THIS ISSUE
Issue 12 | OCT - NOV 2012
SINGLE MARKET DEVELOPMENT An overview of the single market’s achievements through the past 20 years, as it became the world’s largest economic bloc.
page 9
business agenda
Business Agenda discusses the European Parliament’s efforts to unravel the full potential of the EU’s single market for its citizens.
page 13
digital agenda The European Commission’s agenda to create a digital single market. How businesses stand to gain.
page 21
BUSINESS OVERVIEW A look at how the EU’s single market affected the operation of Maltese businesses across Malta's main industries.
pages 23, 30, 31
special edition to mark the 20th anniversary of the european single market
THE Official Business publication of the Malta business Bureau
Study reveals untapped opportunities for Maltese businesses within the Single Market
european parliament
NEWSPAPER POST
A research study by the Malta Business Bureau (MBB) has revealed that Maltese businesses are now being exposed to new niche market opportunities within the EU’s single market, allowing for innovation and product diversification within the local business community. The qualitative study, conducted by MISCO on behalf of the MBB, was carried out among local businesses from the services, tourism, manufacturing, retail and distribution sectors. The study established that in spite of the increased opportunities presented by the single market, many local businesses are still finding it extremely hard to compete, due to their limited capacity and resources, a challenge which they encounter due to Malta’s natural peripheral geographical location. Since Malta has limited natural resources, businesses are forced to import most of the resources they require, resulting in increases in the cost of production and a double increase in the cost
‘THE EU’S DIGITAL MARKET PRESENTS NUMEROUS OPPORTUNITIES FOR BUSINESSES AND CITIZENS ALIKE’ - Charmaine Hogan
“The digital economy has evolved significantly, and its potential for the EU single market’s consumers and businesses is equally significant. However, when it comes to e-commerce it is not functioning to its full potential,” explains Charmaine Hogan, the European Commission's single market Ambassador to Malta, in an interview with Business Agenda. This, she believes, is largely due to the different rules and standards implemented within the various countries of the EU which have failed to achieve one common goal.
of transportation – first to import the raw material and ultimately to export their products. Although the single market offers opportunities for economies of scale, Malta’s small size makes it very difficult for local businesses to reach the desired critical mass in their production output. The study also revealed that businesses are granting significant importance to e-commerce, which most sectors underlined as a main element which could offset the challenges local companies face due to the country’s geographical position. See full story on page 5.
Conscious of this, the Commission has set out an action plan which covers a range of complementary initiatives to help overcome these obstacles and bring further consolidation on the various aspects among the EU’s member states. The interview delves into the numerous initiatives to help strengthen the EU’s e-commerce sector and various other efforts the Commission has embarked on to help businesses, especially SMEs.
See full story on page 11.
‘DEVELOPING A BUSINESS CLUSTERS MENTALITY – KEY TO MAXIMISING COMPETITIVENESS WITHIN THE GLOBAL MARKET’ - Jason Azzopardi In an interview with Business Agenda, Malta’s SME Envoy, Minister Jason Azzopardi, emphasises the importance of implementing a business clusters mentality, a concept which sees businesses join forces to achieve their respective targets, hence becoming more competitive when operating within the international market. Whilst acknowledging the benefits of the single market in making the EU as well as its individual member states more competitive, Minister Azzopardi also explains
how untapped potential still lies within the various aspects of the EU’s single market, most prominently within the digital market for businesses. Although acknowledging that infiltrating the international market is challenging, especially for Maltese micro-enterprises, Dr Azzopardi believes that local companies must remain vigilant to update themselves and continuously develop new products and services, to keep ahead of the competition.
See full story on page 16.
2
BUSINESS AGENDA | OCT - NOV 2012
3
BUSINESS AGENDA | OCT - NOV 2012 | EUROPEAN SINGLE MARKET 20th ANNIVERSAry special edition
editorial
Celebrating 20 years of the European Single Market Anniversaries provide a unique opportunity to take stock, look back to where we started and focus on the future. This year marks an important and special anniversary for Europe and business; 20 years of the European single market. The single market was launched by the Treaty of Maastricht in 1992, and to date it has developed into the biggest economy in the world, catering for 500 million consumers. The Malta Business Bureau (MBB) has put the European single market at the top of its agenda. In fact, this edition of Business Agenda is a special issue, and the first of its kind, dedicated entirely to the single market. The European single market was one of the main reasons why the Maltese business community was so strongly in favour of EU accession. The MBB believes that the EU internal market still offers considerable, yet untapped opportunities that could make a real difference to local businesses, but nonetheless acknowledges the challenges it brings. Trade has been rooted within the Maltese entrepreneurial spirit for centuries and it is therefore natu-
ral for us to conduct commerce with our neighbouring counterparts and beyond. Given the restricted size and insularity of the Maltese market, our micro-enterprises and SMEs should continuously seek expansion and growth. There is a point when any firm undergoing restructuring should look beyond local shores for further opportunities, in order to increase its production and sales. In this sense, the single market presents a golden opportunity. Nevertheless, beyond this idealist theoretical approach lies realism. Many Maltese micro-enterprises and SMEs continue to ask: how is a country such as Malta, with no raw materials, limited resources and a peripheral geographic position, supposed to compete? Given the current economic climate, how can we become more competitive, sustainable and achieve economies of scale? Being fully aware of these concerns, in recent weeks the MBB conducted a consultation process with a number of key businesses in Malta which sought to better understand the experience and challenges microenterprises and SMEs face while
operating within the single market since EU membership. I invite you to read through this edition of Business Agenda, which is presenting the results of this study for the first time. The message emanating from Maltese micro-enterprises and SMEs is that against all odds, and despite the limitations our businesses face due to the reasons referred to above; Maltese business continues to thrive eight years on since accessing the single market, contributing to economic growth and the generation of employment. Maltese businesses can still do more to contribute towards our economy, now more than ever. For this reason, they need to look ahead and seek opportunities to reap the full benefits of the single market. Realistically, given the size of our local market, making the smallest foreign business conquest would be worth its weight in gold for the sustainable growth and competitiveness of our businesses. The time is now ripe for Maltese firms to keep innovating and to become more receptive towards new business models that can make the best of cross-border commercial
By Joe Tanti, Chief Executive Officer, MBB opportunities. Clearly, the time has come to explore new ways of doing business that can enable our enterprises to work together for them to be stronger when doing business beyond our shores. The MBB guarantees its full commitment to support the Maltese business community in taking advantage of the vast opportunities offered by the single market. In this regard, the MBB is strengthening its EU information and monitoring service on the ongoing developments related to the 'Digital Agenda', which is relevant to all economic sectors for the benefit of its members’ companies.
and sectoral export consortia are effective solutions for the inherent limitations of economies of scale that afflict the Maltese entrepreneurial scenario. From a legislative point of view, there is certainly still a lot to be done at a local level, such as the development and implementation of a national entrepreneurship policy tailored to reduce the insularity cost of operating a commercial endeavour in Malta. In particular, a clusters policy can only be successful if the proper supportive infrastructure is put in place, adequately funded and monitored by a lead public authority, possibly Malta Enterprise.
On a more conventional note, it is also worth noting that business models based on clusters-formation, purchasing-pooling practices
COLLABORATING PARTNER:
Publisher
Malta Business Bureau
Content House Group
Casa Leone
Mallia Buildings
Pjazza Robert Samut, Floriana
3, Level 2, Triq in-Negozju Mriehel QRM3000
Tel: 00356 2125 1719 (Malta Office) Tel: 0032 4859 81124 (Brussels Office)
Tel: 00356 2132 0713
Email: info@mbb.org.mt
Email: info@contenthouse.com.mt
infobrussels@mbb.org.mt
www.contenthouse.com.mt
www.mbb.org.mt
The Malta Business Bureau is a non-profit making organisation acting as the European-Business Advisory and Support Office of the Malta Chamber of Commerce, Enterprise and Industry and the Malta Hotels and Restaurants Association. The MBB has two offices, the Head Office in Malta and the Representation Office in Brussels.
Editor: Joe Tanti Deputy Editor: Yolande Spiteri
Editorial Team: Chiara Bonello, Omar Cutajar, Daniel Debono, Mariella Scicluna
Business Agenda is the quarterly publication of the Malta Business Bureau. It is distributed to all members of the Malta Chamber of Commerce, Enterprise and Industry, all the members of the Malta Hotels and Restaurants Association, and to all other leading businesses by Mailbox Distribution Services, part of Mailbox Group. Business Agenda is also distributed by the Malta Business Bureau to leading European and business institutions in Brussels.
4
BUSINESS AGENDA | OCT - NOV 2012
Our expertise maximises your success.
From a simple, intimate event to a large, highly visual conference, Studioseven is able to manage, design and deliver your vision. Our creative minds and technical wizards can supply: • Project Consultation • Sound & Lighting Support • Project Management Support • Satellite Uplink Capability • Design & Marketing Material • Audio Visual Recording • Motion Graphic Projection • Video Editing Production • Set Design & Construction
• CD/DVD Duplication
Studioseven can also provide both ATL and BTL creative design and marketing services to support your conference or event. Contact us today and entrust Studioseven to deliver your conference or event, both creatively and professionally. www.studioseven.com.mt • Tel: +356 2148 6301 • sales@studioseven.com.mt
5
BUSINESS AGENDA | OCT - NOV 2012 | EUROPEAN SINGLE MARKET 20th ANNIVERSAry special edition
cover story
Access to niche markets within the eUROPEAN single market considered a way forward for Maltese businesses The Malta Business Bureau (MBB) carried out a research study among various members of the local business community to gain deeper insight into the experience of Maltese SMEs and microenterprises operating in the European single market. MARK SEYCHELL examines the general business attitude towards the adaptations, challenges and opportunities experienced when operating within the EU’s internal market. A study commissioned by the MBB aimed at finding out more about the experience of Maltese SMEs and micro-enterprises within the European single market has revealed that forming part of this massive market presented increased opportunities for them to diversify their business and to tap into new niche markets. The possibility of outsourcing activities to businesses in foreign countries was quoted as another advantage of Malta’s full access to the single market. Nonetheless, as the study reveals, Malta’s natural peripheral geographical location, the country’s limited capacity and resources, and high transportation costs remain the main concerns for local businesses. The study focused on identifying the key issues that are central to business operations as well as general opinions of Maltese businesses on the impact of the single market on their operations. Participants gave their views on the differences in their modus operandi both pre- and post-accession to the EU, and thus within the single market. The study also provides an insight into the perceived obstacles to penetrating the single market and reaping its benefits, as well as concrete proposals by Maltese businesses for the facilitation of market accessibility. The research was carried out through a number of focus groups covering the four main business sectors: services, importation and
distribution, manufacturing and exportation, hospitality and tourism services. These focus group meetings were conducted in August, with the support of MISCO and the Hotel Phoenicia.
