of standards and if we don’t maintain strong

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A good economy is essential for investment but the country also needs a stable political environment where the rule of law reigns supreme.

values we risk losing stability, so if you think that you are only interested in what’s going on around you and ignore the community at large, then one is ignoring the issues at hand.” I have always believed in the principle of fair competition, the rule of law, free trade and the role of the private sector. I believe that these beliefs have worked well for Malta over the last 20 years or so!” EV

ECONOMIC VISION 2018: Business. Finance. Economy.

2018

TH E

economic

forecast As we set our sights on economic trends for 2018, economist Gordon Cordina talks Jo Caruana through his predictions, suggestions and expectations.

s we round off another year, economist Gordon Cordina and his team are reflecting on 2017 and looking toward 2018.

Photos by Jan Zammit

Mr Cordina begins by stating that it is “quite obvious” that Malta is doing very well from the perspective of macro-economic headline indicators. “We’re experiencing what I like to call a ‘virtuous triangle’ of strong economic growth, low unemployment and price inflation, and a balance in Government finances,” he says, citing the real GDP is 4.6 per cent in 2017 and is expected to be 4.4 per cent in 2018, and that inflation is 1.6 per cent in 2017 and expected to be 1.8 per cent in 2018.

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“At the very least, this situation indicates that our growth is not simply being fuelled by fiscal injection and Government dishing money into the economy, but rather genuine business growth that is mainly underpinned by an expansion in employment.” Taking a look at how the economy is growing, Mr Cordina explains that €9.9 billion of economic value was added in 2016. Currently, 160 firms generate 30 per cent of the economic activity on the island, and 29,500 firms employ an average of 2.5 people. Gaming makes up 13 per cent of the economy (with 800 firms generating 6,500 jobs), while the consumer and tourism sector and the public sector both make up 21 per cent, and the financial services sector makes up seven per cent. “Recent economic growth was balanced between ‘new economy’ and ‘traditional economy’ activities. That growth is being strongly sustained by consumption expenditure (including by tourists) and investment growth, while investment was sustained by public sector projects, as well as private sector business development in equipment and dwellings.” However, as always, the big question is whether this growth is sustainable when there are a number of risks and opportunities that the economy is currently facing.

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It is critical that we continue to sustain our image as a good place to do business in the international arena.

“Reputational risks certainly need to be considered,” Mr Cordina continues, “especially as Malta is very much dependant on the perception and actual reality of being a place that you can visit and do business in a safe and secure manner, and I think a lot of our success so far is down to that. Both when it comes to tourism and foreign investment, our economy’s sustainability is very much hinged on this issue. “With that in mind, it is critical that we continue to sustain our image as a good place to do business in the international arena, which we have so far achieved by joining the European Union, joining the Eurozone, modernising our economy, building infrastructure and regularising mechanisms that are attractive.”

Beyond that, Mr Cordina also stresses that our international tax system should be transparent and compliant. “We cannot really compete when it comes to businesses that require huge economies of scale or a proximity to the rest of Europe, so there should be the possibility to rely on other instruments for us to build competitiveness providing they are compliant with international legislation, especially with regards to international money laundering and transparency. However, it is important to separate between perceived problems and actual problems in this regard. So, we have to do our utmost on all fronts to safeguard and sustain our image abroad, whether it is related to the financial, tourism, ICT or gaming sectors, or even when

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looking at Malta as a place to build a certain type of lifestyle.” There are a number of other risks too, including the possibility of EU-wide corporate tax reform, excessive inflation in housing prices, environment issues and climate change, population ageing, trade and globalisation factors, and ongoing public sector restructuring. However, on the flip side, Mr Cordina details possible opportunities too, including our strategic geopolitical location, Malta’s welltrained and motivated workforce, the low-cost environment, advantageous tax arrangements, our ICT infrastructure, our enviable climate, and our vision for a global lifestyle hub. Meanwhile, when it comes to the property market, it seems prices are showing a relatively stable rate of increase on average, which Mr Cordina says is not indicative of a speculative bubble for the market as a whole. With that in mind, the transactions-based property price index shows relatively stable growth since 2012 – although rental prices have increased at a faster pace and may be subject to more instability due to international client demand. “At present, I don’t think we’re looking at a property bubble – that would happen if people were buying just to sell, rather than as a genuine investment. At the moment, the fundamental demand is being underlined by increased numbers of migrants moving to Malta, as well as locals diversifying into real estate. That said, risks do exist – for instance, if the demand were to suffer some fundamental shock, there would be a risk to property investment.

