Business Agenda Issue 02 by Malta Business Bureau

ISSUE 02 I March – MAY 2010

THIS ISSUE

EU affairs A social Europe is needed, but at what cost for business?

page 06

business agenda

NEWSPAPER POST

MONEY TALKS Accessing Finance in Malta

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THE Official Business publication of the Malta business Bureau

CONSUMERS TO TAKE CENTRE STAGE

In his first interview as EU Commissioner for Health and Consumer Affairs, John Dalli makes it clear that consumers will be taking centre stage when it comes to policies falling under the Health and Consumer Affairs portfolio.

Interview Newly-appointed Chairman of the Malta Tourism Authority, Louis Farrugia, shares his views on the industry.

Mr Dalli, who is only a few weeks into his five year term as Commissioner, stated that although the business community has often voiced concern over EU proposals that may result in additional costs to enterprise, his stance is that “we have to put the consumer on centre stage.”

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In addition to the increased attention that will be given to consumer rights and needs, Mr Dalli

also stated that he would be working to ensure freedom of choice through the provision of more and better information and increased consumer education to “help them interpret this information correctly.” While consumers will be basking in the increased attention, Mr Dalli’s stance may cause the business community to sit up and take note, wary of the possibility that some proposals may result in increased costs for businesses. But according to Mr Dalli, businesses’ needs will also be taken into consideration as “the only way to achieve long lasting success is by bringing people together.” See page 11 for the full story.

CASE STUDY The property market in Malta and Gozo remains an attractive investment option.

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RESTAURANT INDUSTRY IS STRUGGLING Research conducted by the National Statistics Office (Malta) has revealed that Malta’s bars and restaurants are facing tough times and many are struggling to keep their head above water.

Economy The changing trends of Malta’s FDI flows.

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Operators within the industry have pinpointed the global economic recession and the dwindling tour-

ist arrivals experienced throughout 2009 as being the main factors behind their current hardship. Many have claimed that the 2009 –2010 winter season was the toughest ever, but are only expecting an upturn towards the second half of 2010. See page 4 for the full story.

EP PRESIDENT COMMENDS MALTESE MEPs ON THEIR WORK In an interview with the Business Agenda, EP President Jerzey Buzek has stated that Malta’s MEPs are excellent and have helped the smallest member of the European Union to “punch above its weight”. The President also acknowledged the fact that that the level of interest in European affairs in Malta

is impressively high, and that the Maltese people are aware of the fact that decisions taken at EU level have a direct impact on their lives. He also expressed his wish to visit the islands before the end of his tenure in 2012.

See page 16 for the full story.

BUSINESS AGENDA | march – May 2010

editorial

GETTING DOWN TO BUSINESS By Joe Tanti, Chief Executive Officer, MBB

When President Barroso’s first Commission took office, the European economy was doing well and unemployment levels across the then-recently enlarged EU was stabilising. Five years on, and following the greatest recession in decades, a whole new set of challenges awaits the 2010-2014 European Commission. The Barroso II Commission has come into power, faced with a totally different economic and social environment, one plagued by an overall economic malaise generated by dwindling demand, coupled by rising levels of unemployment, across some of the most important economies within the internal market. Outlining his priorities last Autumn, President Barroso is on record stating that his first order of business is to sustain the initial green shoots of recovery whilst tackling head-on the social implications of the international economic crisis. In practice, this means launching coordinated initiatives aimed at getting millions of people who lost their jobs as a result of the crisis, back into productive employment. President Barroso also pledged to continue the push for financial governance reforms, in order for the EU to possess the necessary regulatory shielding to protect the single market against a potential repeat of a comparable economic crisis. Over the past months, President Barroso gave EU leaders a preview of the post-Lisbon plan, known as

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'EU 2020'. The strategy revolves around promoting low-carbon industries, investing in research and development, modernising education systems whilst strengthening the European digital economy through the creation of an internal market for e-commerce and the provision of e-services. The plan will seek to strengthen the single market and bring national budget deficits back under control. In January the MBB released a position paper in reaction to the public consultation on the EU 2020 plan, which outlined the Maltese business community’s criticisms as well as rectified suggestions to the shortcomings that plagued the implementation of the Lisbonrelated reforms. It is the prevailing belief amongst local enterprise that new margins of market flexibility have been gained. However, crucial elements such as fullyfunctioning competition still need to be secured in order to ensure proper market surveillance. These drawbacks indicate how the Lisbon Strategy has failed to translate its commendable policy objectives into tangible measures for businesses, mainly due to inadequate reporting, monitoring and reform verification mechanisms. On the EU’s 2020 vision, President Barroso states: “We need to revise the current Lisbon Strategy to fit the post-2010 period, turning it into a strategy for convergence and coordination which will require both immediate and longer term action, based on making a

Malta Business Bureau Casa Leone Pjazza Robert Samut Floriana Tel: 00356 2125 1719 (Malta Office) Tel: 0032 4859 81124 (Brussels Office) Email: info@mbb.org.mt infobrussels@mbb.org.mt www.mbb.org.mt

successful exit from the economic crisis; building on the EU’s lead on climate change; developing new sources of sustainable growth and social cohesion; advancing ‘Social Europe’; and opening a new era for Global Europe on the international markets. President Barroso states that the overarching priority is to continue sustaining the European Economic Recovery Programme, keeping interest rates low and making use of state-aid rules to support well-targeted and temporary public policy interventions in their efforts to revitalise without adverse effects on other Member States, in full respect of internal market rules. The Commission President in synch with the European private sector’s thinking believes that relying on short-term stimuli will not suffice, and the EU has to give importance to new sources of growth, including eco-innovation. To exploit this potential, it is paramount that the EU institutions refocus efforts towards the promotion of European industry within the internal market and abroad. As a result of globalisation, it is becoming increasingly vital to reinforce the investment attractiveness of the EU-27 member states through a coordinated approach based on a reinvigorated and integrated approach towards industrial policy. In the long-term, an integrated EU industrial policy factoring in the cost implications of climate change policies, re-skilling requirements

Editor: Joe Tanti Deputy Editor: Claire Azzopardi

and the increasingly diversified product markets at sectoral level will help EU-based industry remain competitive on the global markets. Trade openness is equally critical to Europe’s future competitiveness. As the world’s leading exporter, the EU has a fundamental interest in its external dimension and a pivotal role to play in the formulation and exercise of both international and bilateral trade policy. In EU jargon, this is often referred to as the ‘European interest’. Maltese business has repeatedly called for a stronger EU, taking clear pro-business decisions in the context of international and bilateral FTA negotiations in order to yield benefits for both businesses and consumers alike. We decidedly laud the incoming Commission’s public commitment on defending the so-called European interest whilst promoting it in a coherent and determined manner on the international front. The biggest concern at this point is striking a balance between the EU’s social agenda with the competitiveness of business. Barroso’s view of ‘social market economy’ with a softening of all of its implied liberal hard-edges, is widely accepted, as ultimately it is for the better of our societies, however a line must be drawn and not stepped over. As stated by MEP Dr Simon Busuttil in our launch event of the series entitled 'Business Meets

MEPs', it is crucial to strike the right balance between economic growth and social progress. In order to achieve this, top priority in EU policies should focus on enhancing competitiveness, putting business as the key benchmark for a thriving EU, for the private sector to enable the financial sustainability of public policies geared towards bridging those social gaps that prevent the enjoyment of prosperity by all. In this second issue of the Business Agenda, Commissioner John Dalli is interviewed about his new post within the Barroso II Commission where the former Maltese social and health Minister is now holding not merely a prestigious but indeed also a very extensive portfolio. Commissioner Dalli reveals his policy plans and the priority issues he intends to pursue within the ambit of EU health and consumer policy. I am convinced this is just one amongst several other interesting features that will keep you engaged reading our paper. Finally, I take this opportunity to congratulate John Huber on his appointment as the new President of the Malta Business Bureau officially announced during MBB’s Inauguration of Offices on the 17th February. I would also like to sincerely thank outgoing President, George Micallef, for the invaluable dedication and direction which he has given to the MBB throughout the past year, whilst wishing him the best of luck on his new endeavour as President of the Malta Hotels and Restaurants Association.

Editorial Team: Yves Cordina, Omar Cutajar, Mariella Scicluna, Amanda Sciortino

Business Agenda is the quarterly publication of the Malta Business Bureau. It is distributed to all members of the Malta Chamber of Commerce, Enterprise & Industry and all the members of the Malta Hotels & Restaurants Association. Business Agenda is also distributed to 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.

BUSINESS AGENDA | march – May 2010

RESTAURANT SECTOR STRUGGLES AS COSTS RISE AND DEMAND DROPS Slow improvement expected by second half of 2010 By Alex Bonello According to research conducted by The National Statistics Office (Malta), the global economic recession, coupled with largely dwindling tourist arrivals to Malta, have taken a considerable toll on catering establishments on the Maltese islands. Restaurants and bars are already operating in an extremely competitive environment, where over 1000 establishments vie to establish and maintain their share of the market, but with a significant drop in tourist arrivals and a drop in local demand, the sector’s lifeline has weakened. Noel Debono, Chairman of the Restaurants Section of the Malta Hotels and Restaurants Association (MHRA) explains that “this winter has been the harshest one faced by the industry in recent years. The drop in locals’ spending power, along with the drop in tourist arrivals, has seen spending in this area decrease quite drastically.” As pointed out by Mr Debono, the 2009-2010 winter season has been a tough one. Furthermore, the struggle being faced by many in the Maltese restaurant sector has been exasperated by sky-rocketing operational costs, caused by a number of different factors, not least among which one finds the hike in water and electricity prices. The situation is certainly a cause for concern as the restaurant sector in Malta employs over 8,000 people and contributes millions of euro to the local economy. There are many other considerations that need to be given due attention when analysing the situation, and the impact which current trends may have on the economy. The sector is a primary driving force and a main selling factor of Malta’s tourism product. As a labourintensive industry it accounts for thousands of jobs and it also plays a crucial role in the social-domestic market by providing leisure and entertainment facilities for the local population. In hard figures this sums up to a gross contribution of €163 million per year to the local economy. Following many years of exponential development and marked improvement, this sector is now