General Considerations All sectors agreed that Malta’s natural peripheral geographical location, as well as its insularity, are factors that limit local business operations within the single market. While the single market has intensified foreign competition by larger companies in Malta, the same could not be said about local operators wishing to conduct cross-border business in Europe, as these find it harder to compete due to limited capacity and resources. A key issue in this respect is that Maltese businesses have to factor in the costs of importing raw materials and exporting their manufactured products, resulting in added double costs of sea and air freight, thus negatively affecting business competitiveness. However, the single market has certainly increased opportunities for product diversification within niche areas and for networking. Moreover, the ease of transferring factors of production, such as workers, capital and goods, has given local companies a huge boost, although as discussed, transportation costs remain a problem. In order to be more competitive, some companies have considered the option of outsourc-
Why not German? New Courses for Adults
One of the focus group sessions contributing to the MBB study
“Though the single market provides opportunities for economies of scale, to date most of the local SMEs and micro-enterprises can only leverage enough capacity and resources to operate in the local market.” ing activities to other companies abroad, which proved viable thanks to opportunities offered by the single market. The single market has also provided greater investment in Malta, which catered for improvement in procurement practices and infrastructural development, as well as in supporting business to upgrade their operations. Local business strategy has altered with Malta’s accession to the EU. Due to the increase in competi-
tion, businesses now have two options, which present both challenges and opportunities: they can focus on price reduction, to keep up with larger foreign companies, but this would come at the expense of reducing profitability margins. Or businesses can focus on quality, better marketing and branding, and niche market exploitation, the latter being potentially highly profitable. All of the business sectors agreed that some form of market access
Learning for Tomorrow Today Classes for schoolchildren
was already available pre-EU accession, although it was limited by quotas. In fact, participants noted that imports and exports have not increased in quantity, but have been diversified further into other products and services. Yet, the single market enhanced the reputation of Maltese businesses within the international sphere, adding trust and credibility whilst also decidedly putting them on the map.
Key Issues Though the single market provides opportunities for economies of scale, to date most of the local SMEs and micro-enterprises can only leverage enough capacity and resources to operate in the local market. This reduces the bargaining and negotiating power needed when ordering in bulk, as local busi-
Jiena naf bil-Malti Maltese for Foreigners
New courses starting in October. Registration is open. Download Prospectus from www.germanmaltesecircle.org Contact details: German-Maltese Circle, Messina Palace, 141, Triq San Kristofru, Valletta. Email: gmc@germanmaltesecircle.org Tel: 21246967
6
BUSINESS AGENDA | OCT - NOV 2012
cover story nesses face a situation whereby the volumes imported are considered to be minimal in comparison to foreign trade. Manufacturers have also listed their specific concerns. They accept that since the local market gets saturated very easily, export is a necessity. However, due to fierce competition in the single market, margins for profit have decreased proportionally. Importers and exporters showed concern that at times there is still an element of national protectionism that takes precedence over EU interests. Although there should be no barriers to trade within the single market, there are cases whereby countries impose trade barriers in an attempt to protect their own markets. In this respect, increased market surveillance for businesses could help eliminate unfair practices at both the micro and macro levels, such as insufficient labelling and production which do not tie up with European standards. From a hospitality industry perspective, the single market has offered a boost in terms of the credibility and sustainability of Malta as a tourism destination. Despite this, EU accession has only accounted for a marginal change in operations since pre-accession days. Prior to Malta’s EU accession in 2004, tour operators were able to bring tourists to Malta, given that the relevant local regulatory framework was already in line with EU regulations; however
this has been facilitated further when the country joined the Schengen area.
Business Awareness With regard to European Commission initiatives which seek to raise awareness on the single market, participants quite concurred that information is generally easily available. They agreed that this is imperative if they are to compete successfully within the bloc. They also agreed that more needs to be done by national governments and constituted bodies to allow the business community to be fully aware of the changes in EU legislation and procedures as these often prove to be a stumbling block for the business community. The setting up of a national single market office could offer a solution to help businesses overcome this grey area and avoid the overlapping of competences within Government ministries and departments. Such an office could help identify best practice market access solutions and also opportunities for product identification, grants and EU funds. The filtering of information relevant to particular business sectors could be provided through training as well as information seminars and workshops. This would also help to overcome burdensome irregularities in the bureaucracy of national administrations.
The Single Currency and the European Single Market
“Since the local market gets saturated very easily, export is a necessity� Among the different focus groups, the euro currency was generally considered as a positive element of the single market, described as a means to facilitate trade, particularly within the confines of the EU internal market. However it was noted that operations sometimes encountered obstacles due to the fact that the United Kingdom, a key trading partner of Maltese businesses, still retains the ster-
ling; which is particularly problematic when there are fluctuations between the euro and the sterling. The financial crisis has also brought about fluctuations in the value of the euro, which cause significant volatility when negotiating with businesses based in third countries.
The 'Digital Agenda' All participants claimed to have a website, some even in multiple lan-
guages. This has increased opportunities not only within businessto-consumer relations, but also for business-to-business relations. It is interesting to note that manufacturers and distributors regarded the internet as nothing more than a networking and marketing tool. However, the services and tourism sectors believe that there remains a highly untapped potential for their sector in the digital market, due to the numerous possibilities it offers in e-commerce and networking, which could all contribute towards offsetting, at least to some extent, the natural geographical accessibility challenges faced by Maltese economic operators.
BUSINESS AGENDA | OCT - NOV 2012 | EUROPEAN SINGLE MARKET 20th ANNIVERSAry special edition
7
8
BUSINESS AGENDA | OCT - NOV 2012
9
BUSINESS AGENDA | OCT - NOV 2012 | EUROPEAN SINGLE MARKET 20th ANNIVERSAry special edition
siNGLe market development
The European Single Market:
From humble beginnings to becoming the largest economic bloc in the world The single market can be considered one of the flagship achievements of the European Union. Free trade and competition have flourished gradually due to the elimination of restrictions and barriers among EU member states, leading to economic growth and a significant increase in the standard of living for millions of citizens living within the EU. However, this impressive deepening within the Union has experienced its own stumbling blocks. BUSINESS AGENDA takes a look at the historical developments of the single market and explores the elements which restrict it from reaching its full potential.
The foundations of the European single market (sometimes also referred to as internal market) date back to the establishment of the European Coal and Steel Community in 1952. France, West Germany, Italy and the Benelux countries (Belgium, Netherlands and Luxembourg) decided to pool their sovereignty and resources (coal and steel) in an effort to rebuild their economies after the devastations that the Second World War left behind. Political and historical analysts agree that the signing of the Treaties of Rome in 1957 (the first Treaty established the European Economic Community [EEC] and the second the European Atomic Energy Community, better known as Euratom), was a natural consequence of the successful attempt for sectoral integration established in 1952. The EEC Treaty identified a common European market as one of its primary European goals, with the aim of increasing the bloc’s economic prosperity and creating a closer union among its citizens. This aim was partially achieved in 1968, when the six founding members abolished customs barriers between the countries within the Community in order to establish a common customs tariff to be applied to goods, including food
and agricultural produce, from non-Community countries. The rapid evolution in the early years of European integration stagnated in the 1970s and early 1980s, stunting the development of the single market. There have however been some key moments during this period. 1979 proved to be a highly eventful year: it was the year in which the European Monetary System was created, which led to the establishment of an Economic and Monetary Union, as well as the year when the first ever direct election to elect the Members of the European Parliament took place. The turning point of the stagnant period between the 1970s and 1980s took place in 1985 when the European Commission set itself the goal of abolishing all the barriers which restricted free movement between Community members within seven years, whether they were physical, technical or tax-related. As a result of the Single European Act, signed in 1986, these barriers were officially abolished. This enabling instrument for the single market also included provisions to extend the powers of the Commission in other policy areas such as the environment, social policy and research, besides
helping to gradually establish the single market by the end of 1992 through the adoption of hundreds of related directives and regulation. This was a milestone that gave a strong impetus to the actualisation of the single market in which people, goods, services and money move around the EU as freely as they do within a single country, without the obstruction of national borders and barriers. The creation of the single market proved essential to substantially increasing investment, restructuring and legislative modernisation throughout all the member states. In parallel to these developments, the Treaty of the European Union signed during this same year introduced the vision of realising an Economic and Monetary Union. The Treaty of Amsterdam, signed in 1997, incorporated the Schengen Agreement into the EU’s acquis communautaire. This was a major breakthrough which facilitated the free movement of people by means of the abolition of physical barriers to cross-border movement. Another crucial event in 1997 was the launching of the Single Market Action Plan. This plan pursued the elimination of key market distortions, the removal of sectoral obstacles to market integration
Creation of the European Coal and Steel Community in 1951 and ensured that the single market rules are more effective. Much has been achieved throughout the years but more needs to be done. As part of its effort to relaunch its concept of the single market and make it more meaningful to its citizens and consumers, in 2011 the European Commission adopted the Single Market Act. This Act, taking the form of a series of action plans, highlights 12 levers to boost growth and strengthen confidence throughout all countries which form part of the single market. The levers are centred on smart, sustainable and more inclusive growth, and focus on issues such as better access to finance for European SMEs, intellectual property rights, the establishment of a stronger digital single market and the modernisation of public procurement mechanisms.