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At present, I don’t think we’re looking at a property bubble.

Looking to the future of 2018 and beyond, Mr Cordina says it’s important for Malta to develop a long-term economic and spatial strategy for balanced development to invest in Malta’s economic, human, environmental, anthropogenic and cultural capital, as well as distinctive characteristics to sustain medium-term growth. “Development planning has to take a more proactive and enabling approach to bring about desired socio-economic and environmental deliverables, rather than just limit construction activity. “Beyond that, economic strategies are needed for diversification within and away from overweight sectors, to maximise opportunities from Brexit, and to diversify away from excessive dependence on tax competitiveness.” Finally, he also suggests a strategy for maximising human capital value, with a better use of EU funding for learning and continuous training, and the reaping of opportunities for the availability of foreign labour, as well as a renewed focus on housing as a determinant of poverty and on more cost-effective solutions for poverty reduction. “I look forward to a longer-term vision where this balanced approach is being achieved,” he adds. EV

’Before Coffee’ illustration by Nadine Noko

“Beyond that, one should also make sure that investment is properly balanced, especially as this is a small economy. First of all, it’s a question of bringing new real estate onto the market in a phased manner so the market can absorb it; one wouldn’t want to see supply without demand, so it’s more prudent to phase in large investment projects. Secondly, we need to balance real estate with the infrastructure needed and our environmental management such as waste, water and electricity, as well as our landscape investment, traffic management and the need for open spaces. I hope that this latest Budget has started to place some importance on this issue but much more definitely needs to be done in this regard, not just by the Government but by the planning function, which needs to go into these issues in a much more fundamental way. I very much believe in a proactive planning approach that specifies what is expected from any given project rather than just prohibits a project from doing certain things.”

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T he banking sector aising

Buoyant economic figures, local investment opportunities and increased international regulation have kept local banks busy in 2017. But, what are their predictions for next year? Rebecca Anastasi speaks to the industry’s leaders to find out what lies ahead.

ositive economic data from 2017 depicts an environment of high profit margins, low unemployment, low inflation and upbeat consumer confidence. This has resulted in significant gains for the local banking sector, and despite concern from various quarters on the sustainability and long-term future of Malta’s growth rate, industry leaders remain cautiously optimistic that current trends will be maintained in 2018. “Malta has a number of intrinsic advantages which can be further leveraged to support economic growth, in particular the strategic position within key international trade,” Andrew Beane, HSBC Bank Malta plc Chief Executive Officer, asserts. Mr Beane emphasises that this activity can add more value locally if opportunities within the logistics sector continue to be identified. “Today, for example, almost all trade through the Freeport, which is a strategic asset for the country, is transhipped, which means it largely doesn’t touch the domestic economy,” he continues. Yet, responsible development and sustainable growth are essential, according to Mr Beane. “Sustaining this growth for the longer term will require increased focus on enhancing the country’s infrastructure and diversifying the mix of economic activity in order to avoid undue reliance on certain sectors.” In fact, he notes that “the capacity and appetite of the country to sustain a larger population will rightly be a matter for national debate,” in the coming months.

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He notes the role of the bank, currently and in the future, in contributing to this sustainability and to maintaining the stability of the local economy, through responsible, conservative lending. “Our credit underwriting criteria are necessarily conservative, and we will continue to have a limited appetite to support speculative investment property as an oversupply of these assets can pose risks to the economy,” he says.