facing what may be safely termed as one of the toughest financial times in recent history. According to the CEO of the Malta Hotels and Restaurants Association (MHRA), Mr George Schembri, the industry is anticipating that while there are signs of recovery at a global level, Malta is not likely to see an improvement before the latter half of 2010. “Due to several factors we anticipate that 2010 tourist arrivals will see some growth over 2009, which has been the worst when compared to the last four years. The World Tourism Organisation has indicated that there are signs of growth in the first quarter of this year although in Malta we anticipate that we will not experience this growth before the latter half of the year,” he stated when asked about the Association’s outlook for the future. His rather optimistic outlook fell in line with Mr Debono’s expectations. “We are optimistic that the industry will fare better in the third quarter of 2010 – there is a marked increase in the number of enquiries being made for that time of the year, particularly with regards to conferencing, which is an encouraging sign,” he explains. However, until things begin to look up, the restaurant sector is precariously pinned between some-

how raising more cash to finance its expenses and retaining its pricing in an acutely price-conscious market. In the present scenario, it is becoming next to impossible for operators to continue absorbing, often wildly increasing costs without reaching breaking point. “The MHRA is actively involved in researching and proposing initiatives that would be of help to the industry in these challenging times. Unfortunately, many of our requests – such as the reduction of VAT for restaurants – seem to have fallen on deaf ears when it comes to speaking to the local authorities,” Mr Debono points out. The MHRA has spearheaded a number of discussions and negotiations with the authorities on a host of crucial topics with the aim of safeguarding this sector’s sustainability. Talks have covered pivotal issues such as the Working Time Directive, the Food Labelling Act and the much disputed reduction of VAT for restaurants. However the first item on the current agenda is the prohibitive increase in utility rates which will deal the sector a very bitter blow. MHRA has reiterated its pleas to the Maltese government to reverse its prevailing strategy of forced full financial recovery at the direct expense of private operators, to

“We anticipate that 2010 tourist arrivals will see some growth over 2009, which has been the worst when compared to the last four years.” one of stimulus and generation of business, through supportive measures. The various constructive proposals put forward by MHRA include a soft loan scheme, a moratorium on the payment of social security contributions, several mitigating measures to counteract the unsustainable increases in utility tariffs and a more objective attitude towards the reduction of VAT on restaurant services. While understanding the current plight that government is facing with an ever-increasing deficit, it makes no economic sense to overburden private enterprise to the extent of stamping out economic activity with the ensuing related lost earnings and loss of employment. MHRA is also aware that the local restaurant sector’s true situation is not fully understood and that many misconceptions still exist with regards to its profitability and financial stability. Both official and consumer perception seem to be based on a preconceived notion that cater-

ing establishments operate at high profitability levels, when the exact opposite is true. This is probably based on the popularity of very few establishments due to factors such as current and short-lived trends, which are far from being representative of the overall business scenario of the sector at large. The only way forward must be based on a balanced and equitable approach with regards to enforced standards and imposed operating costs, complemented by an overall supportive business environment which encourages growth and development. Only this attitude will ensure the conservation of Malta’s restaurant sector. MHRA will continue in its efforts to raise public and government awareness into the real situation being faced by restaurants in Malta, with the primary aim of curbing some of the many financial burdens that are being unjustly imposed on this sector.

BUSINESS AGENDA | march – May 2010

A SOCIAL EUROPE, but at what cost?

While many demand that Europe becomes more socially conscious, thousands of businesses are wary that the costs of securing this may be too high. amanda sciortino speaks to KEVIN J. BORG, Director General of the Malta Chamber of Commerce, Enterprise and Industry, about the Maltese business community’s stance on a number of related issues. In July 2008, the European Union committed itself to ensuring that it responded effectively to the economic and social challenges that were being faced by its Member States. The EU’s aim in this respect is to assist society to adapt to these fast-paced changes, and is founded on three key principles – creating opportunities for EU citizens, improvement of access to quality services and the display of solidarity towards those most affected by change. The Social Agenda will encompass a number of policies and legislation developed to tackle a number of social issues that are causing difficulty to European citizens including employment issues, poverty, discrimination and education. Whilst it is an undeniable fact that social solidarity is indispensible, healthy debate is needed to ensure that this process does not occur at the cost of the Union’s long term competitiveness within the global economic scenario. “It is an undeniable fact that only business and enterprise will lead Europe out of the economic crisis and into growth and prosperity. But for business to do so it needs to be competitive. The European Union needs to show better coherence between economic policy on the one hand and ambitious labourmarket policies on the other. EU regulation, in this particular area should not contain new and unnecessary or disproportionate burdens on business particularly in view of the fact that Europe is competing with other regions for its share of the global market where workers’ rights are relatively depressed or even non-existent.”, according to Kevin J. Borg, Director General at the Malta Chamber of Commerce, Enterprise and Industry. Amongst the proposals that have attracted the attention of the business community – and perhaps even caused some concern – are the Maternity Leave Directive and the Working Time Directive. According to a position paper issued by the Malta Chamber of Commerce, Enterprise and Industry, some of the proposals made through the Maternity Leave Directive – namely increasing maternity leave from 14 to 18 weeks (which has recently, once again been

increased to 20 weeks) – would result in a large financial burden on business. Mr Borg explains that the report expresses serious concern where “women on maternity leave create a skills gap which is more serious at the local level because systems of temporary workers agencies and child-care facilities are not fully developed”. Mr Borg suggests that “a high minimum level of maternity leave will be counterproductive to mothers in more ways than one. It will serve to fuel higher discrimination not least through a widening of the wage gap that already exists between genders. Moreover it would reinforce the reality of the ‘glass ceiling’ phenomenon in career paths for women. To this end, women could not realistically aspire to occupy the highest positions in business and at the same time absent themselves from work for long periods at a stretch”. He continued by stating that “the issue creates a disproportionate burden on micro enterprises,” which make up 96 per cent of the local business scenario, where “in the absence of effective solutions and alternatives, enterprises employing one or two people have limited flexibility and could find it extremely difficult to fill in the gaps created by maternity leave. But this is not merely a problem for micro enterprises or SMEs. Some of our larger members that employ in the region of 1,000 workers, typically have around 90 employees on parental leave simultaneously”. According to the report, if a woman is employed and becomes pregnant during the first six months (probationary period), there must remain a safeguard whereby an employer can still dismiss an employee in the event that she is found incapable for the job. In line with the elimination of inequalities, the dismissal or otherwise of workers who have been on maternity leave up to one year should be based solely on performance as in any other case and at the employer's discretion. The current Directive is sufficient to protect a woman's dismissal during maternity leave, as it clearly states that an employer should duly substantiate the grounds for such dismissal in writing. Mr Borg explains that the way forward in tackling this issue is

two-fold: “on one hand we need to ensure that business knows where it stands. Rather than the piecemeal process currently being experienced with minimum levels of maternity leave being increased from one year to the next, Member States need to decide on an ultimate long term target for this directive, which all parties will strive to achieve by a given realistic date. On the other hand, at the local level, the necessary support services must be fostered to develop and provide the necessary services to employers and workers alike. Presently, there is very little in terms of temping agencies and child-care facilities do not extend beyond office-hours”.

would be set at 48 hours per week, including overtime. The Maltese business community has voiced its concern about this, arguing that the amount of time worked should be mutually agreed upon by the employer and the employee. Current trends in Malta show that there is a high incidence of part-time workers, which would potentially result in many workers being at work for over 48 hours per week. Due to this situation, an opt-out clause is being proposed through the directive. This would allow for greater flexibility in the amount of hours that can be worked, espe-

ibility gained through the opt out clause, will ultimately create a winwin situation for both employee and employer.” In addition, the report issued by the Malta Chamber believes “that reducing flexibility in working time is inconsistent with the objectives of enhancing growth and jobs in Europe and that any solutions identified must continue to leave companies enough room for manoeuvrability and identify individualised arrangements.” While it is essential for the European Union to continue to pay due attention to the needs of individuals and society, it is equally important

MEP Simon Busuttil, is interviewed by Miriam Dalli about the European Social Agenda.

In addition to this, the Malta Chamber proposes that any financial burdens which could be incurred as a result of the Directive should be alleviated through cost-sharing agreements with the State ideally through a European funding arrangement , as it is firmly believed that this is a social cost. In conclusion Mr Borg believes that “whilst it recognises the validity and benefits of having a minimum level of maternity leave, more focus must be given on attaining flexibility between the employer and the employee, to suit the realities and needs of both parties. ” Another area of the European Social Agenda that has long been the subject of debate in Malta and within the EU, relates to the Working Time Directive. The proposals outlined in the Directive include a capping of the total amount of time an employee is at work, which

cially for those companies that use this flexibility as a way of dealing with fluctuating demand as is the case with industries that are greatly affected by seasonality, such as tourism. Workers who sign the optout will also benefit from it, as it means that they can work overtime, this however would be done within restricted limits also stipulated by the directive. The legislative text lays down the measures for the optout where a maximum of 60 hours of work a week on average, taking place over a three-month period. In response to the proposals made within the Working Time Directive, the Malta Chamber made a number of key recommendations. “First and foremost, the retention of flexibility in working time and working time arrangements is crucial for the competitiveness of Maltese companies and the timely delivery of services. The common position on this is therefore, that the flex-

that the long term impact of the proposed measures are constantly analysed and evaluated, and where any of the proposed measures are seen to possibly impede on the competitiveness of the EU’s industry, then a more flexible approach should be deliberated. “Businesses are the backbone of the economy – they generate employment and therefore income for the worker, which in turn, keeps economic momentum going and the social structure evolving.” If the needs of the European Society are to be met, then a ‘cyclical’ perspective must be taken, which would ensure a successful balance between the needs of all stakeholders. This is no mean feat but with a forward looking vision, dialogue and a clear strategy, a successful compromise will allow for a balance between the needs of enterprise and the individual.