At the end of this year, the Commission will take stock of the progress of these action plans and will present its programme for the following period based on the results achieved. This will be done with the support of a large-scale economic study, which will help identify the areas having unexploited growth potential. One of the lessons learnt from the current financial crisis is that there is no time and room for complacency. The single market has been, and should remain, the driving force behind the EU’s economic development and prosperity. It is now up to the current policymakers to sustain this momentum for the benefit of European people and businesses.
This article was written by Larkin Zahra, who completed a traineeship at the MBB Brussels Office
10
BUSINESS AGENDA | OCT - NOV 2012
Royal Sundays
at the Grand Hotel Excelsior “Sunday is the golden clasp that binds together the volume of the week” – Henry Wadsworth Longfellow.
The Royal Sundays at the Grand Hotel Excelsior are never-ending explorations of the world’s finest cuisines, offering authentic, ethnic dishes to taste and explore - from Asian, Indian and Turkish to French, Lebanese and Spanish. Excelsior’s team of chefs uses only the freshest ingredients guaranteeing the finest in 5-star cuisine. There’s live entertainment for the grown-ups, and animation to keep the young ones occupied while you relax. And those wonderful harbour views from Spice Island complete the perfect setting. Royal Sundays will commence from 7th October. Call the Grand Hotel Excelsior on 2125 0520 to make your booking for Sunday Lunch or email food.beverage@excelsior.com.mt
www.excelsior.com.mt
11
BUSINESS AGENDA | OCT - NOV 2012 | EUROPEAN SINGLE MARKET 20th ANNIVERSAry special edition
interview
‘More needs to be done to get the single market’s e-commerce off the ground’
Charmaine Hogan
SME start-up and access to finance, e-commerce and the future of the digital market are all issues high on the European Commission’s agenda for businesses. Yolande Spiteri speaks to Charmaine Hogan, the European Commission's single market Ambassador to Malta about the state of the single market and the Commission’s efforts to strengthen consolidation between EU member states. “The digital economy has evolved considerably, and its potential for the single market is significant. However it is still under-functioning when it comes to e-commerce,” according to the European Commission's single market Ambassador to Malta, Charmaine Hogan. Statistics indicate that 45 per cent of Malta’s population shop online, a figure which is slightly above the 40 per cent EU average, whilst the number of consumers experiencing problems when shopping online is more or less similar to that of consumers encountering problems when shopping physically, further proving that there lies untapped potential for online businesses operating within the various areas of trade, retail and commerce. Ms Hogan attributes gap between the potential and the current scenario within the EU largely to the differences in rules and standards across member states. However, effort is clearly being put into overcoming this chasm. As she explains, “earlier this year, the Commission set out an action plan covering a range of complementary initiatives to overcome the obstacles.” The plan included initiatives which called for the development of the market for payments by card, internet or mobile telephone, making these more available to consumers and easily implementable by businesses. High speed wireless and
fixed broadband internet, cloud computing and internet security are also part of this action plan and are considered key enabling factors towards a stronger digital single market, Ms Hogan adds. Another initiative looks to extend the so-called internal market Information System (IMI), which helps competent authorities in member states overcome practical difficulties related in particular to differences in administrative culture, the use of different languages and the identification of partners in other member states. This could help ensure the correct application of the e-commerce Directives and the Directives protecting consumers’ online initiatives on parcel delivery. The freedom of trade across borders has been considered one of the biggest success stories of the European single market, with trade between EU countries standing at €2,800 billion in 2011 when compared to €800 billion in 1992, meaning it has more than tripled, Ms Hogan confirms. Yet crossborder business activities are not as developed as they should be, she argues. Ongoing technological developments can create challenges for the more traditional economic activities, as well as in the related administrative provisions governing them, especially since most are still adapting to a globalised market place. “This is the case for physical as well as online sales, here I would say a better environment needs to be fostered
for all businesses to provide them with the right conditions,” she adds. Through the Single Market Act the Commission also sought to identify the priorities and required action needed to continue reducing unnecessary administrative burdens at an EU and national level, which, in Ms Hogan’s opinion, “indicates a step in the right direction for eliminating undue obstacles for businesses.” Nonetheless, she believes that the individual member states have not gone as far as they could have in removing barriers to cross-border business. Taking the services industry as an example, “estimates show that more ambitious implementation and further consolidation of the single market can generate an additional 1.8 per cent of GDP over the next five to ten years. Member states, including Malta, have laudably undertaken substantial work to implement the Services Directive, however certain other hurdles still prevail,” Ms Hogan says, adding that the Commission intends to step up action to deliver full benefits for businesses and consumers, among other things by applying a 'zero tolerance' policy in cases of incomplete implementation of the Directive’s explicit obligations and by putting an end to business practices that unjustifiably discriminate against consumers resident in other member states. The Commission also identifies the significant role of European SMEs, especially in light of the current
Charmaine Hogan addressing a conference economic crisis, and for this reason has drawn more emphasis on incentivising start-ups and business development. As Ms Hogan explains, the Commission is conscious that in order to grow, small businesses need to be given adequate support. “The ‘Think Small First’ principle is increasingly being placed at the heart of EU action, and two examples of this are the reduction of financial reporting requirements for small companies, which serve to alleviate the pressures of bureaucracy, and the right of suppliers to interest for late payments,” explains Ms Hogan. Considered the bedrock of the European economy, SMEs generate growth and jobs all over the continent, however one of the biggest stumbling blocks for start-ups and businesses willing to expand their operation is poor access to finance. The Commission seeks to address this hurdle by continuously making EU funding available for small companies, such as in the form of loans channelled by commercial banks, debt and equity financing under EU
programmes and funding understructural funds through national authorities. Moreover it is facilitating access to private sources of funding. Most recently, the Commission proposed a programme for micro-enterprises and financing for social enterprises. Looking ahead, it is aware that bank financing is a main source of funding for SMEs, and is therefore paying better attention to banks’ capacity to lend to SMEs, Ms Hogan explains. Whilst acknowledging that the road ahead for the EU’s single market to achieve its full potential is long, Ms Hogan states that a great deal is being done to strengthen its function and relevance for citizens and businesses alike. “Proper consolidation of the single market as it was intended may not have been reached, but neither is the single market static. It is a moving target as technology evolves, innovative goods and services emerge and new challenges such as a single market for energy continue to arise, providing further opportunities for the EU and its member states respectively,” concludes Ms Hogan.
12
BUSINESS AGENDA | OCT - NOV 2012
BUSINESS AGENDA | OCT - NOV 2012 | EUROPEAN SINGLE MARKET 20th ANNIVERSAry special edition
13
european parliament
‘With more focus on citizens’ needs, the single market can create jobs and help Europe out of the current crisis’ – MEP Louis Grech
In spite of the many benefits presented to citizens and consumers living within the single market, many are still uncertain of what it really means to their everyday life. Yolande Spiteri discusses the efforts being made by the European Parliament with Maltese MEP Louis Grech and the head of the European Parliament’s Representation in Malta Peter Agius.
Louis Grech Member of the European Parliament
Although several barriers to free movement within the EU have already been removed through numerous legislative acts, the EU institutions are continuously striving to achieve a truly integrated single market by seeking to knock down the barriers which remain in various areas for the benefit of citizens, consumers and businesses. Individuals today are freer to move, work and live in another country within the EU than they were
before the birth of the single market 20 years ago. Statistics show that in 2011 EU citizens living in another member state accounted for 2.5 per cent of the EU's population, a fact which served to enrich citizens’ lives considerably. The opening of national markets has driven prices down across the board; internet access, air travel and telephony services to mention a few. The latter, for example, were reduced by over 40 per cent
between 2000 and 2006, have gone down again this year and will continue to do so until 2014. Nonetheless, according to Maltese Member of the European Parliament, Louis Grech, the single market still has a number of shortcomings which make its execution somewhat incomplete. “Many European citizens are still in the dark as to how the single market affects their day-to-day life,” he argues, adding that this is why the European Parliament is constantly working to strengthen citizens’ rights, whilst making them more aware of how they stand to benefit. The Internal Market and Consumer Protection Committee (IMCO) within the European Parliament, of which Mr Grech is vicechairperson, has constantly upheld that if the focus of the single market is on EU citizens, it can serve to create jobs and help Europe out of the current crisis. To this end the Committee has worked to create a fresh, new and holistic approach through numerous related legislative and non-legislative initiatives. Mr Grech, who has worked endlessly to raise awareness about citizens’ misinformation about the single market, recently presented a report entitled ‘Delivering a Single Market to consumers and citizens,’ which gained widespread media coverage throughout the EU. This report encouraged the re-launch of the single market, including the adoption of the Single Market Act, which stemmed from a number of reports by both the Parliament and the Commission. Furthermore the report puts forward a proposal for the compilation of citizens’ top 20 frustrations, a ‘Citizens Charter’, which would be readily available to all EU citizens, and the setting up of a single market forum, together with a series of measures designed to address
14
BUSINESS AGENDA | OCT - NOV 2012
european parliament the ‘gaps’ which cause difficulties for European citizens. These were taken up by the Progressive Alliance of Socialists and Democrats and IMCO as a contribution to the EU’s 2020 strategy. His other suggestions include the creation of a handbook addressed to consumers, highlighting their rights within the single market; “from personal experience very few citizens know their rights and obligations within the single market, so if its full potential is to be realised, citizens need to be aware of all it encompasses,” he explains. The single market, Mr Grech believes, “should work to benefit consumers and businesses, and not the other way around.” He underlines that it should pay specific attention to the citizens’ concerns and should channel this to help revamp the single market and give it a more human face, by championing citizens’ interests, protecting consumers’ rights and enabling SMEs to compete effectively. Taking an international perspective beyond European shores, Mr Grech believes the EU can be truly effective. Nonetheless in order for it to remain competitive a great deal of work needs to be done for it to break through its structural weaknesses, such as the high levels of bureaucracy, which at times impair its decision-making process, he argues.
