Business Agenda Issue 04 by Malta Business Bureau

ISSUE 04 I oct - dec 2010

THIS ISSUE

Eu Affairs MEP David Casa speaks about the current legislature of European Parliament.

page 16

business agenda

NEWSPAPER POST A balancing act:

Safeguarding consumer rights while promoting business.

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THE Official Business publication of the Malta business Bureau

UNDERGROUND ECONOMY IN MALTA HAS GROWN: NEEDS TO BE ADDRESSED The Maltese underground economy has grown and is certainly beyond acceptable levels. This assertion was made by economist Dr. Gordon Cordina when speaking to Business Agenda about the effects of the underground economy on legitimate business.

case study Café Jubilee's rise to success beyond Malta's shores.

page 22

According to Dr. Cordina, underground economic activity in Malta is motivated by tax evasion and is compounded by the perception that

the likelihood of being caught or facing harsh penalties is relatively low. “The underground economy in Malta is well beyond optimum levels and this is certainly having a negative impact on those businesses that are playing according to the rules. This situation needs to be tackled sooner rather than later by using innovative methods that are likely to be more efficient than current standard practices,” Dr. Cordina stated.

See page 4 for the full story.

Business Investing in youth can reap benefits for both employers as well as interns.

page 26

TOURISM INDUSTRY NEEDS TO FIND WAYS TO RESTORE CONDITIONS FOR GROWTH In an interview with Business Agenda, the newly appointed Chief Executive Officer of the European Hotels and Restaurants Association (HOTREC), Anna Torres, stated that the most important issue for the tourism sector is to find ways to overcome the economic downturn and restore conditions for growth.

Tourism Ensuring the sustainability of the tourism industry is key to economic prosperity.

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Ms Torres stated that it is necessary for other stakeholders to overcome the perception that the tourism industry is the ‘forgotten brother’ of the European economy,

when it actually is the third most important industry in the EU. “HOTREC has an important role in the drive towards achieving a competitive objective and prevent the industry from potential dangers. At EU level, we are pushing for the introduction of clear rules, the reduction of unnecessary burden and taxes; and for further support to industry-driven solutions,” Ms Torres stated. See page 12 for the full story.

MIB

EUROPE’S FUTURE LIES IN ITS ENTREPRENEURS In an interview with this newspaper European Commission Vice President, Antonio Tajani, stated that he believes that “Europe's future lies in its entrepreneurial base, large and small.” Vice President Tajani also stated that that the financial and economic upheaval that Europe witnessed recently confirms this notion and that small businesses are the “job generators of Europe”. He stated that “if we want to stim-

See page 8 for the full story.

ulate growth in Europe, we must start from SMEs.” The Vice President, who is also the European Commissioner for Industry and Entrepreneurship, also said that while access to finance and funding was essential for every business, not all EU funds that are available are being sufficiently tapped and that the EU may need to improve on the way in which such funding opportunities are promoted and offered to the business community.

BUSINESS AGENDA | Oct – Dec 2010

editorial

conflicting and costly decisions from brussels By Joe Tanti, Chief Executive Officer, MBB

Are we giving due importance to economic considerations in EU decision-making? A number of important business-related votes are expected to take place before the end of this year at the European Parliament. These include a final compromise endorsement of the trialogue agreement recently brokered by the EU institutions on the recast of the Late Payments Directive, the adoption of the Schwab Report on the Consumer Rights Directive and last but not least the long-awaited adoption of the Estrela Report on the revision of the Pregnant Workers Directive (also known as the maternity leave directive). Some of these items are expected to generate intense discussion at committee-level. This is the case for instance of the Schwab Report on Consumer Rights whilst others have now reached the parliamentary legislative terminus in plenary. At the time of writing the Weiler Report and the Estrela Report have already surpassed their final hurdle with both reports attaining overwhelming cross-party support. Maltese business has strongly advocated against the harmful competitiveness-related implications of the Estrela recommendations on the revision of the maternity leave directive. The MBB has commissioned and published a detailed impact assessment report on the matter and communicated its conclusions on high cost estimates, not as a severe warning to EU policymakers but as an informed opinion

to all the relevant political decisionmakers. The outcome of the plenary vote on the Estrela Report is decidedly disappointing for Maltese business. At a time when member-states’ governments are introducing fiscal austerity measures, it is indeed disconcerting how the European Parliament can approve of measures that will increase the employment cost of female labour. This will ultimately put to a disadvantage first and foremost, young women seeking first-time employment and secondly, all Maltese employers who have the bear the additional cost of no less than 6 additional weeks of mandatory maternity leave. It is worthwhile recalling that Malta is one out of only three EU memberstates where maternity leave is paid by employers. With the maternity leave vote as a backdrop, the greatest concern for business has been the European Parliament’s inclination to promote so-called “socially-friendly” measures in legislation conceived as a means to strike reconciliation between work and life. This is for instance also, the underpinning logic of the proposed antidiscrimination directive. On both these legislative proposals, the European Parliament engaged in extensive amendments imposing greater administrative obligations on employers to abide to alreadystringent regulations in the employ-

ment protection area, health and safety issues and dismissal rules amongst others. With foresight, Maltese business, together with its European counterparts has warned against such drastic measures which will cost member-states billions of euros at a time when public debt needs to be reduced not increased. What is more of concern is that in some member states costs will be passed on to businesses – businesses that are already struggling to survive and to maintain levels of employment let alone increase them. In the case of Germany, for instance, extending maternity leave to 20 weeks will burden businesses with an additional 700 million euro per annum and simultaneously this will cost UK firms 2.5 billion euros a year. According to the impact assessment study conducted by the Malta Business Bureau, it is estimated that increasing the maternity leave from the current statutory 14 weeks to 20 weeks would potentially cost the Maltese economy 7.5 million euro worth of value added in a year, equivalent to 0.18% of GDP. Of this the cost to private business would amount to 5.3 million a year, equivalent to 0.14% of private sector GDP. The report clearly shows that the burden on the economy of the proposed extension of maternity leave will strongly tarnish Malta’s competitiveness and could be very damaging to local SMEs. The report also