In 2018, HSBC expects to largely complete its programme of risk management changes which will provide a long-term platform for growth in a changed world. Andrew Beane, Chief Executive Officer, HSBC Bank Malta

2018

the bar for

He advocates a further

diversification of payment mechanisms in Malta in 2018, which, he says, will help strengthen compliance and manage risk. “Malta has the highest usage of cash and cheques in the EU which, according to HSBC data, not only costs up to 1 per cent of GDP in lost productivity, but is unnecessarily increasing the compliance risks in the economy,” he explains. To remedy this, he recommends collaboration between Government and financial institutions which must “accelerate a move to more secure electronic payment mechanisms and change the incentives in the system to reduce the attractiveness of cash and cheques particularly for companies,” he states. Mr Beane refers to the planned 2018 visit of the European Union’s Moneyval organisation, which will be assessing the effectiveness and implementation of the country’s anti-financial crime controls across the entire system. “It is considered critical that, as a jurisdiction, the country passes this assessment in order to ensure that our financial system can demonstrate full and effective compliance with EU standards. This is essential to protect our collective reputation and standing within the international financial system and cement the foundations for long-term growth,” he stresses. Indeed, a key focus for the bank in 2018 is to continue enhancing its strategies to monitor risk, as well as to ensure continued technological and business progress to be able to better serve its customers. “In 2018, HSBC expects to largely complete its programme of risk management changes which will provide a longterm platform for growth in a changed world. In addition, focus on revenue growth and innovation will be increased. Our commercial bank now benefits from enhanced specialist capabilities such as international trade, and, in our retail business, a key priority will be harnessing the benefits of technology and innovation to enhance customer experience, improve efficiency and reduce costs,” he emphasises. 111

ECONOMIC VISION 2018: Business. Finance. Economy.

Marcel Cassar, Chief Executive Officer at APS, also points to the positive economic trends and buoyancy in the markets which have further strengthened the banking sector. Indeed, in 2017, “core domestic banks continued to report healthy profits, remained adequately capitalised, liquid and experienced asset growth,” he states. The increase in liquidity, resulting from the rise in residents’ deposits, allowed the bank to focus, among other things, on “optimising its liquidity stocks to meet an increased demand for credit,” he says. He notes the ways in which the bank has consistently dealt with change drivers in the economy such as regulation, technology, people and competition, specifically citing “the increasingly demanding regulatory and compliance requirements, the importance of attracting and retaining quality talent and the low interest rate environment which makes business and pricing a constant challenge.” In 2018, current trends such as the increase in cash deposits and consistent economic growth are forecast to continue, according to Mr Cassar. “Malta continues to enjoy one of the strongest macroeconomic expansions in the Eurozone with an average growth of 4.7 per cent between 2010 and 2016. We expect the Maltese economy to continue performing well, S&P predicting that it will be expanding by nearly four per cent a year on average over the period of 2017

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Malta has a diversified export base and a flexible economy that makes it capable of withstanding Brexit shocks. Marcel Cassar, Chief Executive Officer, APS

to 2020,” Mr Cassar explains. As a result, the bank will be completing and implementing projects which have already started. Attracting the best talent, monitoring credit quality and risk diversification will also continue to be areas of priority for the bank in 2018. However, it will also diversify its strategy by “seeking to be more competitive in the deposit market,” he says, as well as ensuring it reacts to the ever-growing needs of individual industries. “The tourism sector is expected to keep on growing, while e-gaming and logistics are growing at a fast rate and are expected to keep performing well. Banks have a very important role to play in this regard, by optimally balancing between funding economic growth and following their conservative financing practices,” he states. Moreover, APS has a central role to play, Mr Cassar believes, as a result of its ability to cater to the needs of the SME market. He points to the restructuring of its Commercial Banking Unit and changes to the policies and procedures of its commercial facilities, implemented in 2016, with the aim of simplifying processes for smaller enterprises. Looking further ahead, Mr Cassar comments on the effects Brexit might have on the bank next year, in the areas of tourism and financial services. “A weaker sterling as a result of Brexit may negatively affect tourism coming from the UK, which generates 30 per cent of tourism receipts. Moreover, certain segments of Malta’s financial services sector which are exposed to the UK could be disrupted.” Yet, he remains positive Malta, and APS, will be able to deal with any consequences which arise from Britain’s exit from the European Union. “Malta has a diversified export base and a flexible economy that makes it capable of withstanding Brexit shocks. Against this backdrop and in view of the bank’s customer profile, we do not anticipate any meaningful negative impact on operations,” he concludes.