To maintain its competiveness and keep up with large players such as China, Japan and the United States, the European bloc should focus on its strong points, such as keeping “research, innovation and development as the key priority in any of its future strategies,” Mr Grech continues. With such a massive pool of talent and resources, one may ask ‘what is keeping the single market from reaping its true potential? Peter Agius, head of the European Parliament Representation in Malta explains that it is often bureaucracy which hinders the EU’s development. “Many European laws, such as directives, depend on the implementation of the respective national government,” and if not adopted, these create diverse realities within the different member states. For instance, taking a local perspective, Dr Agius explains that the Maltese Government has been falling behind in the implementation of the Services Directive, which seeks to further the integration of the single market. “This results in a fragmented internal market, since only parts of the market are being harmonised as intended by the European legislator,” he adds. “The European Parliament has repeatedly highlighted the need for efficient implementation and effective enforcement of the single market rules. It also encourages
the adoption of directly applicable laws (regulations) to ensure maximum harmonisation, instead of laws requiring implementation at national level,” continues Dr Agius. Although in theory citizens are being exposed to numerous opportunities, what is being done in practice reflects a truly different picture. For instance, although all border control on goods within the EU have been abolished and people are given freedom of movement, obstacles still hinder them from moving to another EU country or doing certain types of jobs there. In light of this, the EU is constantly seeking to improve workers’ mobility, particularly to ensure that educational diplomas and job qualifications are transferable and recognised across member states. One of the key legislative actions currently being negotiated by the European Parliament is the Professional Qualifications Directive, which sets out to facilitate and enhance the recognition of qualifications in all member states. The proposed directive, explains Dr Agius, includes novel elements such as the promotion of paid traineeships across borders and the possibility of acquiring a European professional card, granting automatic access to a given profession. On the manual work front, the European Parliament is expected to seek further clarity of the existing rules to allow workers from any
Peter Agius Head of the European Parliament Representation in Malta EU country to work in any other EU member state, while easing the formalities involved. For consumers and businesses, most of the rights acquired by the single market legislation have today become a living reality, as they are often executed automatically and directly by industry, without the need of any active intervention by the consumer. Due to this automaticity, explains Dr Agius, “in most cases the consumer is unaware of his/her rights and that these are guaranteed no matter where in the EU the citizen stands.” Consumer awareness of these rights is however a crucial factor in instilling consumer confidence in the single market, which
could consequently help to bring about growth. The single market has led to a growth of over two per cent of the GDP of the EU since 1992. However, he explains that much more remains to be achieved if the remaining bottlenecks to the single market are to be unblocked. The European Parliament is therefore responding to the ambitions of the EU’s citizens to ask for more out of the single market, and in Dr Agius’ opinion “one way of achieving this is by addressing areas which the consumer clearly identifies with, such as the need for a more secure online trading environment, including guarantees for online sales.”
BUSINESS AGENDA | OCT - NOV 2012 | EUROPEAN SINGLE MARKET 20th ANNIVERSAry special edition
15
16
BUSINESS AGENDA | OCT - NOV 2012
interview
‘The single market
is crucial for both businesses and consumers’ – Minister Jason Azzopardi
As a result of its EU membership eight years ago, Malta gained access to the vast European single market and immersed itself in one of the world’s most competitive business environments. DANIEL DEBONO interviews Malta’s SME Envoy Minister Jason Azzopardi on his views regarding the European single market and on how he believes the Government should support businesses to exploit its full potential. Whilst satisfied with the achievements of the single market over the past 20 years, Minister Jason Azzopardi expresses his concerns about those areas which are not yet fulfilling their true potential. He argues that “the single market has definitely been successful in making the EU more competitive, with benefits for both businesses and consumers. Citizens have more variety to choose from and businesses have access to a market that is made up of over 500 million persons.”
to look outwards, due to their size and limited resources. In reaction to this, Dr Azzopardi says that while he understands the chal-
“The sale of products on different markets has been facilitated with the setting of common standards and the elimination of duty fees, which for European citizens mean better and safer products,” he continues.
lenges that Maltese companies face in this regard, he nonetheless believes that they do and can compete in an open market, and need to continually update themselves and provide the best business offering in order for them to ensure that they remain competitive in the global market place. He adds that “every enterprise has
Dr Azzopardi highlights the fact that notwithstanding its achievements, the single market has room for improvement, particularly in areas such as the digital single market, which should offer greater opportunities for businesses, in particular SMEs to provide their services and sell their products online. “In fact, a recent Eurobarometer survey on the single market indicates that Maltese businesses estimate that 14 per cent of their turnover is generated from e-commerce. While this is in line with the EU27 average, there are certainly margins to improve on,” he notes. On whether Maltese businesses are well informed about the single market, enough to tap into its opportunities, Dr Azzopardi admits that “lack of awareness and sufficient knowledge is not an issue related solely to Maltese businesses, but an issue that exists across the EU. Most of the times information is readily available, however businesses are often not aware of where to look to for such information.”
SME internationalisation 96 per cent of Malta’s businesses are micro-enterprises. There are those who argue that while Maltese businesses operate in an insular local market which is open to foreign competition, it is highly difficult for our businesses
to proactively update its product offering and develop new products and services, and this should be done irrespective of size. Addition-
“Every enterprise has to proactively update its product offering and develop new products and services, and this should be done irrespective of size.” ally, some enterprises may look towards collaborating with other local and foreign enterprises in order to develop better and offer more competitive products and services.” Dr Azzopardi is aware that “the challenges may seem greater for micro-firms which tend to require
more attention, both when it comes to internal factors related to company operations, including specific in-house capabilities, as well as to innovation and external factors such as networking and collaboration.” In this respect Dr Azzopardi points out that the Government, through Malta Enterprise, intervenes to assist companies in their internationalisation efforts. For instance he notes that “the latest assistance instrument developed by Malta Enterprise is the MicroGuarantee scheme, which provides guarantees for companies committing to investments aimed at making them more competitive, including the tapping of international markets.” “Moreover Malta Enterprise administers an SME development scheme that provides financial support to companies commissioning experts to develop their
products or processes, thus making them more attractive internationally,” he continues.
Developing a business clusters mentality During a recent SME Envoy meeting held in Malta, the first of its kind to take place outside Brussels, Dr Azzopardi underlined the importance of forging business clusters within the Mediterranean region. Business clustering is a concept which sees businesses join forces to achieve their respective targets. Being a relatively new concept for Malta, practiced only by a couple of sectors (one example is the ICT industry) Dr Azzopardi calls for a change in business culture and mentality. “Local businesses, most particularly SMEs, should seek to collaborate in order for them to have a competitive edge within the global market,” he adds.
17
BUSINESS AGENDA | OCT - NOV 2012 | EUROPEAN SINGLE MARKET 20th ANNIVERSAry special edition
interview ity industries (hotels and restaurants). These ‘access to finance’ schemes were available to all enterprises, including SMEs. The JEREMIE initiative, which is ERDFfunded, added loan guarantee support to SMEs in most sectors.” When asked whether other forms of support can be considered, Dr
“Government will continue to promote cross-border collaboration between businesses as well as with industry and research institutions. This is a sure way of stimulating economic growth and improving the competitiveness of specific industrial sectors.” In view of this, Dr Azzopardi reaffirms that “Government will continue to promote cross-border collaboration between businesses, as well as with industry and research institutions. This is a sure way of stimulating economic growth and improving the competitiveness of specific industrial sectors.” In this regard, he continues, “Malta Enterprise has an internal cluster policy in order for it to be in a better position to further assist and promote cross-border collaboration. Moreover, it is also collaborating in an EU funded policy project – ‘Pooling for Clusters’ – led
by the Malta Information Technology Agency (MITA) with the aim of encouraging linkages to motivate firms to communicate with knowledge agents.”
Access to finance for business sustainability and growth Access to finance remains a key priority in the single market, as it allows SMEs to grow. While initiatives and schemes launched locally in recent years were beneficial to start-ups, it is sometimes argued that additional support is required for SMEs to grow. Dr Azzopardi dis-
agrees with this observation and states that the various initiatives launched by Government have assisted enterprises at all stages of development, by facilitating their access to finance. According to Dr Azzopardi, “both the MicroInvest and MicroGuarantee schemes are specifically targeting investment in existing SMEs for growth.” “Furthermore,” he continues, “Malta Enterprise has also introduced the ERDF-funded 20 million for Industry programme, where access to finance instruments were provided for enterprises engaged in the manufacturing and hospital-
Azzopardi confirms that Government has looked into other existing options; however during discussions held with competent authorities such as the European Investment Fund (EIF), it was established that most other instruments are not compatible with the local scenario. Dr Azzopardi argues that “this is mainly due to a required deal flow to sustain such initiatives, that is to say, the scheme would be possible but the likelihood is that take-up will not justify the scheme and that the entire budget would eventually be recovered by the Commission. Consid-
ering all these initiatives, it is hard to substantiate the allegation that there is a gap in the availability of finance, yet one must acknowledge that further improvements may still be possible,” he argues.
The growth of the ‘Digital Agenda’ for the future single market The ‘Digital Agenda’ is another key priority for the future of the single market. In today’s hightech world, the EU lags behind its global competitors in areas such as e-procurement. The European Commission is therefore encouraging member states to take such matters seriously, as the ’Digital Agenda’ promotes efficiency and transparency. Dr Azzopardi agrees that the ‘Digital Agenda’ is instrumental for the EU’s advancement, and states that Malta is an active player, keen to reap its benefits. He explains that Government has in fact achieved and implemented an e-procurement solution that will facilitate the business process, both for Government and for the private sector. “E-procurement has helped to increase accessibility, transparency and efficiency of public procurement procedures, strengthened competition for government contracts and decreased the cost involved in traditional purchasing. Most of the paper work has been eliminated, hence reducing the cost and time required to process the virtual and physical procurement transaction,” he concludes.
IN OUR VIEW, NOTHING SHOULD GET IN THE WAY OF YOURS
NAUTICA LTD, 21 MSIDA ROAD, GZIRA. GZR1401. MALTA TEL: +356 21 345139/8 FAX: +356 21 343821 info@nautica.com.mt www.nautica.com.mt The stunning C48 from Sealine. To explore our extensive range of motor yachts visit www.sealine.com THE DIFFERENCE IS EVERYTHING.