demonstrates that the possible economic benefits of these proposed legislative changes on the Maltese economy to be relatively marginal, given that there is already a significant amount of maternity leave being taken up, while the costs tend to increase per week of additional maternity leave granted, in an exponential manner. Business strongly believes that the European Parliament’s political agenda needs to be better tuned to the current economic realities affecting EU-based enterprise within the context of the globalised market-place. Certain problematic outcomes of EU legislation originating from ill-thought parliamentary amendments that would often surface later at national implementation level could be easily avoided (if proper and timely stakeholder

consultation is carried out, ideally at pre-committee discussion stage). It is understood that the European Parliament, like any other Parliament, is bound to listen to a multitude of different interests as is customary in a fully functioning democratic system. However business interests should not get lost amidst the various interest considerations submitted to MEPs’ attention just because consumer and social issues are somehow easier to position politically with constituencies. The message from business is clear – this is not the right time to play with the economy. EU legislation should be about moving the economy forward and not adding new payroll costs for overburdened companies and national social security systems.

Errata Corrige: The July-September 2010 issue of Business Agenda carried a feature on EU funds available to the business community, entitled 'ERDF Energy Grant Scheme'. The editorial board would like to clarify that this scheme is closed and is currently being evaluated. Any future related calls will be opened at the discretion of Malta Enterprise, depending on the availability of funds

The Malta Business Bureau is a non-profit making organisation acting as the European Advisory and Support Office of the Malta Chamber of Commerce, Enterprise and Industry and the Malta Hotels and Restaurants Association. The MBB has two offices, the Head Office in Malta and the Representation Office in Brussels.

Publisher Content House Ltd Mallia Buildings 3, Level 2 Triq in-Negozju Mriehel QRM3000 Tel: 00356 2132 0712/3 Email: info@contenthouse.com.mt www.contenthouse.com.mt

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

Editor: Joe Tanti Deputy Editor: Claire Azzopardi

Editorial Team: Omar Cutajar, Daniel Debono, Mariella Scicluna

Business Agenda is the quarterly publication of the Malta Business Bureau. It is distributed to all members of the Malta Chamber of Commerce, Enterprise & Industry, all the members of the Malta Hotels & Restaurants Association, and to all other leading businesses by Mailbox Distribution Services, part of Mailbox Group. Business Agenda is also distributed by the Malta Business Bureau to leading European and business institutions in Brussels.

BUSINESS AGENDA | Oct – Dec 2010

cover story

“ THE UNDERGROUND ECONOMY IN MALTA IS well BEYOND OPTIMUM LEVELS...” - Dr. Gordon Cordina, economist

It is a widely accepted view that the underground economy is a ‘necessary evil’, and completely eradicating illegitimate economic activity is neither feasible, nor desirable. But what happens when this illegitimate economic activity goes beyond acceptable levels? CLAIRE AZZOPARDI speaks to economist DR. GORDON CORDINA about this multi-faceted phenomenon. According to economist Dr. Gordon Cordina, the current estimate level of the Maltese underground economy – manifested in tax evasion – has in fact gone beyond optimum levels and this results in an unsurprising direct and negative impact on legitimate business. He states that, “the underground economy in Malta is well beyond optimum levels and this will certainly have a negative impact on those businesses that are playing according to the rules. This situation needs to be tackled sooner rather than later, by using innovative methods that are likely to be more efficient than current standard practices.” Dr. Cordina goes on to explain that “while economists and governments alike acknowledge that a certain level of underground activity is inevitable, the current estimated levels of illegitimate economic activity are high, and this situation

deserves particular attention if it is to be tackled in an effective way.” The effects of the underground economy Dr. Cordina points out that underground economic activity ultimately results in tax evasion which, in turn, results in a reduction in the amount of income for government. Not only does government end up with less ‘cash in the coffers’ than it should have, but competition within different sectors of the economy also suffers. “Not only does government end up with less money to reinvest into the economy but businesses that operate legitimately have to compete with others that are cutting costs illegally. This obviously has a detrimental effect on their ability to compete effectively within the industry,” argues Dr. Cordina. Tax evasion techniques that result in lower cost burdens come

in many shapes and forms, including not declaring VAT or employing workers illegally. Although these methods carry an obvious risk, many businesses believe the potential benefits outweigh any associated risk, and by adopting underhand practices, they tend to have lower overheads. As such, these businesses can often offer lower prices to customers to the detriment of other businesses which stick strictly to the rules. Dr. Cordina points out that “one unfortunate spin-off effect of this situation is the possibility that businesses that are faced with this type of unfair competition adopt the ‘if you can’t beat them, join them’ attitude.” “In cases where there is rampant abuse and tax evasion, many businesses feel pressured into competing on the same level, even if this means adopting illegal practices, which simply serve to increase

underground economic activity, making the situation worse. It’s a vicious cycle.” Yet another negative effect of high levels of underground activity is the fact that it often hinders economic efficiency and potentially even the country’s competitive levels within the global economic playing field. Given that the ultimate result of all activities that take place within the underground economy actually lead to tax evasion. The impact on the government’s fiscal revenue translates into less funds that would otherwise be re-invested into the economy in favour of competitiveness and efficiency. Influencing Factors One tell-tale sign that the level of underground activity in Malta is unacceptably high was the Ministry of Finance’s tax regularisation project, whereby heavy reductions in penalties due for undeclared tax were offered to those who ‘came