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Moreover, 2017 saw the bank go into real estate finance locally, principally by providing financing solutions to established developers for the acquisition and development of property. “FIMBank has traditionally been a trade finance bank focused on international operations, and that has not changed. It is entirely in keeping with FIMBank’s location and commitment to Malta that we launched a real estate developer financing business and focused on trade finance for Maltese corporates,” he states. The FIMBank CEO adds that this was part of the bank’s strategy to increase its euro asset classes at a time of slow but sure economic growth in Europe. “It is the right time to invest in relationships with Malta’s largest corporates, as well as several mid-market corporates in continental Europe that have successful business models,” he continues. Mr Subramanian highlights the growth in Malta’s real estate market and the increased commercial development. Does he expect this to slow down? “This growth has been driven by credit expansion from banks and suppliers, and it is usual to expect any credit-driven expansion cycle to plateau after significant growth. The growth in Malta is also driven by retail and corporate investor demand, which sees real estate as a store of value in addition to the creation of capacity. This will allow the sector to expand and then balance itself with a ‘soft landing’ when it reaches the end of the growth,” he explains.

Murali Subramanian, FIMBank’s Chief Executive Officer, places the bank’s performance within the general positive scenario of this economic sector in Europe. “There has been a move towards health in the banking sector throughout Europe, with the weakest and most unsustainable banks either challenged by the regulator or dealt with. Examples come to mind in Malta and Spain in this regard. New ECB regulations and structures to deal with bank health and recovery plans took shape and resolution plans were tested, in some cases successfully,” he says. He also points to the effects of the trend towards increased regulation. “Globally, there has been a realisation that regulation had gone too far and that it was questioning the long-term viability of banking, though actions are yet to follow.” Furthermore, he notes that in the wider economy, the issue of non-performing loans has not been rectified. “There has been some talk of a Europe-wide ‘bad bank’. This will define the ability of the banking sector to support the incipient economic growth, even as the ECB drops early hints of tapering the QE,” he states.

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We are confident of a good 2018. Our understanding is that Malta is poised for another strong year of growth, accompanied by low inflation and unemployment, as well as low deficit and public debt, and high current account balance. Murali Subramanian,

According to the FIMBank CEO, the prospects for 2018 are bright, and are guided “by the optimism and growth in Malta, where we have a growing local business.” Indeed, he expects Malta’s economy to keep strengthening. “We are confident of a good 2018. Our understanding is that Malta is poised for another strong year of growth, accompanied by low inflation and unemployment, as well as low deficit and public debt, and high current account balance. Overall, a great year is expected for construction and real estate, infrastructure, and services.” In light of this, Mr Subramanian is confident that FIMBank will continue registering year on year profits while diversifying its portfolio. “In 2018, FIMBank will look forward to growing its Malta and Europe focused book significantly, without diluting its risk or client focus as currently set. We expect to do more with corporates and developers in Malta, while building our emerging markets business out of Dubai, and European business out of Malta and London. Our strongest competition is ourselves, such is the opportunity in the space we are active in,” he explains.

As regards FIMBank itself, 2017 has delivered Chief Executive Officer, positive results. He points out that the prioriFIMBank ties set for this year were the legacy clean-up, building business disciplines and introducing growth opportunities, as well as focusing on recapitalising the bank. “This has come along well, and FIMBank has demonstrated nine straight continuous quarters of Considering FIMBank’s international markets, how will Brexit affect profitable results as of the end of September, positioning us well for a good the bank? “Brexit is a concept that will take several years to fully 2017 close,” he confirms. develop, and no one really has any concrete predictions on the state for the UK and Europe at the end of this process,” he states. Despite Among others, this year saw FIMBank signing up to the Target2 payment this, he claims that several financial institutions, as well as insurance system, operated by the European Central Bank System. Mr Subramanian exand financial service firms, have started taking steps toward moving plains, “a benefit from doing this was seen immediately, as FIMBank became key head office functions to mainland Europe. “FIMBank continues a direct counterparty for thousands of banks worldwide that were otherwise to be fully supportive of inward investments, and is providing several paying into the correspondent bank on our behalf.” He also notes the positive of these businesses with assistance in setting up operating accounts, effects on the bank’s customers, saying, “clients have benefited by being able building their banking base here, and expects to play a significant role to make payments later without affecting the value dating, and are able to as this develops. The effect is a positive one for Malta’s economy,” he deliver payments electronically to FIMBank via FIMBank Direct, our new concludes. client portal.”