J11100_148x210_Template.indd 1
07/09/2012 11:44
18
BUSINESS AGENDA | OCT - NOV 2012
19
BUSINESS AGENDA | OCT - NOV 2012 | EUROPEAN SINGLE MARKET 20th ANNIVERSAry special edition
MBB Celebrating 20 years of European Single Market
A Maltese Business Perspective The Malta Business Bureau (MBB) is launching a publication in commemoration of the 20th anniversary of the formation of the European single market, published in conjunction with the European Commission Representation in Malta. The publication focuses on various milestones in the establishment of the single market, which eventually led to the creation of the European Economic and Monetary Union and the single currency. The publication’s main feature is a qualitative study on various sectors of the local economy, providing an overview of the performance of Maltese SMEs in the single market. These include: · · · ·
Importation and distribution Manufacturing and exportation Services Hospitality and tourism services
The MBB organised four focus group sessions with representatives from each sector, with the aim of stimulating discussion on the operational processes of the single market. The study was supported by MISCO and Hotel Phoenicia. MBB President George Vella noted that following a publication earlier this year, which delved into what the EU Budget means for Maltese businesses, the Bureau is once again collaborating with the European Commission Representation by issuing a publication on the European single market, which is in itself a critical subject for Maltese enterprises. “We hope that the business community will find this publication useful and informative whilst we invite businesses to contact the Malta Business Bureau if they feel we can be of any assistance on issues related to the European single market and EU legislation affecting any particular business concern,” he stated. Martin Bugelli, Head of the European Representation in Malta expressed the opinion that this study is critical as it sheds light on the current modus operandi of local businesses: “I hope that through this exercise we will understand better how Maltese businesses are faring in the existing framework.” This single market publication will be launched at a business conference entitled, ‘European Single Market: Discerning the opportunities and challenges for Maltese business’, which is being organised by the MBB and the European Commission Representation in Malta on 16 October at the Hotel Phoenicia, Floriana.
The MBB and the European Commission Representation to launch commemorative publication.
Martin Bugelli Head, European Commission
George Vella
Representation in Malta
MBB President
20
BUSINESS AGENDA | OCT - NOV 2012
21
BUSINESS AGENDA | OCT - NOV 2012 | EUROPEAN SINGLE MARKET 20th ANNIVERSAry special edition
EU Policy
A ‘Digital Agenda’ for Europe: The evolution of an Online European Single Market – By Omar Cutajar, Permanent Delegate MBB The ‘Digital Agenda’ project began in late 2009 after several studies indicated that the prompt and effective establishment of a digital single market would provide solutions for economic growth in Europe by adding at least four per cent to its GDP by 2020, and at the same time would promote expansion and better choice for consumers. Certainly, these figures are enticing from a business perspective. Luckily they are not just academic projections, since no less than half of European productivity growth over the past 15 years was driven by information and communications technologies (ICT), and this trend is very likely to accelerate. The ‘Digital Agenda’ is meant to ensure greater and faster productivity growth via electronic commerce and other online business tools. The European Commission adopted the ‘Digital Agenda for Europe’ in 2010 with a policy communication articulating the steps and new legislation necessary for creating a digital single market and improving both national and cross-border e-commerce opportunities for businesses and consumers alike.
Addressing current gaps in the EU digital infrastructure A digital EU internal market cannot be created and neither can it work effectively unless high-speed internet is deployed at affordable costs for all – businesses and consumers alike. In this regard, the Commission’s initiative also includes concrete action to support widespread access to high-speed internet connections and improved ICT and internet skills across the single market area which would in turn enable the promotion of their application in business. The ‘Digital Agenda’ is part of the Europe 2020 policy, however the Commission has stated that it aims to have full member state level implementation by 2015. The main problems at present are the fragmented nature of the European digital market, complicated legislation that restricts the expansion of more and better quality business services, and the lack of structured internet security enforcement.
New EU legislation to strengthen e-commerce and consumer trust The ‘Digital Agenda’ intends to roll out the EU’s internal market online by creating greater interoperability, boosting internet trust and security, encouraging much faster internet access, investing
further in research and development, enhancing digital literacy skills and inclusion, whilst applying information and communications technologies to address social challenges. Examples are plenty, such as developing new online telecare support for elderly people in the context of an ageing population. On the legislative front, the ‘Digital Agenda’ is addressing the present regulatory gaps preventing greater uptake of online business practices and consumer trust particularly in cross-border online shopping. Updating the e-commerce Directive with the view to make EU markets less fragmented is especially important to help small businesses develop and grow. Regulation currently fails to promote cross-border trade within the EU, denying choice to consumers and the opportunity of expanding to businesses. The Commission aims to double the amount of e-commerce by 2015 and to facilitate the way in which businesses and consumers can offer and receive services and products across the EU. Proposals for this include making it easier to use non-domestic credit cards for
payment and increasing consumer confidence in cross-border trade through extended use of the ‘.eu’ domain name. Another key aspect of the creation of a digital single market is to improve consumer trust in online services, this being particularly important for SMEs and businesses seeking to grow, as sustained consumer interest generates expansion and investment. Therefore, the ‘Digital Agenda’ contains an important element reinforcing online rights protection and presents concrete proposals on enforcing these rights which are backed by punitive sanctions targeting those unfair commercial practices breaching consumer trust when engaging in online purchasing and selling transactions. By the end of 2012, the European Commission aims to enhance online consumer protection via the establishment of a European cybercrime centre, charged with tackling malicious ICT-based activities which may undermine public faith in the digital single market. This centre will collect data on internet offences and feed into a European forum which could stimulate discussion between pub-
lic and private institutions on how best to counteract these problems. In conjunction with this, there is also the need to make businesses more secure online, which could in turn provide further confidence to consumers. It is therefore essential that the EU is not only able to identify cybercrime, but that it is also armed to adequately tackle it, thereby improving the overall security and consumer trust in cross-border e-commerce for both business-to-business and business-to-consumer transactions.
Benefits for business Businesses stand to benefit from these developments mainly through the large opportunities to expand and to reach new markets that were previously inaccessible due to complicated and ineffective regulation. Deploying business activities online also helps smaller businesses overcome certain
structural challenges such as geographical market isolation or the relative lack of transport interconnectivity with their destination and/or transit markets. As well as reaching a more international consumer base, businesses should be in a better position to expand their domestic clientele through improved confidence in online security and better communication tools. Making audio-visual content more widely available will decrease the need for illegal procurement and allow distributors of this content to compete globally and not just within their member state. The proposed extension of e-invoicing, made already easier through the completion of the Single European Payments Area (SEPA), aims to make electronic transactions simpler, whether they are cross-border or domestic, with the result of easing online business and reducing costs for all parties concerned.
22
BUSINESS AGENDA | OCT - NOV 2012
23
BUSINESS AGENDA | OCT - NOV 2012 | EUROPEAN SINGLE MARKET 20th ANNIVERSAry special edition
case study
Malta’s services industry: PERFORMING IN SPITE OF INCREASED COMPETITIVE FORCES The services sector is crucial to the EU’s internal market and accounts for a significant portion of the EU’s economic activity. BUSINESS AGENDA discusses the effect of EU membership on some local SMEs operating in various services industries. The European single market has had a profound influence on the economic and social development of the EU and it has affected not only trade flows across national borders but also the patterns of economic development as well as product and service specialisation across the European Union.
John A. Huber John Huber and Associates
The services industry which includes, among others, professional practice, financial services, banking and insurance services is critical to the internal market as it accounts for over 70 per cent of the economic activity in the EU and for a similar and increasing proportion of overall employment. In the first 10 years since the completion of the first single market programme in 1993, at least 2.5 million additional jobs were created as a result of the removal of barriers in the services sector. The increase in wealth attributable to the internal market in those 10 years was nearly €900 billion; on average about €6,000 per family in the EU.
COLLEIRO GENERAL SUPPLIES
Julian Mamo Gasan Mamo Insurance A larger market poses challenges For EU member states, entering a larger market meant that local companies were now faced with increased competition, causing those that do not perform and reach certain standards to lose out. As a result, prices converged, in many cases downwards, and the range and quality of services available to consumers increased, giving further choice. Although the overall impact of the single market is generally agreed to have been a positive one, it was acknowledged from its inception that the internal market would
have a different impact across EU regions. It is widely acknowledged that SMEs tend to shy away from fully exploiting the potential of the single market because of perceived, and perhaps real, complex administrative and legal requirements. In fact a Eurobarometer survey carried out before the Services Directive was adopted indicated that only 8 per cent of SMEs across Europe engaged in crossborder activities because of such difficulties. Given the predominance of SMEs in service operations, it became clear that the development of the internal market for the services industry was being hindered and the internal market of goods was developing at a faster rate. Following a thorough analysis, the Commission made a proposal for a Directive on services in the internal market in 2004. The Services Directive was finally adopted almost three years later and needed to be transposed by the member states by the end of 2009. The aim of the Directive was to eliminate obstacles to trade in services, to remove red tape, to significantly facilitate the establishment of service providers at home or in other EU member states, to facilitate the cross-border provision of services and to give consumers easier access to services. Nonetheless in spite of these developments, to date, the Services Directive has not been fully implemented and companies find themselves still faced with many regulatory, linguistic and administrative barriers when operating in the single market. In order to overcome these hindrances, BUISNESSEUROPE, the EU’s main business organisation which represents over 20 million companies from 35 countries, believes that further modernisation and simplification of the administrative procedures which are applicable to service companies should be enforced. It also suggests the possibility of
24
BUSINESS AGENDA | OCT - NOV 2012
case study completing administrative procedures entirely online and providing the necessary information and assistance in various language rather than simply in English. So how have local players in the services industry fared so far in the internal market? John A. Huber, Managing Director at John Huber and Associates and a leading tax expert, believes that Malta has two main problems in operating within a larger market; one of size and the fact that it lies on the periphery of Europe. However, he asserts that these problems are inherent to the country and are present even if Malta were not part of the single market and that therefore the single market has definitely been of benefit to Malta as it allowed the country to operate freely in the largest market without hindrances. In business performance terms, Mr Huber claims that his business has been successful in tapping European mar-
kets which in turn have confidence in the island’s operations as an EU member state. Julian Mamo, Director of Sales, Marketing and Administration at Gasan Mamo Insurance tells Business Agenda that upon EU membership there were some concerns on the potential for increased competition in a market that was already almost saturated. As things turned out, though, he explains, “few companies are interested in the Maltese market per se and in actual fact more operators are interested in using Malta’s infrastructure and its easy access to the wider EU market.” This evidently has added benefits to the local economy. Mr Mamo claims that although “we are very aware that in relative terms we are very small fish, we feel proud to be players in a large pond,” and the company is confident that there are opportunities
Mary Gaerty GreenSkip Services Ltd
for cautious growth as a result of EU membership.