BUSINESS AGENDA | march – May 2010

MONEY TALKS: Accessing Finance in Malta By Omar Cutajar Success within the competitive world of business is highly dependent on the ease of obtaining capital to finance business ventures. As such, access to finance is a critical issue for all enterprises, not just at the early stages of a start-up enterprise, but also throughout the whole lifecycle of any business, irrespective of the sector and location of its operation. The Maltese business landscape is no exception. For several businesses, access to finance is a critical issue and this is particularly so for those firms suffering from a credit crunch as a result of the prevailing international economic situation. It is no surprise that in times of economic slowdown, credit short-falls afflict those companies whose business models are oriented towards meeting export demand induced by purchasing orders lodged by foreign clients. Internal cash-flow management at firm-level is critical for such businesses to steer away from the stormy waters unleashed by the uncertain international climate. From an operational perspective, credit management is not just essential to obtain cost-effective business administration but also an invaluable asset during times when the financial balancing act becomes rather precarious if not altogether a matter of life or death. Trends to Date The usefulness of sound credit management practices gains extra value within the context of the dominant financial behaviour of Maltese business which on the whole demonstrates limited enthusiasm for alternative financing mechanisms. The financing behaviour of Maltese businesses is very often prescribed by traditional methods of obtaining credit supplementing the initial capital outlay sustaining the given entrepreneurial endeavour. It is indeed the prevalent practice especially amongst the smaller business categories to finance their activities by resorting to property mortgaging with the commercial banks. Inevitably, this implies that the firms’ ability to raise finance is directly linked to the value of the properties mortgaged by the entrepreneur. Very often the mortgaged

property is the very same offices, warehouse stores and industrial facilities utilised to run the business. Such traditional means of securing finance have undoubtedly their advantages. The popularity of obtaining credit facilities through traditional loan products managed by banks is self testimony to the clear and important element of business sense that such mechanisms offer to local entrepreneurs. In the first instance, access to finance through bank loans ensures a certain degree of predictability which is in turn often complemented by a personal relationship nurtured over the years between the entrepreneur and the bank consequently instilling a sense of confidence. Such attributes are rather difficult to obtain in comparable situations involving alternative financing instruments without the direct or at least intermediary involvement of the banks. Conversely, mortgaging property to raise investment capital from banks also carries its obvious shortcomings often limiting the local entrepreneurial growth capabilities to the estimated value of the given enterprises’ banksecured properties as collateral to the loan facilities. Inevitably, the scope for innovation in such financing arrangements is equally a firstfront victim of the process, as the businesses obtaining additional credit through overdrafts and subsidised loans would have to live up with the payback times and interest due as agreed with the bank. Ultimately, this puts businesses, especially micro-enterprises in the unenviable situation of having to manoeuvre with a limited margin in relation to long-term finance planning. This might give rise to situations whereby entrepreneurs have to operate within the constraining ambit of a working capital budget deriving to a significant extent from the specific financing arrangements obtained accordingly from their banks. The prevalent trend of family ownership within the Maltese business fabric is another reason fuelling the retention of loyalty to traditional financing mechanisms by local entrepreneurs. Seeking alternative routes of financing, through for instance venture and

“This might give rise to situations whereby entrepreneurs have to operate within the constraining ambit of a working capital budget deriving to a significant extent from the specific financing arrangements obtained accordingly from their banks.” seed capital would open up a direct stake for ‘outside’ investors into the control or management structure of the given firm - something that entrepreneurs would be reluctant to concede, unless there is a market-driven logic and/or incentive to involve foreign investors. A clear case could be the inception of a long-term business plan aiming at the overseas expansion of the business, whereby the rationale of seeking a foreign partnership making the option of capital involvement, in order to expand the working capital endowment of the business, a much more attractive proposition for the owner of the firm. Taking on the Challenge of Alternative Financing Products Overcoming the inherent reservations of tapping into alternative financing instruments beyond the traditional loan-based services

offered by commercial banks is the core test for Maltese businesses to nourish the necessary capital endowment to meet and overcome the ever-increasing competitive challenges of globalised markets. To make the best of the opportunities of the EU single market and go beyond onto the international markets, it is paramount that Maltese SMEs have the capacity to undertake their commercial operations on a cross-border basis, whether in the various goods sectors or in the provision of services. To enable both the internationalisation of local business and the re-positioning of the Maltese services industry onto the cutting edge of the modern knowledge-based economy, there is clear need for the availability of a wider array of finance tools supplementing traditional loan support for SMEs. Despite the wide availability of finance mechanisms in the shape

of EU-funded grant schemes and the myriad incentive schemes managed by Malta Enterprise as support mechanisms for local business development, operational upgrading and expansion initiatives (covering also aid channelled for firsttime internationalisation efforts) as well as innovation-uptake schemes, there remain nonetheless some market gaps on the provision of finance for small and micro-business in Malta. For instance, seed capital funds are one typical example of a finance product still missing on the Maltese market. The availability and accessibility to high-risk capital earmarked for early-stage business development is a structural prerequisite if the Maltese entrepreneurial framework is to make the desired and expected quality leap forward into the knowledgeeconomy of the 21st century. The structural constraints of a limited

BUSINESS AGENDA | march – May 2010

“In concrete terms, the various family-owned small businesses, constituting the backbone of our economy, need to be financially-empowered to properly address their restructuring needs.” insular market such as Malta can be successfully overturned into business opportunities if ‘equity gaps’ preventing greater investments into product development are comprehensively addressed in an integrated approach. Developing Equity Finance to Improve Business Competitiveness In concrete terms, the various family-owned small businesses, constituting the backbone of our economy, need to be financiallyempowered to properly address their restructuring needs. To make such an exercise a successful endeavour across a wide and economically-relevant cross-section of the Maltese business community, efforts must be directed towards enhancing liquidity at firm level. On the one hand this means that public finance support schemes should be tailored to tackle the undercapitalisation that plagues the vast majority of local economic

operators in key sectors such as tourism, and traditional industrial sub-sectors like textiles, furniture and wood-fittings, the printing industry and the non exportoriented agri-food processing firms. On the other hand, the same SME financing schemes need to be complemented by other mechanisms that can contribute to the improvement of the framework conditions conducive to a more entrepreneurial-friendly climate in Malta. The development of business angles co-investment funding and the targeted provision of entrepreneurship-support schemes in the form of guarantee credit for both investment and working capital purposes are critical. These are market gaps, whose redress from an equity perspective would significantly bolster both the competitive and productive capacity of local enterprise. Significant efforts have been focused in this direction over the recent years specifically targeting

the creation of a venture capital fund and the launch of several structural fund intervention schemes aiding the internationalisation of business, operational and product upgrading, the migration onto e-business activities and innovation-related funding. A venture capital fund, in which the Maltese government committed financial resources to the tune of €2.1million, was officially launched in December 2006. Equally, the indisputable success of the ERDF schemes managed by Malta Enterprise and the Malta Tourism Authority are testimony to the investment-driven commitment of Maltese business to channel capital investment for maintaining their competitive edge. New investment incentives are also coming onto stream as a result of government’s efforts on the one hand to shield as much as possible Maltese enterprise from the negative spill over effects of the international economic crisis and on the other to put the local industrial

set-up on a firm footing to withstand competition from lower-cost investment locations. The MicroInvest scheme is intended to support micro enterprises and the self-employed that invest in their business, innovate, expand, implement compliance directives and/or develop their operations on a postexpenditure basis. Maltese businesses can thus benefit from tax credits representing a percentage of the eligible expenditure and wages of newlyengaged personnel. Not surprisingly, the scheme has been warmly welcomed by local enterprise in part because it serves to offset some of the induced operational costs that local enterprises have to face in the wake of increased energy utility costs but also because it facilitates considerably the small businesses’ investment capacities despite the unfavourable international economic climate. The European Investment Fund’s (EIF) JEREMIE facility is another scheme that is expected – once it is launched in Malta – to go a long way in addressing those equity market gaps afflicting particular segments of the Maltese entrepreneurial texture. The JEREMIE scheme should consequently lead to the market launch of novel finance instruments primarily in the shape of equity

financing to abet start-up businesses and possibly businesses shifting onto a more R&D-intensive operation. On their own, the provision of equity finance products whether in the form of seed, venture capital or guarantee schemes will not solve the structural deficiencies hindering the development of a healthier capital base for Maltese business to thrive, reach higher standards and expand overseas. Without a better, comprehensive and integrated approach to access to finance, which links together the various financing opportunities including government aid schemes, EU support measures, traditional loan-based banking services with new innovative forms of equity finance, the overall competitive edge of Maltese enterprise can never obtain the necessary quality levels. This is needed not just to surpass competition, but more importantly to keep ahead of competitors whether in product development, quality standards or FDI-attractiveness which are all so vital for the economic well-being of the islands. In short, improving and diversifying access to finance is the muscle power imbuing greater strength into the competitiveness of several local industries.

BUSINESS AGENDA | march – May 2010

Interview

“CONSUMERS MUST COME FIRST” As a seasoned Maltese politician but a newcomer to European politics, JOHN DALLI, has just been appointed as EU Commissioner for Health and Consumer Affairs. He speaks to Claire Azzopardi about the challenges presented by the issues that fall within his area of responsibility. At first impression, John Dalli is as soft spoken, composed gentleman with an almost guarded, yet approachable demeanour. But behind his composed manner, it seems that John Dalli is a man of strong character who rarely, if ever, gives up. Sitting comfortably and confidently in his office, Mr Dalli speaks comfortably and openly and states that “everything must focus on people... we need to give priority to the consumer.” As he explains his stance on how he will be tackling health and consumer affairs, Mr

Dalli goes on to say that “there is a lively debate underway on many issues that fall within my remit and these must be handled with care, yet decisively.” Mr Dalli is well aware of the fact that his position will certainly need to be cleverly presented to businesses across Europe, as one of the most frequent positions presented by the business community is the possibility that by putting the consumer first, additional costs may be incurred by businesses in their bid to fulfil their obligations towards the consumer.

“The business community has often voiced the opinion that some initiatives proposed by the EU – such as providing additional information to ensure a more educated consumer – may negatively impact on their competitiveness,” Mr Dalli acknowledges. “But my stance is that consumers must come first. Simultaneously, we must ensure that businesses are in a position to respond to consumer demands and expectations, which will ultimately provide business opportunities and will be of benefit to Europe’s socio-economic framework in the long term.”