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Meanwhile, Paul Mifsud, Managing Director at Sparkasse, describes the opportunities 2017 presented, emphasising the bank’s strategy. “The bank has developed a strong business model and a dynamic business culture that has allowed it to seek new opportunities both locally and most importantly within the rest of the EU,” he explains. The challenges facing the bank in 2017 were those facing the entire banking sector, related to negative interest rates and increased regulation, as well as an increasing dependency on efficient electronic systems. “2017 was yet another year where several resources were directed towards the regulatory implementation and investment in Information Technology to satisfy both customer demand, but more so regulatory reporting and regulatory adherence in general,” he states. These demands are expected to hold into 2018. Indeed, Mr Mifsud specifies that the bank’s strategy will centre on reacting, and dealing with, the specific needs which arise

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Malta’s position as a hub of foreign investment and business has also had a knock-on effect on consumer banking. “Individuals as well as businesses require banking services, so it is inevitable that as the influx of EU nationals into Malta increases, the banking sector will advance at possibly the same pace. Although it is also true that a person or entity moving to Malta may not necessarily require banking services in Malta, practice has proved otherwise. Banking services seem to move in tandem with movement of businesses and residency,” he continues. Despite this, the bank made a conscious decision to remain out of the housing market. “The issue of house pricing is and will become a serious problem for Malta unless properly monitored. It is inevitable that this will lead to wage inflation very soon,” he predicts. Mr Mifsud is optimistic regarding the opportunities Brexit might have to offer Malta. “We see good opportunities as a result of Brexit and both Malta and the bank should be able to capitalise on the fact that entities established in the UK will most likely need to relocate to other jurisdictions within the EU should they wish to continue doing business within the Union,” he asserts.

The bank has developed a strong business model and a dynamic business culture that has allowed it to seek new opportunities both locally and most importantly within the rest of the EU. Paul Mifsud, Managing Director, Sparkasse

from the economic environment. “Our priorities in the years to come are to strengthen our base in Malta with all the resources necessary to run and support a strong and successful bank, by investing in our human resources, IT infrastructure and regulatory framework, while contemporaneously looking to emulate our business model within the Union,” he continues. For Sparkasse, growth requires a consideration of office, space and accommodation for an increasingly foreign workforce. “Twenty per cent of the workforce in Malta is already made up of non-Maltese, a statistic we can very much relate to as it permeates within our bank. Thankfully, Sparkasse has already made provision for expansion of its office space early in its

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growth trajectory that should serve it well for the foreseeable future, and is now seeing how best to address other issues such as residential options for its foreign workforce,” he asserts.

However, he sounds a note of caution. “Malta has to be realistic here too as the competition from other attractive jurisdictions is a reality. Size, infrastructure, quality, accessibility and price are all criteria that form part of the assessment one would make before relocating. Capitalising on our culture, legacy and language, however, should assist us in picking up some mid-size entities,” he states. Growth is also expected within Sparkasse itself and plans are underway for its presence to extend beyond Malta’s shores. “As a result of the resilient growth locally, there will come a time when the bank will need to seek expansion solutions that will include its presence in other jurisdictions within the European Union. Plans in this respect are already advanced, and form part of the bank’s business continuity plan,” he outlines.

ECONOMIC VISION 2018: Business. Finance. Economy.