clean’. In the months since the launch of the initiative, millions of previously undeclared tax have been registered, but it is difficult to tell how much more undeclared tax has not been registered as yet. Malta is certainly not the only EU member state that faces a high level of underground economic activity. Estimates on the level of underground economic activity in different EU member states vary, with Greece’s underground economy registering an estimated value of between 20 and 25 per cent of GDP, while Italy’s stands at over 25 per cent of GDP. On the other end of the scale, the United Kingdom’s underground economy is estimated to stand at a value of around seven or eight per cent of GDP. But what has contributed to such a great discrepancy between the levels of underground economic activity within the 27 EU member states? Dr. Cordina explains that there are a number of issues that affect the level of underground activity within an economy. “First of all, the tax system has a direct impact on the likelihood of businesses trying to avoid taxation. If tax levels are excessive, it is difficult for businesses to be profitable, resulting in an increased trend of cost-cutting through tax evasion.” Dr. Cordina goes on to explain that high taxes are not the only incentive for ‘going underground’. “For instance in Malta, the tax system is not unduly penalising, yet the underground economy is certainly alive and kicking... estimates available, albeit quite dated, placed it

“the tax system has a direct impact on the likelihood of businesses trying to avoid taxation. If tax levels are excessive, it is difficult for business to be profitable.”

BUSINESS AGENDA | Oct – Dec 2010

cover story Tackling underground economic activity Given the current social, political and, of course, economic framework that influences the levels of underground economic activity in a country, tackling the problem may seem like a daunting task. Malta established a ‘Tax Compliance Unit’ just under a decade ago which supports investigative initiatives being carried out by tax departments, conducts business profiling and risk assessments, and carries out research into the earning patterns of various economic operators in order to establish industry benchmarks.

at a value of around 25 per cent of GDP,” he points out. He continues to explain that there are many other factors that lead to underground economic activity and which certainly cannot be ignored. “Other factors that have a direct impact on the level of underground economic activity that take place within a country include the perception that the probability of getting caught is low and the likelihood of having to pay penalties is perhaps even lower,” he says. In addition, the socio-economic cultural environment and the nature of the country’s political system also have an important role to

play. Dr. Cordina explains that certain cultures – including Malta’s – tend to be more indifferent at the prospects of illegitimate economic activity. “In this respect it is very important to make a distinction between illegal economic activity and criminal activity. While criminal activity, such as drug trafficking and prostitution, may be frowned upon by society and carry very harsh penalties, some illegal economic activities such as employing staff without a work permit, are widely accepted by Maltese society,” he explains. Furthermore, the political landscape of the country – particularly

when the governing party needs to keep votes by retaining popularity – also makes it trickier to combat the underground economy in an overt way. “In times of economic hardship such as what the vast majority of European member states have had to endure in recent months, individuals and businesses may be increasingly tempted to resort to underhand activities in an attempt to retain their standard of living.” He continues to say that “governments are very much aware of the fact that they need to strike a balance between regulating such activity and ‘allowing’ it to take place to ensure that they do not lose popularity.”

However, the fact that Malta’s underground economy is still so ‘healthy’, is a sure sign that more needs to be done. “New innovative and exciting methods of measuring the size of the underground economy are emerging and their implementation is worthy of serious consideration by the government,” Dr. Cordina states. “Furthermore, innovative tax regimes are also another way of combating, or at least limiting, underground activity. Government should also focus on developing effective tax regimes targeting the new digital economy, including sectors like online gaming and financial services,” he says. Dr. Cordina goes on to explain that “research shows that these developing sectors tend to be less likely to succumb to the temptation of tax evasion. This gives gov-

ernment an excellent opportunity to ensure a competitive taxation system whilst capitalising on tax revenue which would increase the opportunity of maintaining a healthy fiscal balance, and enables the benefits to transcend other sectors of the economy.” Nevertheless, while exploring new ways of managing the economy in order to ensure the maximisation of tax revenues with optimum efficiency levels within relevant sectors, one should not forget about the longer process of bringing about a culture change, which is equally important. “If the underground economy is to be brought back to lower, optimum levels, then a multi-faceted approach must be taken,” Dr. Cordina says. “More information is desperately needed if adequate policies and initiatives in this regards are to be developed.” “The risk of participating in underground activity must be increased to make it less appealing, and this can only be done through better monitoring and more consistent implementation of penalties.” “It will take generations for the underground economy to be brought back ‘under control’ but if the interests of those businesses that abide entirely by the law are to be properly safeguarded, then it is a process that must be done,” he concludes.

BUSINESS AGENDA | Oct – Dec 2010

INVESTMENT

THE PROS AND CONS OF AN INTERNATIONAL INVESTMENT POLICY There are a number of arguments in favour and against the adoption of a comprehensive European international investment policy. BUSINESS AGENDA takes a look at the main proposals being made and how these are likely to affect investment policy and trends across Europe. The European Commission has recently taken the bull by the horns and outlined initiatives that will aim to boost its competence in attracting and managing Foreign Direct Investment (FDI). The policy paper lays out how new EU-level competence in the area can be used to boost competitiveness and trade, which will ultimately result in economic growth and increased job opportunities. The proposed policy has been developed in tandem with a proposed regulation that would establish transitional agreements relating to investment agreements between EU member states and third countries, aiming to provide legal certainty to EU and foreign investors. The Commission stated that should the Commission’s proposals be approved, a comprehensive, EU-wide investment policy would certainly bring about a number of benefits, not least the facilitation of investment by enterprises and the protection of such investments. But how will the proposed changes affect member states’ competence and competitive edge in the area? IS A COMPREHENSIVE INVESTMENT POLICY NEEDED, OR WANTED? The proposed comprehensive international investment policy takes a two pronged approach to the management of FDI, seeking to integrate both investment liberalisation and investment protection. This approach would certainly be needed to tackle the current state of affairs, where a multitude of investment agreements concluded by member states have resulted in different levels of protection depending on where the investment is being made. This has led to an unequal playing field for EU investors. The European Commission argues that since FDI is beyond any shadow of doubt one of the main contributors to economic growth, the way in which it is managed