Mr Dalli continues to explain that during his tenure, he will be working to increase the level of education amongst consumers about key issues that affect their daily lives. “I will aim to enable the consumer to make more informed choices about what they are buying, what they are eating, what their rights are and also what obligations they must respect,” he states. Mr Dalli also makes reference to the fact that giving the consumer freedom of choice is a primary aim. “This will be achieved in two main ways; firstly, by increasing

the amount of information given to consumers and secondly, by educating the consumer to help them interpret this information correctly. Freedom of choice does not really exist if the consumer is not equipped with both of these two factors.” But while Mr Dalli is certainly set on what he wants to achieve over the next five years, how exactly does he propose going about tackling these issues, some of which often prove to be rather contentious? “In my experience, the only way to achieve long lasting success is by bringing people together.”

BUSINESS AGENDA | march – May 2010

Interview cont. “While each stakeholder has their own point of view, constructive dialogue will only be successful if it leads to decisions and action, and that is what I will aim to achieve.” While this approach may initially come across as simplistic, Mr Dalli states that while dialogue is essential, it cannot end at being just a talk shop and decisions on contentious issues, such as genetically modified organisms (GMO's) and the PHARMA package, need to be made. “While each stakeholder has their own point of view, constructive dialogue will only be successful if it leads to decisions and action, and that is what I will aim to achieve. I propose bringing both the consumers’ as well as the business community’s needs to the table, but ensuring that decisive action on the issues at stake are taken as a result.” Indeed, there are a number of challenging issues that Mr Dalli has inherited as part of his area of responsibility. One of the most challenging to resolve will certainly be the PHARMA package. While the vast majority of inaitives falling under the package are straightforward and have enjoyed general agreement, some controversy has arisen regarding the possibility of relaxing advertising rules for prescription medicine. “The main difficulty in this regard is identifying the demarcation line between the provision of information about medicinal products as opposed to actually advertising the product itself. Many stakeholders are against the actual advertising of prescription medicines. I believe that we need to take a much more ‘patient-oriented’ approach when analysing and discussing this proposal,” Mr Dalli states. The PHARMA package will certainly be surrounded by interesting debate, as will the issues relating to genetically modified organisms (GMOs) and their cultivation. The GMO debate has a number of perspectives coming in to play – some arguments are emotional, some are based on scientific fact and others are more economic. “On the global level, a lot of major players like the US and China are moving fast and this raises the issue of competitiveness,” Mr Dalli points out. “There is the argument that GMOs are a source of food security and that there is no scientific evidence that they cause any harm. But many environmental lobby groups claim that there is still

“On the global level, a lot of major players like the US and China are moving fast and this raises the issue of competitiveness.” a risk associated with GMOs, and that this risk is too big to take. Political groups with the European Parliament themselves are split on this issue – but we must find a position that is suitable to all and I plan to tackle this during my term as Commissioner.” A similar topic that Commissioner Dalli will likely be tackling is the issue of cloning. As is the case with GMOs, the use of clon-

ing for the rearing of animals for consumption is surrounded by vastly different arguments ranging from economic benefits, ethics and whether there is even a need for it. “One major factor that cannot be ignored in this respect is that cloning can cause a great deal of suffering when there is a more natural way of breeding animals and rearing them for slaughter. Is it ethical

to clone them? Is it even really necessary?” he questions. “It’s not just a political decision, there are many perspectives that come in to play and are equally important. Once again, we need to discuss and we need to take a stance on it.” There are a myriad other issues that the new Commissioner will have to face over the next five years and the Health and Consumer portfolio is one that will certainly

see a great deal of healthy debate, especially due to the very wide variety of subjects that fall within the portfolio. But it is not only individual topics that will need to be addressed; Commissioner Dalli will also have to work through a period of personal adjustment in his new role, with his new team and operating within a new, European, framework. His decades as one of Malta’s leading politicians are testimony to the fact that despite the different dynamics and challenges that come his way, John Dalli is a man who can get a job done, and he can do it well. But will his experience in national politics be enough to ensure success at the European level? If his ‘can do’ attitude is anything to go by, it certainly will be.

BUSINESS AGENDA | march – May 2010

AWARENESS

Chevrolet Cruze finalist for World Car of the Year. Camaro finalist for World Car Design of the Year. The World Car Awards announced that Chevrolet Cruze is a finalist for the prestigious World Car of the Year Award, and the Camaro is a finalist for the World Car Design of

the Year award. The winners will be announced at the New York International Auto Show on Thursday, April 1st.

The Cruze is one of 10 finalists for the World Car of the Year award, as selected by a jury of 59 international automotive journalists, based on their experience with each can-

didate as part of their professional work. The jury members constitute a balance of representation from Asia, Europe, North America, South America, as well as other parts of the world. The jurors' next step is to reevaluate the ‘top ten’ cars, in preparation for a final round of voting in February. They will specifically rate each vehicle in terms of overall merit, value, safety, environmental responsibility, emotional appeal and significance. The Chevrolet Camaro is one of four finalists for the World Car Design of the Year, as selected by a jury of five design experts from around the world. The 59 World Car Awards jurors will now vote on the expert's design recommendations.

According to Yahoo!, Camaro was the most-searched vehicle in 2009. Camaro has also received the Popular Mechanics Automotive Excellence Award, and was named an All-Star by Automobile Magazine. Since its introduction in 2009, Camaro has outsold Mustang for seven straight months.

For more information about the World Car of the Year award jurors and process, please visit www.wcoty.com.

DRAGO BOATS DRAGO BOATS was first established in 1969 by the present Managing Director Mr Nikos Farazis. Since then the company has produced more than 23,000 cabin cruisers and sport boats. The last few years DRAGO BOATS has specialised in producing small pleasure boats, sized from 4.7m (16ft) up to 8m (27ft), although many special constructions have been built for customers. The latest FLAG SHIP has been launched at the Athens Boat Show 2009 – DRAGO 35: Fly Bridge Yacht.

Today DRAGO BOATS is one of the largest manufacturer and exporting boat building companies in Greece, exporting hundreds of open boats, cabin cruisers and fishers (Timoniers) all over Europe including France, UK, Ireland, Austria, Germany, Holland, The Netherlands, Malta, Italy, Cyprus, Romania, Poland and Bulgaria. DRAGO also

manufactures and distributes inox accessories throughout Europe.

certification requirements according to ISO 9001 standard.

The new state of the art factory built and fully operational in 2007, is situated in Koropi Attikis, and has all the departments needed for the boat and pool production. It is equipped with a machinery shop which constructs inox accessories for both Drago boats, and for other boat building companies, individuals, hotels, etc. Equipped with a mould department, a carpenter’s shop, and an upholstery facility, the factory has the capacity of producing over 1200 boats every year.

MECCA MARINE, also importers for Tohatsu and SUZUKI Outboards, is now offering the lowest price

PACKAGE DEALS for all DRAGO BOATS. Visit the new MECCA MARINE showroom in Main Street, St Paul’s Bay where you find over 65 crafts on display and outboard line up from 2.5Hp to 300Hp.

Each boat is made of high quality materials, has a CE certificate and is taken care by staff and personnel right through until its last detail. In September 2000, the company was audited by the international recognised body of ABS Group and was found to comply with all the

Tekno Airconditioning Ltd. Tekno Airconditioning Ltd is an organisation that was set up in 1994 to provide a total quality driven service to clients. Its operational methods are sensitive to the environment and human needs, and yet profits from the progress of technology.

mental since all aspects of the high quality service are to be met.

opment will be made aware of the financial parameters budgeted for.

Our holistic approach properly balances the social, technical, environmental and economic requirements to fulfil our client's brief and exceed their expectations.

The organisation is set up with the necessary expertise that enables us to undertake projects of every scale. The involvement of the right people and skills at the right time is funda-

It has to be pointed out that the success of a project cannot be achieved at any price and therefore whoever will represent the client in the initial stages of design devel-

Over the past years, the company has steadily penetrated the air-conditioning market against most established companies which were the pioneers in air-conditioning in Malta. We achieved this goal through the pursuit of aiming for perfection in giving the product a quality installation and an efficient after-sales service.

McQuay were recently entrusted with another prestigious project to air-condition The George Hotel in Paceville. Imagine what we can do for your business.

Visit Tekno at Tal-Qares Street, Mosta. Tel: 2132 2553/4; Email: sales@tekno.com.mt

For further information you can contact the MECCA Sales team on 2157 3278/7973 2783 or sales@mecca.com.mt or visit www.mecca-marine.com

BUSINESS AGENDA | march – May 2010

EP PRESIDENT JERZEY BUZEK COMMENDS MALTA’S MEPs FOR THEIR WORK Buzek hopes to visit Malta in the near future In an interview with the Business Agenda, European Parliament President Jerzey Buzek, has stated that Malta’s Members of the European Parliament are excellent and have contributed to enabling the country to “punch above its weight” within the EU framework. The EP President’s comments were made during an interview with this newspaper, where a number of EU-related issues, that are of particular interest to the Maltese business community, were touched upon. According to President Buzek, Malta is performing well as an EU member state and he highlighted the fact that the level of interest in European affairs is impressively high, stating that “Malta has five excellent MEPs who actively participate in debates within the European Parliament.” The President also expressed his belief that Malta's voter participation rate for the 2009 European Parliament elections “was an excellent one, standing at 80 per cent, the highest of any EU member state where voting is not compulsory.” President Buzek believes that this high level of participation is primarily due to the Maltese people’s high level of awareness about EU affairs, and said that “it is apparent that the Maltese voted because you know that the laws and decisions taken by the EP have a direct impact on your lives. Those powers give citizens a democratic right to know what is being done in your name.” EP President Jerzey Buzek heads the 736-strong European Parliament, which is the only EU institution whose members are directly elected by EU citizens. While elections to the Parliament take place every five years at member state level, elected members then take up their post according to political

affiliation and are not segregated according to national affiliations. The members of the European Parliament form a political alliance that primarily represents the needs of European citizens and not of the state, and the EP’s role in the development and passing of European legislation and policies is an extremely important one. As the EU’s smallest member state, Malta currently has the right to elect five Members to the European Parliament, but this number will soon be increased to six following the recent ratification of the Lisbon Treaty. However, many have claimed that having such a small number of MEPs to cover – and influence – events taking place within the EP is nigh on impossible. However, the fact remains that the number of MEPs elected within each country works on the basis of inverse proportionality. In this regard, President Buzek voices the opinion that “the principle of inverse proportionality with regards to the number of seats per country is a very important factor within the EP. In fact this principle allows for smaller populations to have a proportionately higher number of MEPs. For example – Germany, with a population of more than 80 million has only 99 MEPs, almost one MEP per million people. With the ratification of the Lisbon Treaty, Malta will soon have six MEPs for a population of around 350,000, which translates into having one MEP per 60,000 people. I also hope to visit Malta during my mandate as President of the European Parliament, which lasts until January 2012.” While President Buzek correctly points out that Malta has a proportionately ‘large’ number of MEPs, the fact remains that the five –