A strong policy infrastructure In spite of competitive forces which might have challenged the operation of local companies, the single market brought with it a strong policy infrastructure which ensures a level playing field for businesses and has also set out certain standards in an attempt to secure quality for its consumers. Mary Gaerty, Joint Managing Director of GreenSkip Services Ltd, explains that since Malta joined the European Union, the waste management sector experienced a great uplift due to the directives that Malta was required to adopt. “Although we were already working along these lines, EU membership did give us a boost, especially as the European directives had to be transposed into Maltese law,” explains Ms Gaerty. Moreover, MEPA’s implementation of stricter regulations has led GreenSkip Services to improve its standards and services. Since the company had already adopted high industry standards, this gave it an edge over the competition. In the printing services sector, Gutenberg Press had oriented itself to providing an export service way before Malta’s accession to the EU, a strategy which helped the company readily face the challenges and grasp the opportuni-
Blodwen Spiteri Gutenberg Press ties of the EU’s open market. “At the time, Gutenberg exports were mainly focused towards the UK, thus when compared to other companies within our sector, we were at an advantage as we were already geared up for EU markets,” Ms Blodwen Spiteri, Director for Business Development at Gutenberg Press Ltd explains. Upon entering the EU market the company was susceptible to harsher competition. However, in Ms Spiteri’s opinion, today customers do not just look for the cheapest prices, but also for higher quality, faster turnaround times and better communication skills, which, she claims, are qualities that distinguish the company.
The single currency Malta’s adoption of the euro has also helped to strengthen business relations and to aid companies acquire new commercial ties
beyond local shores. “The single currency facilitated our tendering and payments process as the fear of currency fluctuations disappeared, therefore one can now bid with the knowledge and security of a certain price or rate,” explains Ms Gaerty. For Gutenberg Press, given that one of its major markets remains the UK “the euro proved to be challenging for us particularly when the devaluation of the sterling took place,” Ms Spiteri adds. On the other hand, for GasanMamo Insurance the single currency was a crucial piece of the puzzle and in spite of the current difficulties that the euro is encountering, he asserts that “it was a positive step to adopt the euro as our currency. The euro gave Malta the final seal of credibility that it needed to make a success of EU membership.”
BUSINESS AGENDA | OCT - NOV 2012 | EUROPEAN SINGLE MARKET 20th ANNIVERSAry special edition
25
26
BUSINESS AGENDA | OCT - NOV 2012
27
BUSINESS AGENDA | OCT - NOV 2012 | EUROPEAN SINGLE MARKET 20th ANNIVERSAry special edition
AWARENESS
Financial News selects Peter Rutter, in its 40 Under 40 Asset Management Rising Stars 2012
Peter Rutter, Fund Manager of the Vilhena Global Themed Fund at J O Hambro Investment Management Limited (JOHIM) was selected among a long list of potential rising stars during the second run of the Financial News (FN) 40 Under 40 Rising Stars of Asset Management. FN picks the brightest up-andcoming men and women in the asset management industry. Over the past three months, FN canvassed the market for opinion and drew up a long list of over 150 potential rising stars. All nominees
had to be less than 40 years of age on September 10, based in Europe, the Middle East or Africa, and working in asset management. Candidates were then assessed by FN’s editorial panel on four criteria: achievements to date given their age, the stature of their mentors, firepower at their disposal and their potential to reach a position of great influence. According to the FN’s editorial, the selected 40 in their list are not just stock pickers but talented multi-asset managers, focusing also on asset allocation. The job titles on the list are not restricted to fund managers, but also include marketers, consultants, exchange-traded funds experts and investment strategists from pension schemes. FN reveals that, “the 40 named candidates’ success has required commitment and
dedication and are by no means one-dimensional workaholics.” FN also stated that the 40 selected stars include mountain climbers, a racing car driver and a minorleague basketball coach.
The value of the investment may fall as well as rise and any initial charges may lower the amount invested and the amount received upon redemptions. Currency fluctuations may also affect the value of the investment. Investments should be based on the full details of the Prospectus, which may be obtained from Valletta Fund Management Limited (VFM), Bank of Valletta plc branches and other licensed financial intermediaries. VFM is licensed to provide Investment Services in Malta by the MFSA. The Vilhena Funds SICAV plc is licensed by the MFSA and qualifies as a UCITS. JOHIM is
authorised and regulated by the Financial Services Authority. At age 33, Peter Rutter occupies the role of Investment Manager within the JOHIM global equity team and is one of the subinvestment managers responsible for the Vilhena Global Themed Fund which is managed by Valletta Fund Management Limited (VFM). Peter Rutter joined JOHIM in April 2012, reuniting with former Deutsche Asset Management colleagues Charles Hemphill, Will Kenney and Stephen Barrow, and is an important part of the team managing $1.7bn in global equities in segregated global mandates. He achieved a first class degree from Cambridge University, where he had conducted award-winning research using radar data from NASA’s space shuttle Endeavour
to study volcanoes from space. Rutter has had a similarly impressive career in the fund management industry. He spent three years on the global equities team at Deutsche Asset Management and six years at IronBridge Capital Management, where he was partner and co-fund manager of its $5bn global equity strategy fund.
Issued by VFM, TG Complex, Suite 2, Level 3, Brewery Street, Mriehel BKR 3000. Tel: 2122 7311; fax: 2275 5661; email: infovfm@ bov.com; web: www.vfm.com.mt. Source: JOHIM
Micro Guarantee Preluna Hotel works with scheme to ease Brighter Solutions Ltd for energy efficient lighting access to finance solutions The Preluna Hotel has invested heavily in energy efficiency over recent years. Under the expert guidance of Engineering Services Ltd, it is now also undergoing an upgrading programme in the plant room, which includes a Building Management System. This project has been entrusted to E.S.I and is partly funded by the EU. Furthermore the air cooling system throughout the hotel is undergoing a major change, in that instead of making use of the cooling tower, the system is being changed to one dependent on sea water heat exchangers, making chilling more efficient and less energy consuming. A more visible and practical way of energy saving is, of course, clever use of lighting. Together with Brighter Solutions Ltd, Pre-
The Micro Guarantee scheme recently launched by Malta Enterprise seeks to ease access to finance for enterprises employing up to 20 workers – including start-ups and self-employed – to support them carry out investment projects to develop their business.
luna has been phasing out all halogen lighting, replacing it with LED energy efficient lighting. During this period the hotel has changed approximately 700 halogens to LED (3W/5W LED). This alone has seen the energy load of these 700 lamps drop from 30kW to just 2.7kW, with a return on investment of less than six months. Brighter Solutions Ltd is leading the introduction of LED Lighting technology in the Maltese islands, and has successfully completed LED installations in a number of commercial outlets including hotels, retail outlets, restaurants, schools, offices, supermarkets and factories. The residential sector is also given importance; a larger number of customers are increasingly turning to LED lighting to
Through this scheme, enterprises may be granted a guarantee to help them secure a loan of up to €100,000 from commercial banks participating in the scheme. The enterprises shall be required to provide only 10 per cent (or less) of the value of an eligible loan as security. lower their energy use and also to reduce lamp replacement costs. Brighter Solutions Ltd, 2/3, TalBalal Road, Xwieki l/o Gharghur. Tel: 2142 4750/2742 4750; www. brightersolutions.com.mt
Lounge Extension and Priority Lane for La Valette Club at Malta Airport The services and amenities offered by the La Valette Club (LVC) at the Malta International Airport have recently been enhanced in order to offer greater value and excellence to its members.
Also, recently, the catering within the lounges was upgraded with the selection of food items from a new catering partner – Flight Services Ltd – which is based at the airport itself.
One of the major developments has been the re-design and extension of the VIP Lounge at departures which now can take up to 130 LVC members at a time. A new concept was also introduced as now the lounge will also serve as an art gallery. In fact, exhibitions by Maltese artists are being held on a quarterly basis, thus promoting Maltese art with locals and foreigners alike.
Another very important addition is the new exclusive lounge for the ‘High Altitude’ members of the LVC, offering more privacy, exclusivity and meeting facilities within the lounge. In conjunction with the extension of the lounge, the LVC has introduced the new priority lane at the passenger security screening area. LVC members can now proceed directly through the priority lane at the security
check-point instead of making use of the normal passenger lane. LVC members as well as passengers travelling business or first class need only to present their boarding pass and identification together with their LVC membership card or VIP voucher to the security staff in order to proceed ahead to the screening area. These new services continue to give value added to all the LVC members whilst ensuring a stylish and exclusive experience whilst going through the Malta International Airport.
Eligible costs include the investments in acquiring tangible assets such as machinery and equipment; fittings, fixtures, refurbishment and restoration of commercial properties; investments leading to
significant growth or to the development of a new market; immoveable property linked to a business development project; as well as working capital linked to such investments. Malta Enterprise will receive applications until 1 December 2013. Successful applicants will be given a Letter of Intent which they can present at any of the banks participating in the scheme. The latter shall apply conventional lending criteria but are not committed to lend on the basis of the Letter of Intent issued by Malta Enterprise. For further information visit www.maltaenterprise.com/ microguarantee or contact Business First via email: info@businessfirst.com.mt or tel: 144.
28
BUSINESS AGENDA | OCT - NOV 2012
HSBC Premier loyalty scheme Studioseven – active extended to Hilton and The Point member of Congress Rental Network AWARENESS
reward from Malta’s most prestigious establishments,” HSBC Malta’s Head of Premier Proposition, Speranza Catania explained.