should be streamlined and improved on a European level. FDI is currently secured through ‘Bilateral Investment Treaties’ (BIT) made by individual member states that establish the terms and conditions for investment, including the legally binding level of protection. However, BITs only tackle the treatment of investors ‘post-entry’ and this implies that there are no specific conditions of entry, although the EU has started to address this ‘gap’ through multilateral and bilateral agreements that cover EU investment market access and investment liberalisation. However, not all members of the business community have greeted the proposals with unreserved enthusiasm. The Malta Chamber of Commerce, Enterprise and Industry have voiced their concern about the Commission’s desire to establish a common international investment policy. According to Helga Ellul, President of the Malta Chamber, a common international investment policy is the first step to erode the special agreements, laws and fiscal incentives, which to date give Malta a comparative advantage to target investment in certain areas.

“The new proposed policy will not only enlarge the competitive space that is available to EU investors but it will also strengthen the protection offered to them.”

“Some northern-European Member States look unfavourably at the special status of, for example, Malta and Cyprus, especially in the areas of fiscal incentives, e-gaming and financial investments,” she explains.

On the other hand, the European Commission maintains that the need for a comprehensive approach to investment across the EU is still necessary, particularly to support the Union’s global positioning when it comes to FDI.

“To date, this area is considered to be a national issue, but Malta should be concerned that the move to make this a common policy area is the first step to eliminate the tools which the country has successfully employed to attract investment. Can the Commission assure us that it will not impede the possibility for member states to create and maintain separate national legislation in the fields concerning investment

According to the Commission, the proposed strategy will assure investors that they will be able to operate in an open, properly and fairly regulated business environment, both within and across a host country's borders. The comprehensive investment policy will ensure that all financiers enjoy a level playing field and that there are homogenous conditions in all EU member states for their investment.

and taxation of foreign nationals?” Ms. Ellul asks.

The new proposed policy will not only enlarge the competitive space that is available to EU investors but it will also strengthen the protection offered to them. In addition, an EU as a block has more bargaining leverage than individual states would have. The draft regulation that has been developed in tandem with the proposed investment policy will provide for a transitional mechanism that empowers member states to enter into bilateral negotiations with nonEU countries. This approach would ensure that the same framework is available to all member states that would like to negotiate and conclude new investment treaties with countries but which are not targeted for EU-wide investment agreements.

However, authorization to start such negotiations and conclude new agreements will be conditional and the process will be monitored closely by the Commission, with the aim of ensuring the compatibility of potential investments with the EU’s common investment policy. However, a one-size fits all model for investment agreements with third countries is not feasible, and the context of each specific negotiation would need to be taken into account. The Commission has stated that while the new proposals will seek to streamline investment liberalization and protection, there will still be scope for member states to pursue promotion policies that complement the new European standards. This is surely a statement that is welcomed by the business communities across Europe, but if one thing is for sure, the proposed European investment policy will be the subject of debate before it ever becomes a tangible reality, as member states will unlikely be willing to give up competence within this area without ensuring that their competitive edge is not adversely affected.

BUSINESS AGENDA | Oct – Dec 2010

interview

“ MUCH MORE WORK NEEDS TO BE DONE” - EU Commission Vice President, Antonio Tajani

As Vice President of the European Commission and Commissioner for Industry and Entrepreneurship, this man’s work is under constant scrutiny. In an interview with CLAIRE AZZOPARDI Commissioner ANTONIO TAJANI discusses the future of European entrepreneurship, facilitating access to finance and ensuring Europe’s competitiveness. Antonio Tajani is an undisputable heavy weight within the European Commission. Not only is he Vice President of the Commission, a role which attracts a great deal of attention and scrutiny on all fronts, but he is also Commissioner for Industry and Entrepreneurship. This demanding portfolio is not an easy one to manage and the sheer diversity of the issues that the Commissioner and his team must address is almost formidable, and certainly impressive.

Nevertheless, Commissioner Tajani displays a clear ability to identify exactly what needs to be done, and what needs to be given priority. “There is a lot to be done throughout my mandate in the socalled ‘Barroso II’ Commission,” he states when speaking about his portfolio. “When addressing the European Parliament last February, I had highlighted a number of things that are key to re-launching Europe's industry and its entrepreneurs. I believe that Europe's future lies in its entrepreneurial base, large and small.”

Commissioner Tajani goes on to explain that the financial and economic upheaval that Europe witnessed recently confirms this notion. “In this respect, in its ‘Europe 2020 Strategy’ the European Commission outlined two flagship initiatives that are essential to Europe's industry and businesses. The first goes by the name of ‘Innovation Union’, and aims at strengthening the innovation chain, enabling research and innovative ideas to reach European markets for the benefit of all citizens,” Commissioner Tajani says.