BUSINESS AGENDA | march – May 2010

soon to be six – MEPs have a hectic schedule trying not only to participate in as many hearings and voting sessions as possible, but also to actively influence the decisions made at EP level. Furthermore, it was recently announced that any additional seats allocated to member states in the Lisbon Treaty would probably not materialise soon, as a number of legal and bureaucratic obstacles have yet to be dealt with. President Buzek reveals that EP Council President, Herman Van Rompuy, had informed him of the Council’s decision to consult the EP on the issue of 18 extra MEPs. This comes in light of the fact that “the Spanish government wants the Parliament’s consent not to organise a convention on this matter. I have referred to the Committee on Constitutional Affairs about the matter... MEP Íñigo Méndez De Vigo is the EP’s rapporteur on the issue and he will be aiming to have his report presented to the the EP in March,” he explains. The fact that the EP is ‘divided’ into 20 Parliamentary Committees means that it is practically impossible for a Maltese MEP to be present in all of them. However, the Committees that do fall under locallyelected MEPs’ portfolio are of particular interest to the local business community. Maltese MEPs sit on the Committee for employment and social affairs, the Committee for the internal market and consumer protection, and the Committee for economic and monetary affairs, amongst others. The issues raised and the decisions made within these three committees in particular are of direct interest to businesses. In fact, the EP has extensive powers on regulating the European economy, a power its shares with national governments. In this regard, President Buzek states that “the economic crisis highlighted the need to reform the supervision of financial services.” “The current focus is on three proposals for new EU laws covering: alternative investment funds which includes hedge funds and equity funds; capital requirements for banks and the bonuses these financial institutions pay out, and the supervision of the financial sector, both at the micro and the macro level,” he continues. The President continues to explain that the fact that the European Parliament has set up a Special Committee on the financial and economic crisis, is “tangible proof of its commitment to help avoid any future recurrences of the crisis.” He concludes that the 45-strong committee, lead by German Liberal Wolf Klinz, will “examine ways to avoid future crisis with a view to developing appropriate measures for the long-term reconstruction of sound and stable financial markets, that support sustainable growth, social cohesion and employment, and respond to demographic challenges.”

17 European Parliament building in Strasbourg

BUSINESS AGENDA | march – May 2010

Business News BUSINESS AGENDA | march – May 2010

Activities Update ‘ COMMUNICATION ON CROSS-BORDER BUSINESS TO CONSUMER E-COMMERCE IN THE EU’ During the last month of 2009 the MBB issued a ‘Communication on Cross-Border Business to Consumer E-Commerce in the EU’. The report states that Maltese businesses welcome the Commission’s efforts to enhance this cross-border business to consumer e-commerce and agree with the Commission’s assessment that the potential for development of the digital retail internal market is substantial. More importantly, the report states that this demonstrates a need which goes beyond regulatory reform, and concerns heightened and pragmatic support which is required to develop the market model in a better and quicker manner underpinning the successful expansion of electronic trade in the past years. Electronic transactions are a fast growing market phenomenon, driven in part by technological development resulting in new commercial options for consumers and businesses alike. Such market trends are in turn reinforced by the inherent cost/selection-competitive edge that cross-border electronic

commercial transactions can avail themselves of, in comparison with conventional over-the-counter purchases. The report points out that the development of an EU-wide online single retail market cannot be attained unless a parallel effort is also conducted by eliminating the obstacles hindering e-commerce in services. The report states that the Commission’s communication pointedly excludes the address of these obstacles from its scope, thus preventing a faster and wider take-up of e-services in cross-border commercial transactions. The report continues by assessing a set of concrete measures, which should be developed in an integrated manner to create a better environment for the success of e-commerce in the EU. The concluding pages of the report include a number of remarks reflecting the ideas of the members of the Malta Chamber, which directly relate to the proposed policy actions suggested in the Commission’s communication.

MBB BRUSSELS EVENT LAUNCHES THE ASSOCIATION OF MALTESE IN BELGIUM AND LUXEMBOURG

The Association of Maltese in Belgium and Luxembourg was officially launched 12 February 2010 with a reception held at the offices of the Malta Business Bureau in Brussels. The Association is a nonprofit one and its main goal is to serve as a contact point between Maltese people residing in Belgium and Luxembourg through the organisation of events. The evening event started off with a carnival-themed party for children which was was followed by inaugural speeches from H.E. Ambassador Pierre Clive Agius, the

Maltese Ambassador to Belgium and Luxembourg, and Mr Franklin Mamo, on behalf of the Association's organising committee. A reception, where traditional Maltese specialities were served, concluded the successful evening. This event was organised with the kind support of the Permanent Representation of Malta to the EU, the Maltese Embassy in Brussels and the Malta Business Bureau and was sponsored by Maypole Confectionery, AirMalta, Delicata Wines, Farsons and Playmobil.

BUSINESSEUROPE’S COUNCIL OF PRESIDENTS IN STOCKHOLM Between the 2nd and 5th December, MBB CEO Mr Joe Tanti, Malta Chamber President Ms Helga Ellul and Malta Chamber DG Ing. Ray Muscat were present for Business Europe’s Council of Presidents in Stockholm. At the meeting BusinessEurope pointed out that the responses to the economic and financial crisis are beginning to produce results, but in counter said that recovery is fragile and that Europe is lagging behind in the global upturn. In order to ensure a sustained recovery, BusinessEurope believes it is crucial to restore access to finance for companies, in particular to SMEs. It is also essential that new capital rules remain proportionate, avoiding any further credit constraints. BusinessEurope believes that Europe must avoid being caught in a policy dilemma. Stimulus policies are a key factor of the current economic rebound. It was pointed out that growing fiscal imbal-

ances will soon put upward pressure on long-term interest rates and crowd out private investment. BusinessEurope suggested that the EU Council can break the circle by first of all defining an exit strategy from the unprecedented public intervention in the economy, and secondly by preparing its implementation in 2011 by speeding up structural reforms in 2010. In light of the UN Climate Change negotiations which were taking place in Copenhagen, BusinessEurope also highlighted a number of factors involved to make the agreement a success for European companies. Some factors included establishing a shared vision for long term global action to combat climate change, committing all developed countries to internationally legally binding and strong emission reduction targets and creating a level playing field worldwide for internationally traded goods. BusinessEurope also stated

that not enough commitment has been placed on measures that connect the strength of free trade and the market economy to boost technological cooperation to fight against climate change. According to BusinessEurope, greater priority should be given to research and development in the fields of energy and clean-technology in the new EU budget, and this is essential if environmental protection and economic growth are to be reconciled. On another note with regards to the Lisbon Strategy for Growth and Jobs, BusinessEurope recommended that this strategy should be based on five strategic objectives, namely: deepening economic integration and restoring financial stability, enhancing innovation, entrepreneurship and skills, putting modern employment policy in place, integrating energy, environmental and competitiveness policies and finally shaping globalisation and fighting protectionism.

CONSULTATION ON THE FUTURE ‘EU 2020’ STRATEGY In January 2010 The Malta Business Bureau released its position on the Commission consultation on the post-Lisbon Strategy outlining the Maltese business community’s expectations on macroeconomic reform targeting economic recovery at both EU and local level. The MBB position is a reaction to the Commission working document ‘Consultation on the future EU2020 Strategy’. The Commission working document identifies a threepronged approach for revising the Lisbon Strategy into the new ‘EU 2020’ strategy. This is perceived as a step forward in increasing the focus on the key economic reform priorities for the EU-27. Feedback from Maltese business warns that the new EU 2020 strategy should not be a repeat of the current Lisbon strategy, namely by missing reform opportunities from an over ambitious plan. The reform process from a national perspective has brought positive results although it was noted that much more could be achieved.

Results so far and Pospects for the Future From a national point of view, the progress achieved through the National Reform Programme (NRP) has led to greater market flexibility. However, the reform process still has to deliver certain crucial elements such as fully-functioning competition policy instruments to ensure proper market surveillance. The insistence of such drawbacks indicates how the Lisbon strategy failed in translating its policy objectives into tangible measures for businesses, mainly due to the inadequate structure of the implementation monitoring system. Proper adaptation and reinforcement of the methods of delivery associated with the current Lisbon process could lead to better results for the EU 2020 strategy. Assessing the Proposed Means The approach taken by the Commission in this working paper is a trifocal emphasis on knowledge,

inclusive societies and an interconnected ‘greener’ EU economy. Amongst the obstacles that the paper highlights, there are several missing links connected to innovation preventing the realisation of an integrated approach to education research and creativity which can ultimately sustain economic growth. The Commission paper also recognises human capital as key to better inclusive societies in the EU through increased job possibilities, equitable opportunities in lifelong learning and better employment rates coupled with sustainable social security for those who are unemployed as well as people in job-to-job or study-to-work transitions. In line with our consistent leadership on the national debate on the Lisbon Strategy, the Malta Business Bureau will be spearheading the discussions within the local private sector as to how best to articulate a European reform strategy that tangibly delivers on its targets for economic growth and employment creation.

BUSINESS AGENDA | march – May 2010

BUSINESS MEETS MEPs MBB ATTENDS MEUSAC OPEN DEBATE ON THE SPANISH PRESIDENCY

MEP Simon Busuttil, MBB President George Micallef and MEP Louis Grech address the audience at the launch of the Business Meets MEPs events..