For the past 11 years Studioseven has been an active member of Congress Rental Network (CRN), a worldwide network of top-quality companies equipped with the latest Bosch congress equipment for hire. CRN caters for any event where audio-visual equipment and support personnel are required. So it does not matter if you are dealing with thousands of delegates from all corners of the world, or simply a handful of representatives in a single meeting room, CRN can supply exactly the solution you need. As a CRN member Studioseven Malta was voted the Best CRN Member of the year for two consecutive years and Studioseven Chairman and Founder, Joe Debono, was also Chairman of CRN for a fouryear term. CRN members are specialists in congress equipment hire, with experience in installing and oper-
ating state-of-the-art equipment for event organisers in countless venues around the world. Only the best Bosch congress systems and peripheral equipment are used, which is your guarantee of maximum efficiency, optimum control and perfect sound reproduction. For the very largest events CRN members will not only supply and install the equipment, but operate it as well if required. And for smaller gatherings in hotel suites or breakout rooms, your nearest CRN member will quickly install a suitable system. After the conference or meeting is over, the system is simply packed up and taken away. For more information about Studioseven visit www. studioseven.com.mt
HSBC Premier customers now also benefit from cash vouchers from Hilton Malta and The Point Loyalty reward points earned through the use of HSBC Premier’s MasterCard may now be redeemed in favour of cash vouchers at the Hilton Malta Hotel and The Point Shopping Mall, in addition to the long-standing option of receiving Air Malta KMiles. Cash vouchers for The Point may be used in all of the outlets located within The Point Shopping Mall, Tigné, Sliema, while Hilton Malta
The EIE Institute of Education is now 12 years old, and has come a long way from the day when it opened its doors to the first local students, who found in EIE an alternative to the traditional higher education system. During this time EIE has grown into an established organisation, both in Malta and internationally. Apart from locals, the Institute hosts international students who choose Malta as a place to live and to study. There are more than 24 different nationalities studying at the EIE centre in San Gwann.
The EIE acronym stands for Excellence in Education. Excellence is confirmed by the student and graduate testimonials that EIE regularly receives from satisfied customers. EIE will be offering 97 different programmes this October, ranging from a level 4 certificate up to a level 7 masters in various areas which EIE calls ‘Pathways’. These are Business and Management, Finance and Accounting, Sales and Marketing, IT and Human Resources. EIE is also introducing
“In addition to the many benefits and privileges available to our Premier customers, this latest enhancement to the Premier MasterCard loyalty scheme allows our customers to choose their own
For more information about Premier visit the HSBC Premier website at www.hsbc.com.mt/ premier, call Premier on 2148 9100, or visit the Premier Centres in Swieqi and Valletta, or any HSBC branch in Malta and Gozo.
Boss Golf Open & Lifestyle Tournament by VF Group in Malta From Thursday 4 October 2012 to Sunday 7 October 2012 HUGO BOSS and its local retail partner, VF Group, will present the 2012 edition of the BOSS Golf Open and Lifestyle Tournament, in partnership with Lufthansa and Mercedes-Benz.
New and exciting courses at the EIE Institute of Education
cash vouchers can be used as payment for hotel accommodation or in any of the following Hilton Malta restaurants: Oceana, Bottega del Vino, Blue Elephant, Gazebo and Merkanti Beach Club.
To redeem loyalty points HSBC Premier customers may simply call HSBC Premier Direct on 2148 9100 to choose between Air Malta KMiles credited to a Flypass account or Hilton or The Point cash vouchers. Loyalty reward points for Hilton or The Point cash vouchers are sent directly to the customer by registered mail, and are redeemable at the rate of one €25 voucher for every 5,000 points earned.
The three German brands team up with the Royal Malta Golf Club to welcome all golf enthusiasts, to cheer on the golfers and enjoy special German treats and a selection of other activities, including test drives and a display of the latest Mercedes cars on the golf course itself. The RMGC opens its doors to you on Saturday 6 and Sunday 7 October, from 10am to 4pm, making this event the first of its kind. VIP guests and clients of BOSS, Lufthansa and Mercedes-Benz are invited to celebrate the launch of
this first edition of the tournament on Friday 5 October at 9pm. There the guests will be able to enjoy live jazz music in a beautifully set location overlooking the spectacular golf course. For clients and members of the press who are not familiar with the sport, Head Golf Professional Henning Schulze-Doering will be sharing some golfing secrets during a practice session, which will take place at the driving pens along the course. The awards ceremony, which shall be celebrated on the grounds of the course on Sunday 7 October, will bring the tournament to a close. Within the brand world of HUGO BOSS, BOSS Green represents premium sportswear that transcends the boundary between
fashion sports apparel and performance golf wear. Sponsorship activities include the outfitting of professional golfers such as American star Nick Watney and German golf professional Martin Kaymer. Good luck to the golfers from HUGO BOSS, Lufthansa and Mercedes-Benz.
new courses in Journalism, Tourism and Hospitality, and Maritime Management. For more information contact EIE on tel: 2133 2804/5 or by email at info@eieonline.com or visit www. eieonline.com
Smart Leasing Leasing - the wisest way to remain on top in the ICT world without capital expenses each time equipment needs upgrading or replacing. Contact us for more information.
Renting | Leasing | Outsourcing
Smart Technologies Limited, No 1, Valley Towers, Valley Road, Birkirkara BKR9022. T: (+356) 21 443 327 | F: (+356) 21 443 328 | E: leasing@stl.com.mt | W: www.stl.com.mt
BUSINESS AGENDA | OCT - NOV 2012 | EUROPEAN SINGLE MARKET 20th ANNIVERSAry special edition
29
30
BUSINESS AGENDA | OCT - NOV 2012
case study
The single market continues to broaden and increase Malta’s tourism base In spite of increased bureaucratic procedures and stiffer competition, the single market has opened doors of opportunities for the tourism sector in Malta. More than anything it sealed Malta’s reputation as a destination that offers quality and good service. BUSINESS AGENDA speaks to a number of prominent players within the field to discuss how George Micallef the single market has affected their operations. 79 per cent of respondents within the EU’s tourism sector who participated in a pan-European study on the impact of the single market on their industry reported that their business has benefitted greatly from the strengthening of the European single market. The study was carried out by the London School of Economics (LSE) Enterprise together with a number of consortium partners among respondents from various tourism-related sectors within EU member states. Tourism, being one of Malta’s main industries is no exception. The unprecedented records achieved by the local tourism industry in Malta show that the sector has continued to grow and evolve since the island joined the European Union. In spite of challenging economic times, the trends are pointing towards another record year for 2012, with some saying that 2012
could topple last year’s tourism record of 1.4 million visitors. Paul Bugeja, Chief Financial Officer at Corinthia Hotels believes that “a substantial part of this increase can be attributed to the introduction of low cost airlines, which has provided various travel opportunities mainly within EU countries.” As a member of the EU, Malta has gained extensive exposure in the European Union member states and beyond, helping the destination to position itself better on the marketplace and gain better recognition particularly with markets outside the EU. “EU membership gave potential visitors the guarantee that Malta is a safe destination in all senses – a destination that offers quality, good service and adequate safety standards. These are important issues for any potential traveller in the process of choosing a destination as they give the peace of mind needed when booking a holiday,” says George Micallef, Managing Director of Sunroute Hotels Ltd. The single market has increased competiveness between EU member states driving them to increase the quality of their tourism product and hence providing further choices for citizens who wish to travel. Competitive pressure has
Paul Bugeja Corinthia Hotels
led to significant drops in the price of airfares mostly due to the proliferation of low cost carriers, which has continued to encourage citizens to travel more. Figures published recently by Eurostat show that in 2011, residents of the EU27 made 1,020 million holiday trips and 165 million business trips. The skies over Europe are gradually being liberalised in stages, with the result that there is greater scope for capacity-sharing between major airlines, reciprocal market access and the freedom to set fares. In Mr Micallef’s opinion “like most things, this form of liberalisation has its advantages but also disadvantages vis-à-vis our national airline. Air Malta is a relatively small airline and cannot compete on an equal footing with competitor giants in the industry, despite the fact that the rules of the game are equal to all.” The national airline is currently undergoing a restructuring process and has been subject to a mandatory 20 per cent cut on its previous seat capacity, as a compensatory measure for the approved state aid. However, “until the restructuring process is over this puts our national airline at a disadvantage to some extent,” Mr Micallef argues. Major tourism players believe that the single market has also changed the profile of the traveller visiting Malta. Malta is now attract-
Sunroute Hotels Ltd ing tourists who are after shorter trips but also after quality at the best prices. Operating within the single market has also pushed the country to compete with larger tourist destinations such as Italy and the UK, which had improved their standard at a more gradual pace than Malta. This has forced the island to adopt certain standards within a very short span of time, indeterminably causing pressure on the industry as a whole. Mr Bugeja reports that Corinthia Hotels in Malta have seen a steady growth in the business generated from the non-traditional markets and in fact the hotels’ business mix from the 27 EU countries (excluding the four core markets namely France, Italy, Germany and UK), has increased from 11 per cent to 26 per cent since 2003. In volume terms it has tripled over the nine-year period. On the flip side, “takeovers and consolidation of major tour operators have in themselves strengthened their negotiation position but have inevitably led to reductions in our profit margins,” explains Mr Bugeja. For the hotel business, the possibility of other EU nationals working in Malta has provided an increased base of available labour which led to positive effects on the flexibility of a section of the workforce. On the other hand, the industry has
experienced an outflow of trained personnel who are now seeking opportunities in other European countries which were not available before. Moreover, bureaucracy remains one of the biggest obstacles for businesses and the cost of adhering to standards can also be taxing to the industry. The stringency of visas for non-EU citizens is also a cause of many headaches and has only helped to create further obstacles for the industry, particularly as the country is trying to attract better quality tourists. Nonetheless looking at the wider picture, Mr Micallef asserts that being part of the Union definitely offers more pros than cons: “overall tourism has certainly gained from the single market, despite certain setbacks arising from imposed compliance costs which were introduced in a relatively very short period of time.” He explains that Malta’s main source market was always Europe so local businesses had already been operating within the rules of the single market to some extent, especially when it came to incoming business. He concludes on a positive note that “the ease of access and of conducting business across Europe has helped the industry in no small way.”