“Small businesses are run by dynamic entrepreneurs, who in turn are the job generators of Europe. If we want to stimulate growth in Europe, it is from SMEs that we must start.” “The second initiative – ‘An industrial Policy for the Globalisation Era’ – will be launched within the com-

ing weeks and will seek to address the challenges being faced by our industries, challenges such as glo-

BUSINESS AGENDA | Oct – Dec 2010

interview balisation, readjusting production processes and the shift to a lowcarbon economy, just to name a few,” he continues. Like the rest of Europe, Malta’s business community is mainly characterised by small and micro companies which are set to benefit from such initiatives. Commissioner Tajani also points out that not only will he be working to assist existing enterprises, but promoting and boosting entrepreneurship will also be a top priority of his mandate. “Small businesses are run by dynamic entrepreneurs, who in turn are the job generators of Europe,” he states. “If we want to stimulate growth in Europe, it is from SMEs that we must start. Several actions are ongoing to achieve this goal: SMEs week 2010, the Small Business Act for Europe (SBA), the adoption of the Late Payments Directive and improved access to finance. We've started the year with work on tourism and on clean and energyefficient cars, but there's much more work that needs to be done.” This statement will certainly find favour with business across Europe, especially SMEs which often struggle to keep up with the economic challenges that they have undoubtedly crossed paths with in the last few years. One area that the local business community is constantly seeking assistance for is the maze of EU funding opportunities which, while abundant, often viewed as complicated and bureaucratic. “Access to finance is vital for every business, whether it requires start-up cash or for expansion,” Commissioner Tajani acknowledges. “The EU provides finance for small firms in different forms - but not all of these are sufficiently tapped by entrepreneurs and perhaps we need to work better in our ‘marketing strategies’ to attract entrepreneurs into using these funds. But when we talk of funding for SMEs we shouldn't just stop at EU money. Access to finance also means money made available through banks and other ventures.”

In this respect, the Small Business Act will certainly prove beneficial. One of its key objectives is to improve access to finance for SMEs. Commissioner Tajani explains that in a recent European Central Bank survey, 18 per cent of small enterprises reported a rejection of their bank loan application. Up to 2 per cent desisted from taking up the loan offer, considering the price too expensive, while small enterprises in the services and construction sectors were the least successful when applying for a bank loan. “To overcome these barriers to growth, I am working to allow a permanent dialogue on this topic between financial institutions and SMEs,” he explains. “I have now established a high level group of experts that will follow this issue closely, with their main objectives, amongst others, being to strengthen the collabora-

“Access to finance is vital for every business, whether it requires start-up cash or for expansion. The EU provides finance for small firms in different forms - but not all of these are sufficiently tapped by entrepreneurs and perhaps we need to work better in our ‘marketing strategies’ to attract entrepreneurs into using these funds.” tion between European banks and SMEs, strengthen the collaboration between the European Commission and the European Investment Bank with the objective of maximising the effectiveness of financing programmes for SMEs, recommend measures to create a real single market for venture capital, review listing requirements of SMEs for stock exchange listings and improve liquidity in those markets.”

MBB salutes the memory of Guido de Marco I was fortunate enough to know Prof. Guido de Marco personally and I even had the opportunity to spend quite some time with him. Prof. de Marco was a mentor to me and many others in more ways than one; he showed great personal interest in my projects and his fatherly advice was always invaluable. He was also a mentor on life and on dealing with people. To him nobody was an adversary; rather, he respected the fact that people had different opinions and he would

unfailingly reach out to them with persuasion and perseverance. Back when I first got to know Prof. De Marco, little did I know that one day I would be presiding over an organisation that fitted well within one of his own dreams, that of seeing Malta as a Member State of the European Union. When he was appointed as Minister of Foreign Affairs in September 1998, he presented Malta's request for the reactivation of its application

for membership to the European Union. Had it not been for the vision of Prof de Marco and his colleagues, the Malta Business Bureau would not exist today. On behalf of the MBB Board of Trustees and the Executive Team, I salute the remembrance of Prof. de Marco and his everlasting memory.

John A. Huber President, Malta Business Bureau

Access to finance, which will enable business organisations to invest, innovate and grow, is certainly essential for the future health of Europe’s economy. Not only does the European business community have to come to grips with a new economic playing field that is taking shape in the wake of the economic recession, but it must also contend with hard competition from other global players.

In this respect it has been widely accepted that Europe’s strategy towards ensuring its competitiveness lies in concentrating on quality, knowledge, research and innovation and Commissioner Tajani clearly states that Europe’s industrial and entrepreneurial base is key to the future development of the European Union. “We need it to be more competitive and more innovative... this is where we have an advantage that needs to be fully exploited,” he concludes.

BUSINESS AGENDA | Oct – Dec 2010

analysis

ENCOURAGING TOURISM RESULTS FOR SUMMER 2010 After a tough 2009 all indicators show that the tourism industry has seen a significant improvement in the summer 2010 season. KRISTA MICALLEF TRIGONA takes a look at the latest trends and expectations for the next season. Can we say that summer 2010 has been a successful period for the tourism industry? According to the National Statistics Office (NSO), the summer period has shown signs of improvement, in comparison to the turbulent period faced in 2009. In fact, MHRA President George Micallef states that “the results for summer 2010 were very encouraging, and we have registered notable increases over last year’s figures, with the indication that this positive pattern will continue over the coming months. “In terms of tourist arrivals we are doing better than most of our competitors in the Mediterranean region,” he says, further stating that “tourist expenditure is also rising, which is mainly a result of a significant increase in the number of independent travellers and a trend towards an average shorter stay.” According to the NSO, statistics show that there has been an increase in tourist arrivals between the June to August period. In June, tourism grew by 20 per cent, in comparison to the same month last year, with inbound tourists estimated at 136,758 and total nights spent up by 9 per cent. As with previous months, the majority of tourists came from EU member states – predominantly the UK and Italy. However, the number of tourists from non-EU countries increased by 27 per cent. Overall, total tourist nights spent resulted in 1 million nights, with an average length of stay of 7.4 nights – a decrease of 0.8 per cent, in comparison to the 2009 figure. July, on the other hand saw an increase of 17.5 per cent in comparison to the previous year. Tourstat statistics show that total nights spent in Malta increased by 17 per cent, and the amount of inbound tourists was estimated at 159,519. As in the previous month, tourists visiting the island were pre-