The Malta Business Bureau organised the first in a series of events entitled ‘Business Meets MEPs.‘ These events give the local business community the opportunity to express their views, concerns and ideas directly with the current Maltese MEPs. These meetings as explained by CEO Joe Tanti, “will establish and maintain an effective channel of communication linking the demands of local businesses with their European representatives”. The MBB held a press conference before the event, addressed by MBB President Mr George Micallef, Dr Simon Busuttil MEP and Mr Louis Grech MEP presented their views about this initiative. Mr Micallef stated that “The Malta Business Bureau strongly believes these reg-

ular events will help better inform our MEPs on the core issues affecting local business, consequently also enhancing the MEPs’ own contribution to the political debates at a European level.” On the same note Mr Grech said that “decisions taken at EU level affect citizens, including business especially SMEs. This interactive process between MEPs and interested stake holders should not simply serve as an information session, but should serve as a catalyst to promote ideas and potential action for the benefit of business, SMEs and consumers.” At the event, held subsequently at the Hotel Phoenicia, Ms Miriam Dalli asked MEP Busuttil a number of questions regarding the costs for

business implied by the EU’s Social Agenda. The major topics discussed to this end were those concerning the Maternity Leave Directive, and the Revision of the Working Time Directive. Following this discussion the audience was given the opportunity to liaise directly and ask Dr Busuttil any particular queries about employment and social issues affecting their business. These events are going to be held on a regular basis, at the Hotel Phoenicia on Friday afternoons between 15.00 and 17.00hrs. Each event will be chaired and moderated by a senior Maltese journalist, who will ask the invited MEP a series of questions, and after which, the debate will be open to the floor for any queries which may arise during the meeting.

On the 26 January, representatives from the MBB attended the MEUSAC open debate on the Spanish Presidency of the EU at the Hotel Phoenicia. Dr Vanni Xuereb Head of MEUSAC welcomed the audience at the event, while the Priorities and Programme of the Spanish Presidency were presented by Ms María Isabel Vicandi Plaza, Ambassador of Spain to Malta. Hon. Dr Tonio Borg, Malta’s Deputy Prime Minister and Minister of Foreign Affairs provided an insight into Malta’s reactions, perspectives and priorities for this semester. The Ambassador of Belgium to Malta, Mr Jean-François Delhaut and the Ambassador of Hungary to Malta, Mr Miklós Merényi also intervened giving an outlook for the priorities of their countries’ Presidencies. H.E. Vicandi Plaza stated that the main goal of the Spanish Presidency is to boost European sentiment, and a feeling of community while also becoming a more innovative and social Europe. The Ambassador discussed the four priorities in detail outlining: the full and effective implementation of

the Lisbon Treaty; Guaranteeing Economic recovery; Reinforcing the presence of the EU in the world; and placing EU citizens at the centre of the EU. Hon. Dr Tonio Borg commended the commitments taken by the Spanish Presidency to make the Lisbon Treaty work. Hon. Borg stated that the International scenario at present is tense due to the airline hijack on Christmas Day, the shoot out at the African Cup of Nations and the earthquake in Haiti, nonetheless the Spanish programme has recognised these challenges and is tackling them head on. The Deputy Prime Minister concluded by stating the three priorities which Malta wants to gain from this Presidency period including: a Re-launch of the Mediterranean Fora, the support of Spain in setting up the European Asylum Support Office and also on the Malta Pilot Project Illegal Immigration, and last but not least support in the accession of Turkey and Croatia stating that the EU can no longer sit on the fence when it comes to commitments with Turkey, but be clear about the policies which are being taken in their regard.

BUSINESS AGENDA | march – May 2010

MEETING WITH AMBASSADOR CACHIA CARUANA On the18th December, MBB President and CEO met with Ambassador Cachia-Caruana at the EU Secretariat OPM in Valletta. The discussion during the meeting encompassed a number of topical issues relevant to MBB’s work. Primarily, the MBB presented H.E. CachiaCaruana with an update on MBB policies and reports which have been compiled since the MBB’s restructuring last April. During the meeting the government priorities for the upcoming six months during the EU Spanish Presidency were discussed, along with priorities which will be affected in the longer term – during the Belgian Presidency. This meeting also built upon the previous meeting held with the

Prime Minister where MBB assured Hon. Dr Lawrence Gonzi that an increased effort would be put into better supporting consultation processes and also provide stronger backing to Government-EU legislative processes. Subsequently, Permanent Delegate in Brussels Mr Omar Cutajar and Mr Joe Tanti met with Ms Charmaine Hogan, Attaché at the Permanent Office in Brussels on the 14th January, 2010 during the recent visit by the CEO. A second meeting between the MBB and the Ambassador is set to take place in the coming days.

EUROCHAMBRES’ 2ND STRATEGIC COMMITTEE MEETING Eurochambres’ second strategic meeting was held on the 4 February, where Mr Stefano Mallia, Vice-President of the Malta Chamber and Mr Omar Cutajar, MBB Permanent Delegate in Brussels were in attendance. The Strategic Committee is holding discussions with national representatives of Eurochambres’ member organisations at a senior level in order to identify the priority issues demanding focused attention through the issuing of common positions, lobby work as well as coordinated communication initiatives including workshops, conferences both in Brussels and in the capitals of the respective EU-27 member states.

The meeting was opened with a single item on the agenda for the day; an exchange of views and discussion of the results of the policy survey conducted with the members of the committee as a result of a decision taken at the first meeting of the Strategic Committee. The survey was conducted to discern the degree of convergence and divergence of the national policy priorities in line with the dominant issues being tackled at EU level by Eurochambres. The Malta Chamber submitted its response, highlighting the paramount importance of competitiveness-related issues such as employment and labour regulations, environmental legislative compliance costs, energy

issues and within a broader context, the facilitation of trade within the internal market. The Chair of the meeting launched a tour de table, an activity which is intended to better define the touchstone criteria for establishing the priority issues as well as the working methods to be adopted by Eurochambres. Within this context Mr Mallia intervened on the need to clearly define the requisite timeframes for preparing a well-drafted strategic policy development proposal as well as the need to define a mechanism permitting the continuous update of documents whenever required.

OPENING OF THE NEW MBB OFFICES On the 17 February, Minister for Finance, the Economy and Investment Tonio Fenech, inaugurated the new Malta Business Bureau offices, located at Casa Leone, Pjazza Robert Samut in Floriana The Malta Business Bureau moved offices as a result of its drive to enhance the quality and scope of services it renders to the membership of its parent organisations, the Malta Chamber of Commerce, Enterprise and Industry and the Malta Hotels and Restaurants Association. The MBB Malta office had been operating since 1998 at the Exchange Buildings in Valletta. The decision to open new offices has been taken in the context of the restructuring process that the MBB has been undergoing over the past months. The restructuring has seen the consolidation of the MBB’s position as the EU advisory office for the local private sector in line with the office’s proactive approach in supporting Maltese business on the provision of EU-related information, regulatory updates and EU funding opportunities. Minister of Finance, the Economy and Investment Tonio Fenech congratulated the Malta Business Bureau on the inauguration of their new premises and for their sterling work amongst businesses carried out throughout the years. He expressed his belief that 2010 will provide better prospects for the Maltese economy and remarked that confidence is already being shown in our economy. Hon. Fenech referred to the “new investments announced over the past few weeks, the take up of privately issued bonds and Moody’s report on the resilience of Malta’s economy”. The minister announced that “government will continue to assist this recovery both through wider scale projects such as the substantial investment in national projects which generate employment in the short-term and better prospects for future and also through direct support to particular sectors, including specifc incentives for restaurants and hotels, the MicroInvest tax credit scheme, the EU funding opportunities for businesses and also through the

organisation of business missions to South Africa, the Gulf and China to support local businesses in tapping new markets.” The inauguration event was also addressed by outgoing MBB President Mr George Micallef who described the efforts which the MBB are taking in order to bring on stream more value-added services and assistance for the Maltese business community: “The MBB has stepped up a gear over the past year, strengthening its capacity to deliver on its core objective of advisory support to Maltese business on EU issues affecting enterprise. The opening of our new modern offices is the culmination of this restructuring process.” Mr Micallef also took the opportunity to introduce the incoming MBB President Mr John Huber.

HON. Tonio Fenech, MBB President George Micallef, Dr Jason Azzopardi and Mr John Huber at the inauguration of the new offices.

BUSINESS AGENDA | march – May 2010

Interview

A POSITIVE TOURISM TURNAROUND? The last year has been a particularly challenging one for the local tourism industry. With a new Chairman heading the Malta Tourism Authority, will 2010 fare any better than 2009? KRISTA MICALLEF TRIGONA speaks to LOUIS FARRUGIA, Chairman of the Malta Tourism Authority, about his views on the current situation and how he plans to strengthen Malta’s position in the global tourism market. The way that Malta is perceived by tourists is fundamental to the long term development of the Maltese economy since tourism plays such an indispensable role, directly contributing to about 25 per cent of the economy. After having taken on the critical role as Chairman of the Malta Tourism Authority, Louis Farrugia will be taking stock of the product we are offering and analysing its strengths and its weaknesses. “The tourism industry generates €1 billion a year in expenditure and attracts around 1.2 million tourists each year. The amounts are spread between the travel industry and the local economy,” he says. One of Mr Farrugia’s main priorities within his new post is to analyse the markets that attract tourists to the island. “We need to articulate what our product really is,” he explains, “as Malta has a diverse range of products to offer: sun and sea; history and culture; English teaching; diving. We need to decide on how important each sector is and determine Malta’s unique selling proposition, which could well be the diversity that’s on offer.”

“Therefore, it is important that we constantly review the product that we are offering,” he stresses. “If, for example, we decide that we should give more importance to history and culture, we can then adjust our communication strategy with this in mind.” Malta has a lot to offer as a destination. However, the way that Malta is packaged is instrumental in attracting more tourists to the islands. So, developing an appropriate strategy for the Maltese islands within this highly competitive market is absolutely essential. “If we are going to package Malta just as a sun and sea destination, wouldn’t Tunisia, Egypt or Turkey be a more attractive option for tourists?” Mr Farrugia argues. “The solution could be that we attract tourists who are not only looking for sun and sea, but who also want to experience our rich and varied history and culture as well as wanting to eat well in restaurants and so on. We need to ensure that we have a refined product and that the messages are clear, but, more importantly, we also need to be cer-

Malta Tourism Authority Chairman Louis Farrugia

BUSINESS AGENDA | march – May 2010

Interview cont.