31
BUSINESS AGENDA | OCT - NOV 2012 | EUROPEAN SINGLE MARKET 20th ANNIVERSAry special edition
case study
EU membership has boosted the credibility of Maltese businesses Manufactured products accounted for over 80 per cent of the EU’s total exports in 2011, and exceeded imports by €264 billion. Chiara Bonello discusses how the European single market has shaped the local manufacturing and retail industries with players in the field. The European Union is the world’s biggest exporter of manufactured goods with a diverse portfolio that includes, among others, pharmaceutical products and motor vehicles. One of the EU’s greatest achievements is the establishment of a european single market, which ultimately benefits the consumers as it offers greater choice and lower prices. “Malta’s entry into the EU was timely, necessary and inevitable; there is no question about this. Having said that, it did not bring about a dramatic change in the ease of entry into EU markets, since prior to EU entry most companies already had duty-free access to the EU due to the preexisting Association Agreement. What EU membership gave local companies is more credibility, since products could be promoted as ‘made in the EU’, which is particularly important when exporting outside the EU,” according to Simonds Farsons Cisk plc Head of International Business Development, Stephen Sultana. In his opinion it would be safe to say that if Malta had not joined the EU, many local companies would have remained ‘local’ and focused on Malta. “The ‘real’ benefit of EU membership is that it made us look overseas for growth and in many respects has helped companies to become even more competitive on the local market,” he says. “In fact over the last two to three years we have seen our domestic and export sales reach record levels. In a nutshell we’re more profitable and have a higher turnover today than when we were still a ‘protected industry’ prior to EU membership and to full liberalisation,” Mr Sultana adds.
The single market has significantly simplified trade with European countries, Gino Cutajar, Managing Director at Cutrico Services Ltd explains. EU legislation is necessary, however it does often have a tremendous effect on operational costs, and unless there is strict surveillance, so that all operators fall in line with this legislation, we will continue to operate in a non-level playing field, he argues. Andrew J Mamo, Managing Director at Galdes and Mamo Ltd, says that although he fully supports the idea of free trade and that the benefits
of the single market are undeniable, EU membership has not resulted in such a positive experience for the company. As importers and distributors of woodwork, DIY and automotive repair equipment, the firm is suffering the effects of other companies retailing products at landed cost, he explains, admitting that this is hardly cause to describe the single market as ‘no good’.
general population,” he cautions. Drawing from his experience Alex Aquilina, Chairman at Eagle K-Wear, a company which specialises in clothing and uniforms, explains that when back in 2006 a new UK-based customer had to choose between awarding a contract to his company or to another, the balance tipped in favour of Malta because it was an EU member state.
and time-effective,” Mr Aquilina explains.
“One has to be vigilant as some markets change radically over a short span of time. Do not underestimate the draw of cheaper or perceived cheaper prices on the
Moreover, “the movement of goods within the single market, from both the intra-community acquisition and supply aspects has become so much easier and more cost-
On the subject of increased competition brought about by the single market, Mr Aquilina shares that “we had to play the ball game under the same rules, so we had
Although the euro has facilitated international transactions within the euro area, Eagle K-Wear does a lot of business with the UK, which does not fall within the euro zone, he admits, hence the company cannot reap the full benefits that the adoption of the single currency brought with it.
32
BUSINESS AGENDA | OCT - NOV 2012
case study Those exporters that manage to build their own brands are, in Mr Sultana’s opinion, the most successful ones, however he believes that “brand-building overseas is a necessary but expensive, risky and long-term process, beyond the means of many Maltese companies. However with the right kind of institutional support from Government and its business support agencies, a lot can be achieved in this critical area.”
Stephen Sultana
Gino Cutajar
Alex Aquilina
Simonds Farsons Cisk plc
Cutrico Services Ltd
Eagle K-Wear
to upgrade a few notches to face increased competition”, adding that for this to be possible the company had to break from the island mentality and look at opportunities, which improved just as competition increased. “Eagle K-Wear has also actively participated in two ERDF projects which have helped to internationalise our business, and has invested internally to increase our competitiveness and brand image in the international arena,” Mr Aquilina explains.
He states that Malta had to upgrade at both a micro and a macro level after joining the single market, and to abide by new EU legislation, but in his opinion, in the long run, results are being registered. Mr Cutajar is cautiously optimistic and says that although the single market has a potential market of around 500 million consumers, it is quite difficult for local SMEs to branch out and access new markets, particularly at a time of economic uncertainty. However he is of the firm opinion that there are
opportunities which SMEs can explore and develop. Mr Sultana, on the other hand, believes that in terms of core challenges, regardless of EU membership, Malta’s position has remained relatively unchanged, claiming the disadvantage of being an island state with no primary and secondary material resources as a major challenge for any exporter. Furthermore, he argues that many companies in Malta are often unable to benefit from economies
unitech
of scale when it comes to procurement of raw materials, primary and secondary packaging, as opposed to many of its European counterparts that have such inputs more readily available. He explains that in the case of fast moving consumer goods, the cost of packaging is a often a determinant factor underlying one's export competitiveness, and that the only way to overcome this inherent limitation is through product innovation, investment in new technology, and brand building overseas.
He also argues that some cost structures facing companies, including SMEs, in Malta are abnormally high (compared to those of our competitors in Europe), due to our peripheral and small island economy status, and that legitimate enterprise support aimed at levelling the playing field are both necessary and justifiable in order to help Maltese companies to integrate themselves more fully into the European economy. Forecasting the future of the single market is no easy task, Mr Aquilina admits, adding that understanding its full potential is the issue. Before its full implications are understood, it is difficult to exploit the opportunities. Being a small country with over 90 per cent of its business classified as micro or SMEs, he advocates that Malta must look for niche opportunities and focus energy and strategies in that direction.
BUSINESS AGENDA | OCT - NOV 2012 | EUROPEAN SINGLE MARKET 20th ANNIVERSAry special edition
33
34
BUSINESS AGENDA | OCT - NOV 2012
enterprise
Malta Enterprise assisting
companies’ growth in foreign markets Embracing globalisation and taking advantage of the business opportunities that foreign markets offer can have a very positive impact on enterprises and their prospects for business success. This was confirmed by a study conducted by the European Commission among European SMEs in the past years, which showed that internationally active enterprises tend to have a better performance than those that restrict themselves to their home market. Among others, the report highlighted that businesses active within the international market reported an employment growth of seven per cent, whereas those that restricted themselves to their home market grew in size by only one per cent. Additionally, internationally active SMEs are more innovative, with 26 per cent of them introducing products or services that are new in their country, while for the other SMEs this only amounted to eight per cent. With the progressive disappearance of barriers and borders, companies are in actual fact being exposed to new markets and international competition even if they remain solely in their home market, in which case they would have to overcome the challenges brought about by globalisation without being able to benefit from the advantages that access to larger markets can offer. In order to facilitate foreign market penetration by Malta based companies, Malta Enterprise offers wide-ranging support to help companies in their efforts to internationalise, with the aim of assisting them in their development and growth into new markets abroad. In doing so, the companies would also be reducing their dependency on the local market. Among other initiatives, Malta Enterprise organises business delegations through which local enterprises are assisted to explore business opportunities and establish new contacts within foreign markets through a series of oneto-one meetings and networking events. Malta Enterprise uses its foreign counterparts in the target markets to facilitate the organisation of these meetings in an attempt to help local enterprises find suitable business partners. Malta Enterprise also assists local enterprises to participate in specialised fairs and international events which bring together stakeholders within the specific industries from around the globe. Enterprises participating in both the business delegations and the fairs may also be assisted through a travel subsidy and a per diem allowance for one representative,
Malta Enterprise has intensified its assistance to help Maltese businesses in their internationalisation efforts.
tional, market-oriented research and innovation by means of the support it offers to SMEs, large industry, universities and research institutes. Through EUREKA, these organisations are introducing new products, processes and services to the market, helping make Europe economically strong and socially sound. Malta is also a member of the Eurostars programme within the EUREKA framework, which is the first European funding and support programme specifically dedicated to research-performing SMEs, stimulating them to lead international collaborative research and innovation projects.
while in the case of fairs the costs in relation to the rent of the exhibition space and the construction of the stand may also be eligible for assistance. Through these events, that target both existing as well as new markets in which local companies would have good prospects for successful business, Malta Enterprise also promotes Malta and increases the awareness of the opportunities that the country offers to foreign investors. In addition to these initiatives, which form part of the Malta Enterprise yearly calendar of internationalisation events, the Corporation also supports local enterprises to tap into foreign markets
through other measures, schemes and support. Indeed, Malta Enterprise offers a training programme aimed at enterprises that are totally new to the export process. 'Entitled Gateway to Export', the initiative is a structured yet flexible programme that can be completed in around 18 months with the aim of providing participating enterprises the skills, know-how and confidence to excel in the international marketplace. Moreover, through its membership in international networks such as EUREKA and the Enterprise Europe Network (EEN) the Corporation also helps local enterprises to find business partners with whom they can collaborate on specific projects.
Bringing together close to 600 business support organisations from more than 50 countries, including chambers of commerce and industry, technology centres, research institutes and development agencies, the EEN helps businesses to find international business partners, source new technologies and receive EU funding or finance. Businesses are also assisted through professional advice on diverse issues such as intellectual property, internationalisation, as well as EU law and standards. On the other hand, EUREKA is a pan-European network bringing together 40 member countries – with the EU as the 41st member – with the aim of promoting interna-
Malta Enterprise also assists local enterprises to learn more about certain foreign markets through its regional leaders, who focus on a specific region with the aim of strengthening the commercial ties between Malta and that particular region, both in terms of attracting new investment to Malta and helping local companies expand abroad, as well as in terms of facilitating trade opportunities. In certain cases, the regional leaders are also working within the market itself, either through Malta Enterprise’s Commercial Office in the region or as commercial attachés with Malta’s High Commissions, embassies or consulates around the world.
BUSINESS AGENDA | OCT - NOV 2012 | EUROPEAN SINGLE MARKET 20th ANNIVERSAry special edition
35
36
BUSINESS AGENDA | OCT - NOV 2012