dominantly from EU member states; however, tourists from non-EU countries saw a rise of 38 per cent. Increases were recorded for both the number of repeat tourists and first-time-visitors with a total average of 1.5 million nights and an average length of stay estimated at 9.7 nights. From a gender perspective, results show that male tourists exceeded female, accounting to 52 per cent. August also showed signs of improvement, with the number of tourists increased by 12 per cent, in comparison to last year. Total inbound tourists numbered at 193,115, most of which again hailed from EU member states, whereas, non-EU destinations resulted in a significant 22 per cent increase. All in all, total nights were estimated at 2 million, with the average length of stay at 10.4 nights – (same as in August 2009). However, total nights spent between January and August increased by 11 per cent – reaching a total of 7.7 million nights. “These results should be commended particularly in the background of a slow economic recovery in the EU and austerity measures affecting countries which represent our main source markets, such as the UK, Italy and Spain,” Mr. Micallef says. “Without any doubt, these positive figures were mainly a result of increased seat capacity and the introduction of new routes to Malta. “The rise in additional tourist expenditure has enabled Malta to begin to register tangible signs of economic recovery and deficit reduction. Interestingly, over 38 per cent of this incremental expenditure was actually credited to operations outside the hotel, airline and tour operators sectors,” he continues. He goes on to say that despite the seemingly positive results, hotel gross operating profits are still of concern and have remained at

“The rise in additional tourist expenditure has enabled Malta to begin to register tangible signs of economic recovery and deficit reduction. Interestingly, over 38 per cent of this incremental expenditure was actually credited to operations outside the hotel, airline and tour operators sectors.” George Micallef

around 25 per cent below the average level of profitability registered between 2006 and 2008 due to substantial increases in operating costs. In fact, Clement Hassid, General Manager at the Hilton, shares the same views stating that “in relation to 2009 - a challenging year for our industry, we are experiencing an out of recession general trend in 2010 – however, we are far from being fully recovered. Overall, our summer was good, characterised with a late booking trend, and the average stay remained unchanged.”

As for carrying on the momentum gained into the winter season and beyond, Mr. Micallef states that “after having recovered substantial lost ground in tourist arrivals, we must continue to push for further increases which would enable us to also make up for the unavoidable decline in the average length of stay which continues to recover at a slower pace than arrivals. “The immediate future presents a number of challenges for all of us in the industry. Ultimately we need to see how we can sustain the

numbers registered so far and how these can be improved in order to secure a healthy number of occupied bed nights. The months ahead of us will be crucial to all stakeholders in the industry, as we need to find ways of securing the momentum of growth in arrivals. At the same time, Malta needs to retain and extend its competitive advantage, if our tourism industry is to remain sustainable in the long run,” he asserts in conclusion.

BUSINESS AGENDA | Oct – Dec 2010

Tourism

EFFECTS OF THE ECONOMIC DOWNTURN MUST BE OVERCOME TO RESTORE COMPETITIVEneSS WITHIN THE TOURISM INDUSTRY - Anna Torres, CEO of HOTREC, the Confederation of National Associations of Hotels, Restaurants, Cafes and similar establishments in Europe Q. It has already been a

The newly appointed CEO of HOTREC, ANNA TORRES, speaks to MARIELLA SCICLUNA about her new position, HOTREC’s current challenges and the European Commission’s Communication on a new framework for tourism in Europe.

few months since your appointment as the new Chief Executive Officer for HOTREC. How has the experience been so far? Are there any new and exciting challenges which this new position brings along?

A. It has been over three months,

and I feel very honoured and at the same time responsible for the future development of HOTREC, as a reliable and successful EU lobby organisation, and for the management of a team of five brilliant colleagues. There are certainly new and exciting challenges inherent to this position, because this is the first time I am CEO of a trade association. I had worked for similar organisations before as an external advisor, but being in charge is very different. I find this challenge particularly motivating and in a way I see it as a privileged opportunity to apply all the knowledge and experience I have acquired in these past 14 years working on EU affairs in Brussels. So far so good!

Q. In your opinion, what

is the biggest single competitive issue in the tourism sector at the moment? Are there any particular ‘dangers’ that the industry needs to be aware of as it continues to grow?

A. The most important competitive

issue for the tourism sector is to find ways to overcome the current economic downturn and restore conditions for growth. It is also necessary to overcome the general perception that the tourism industry is in many aspects the ‘forgotten brother’ of the European economy, when it actually is the third most important industry in the EU. HOTREC has an important role in the drive towards achieving a competitive objective and preventing the industry from potential dangers. At EU level, we are pushing for the introduction of clear rules, the reduction of unnecessary burdens and taxes, and for further support to industry-driven solutions. In addition, HOTREC is asking for the promotion of the European

cultural heritage inside and outside Europe. We also encourage and promote the need of the industry to work together with all stakeholders and EU institutions towards a more sustainable and developed model of tourism, in order to ensure the industry’s best possible future.

Q. As you are very well

aware, the European Commission issued its Communication on a new framework for tourism in Europe; what is HOTREC’s position on this policy and what will its next step be when it comes to its implementation?