“The solution could be that we attract tourists who are not only looking for sun and sea, but who also want to experience our rich and varied history and culture as well as wanting to eat well in restaurants and so on.” tain that we deliver a good experience all-round.” He affirms that one of Malta’s main weaknesses is that it elicits mixed perceptions wherein the destination’s image is concerned. “Some people from the UK, for example, mistakenly view Malta and Gozo as a resort for the elderly, whereas continental tourists believe that Malta has the potential to be a good short break destination.” Another area which Mr Farrugia intends to monitor closely relates to the constant feedback received from tourists regarding their overall experience when in Malta, taking particular care to address those issues which consistently appear to be causes for concern. “Through

research we can find out what tourists liked, what they didn’t like and why they would come back, if at all” he says. The world economy has been through a turbulent period, most especially during the past year. Malta’s tourism industry was not spared the consequences of this economic upheaval either. “There is no doubt that 2009 was a difficult year since we not only registered a decrease in numbers – with arrivals down by eight per cent – but we also had a decrease in the average length of stay, with bed nights down by around nine to ten per cent”. “When we make comparisons with that which was the norm ten years ago, the current trend is that

people are staying for less bed nights than they used to,” Mr Farrugia states. “The average stay is now around 8.5 days when before it used to be ten or 11 days.” The potential for shorter breaks is there and this can easily be exploited, particularly through increased accessibility via low cost airlines and encouraging shorter vacations due to their effective pricing strategies. Mr Farrugia also explains that whenever hotels experience a dip in demand, the natural course of action is to lower room rates. “Ideally we want to strengthen the demand for hotel rooms which will in turn help increase the room rate. If room rates increase, then there

will be more money to invest and for hoteliers to upgrade their product,” he explains. “It is in the interest of the Maltese tourism industry as a whole for us to attempt to achieve the maximum possible amount of tourist arrivals, also encouraging a higher average expenditure. We can generate more income by making our product more resilient, by providing tourists with precisely what they want. We must provide the experience which we promise in our messages,” he says. Mr Farrugia believes that 2010 has the potential to be a better year than 2009. “If we get it right, there is a positive future. If we upgrade our product and give value to the experience, the benefit to the economy will be enormous.” Mr Farrugia clarifies this point further by providing an example. “The average spend per tourist per trip is about €750, part of which goes to the airline. If we assume that 1.2- 1.3 million tourists visit Malta and they increase their spend by about €50 per trip, the direct benefit of this would be an additional €60 million spend. If the aver-

age spend increases by €100, the overall increase in expenditure per annum would be of €120 million. In other words we should also look at a strategy for encouraging an increase in expenditure and not just for increasing the amount of people visiting the island,” he affirms. “In December 2009 we registered an increase of ten per cent in tourist arrivals. January also seems to have continued in this vein with passenger movements increasing by seven per cent. “So far it seems that the tide has slowly begun to turn and, in the discussions I have had with airlines and the industry, various indicators are pointing towards things continuing to pick up from March onwards. Although it is still early in the day to make any predictions, the indicators are there. Malta International Airport is foreseeing a 2.9 per cent increase in passenger movement for 2010 and I don’t see why we shouldn’t achieve that,” he concludes.

BUSINESS AGENDA | march – May 2010

PRICES DROP BUT PROPERTY REMAINS ATTRACTIVE INVESTMENT OPTION IN THE LONG TERM

Despite a drop in property prices in recent years, the real estate industry in Malta and Gozo has retained its attraction as a lucrative investment option. The Business Agenda reports on the current state of affairs in the industry. Ambassador Pierre Clive Aguis

The property market has long been one of the Maltese islands’ strongest industries and investing in real estate has traditionally given very attractive returns for investors, often significantly higher than that gained through equities and other financial products. However, the industry has of course not been spared the repercussions of the global economic downturn and over the last four years, a consistent – yet contained – drop in property prices has been registered. The latest available statistics for the Central Bank of Malta’s Property Price Index show that property prices in Malta and Gozo declined by 2.5 per cent during the fourth quarter of 2009. Yet, while it is true that a decline was registered in the final quarter of 2009, it was a relatively moderate one considering the 6 per cent drop that had been registered in the third quarter of 2009, which was still an improvement upon the drop of almost 10 per cent registered at the beginning of the year. Nevertheless, the property market in Malta and Gozo remains an attractive investment for both local residents and foreign investors alike. Land is a limited resource on the islands, and while this can cause some challenges with regards to how best to use this resource, it does mean that the value of property increases significantly with

time, offering a valuable return on investment. The Maltese property market has become increasingly attractive to foreign investors particularly since the country joined the EU in 2004 and subsequently adopted the euro in 2008. As a result of these various factors, demand within the industry has remained consistently strong, both for housing as well as commercial properties. In fact, according to the Federation of Real Estate Agents, approximately 10,000 transactions occur each year which, for a local population of just under 400,000 people, is a clear signal that the industry is very active. The Particular Attraction of Gozo’s Property Market While opportunities for investment in Malta itself are usually promoted strongly, its sister island Gozo often plays second fiddle and does not get the same amount of attention. However, there are a number of stakeholders who are actively involved in highlighting the benefits and opportunities of investing in the property market in Gozo. Malta’s Ambassador to Belgium, Pierre Clive Agius, explains that Malta’s embassies abroad take every given opportunity to promote the islands and their potential. “We never promote Malta alone but we

make it a point to present Gozo alongside it, even on press trips, and the feedback we get is unfailingly positive.” “For the very first time, the Ministry of Foreign Affairs requested every Maltese embassy to submit a detailed plan of action of all activities foreseen for 2010 and Gozo features as a priority area in this action plan. Our embassy this year plans specific events on Gozo as an ecological island. We greatly hope that with these initiatives we will attract more visibility to this proud island which has so much to offer,” he explains. The Ambassador goes on to point out that, while other destinations in the Mediterranean also have a lot to offer investors, the property market of the Maltese islands is particularly stable in the long term. “Acquiring property in Malta or Gozo is acquiring property in the European Union. This is clearly not the case with other destinations such as Croatia, Montenegro, Turkey, Morocco, or Tunisia. Acquiring a property in Gozo is also buying into a lifestyle… I believe this is a very strong selling point which contrasts very much with other competitive destinations. Often, properties in competitive destinations are far away and isolated, and are often difficult to reach. This is clearly not the case with Gozo.”

According to Ambassador Agius, the fact that Gozo has been earmarked to become an ‘ecological island’ is another added ben-

efit gained when investing in the Gozitan property market. “This is a vision which will increase the value added of the Gozo product. I was

BUSINESS AGENDA | march – May 2010

recently at a tourism fair in Brussels and the ‘environment’ trend emerged very clearly. This is how many destinations are now promoting themselves, and this is where the consumer seems to be heading. It is also against this background that the embassy will seek to promote Gozo,” he says. One investor who certainly recommends property in Malta and Gozo is Geert Sciot, Vice President of External Communications with Brussels Airlines. Mr Sciot purchased an old house in Birgu. “Malta is a hidden diamond... you are able to ‘buy a piece of history’ – parts of my house are almost 500 years old, and I don't know other areas in the Mediterranean where you can find a similar price-quality level and enjoy great 180 degree sea views. It is as simple as that.” Ms Sciot also points out that Malta “is the only Mediterranean country where everybody speaks English. This is a real advantage allowing you to familiarise with the local culture and the village life in no time. I can say that we were immediately accepted by the friendly, welcoming local population and allowed to actively take part in the town’s life. Also the fact that Air Malta offers great travel solutions was an important element in my decision making process.”

extensive experience on the Italian and Sicilian property market and has noticed a number of factors that, if adopted on the Maltese level, would serve to strengthen the industry even further.

taxable capital gains for properties sold before this statutory five-year limit attract a tax rate of 20 per cent in Italy, compared to the potential personal tax rate of 35 per cent in Malta,” he explains.

“There are aspects of the way real estate is regulated in Italy

According to Mr Spiteri, one other improvement that would facilitate

“Malta is a hidden diamond... you are able to ‘buy a piece of history’ – parts of my house are almost 500 years old, and I don't know other areas in the Mediterranean where you can find a similar price-quality level and enjoy great 180 degree sea views. It is as simple as that.” which, if adopted in Malta, could contribute to either improving the Malta real estate product or to stimulate the Maltese real estate market. Among these, one finds the fact that, insofar as private individuals are concerned, any property which is transferred after five years from acquisition does not attract any capital gains, as against the situation obtaining in Malta where this exemption applies only to the individual’s main residence if transferred within three years.”

Operating in a Competitive Market The Maltese islands are operating in a competitive environment when it comes to attracting potential buyers. Mario Spiteri, Managing Director of Go Sicily properties is in the ideal position to make an analysis of how Malta’s property market compares to what other Mediterranean islands have to offer. He has

Mr Spiteri goes on to explain that the benefit to the property owner in Italy is that this exemption is not restricted to the main residence only but also extends to any property owned. “Obviously, this measure contributes towards the containment of fiscally-induced inflationary pressures on the property market. In addition to this, any

investing in the Maltese property market would be to address the frequent occurrence that a property is valued by the Inland Revenue’s architect after the transfer, with the possibility of having divergence of opinion as to the value of the property, which may lead to unwarranted fiscal penalties. The Italian authorities take a different approach which may prove to be a useful case study for the local authorities. “In Italy, all properties are registered at the land registry, from where one can determine the various attributes of each property, including the valuation which the state gives to the property. As a result of this valuation, potential transferors of property are guided prior to entering into the transfer commitment as to the valuation which the state would expect

should that particular property be transferred,” he explains. Mr Spiteri goes on to explain that if a property owner in Italy sells a property at a lower value than that shown in the land registry, the seller may still opt to pay taxes and stamp duties on the basis of

the higher land registry valuation. “In this way, the seller can avoid unwarranted penalties brought about by the subjectivity with which the matter is treated in Malta. Such measures will, if adopted in Malta, contribute to the overall fine-tuning and improvement within the Malta real estate product,” he concludes.

Mario Spiteri, Managing Director of GoSicily Properties

BUSINESS AGENDA | march – May 2010

CHANGE

IN FOREIGN DIRECT INVESTMENT TRENDS Malta has a lot to offer potential investors, but both international and national economic trends are having a direct impact on FDI flows. The Business Agenda finds out more about the authorities strategy to secure and maintain a high level of investment. Over the last few years the landscape that characterised Foreign Direct Investment trends in Malta has changed considerably. According to a report issued by Malta Enterprise, the trend for inward flowing FDI has shifted from fixed assets to human resources. In fact, approximately 50 per cent of the projects approved by the organisation were knowledge-based, focusing primarily on ICT, high value engineering, aviation and healthcare.