Mario Mallia, Bank of Valletta’s Chief Executive Officer, compares the positive indicators in the Maltese economy in 2017 to the more challenging situation in Europe. “The local banking sector is in a good state of health, with high levels of capitalisation and rates of return which are, in general, superior to European counterparts. Asset quality is also improving, as non-performing loan ratios continue to be managed downwards. Although local economic performance is strong, and is providing good-quality business opportunities for banks, the Euro area environment, marked by rock bottom interest rates and a dearth of quality investment opportunities, is more challenging,” he states. He notes the challenges which have been created locally as a result. “The bank is responding to these challenges by revising its traditional business model. This is a strategy that has two facets: firstly, BOV is seeking to diversify its sources of income in order to reduce reliance on interest margin. Secondly, the bank is reviewing its risk profile, with a view to exiting or re-dimensioning certain business lines where the risk being carried is not justified by the return,” Mr Mallia explains. BOV has also been in the process of re-assessing its organisational structure, laying the foundations for a comprehensive HR strategy, though this has not been without its difficulties. “As the service economy grows, we are encountering a lack of supply in a number of skills. BOV is responding by giving top priority to staff training, and by aligning its remuneration packages to the new market conditions. The aim here is optimisation of the workforce and ensuring that BOV has the resources to attract and retain top talent,” he asserts. This will continue to be a priority for 2018, according to Mr Mallia, together with business opportunities in the areas of private banking, payments and lending. “Vibrant economic growth naturally presents good business opportunities for the financial sector, especially in the areas of private banking and payments. Lending is also likely to prosper, although many ‘new economy’ businesses are typically not capital intensive, which means that the growth potential for business credit will be limited. I see more growth potential in personal lending, including both mortgages and consumer finance,” he notes.

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Moreover, Mr Mallia also describes the extensive IT system overhaul commenced in 2017, the bulk of which will take place during 2018, with the final stages of implementation planned for the following year. “It is a multi-million Euro programme which underlies BOV’s digitalisation strategy, and which will carry the bank into the 2020s and 2030s. The focus of this change programme is the customer – we aim to provide customers with access to our product suite efficiently and across multiple electronic and physical channels,” Mario Mallia, Chief he specifies. Executive Officer,

We see continued economic growth for Malta over the next three years.

Bank of Valletta

However, Mr Mallia is also cognizant of the demands which the banking sector will face in 2018. “Banks will face challenges from market disrupters, which will continue to venture into territory traditionally the natural habitat of banks, but which are being increasingly penetrated by FinTech companies. Unless the banking sector gives top and immediate priority to digital channels, including the development of API platforms and the provision of services across multiple channels, it will be laying itself open to some quite heavy disruption,” he explains. Increasing regulation is also a concern for BOV, specifically in relation to the expenses which arise, and which are applied across the board. “The constantly expanding regime of banking regulation is in reality a double-edged sword. While regulation makes the banking system safer, the costs of compliance are many times very significant, and constantly rising. This is especially the case for smaller jurisdictions like Malta, where banks are expected to carry the same regulatory burden as their much larger European counterparts. The local sector, in liaison with Government authorities, is lobbying for greater proportionality in banking regulation. The ‘one size fits all’ approach is placing disproportionate cost burdens on the smaller players,” he continues. His projections for the Maltese economy for 2018 are positive. “We see continued economic growth for Malta over the next three years, and our business plans are aimed at supporting, indeed shaping, that economic activity in a responsible manner. The businesses that will do well are those businesses which are designed to do well, namely those that are geared for the long term (as against those that are out to make a quick buck), that base their planning on sound economic fundamentals (as against those who simply ‘follow the herd’), that are adequately capitalised, that are socially responsible and that succeed in attracting the right skills. These businesses will find the banks’ doors always open for them,” he concludes. EV 119

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Financial planning sessions for BOV Investment Centre clients November brought to a close a series of workshops focusing on financial planning organised by Bank of Valletta’s Retail Business Support Unit for clients of its network of six Investment Centres and their satellite branches. Hosted at various venues around Malta and Gozo, the sessions saw BOV speakers discussing the importance of consciously planning one’s financial priorities at different junctions in one’s lifetime. Discussing the initiative, Grace Debono, who heads the Retail Business Support function within the bank, explained, “often people tend to procrastinate when it comes to their investment decisions, either because they don’t feel sufficiently confident or because they believe investment solutions to be complicated, and so they opt for the conventional term deposit account to put away their life savings.” However, as Ms Debono explained, “we need to plan for our financial well-being in the same manner that we plan for other milestones in our lives, especially if we want to ensure that we can afford our current lifestyles once we reach retirement age and are no longer in gainful employment.” Pitted against the rising life expectancy age, which is forecast to be in the region of 84 by 2050 for the Maltese population, BOV speakers explained how one’s priorities in life change depending on one’s circumstances. “Likewise, one cannot retain the same financial plan throughout one’s life. The plan needs to match one’s circumstances; probably riskier for younger investors seeking to grow their capital base, and eventually growing more balanced and