Over these past few weeks we have precisely been focusing on the preparation of HOTREC’s response to this Communication. Our member associations have contributed with their feedback, with MHRA being one of the respondents. We are very grateful for the information our members provided us with and I invite you all to read our response, which will be published on HOTREC’s website in the coming days. HOTREC welcomes this Communication, which will hopefully mark the beginning of a new era for tourism at EU level. The various actions and measures proposed in the Commission’s paper should be an important step towards a true tourism policy in Europe, although of course there are some shortcomings and priorities that should be further clarified. It is now our responsibility to ensure efficient implementation. This is why HOTREC and its member associations must voluntarily offer their knowledge and expertise to the Commission and all EU institutions must help in implementing the actions proposed in the Communication. The European Tourism Forum to be held in Malta on 18-19 November should be the platform for the launch of the first ‘Action Plan’ under the new regulatory framework and HOTREC has offered to participate actively in its preparation.

Q. What do you think about the European Commission’s approach in grouping the European tourism

BUSINESS AGENDA | Oct – Dec 2010

Tourism objectives into four major priorities? Do you think that this approach will serve its objective to evolve the tourism industry within Europe?

A. Yes, indeed the four objectives

set up in the Communication constitute the backbone of what should be the new tourism framework – competitiveness, sustainability, promotion and financing instruments. If such pillars are strongly constructed, they will offer the proper foundation for a very sound and beneficial tourism policy. However, HOTREC is of the opinion that the various actions foreseen in the Communication to achieve the above mentioned goals should be properly monitored to avoid the dispersion of resources

and duplicity of efforts, as well as to ensure that existing initiatives of the member states and of the tourism industry are not hindered.

Q. What is your opinion

on the seven proposals to promote the development of sustainable, responsible and high-quality tourism?

A. Without

going into too much technical detail, HOTREC fully agrees with the need to promote sustainable, responsible and high quality tourism. To achieve these goals, we consider that the environmental, economic and social aspects have to be considered. In particular, HOTREC considers that the promotion of sustainable use of resources in the tourism industry necessitates real incen-

“HOTREC is also working on an online communications strategy tailored specifically to our needs and objectives. Its aim would be to market the HOTREC positions via the web in order to make its voice even more heard.”

tives for both the industry and the consumers to facilitate a shift in their practices. In other words, not only should the industry adopt such measures but consumers must also have a responsbile attitude when making use of touristic services. Public authorities should in particular further encourage consumers to shift towards more sustainable patterns of consumption. On the topic of resources, energy comes as a major priority as it affects the industry’s profitability, the environment and the consumers through the final prices of the contracted tourism services.

Q. The Commission is of the

opinion that the image of Europe and its perception as a collection of sustainable and high-quality tourist destinations must be improved. Does HOTREC agree with this statement?

HOTREC agrees with the idea of promoting the image of Europe as a sustainable and high-quality destination around the world. However, it considers that any EU action in this field should be done in coordination with the tourism industry, which is best positioned to help achieve this objective.

Q. What are HOTREC’s

proposals with regards to better integration of tourism into other EU policies? And how

do you consider the CIP amongst other funding possibilities as a tool for the development of a more competitive and sustainable tourism in Europe?

A. HOTREC welcomes the Com-

mission's commitment to ensure that tourism is integrated in its various policies. Indeed, due to the transversal nature of this sector, a large number of other European policies have a direct or indirect impact on tourism. It is therefore imperative that any political or legislative proposal is assessed also in terms of its possible impact on the tourism sector by independent and specialised professionals of the tourism sector. With regards to the funding of European tourism, it is primarily necessary to facilitate the access of tourism businesses, composed mainly by SMEs, to the European financial instruments. Overall, the EU institutions should decide on a sufficient budget line for tourism, which would allow existing funding programmes and instruments, like the CIP, to concentrate important parts of their investments to ensure the development of the European tourism industry.

Q. What future plans

are in the pipeline for HOTREC? What do you see as big challenges for the organisation in the near future?

Apart from the objectives and challenges mentioned above, together with the Executive Committee, we are working to re-launch HOTREC in the Brussels scene. HOTREC can now play a much more enhanced role in the policy making process under the new institutional landscape brought by the Lisbon Treaty. For the first time, the EU has a specific competence in tourism, which complements that of the member states. In other words, the EU institutions can now decide on political initiatives and measures affecting the tourism industry through ordinary procedures, which can be very positive, but this requires the institution to be very vigilant. Thus an efficient HOTREC is more needed than ever! Moreover, in an internet driven world, it is key to enhance communications in order to market HOTREC’s message in a way that will support its lobbying and issues management. This is the reason for which HOTREC is also working on an online communications strategy tailored specifically to our needs and objectives. Its aim would be to market the HOTREC positions via the web in order to make its voice even more heard, reach the right audiences and be able to gain support in an information environment where other stakeholders also spread their own messages.

BUSINESS AGENDA | Oct – Dec 2010

STRIKING THE RIGHT BALANCE BETWEEN RIGHTS AND TRADE by Omar Cutajar, MBB Permanent Representative in Brussels

The debate on improving consumer rights often catches the media limelight in relation to better representation of consumer rights, transparency in commercial transactions and the political discourse linked to guarantees for delivering better ‘value-for-money’ in business deals. Certainly, discussions on consumer rights attract considerable political attention given the scale of the constituency that the consumer body in itself represents. Inevitably, this is precisely the case with the current discussions on the draft directive on consumer rights taking place, at the time of writing, within the Internal Market and Consumer Affairs’ Committee at the European Parliament. The Committee is expected to take a vote on the Schwab Report, named after the German MEP appointed rapporteur on the Commission’s draft legislative proposal by the end of October. A New Consumer Rights Directive The proposal for a new Consumer Rights Directive, originally tabled way back in October 2008, was conceived to simplify the current EU contractual rights regime fragmented into four separate directives dealing with unfair contract terms, sales and guarantees, distance selling and doorstep selling. The draft Consumer Rights Directive aims not just to simplify the overall regulatory environment applicable to cross-border business-to-consumer sales contracts. The original Commission’s reasoning goes beyond mere simplification; it aims to consolidate the disparate EU laws catering for consumer protection by merging the four EU consumer-related directives into one set of fully harmonised rules. The proposed directive concerns business-to-consumer sales contracts for goods and services and specifically covers issues such as pre-contractual information, delivery rules, 'cooling off' periods for distance sales, repairs, replacements and guarantees as well as new selling technologies. Therefore, the legislative scope is relatively extensive, implying that in broad terms all contracts would be covered, whether for purchases obtained over the counter in a shop, at a distance including through the internet, as well as away from business premises. The draft proposal strengthens consumer protection in a number of areas that have either been the subject of numerous consumer complaints over the past years, or else addressing specific issues, where regulatory shortcomings

have been identified through an impact assessment exercise.