Hon. Tonio Fenech , Minister for the Economy, Finance & Investment

Nevertheless, the 20 per cent drop in FDI that was registered by the National Statistics Office between 2008 and 2009 has caused stakeholders to sit up and take note. As a result a more proactive and targeted approach has been taken on board, with the realisation that that the impact of the current economic climate on FDI flows, coupled with the fact that local investment has also decreased significantly, needs to be treated as a high priority. However, despite figures showing a drop in the level of investment being injected into the economy from abroad, a deeper analaysis of the structure of the investment being made is needed if the medium to long-term effects of this trend are to be identified correctly. Dr Gavin Gulia, Shadow Minister for the Economy and Self Employed points out that statistics concerning FDI flows can often be slightly misleading as “the data can be distorted by transactions of international banking institutions operating from Malta.”

“These transactions are characterised by financial inflows - which are classified as FDI - and that flow out instantaneously, either as portfolio outflows and/or other investment. Such transactions have very little impact for the Maltese economy, but significantly distort FDI statistics,” Dr Gulia explains. “A significant trend that has been registered is the fact that FDI

flows in the form of equity capital decreased steadily since 2006 from around 14 per cent of GDP to around 10 per cent in 2007. This downward trend continued and reached 5.5 per cent in 2008, and 3.4 per cent of GDP during the first six months of 2009,” he says. According to Dr Gulia, these figures show that FDI has been definitely on a decline, even before the

“However, despite figures showing a drop in the level of investment being injected into the economy from abroad, a deeper analaysis of the structure of the investment being made is needed if the medium to long-term effects of this trend are to be identified correctly.”

BUSINESS AGENDA | march – May 2010

Lufthansa Technik has invested in major projects in Malta

global economic crisis, although there is no doubt that the global economic crisis contributed to further decline in FDI, particularly during 2009. However, while there are certainly a number of challenges that need to be met head on, a proactive stance is being taken by the authorities responsible for attracting Investment. Mr Alan Camilleri, Chairman of Malta Enterprise, states that while “FDI flows may have dropped in real terms, they have not dropped in economic terms.”

also multilingual, fluent in English Maltese, Italian and less frequently, also in French. The authorities have also learnt how to best promote the islands’ strong points when it comes to securing investment. Tonio Fenech, Minister for the Economy and Investment states that “Malta’s investment promotion efforts place great emphasis on identifying and establishing direct contact with key players operating in high value adding sectors.”

He explains that “inward FDI flows have remained strong in economic terms, mainly because of the transformation that the Maltese economy has undergone, from being capital intensive to knowledge intensive.”

“During the year, government carried out a number of initiatives related to major target sectors such as ICT, healthcare, education, engineering services including aviation and maritime, value adding manufacturing and regional support operations,” he continues.

Indeed, Malta does certainly have a number of competitive strengths and unique advantages in selected areas, particularly in the services sector. The authorities have developed a number of attractive financial incentives that would certainly attract the attention of potential foreign investors. Malta's legislative and regulatory systems have been formulated to create a sound - yet flexible - framework for business and the islands have been recognized as leaders in the use of ICT.

“Our efforts are primarily targeted through two channels – the Malta Financial Services Authority and Finance Malta are responsible for the financial services aspect, while Malta Enterprise is responsible for the remaining fields. Significant efforts are being made to seek new opportunities, as well as by assisting Maltese companies to establish contacts in new regions, both in Europe but also in other regions including South Africa, the Gulf Region and China.”

A number of other factors are also of prime importance, for example, the islands’ geographic location at the centre of the Mediterranean enables it to act as a crossroads between Europe, North Africa and the Middle East, and it is extremely well connected by both air and sea routes. Furthermore, the workforce is highly educated and most business operators and employees are

Considering that economies across the world are undergoing a period of transformation and upheaval, FDI trends in Malta are undoubtedly going to change as a reflection of the economic realities that influence them. It is essential that all stakeholders play their part in ensuring that Malta offers the very best options

“Malta does certainly have a number of competitive strengths and unique advantages in selected areas, particularly in the services sector. The authorities have developed a number of attractive financial incentives that would certainly attract the attention of potential foreign investors.” to investors. The islands have a number of strategic advantages that it can offer investors and these need to marketed and promoted in an effective manner and within the right spheres. Any issues that

may be hindering the islands’ competitiveness in the area – such as bureaucracy and the need for a greater supply of workers for given sectors – will need to be addressed with decisive action.

With the right strategy, Malta can enjoy many more years of strong FDI which will be mutually beneficial to all involved.

Inward FDI flows services and knowledge based industries has increased

BUSINESS AGENDA | march – May 2010

Interview

Communication & Trust: The Key to Greater Business Success According to international business consultant, MARIA RAUCH, businesses stand to benefit by implementing a clear networking strategy. The need to communicate and build trust in potential partners is the key to long term success. KRISTA MICALLEF TRIGONA speaks to the networking expert about the benefits that good networking can bring to local businesses and learns more about best practices that have been adopted across Europe. “The problems that organisations are facing are multi-dimensional,” Ms Rauch states as she settles in to discuss a topic she holds close to her heart. “The only way that an organisation can deal with a problem is through effective networking, that is, the coming together of organisations and people, each of whom hold different competences and different resources, which allow organisations to find an integrated solution when having to face such complex problems.” According to the international expert, good networking practices allow intensive exchange of knowledge and practices fostering common learning and development. There are many different ways in which effective communication and the exchange of skills and knowledge can occur. One popular and effective form, is ‘clustering’, which is based on the principle of the effects brought about by economies of scale. “The cluster policy is based on the fact that competitiveness of

companies is not only affected by outside global influences but also by local factors such as neighbourhood, personal exchange and informal meetings. Experience and research have shown that companies in clusters are more innovative and productive because they can use factors such a network of specialised delivery services, research organisations and a specialised workforce all in short proximity,” Ms Rauch points out. A deeper way of networking is the ‘partnership approach’, which is a popular form of improving performance through communication. “This is a deeper and more humble approach to networking, in which businesses form one common vision and adopt a set of common objectives. This idea was born as the need arose amongst businesses, through the evolution of a more complex and fast paced, highly competitive lifestyle. It offers the possibility of having small to medium sized enterprises find more innovative ways of doing business together,” she explains.

A partnership involves the process of building trustworthy relationships, enabling businesses to learn from one another. According to Ms Rauch, trust is an indispensable part of all networking initiatives. However, this does not mean that any given individual – or this case, business entity – will lose their individuality. “Good networking establishes a common perspective. After having decided on the common characteristics, you can negotiate on something that you both can live with,” she adds. Ms Rauch explains that there are many excellent examples of networking initiatives around Europe. “One particularly successful initiative was carried out in Ireland, where operators involved in the manufacturing and wholesale of non-durable products established a networking partnership, called SLM Skillnet. Membership reached over 60 companies and regular networking meetings were held. Over a period of only a few months, over 600 participants were given training in operational and managerial skills,” Ms Rauch says. The tangible benefits of the networking project were clearly visible. In a survey conducted after the initiatives were carried out, the results were extremely positive. For example, 40 per cent of member companies reported significant increases in trainee numbers. Almost 80 per cent of member companies

THE LOCAL PERSPECTIVE: Ing. Ray Muscat, Director-General of the Malta Chamber of Commerce, Enterprise and Industry has a good amount of experience when it comes to networking at the local level. According to Ing. Muscat “Malta requires a coordinated effort to stimulate higher levels of enterprise collaboration to boost innovation.” He believes that there a number of strategic advantages to be gained from networking including the reduction of business risks; leveraging in partnering; cost reduction through

claimed that training had become an integrated long-term goal for their businesses. “I think that businesses and individuals are often afraid of forming a partnership because they seem to have the impression that partnership means dominance. However, what many fail to understand is that a partnership allows organisations to adopt a horizontal structure amongst businesses, posing more of a challenge when you are working with organisations that adopt more of a vertical structure, a hierarchy,” Ms Rauch clarifies. Whatever the format adopted, the core basis for effective networking is people. First impressions really count and are intrinsic to networking and building a partnership between businesses. “Upon meeting, the first phase is the exploratory phase. When your intent is to network, you need to be aware that what you have before you is not an organisation but people, as it is people who make up the organisation,” she says. Owing to Malta’s size, there is a lot of potential for successful networking to take place, and should in fact be very easy. However, Ms Rauch also elaborates that this characteristic may also be seen as a drawback because there is a lack of trust since Malta is perceived as a country where everybody knows everyone.

“There is room for more to be done to ensure successful networking in Malta. The aspect of being small could result in networking opportunities that focus outwards and could help Malta tap into larger projects abroad,” Ms Rauch conveys. “Competition is also harder in a smaller market, however businesses that engage in CSR (Corporate Social Responsibility) could help Malta differentiate more on a competitive level.” Due to its geographical position, Malta has long been affected by intercultural traits with a long standing history that owes much to this aspect. Malta could also serve as a hub for businesses in Europe to become more aware of networking with Africa due to its geographical proximity. “Malta has a language that has been influenced by Arabic, it has a culture that has been influenced by African cultures making it a good facilitator and a good mediator between Europe and Africa and Malta can invest more in this role,” Ms Rauch points out. “We can already see some companies in Malta which work closely to companies based in Libya, however, this needs to be developed more. Malta is no longer a country that is deeply influenced by the British, this umbilical cord that once existed is being cut slowly and is helping the Maltese to form ties and make connections with other countries.”

specialisation; keeping pace with technological progress and the fact that networking can serve as a basis for strategic business cooperation to undertake joint projects. Ing. Muscat also points out that in Malta, there are a number of challenges that need to be tackled for successful networking to take place. “Enterprises have different management styles, there may be cultural gaps, a fear of competition and a history of insular approaches.” However, he believes that the benefits far outweigh the difficulties and that a more proactive approach should be taken towards building networks and partnerships in all industries.

BUSINESS AGENDA | march – May 2010