conservative as one gets closer to retirement and the main focus becomes income generation,” explained Mark Vella, Head of Marketing and Business Development at BOV Asset Management. These sessions served to set the scene for clients to consciously think about when and how much they should start investing at a given point in time, and what fallback measures they should adopt for a rainy day. The input of the Investment Centre and the satellite branches was critical for the success of these sessions, explained Ms Debono. The managers of the Investment Centre continuously work closely with the management at the respective branches, so as to ensure that the service delivered to the individual customer reaches the desired level of expectation. Following the informative sessions, participants were able to network and discuss personal concerns with the Investment Centres and branches’ teams present for the event on a one-to-one basis. “Bank of Valletta strongly believes that it has an active role to play in the communities in which it operates. Financial education features highly on the bank’s agenda, and these sessions were amongst the bank’s initiatives undertaken this year to support its clients, enabling them to make more informed decisions vis-à-vis their financial goals,” concluded Ms Debono.

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Julian Sant Fournier appointed by Computime Software to drive market growth with Acumatica Cloud ERP and Pepperi B2B Commerce Platform solutions Computime Software, a local market leader in business software and integration solutions has announced the appointment of Julian Sant Fournier as Senior Solutions Consultant. In his new role, Mr Sant Fournier will be driving through state-of-the-art cloud-based solutions such as Acumatica ERP and Pepperi B2B Commerce Platform. Mr Sant Fournier joins Computime Software with over 35 years’ experience in the Maltese software market, having held key positions within leading IT companies, and delivering numerous strategic custom and ERP software projects in Malta. He started his career as a software developer in 1981, and worked his way through various positions in consultancy and management. He holds a Masters in Business Administration from Brunel University. Mr Sant Fournier will focus on vertical ERP solutions for industries such as distribution, professional services, and construction, as well as horizontal solutions such as financial management, procurement and project accounting. Cloud-based solutions create the potential to connect and collaborate with other cloud-based applications with ease and in a relatively short timeframe. This agility empowers companies to connect customers, suppliers and employees seamlessly, delivering business value anywhere, on any device, and at any time.

HSBC Malta releases 2016/17 Corporate Social Responsibility report

For more information visit www.computimesoftware.com or contact Julian Sant Fournier on T: 7979 1671.

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HSBC Malta Foundation released its first Social Corporate Responsibility (CSR) report, showcasing its efforts, goals and performance in sustainability, corporate citizenship and staff volunteerism. The inaugural report provides a comprehensive review of the impact the bank makes in its mission areas of education, environment and Maltese heritage. It also presents the sterling work done by its employees in the community. Highlights of the report include: • Successful conclusion of the €400,000 conservation work at Our Lady of Victory Church • Partnership with Prince’s Trust International with a support of €300,000 to introduce youth advancement programmes • Updates from the €540,000 HSBC Water Programme – Catch the Drop conservation campaign

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About Computime Software Computime Software is a leading provider of standard and customised business software and integration solutions for medium- and large-sized organisations across the globe. We deliver industry-focused solutions to various sectors.

“HSBC Malta’s history on these islands dates back over 150 years, and we have always been part of the local community. Sustainability means building our business for the long term by balancing social, environmental and economic considerations in the decisions we make. This enables us to help businesses thrive and contributes to the health and growth of communities,” said HSBC Malta CEO Andrew Beane. Initiatives run by the bank’s staff members such as CSR Day, walkathons, Pink October, Movember, and sales of prinjolata to raise funds for charity also form part of the report. The HSBC CSR report is available online at www. about.hsbc.com.mt/hsbc-in-malta/community. A copy of the report can be found at all HSBC branches and offices.

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