written confirmation of consumer information.

The proposed directive was primarily conceived for enhancing consumer rights through harmonisation of consumer safeguards in relation to late delivery and nondelivery of goods, whilst setting tough EU-wide consumer protection vis-à-vis cooling-off periods, regulating a wide range of remedies available to consumers whilst also introducing a two-tier system of distinction between unfair and possibly unfair contractual terms. The draft directive’s text discerns between what are termed as absolute unfair contractual terms on the one hand and on the other, a more flexible ‘grey’ list of contract terms deemed to be unfair only if the trader cannot prove the contrary.

Doing away with this exemption as currently envisaged in the Schwab Report would create additional administrative burdens through the legal obligation for small and often family-run hotels and restaurants to provide written confirmation of information in relation to contractual arrangement contracted at distance. For this reason, HOTREC considers that the optimal solution would be to fully exempt hotel and restaurant contracts from the requirement to provide a confirmation of the consumer information on a durable medium which can also include electronic communications by e-mail.

The discussions through the ordinary legislative procedure involving the Council and the European Parliament have been notably protracted in achieving progress on the matter. Discussions at the political level only picked up during the Spanish Presidency during the first half of this year. At the Competitiveness Council meeting of the 25th May, the conclusions of the ministerial meeting reported that a flexible approach to harmonisation supplemented by respect for basic consumer rights, should propel the thrust of the debate in the right direction to strike an agreement between the EU-27 member-states’ governments. The situation in Council discussions at working-group level have progressed in so far that the draft text of the Commission has been revisited several times, however, the common ground between the respective negotiating parties remains tight. This is due to the existing political splits based on the varying scale of agreement on the extent of harmonisation to be attained depending on the type of contract under discussion. In the meantime, the discussions at the European Parliament on the draft directive were taking place at a faster pace. The outcome of the discussions so far, is the pursuit of a partially divergent policy approach in relation to the extent of harmonisation that should be pursued in the field of consumer rights. According to MEP Andreas Schwab, the recommendations carried in his report significantly alter the original Commission proposal. The rapporteur takes a cautious stance on the scope of maximum harmonisation of consumer rights in all areas and for all types of contracts – something which is considered unfeasible at this stage of crossborder market development in the EU’s internal market.

In this regard, the Schwab Report forges both structural and conceptual alterations to the Commission’s draft directive by prompting the adoption of “targeted full harmonisation” to areas where it is retained that harmonisation is possible and indeed, useful for economic operators and consumers alike. It is also being proposed that other issues that cannot be best tackled through harmonisation would be left under a minimum level of harmonisation. Discerning the business concerns – a need to contain new administrative costs The Schwab approach has received a mixed assessment from the business community. For instance, Businesseurope sees positively the approach of targeted full harmonisation taken by the rapporteur concerning the definitions, distance and off-premises contracts, conformity and passing of risk. On the negative side, reservations have been expressed on a substantial number of issues mainly dealing with legal clarity and certainty in interpreting the directive’s prospective provisions for both businesses and consumers. Businesseurope recalls that the outcome of the debate on the consumer rights directive should avoid legal fragmentation and additional burdens for companies trading cross-border due to a potential lack of clear understanding of the harmonisation provisions. In this regard, Busines-

seurope has consistently argued that wherever full harmonisation is not possible, then the current national legal framework should remain in place. Concern is also expressed in view of the introduction of additional derogations, exceptions and unclear wording. A case in point is the issue of the right of withdrawal and the specificity of hotel contracts. According to the Distance Selling Directive, hotel contracts concluded at a distance are exempt from the provisions on the right of withdrawal. This is due to the perishable nature of hotel room reservations, whereby if a hotel room is left empty at short notice it is highly unlikely that it would be then sold. It is for this reason that HOTREC – the European lobby association for the hotel, restaurant and café industry is advocating that the EP draft report on the Consumer Rights Directive maintains the exemption on the right of withdrawal for hotel accommodation services contracted for specific dates and/or periods of performance. A separate yet similar instance of concern for the hospitality industry relates to the provision of consumer confirmation of distance contracts through the receipt of pre-contractual information on a “durable” medium. Once again, the existing Distance Selling Directive, exempts hotel and restaurant contracts concluded at distance from the requirement to provide to the consumer a

A contentious point deals with the idea of the creation of a differentiated consumer protection aquis between online sales contracts and the traditional over-the-counter sales transactions. The idea was originally floated before the summer recess by Justice and Fundamental Rights Commissioner Viviane Reding. The Commissioner made the case during a conference that it would be sensible to harmonize pre-contractual information as well as the 14-day cooling-off period specifically and exclusively for online sales whilst leaving member-states’ governments to keep applying their national rules for ‘conventional’ contracts carried out face-to-face. Clearly, such a distinction would create a dual regime which is not desirable for both consumers and businesses, as it would instill confusion as to which legal regime applies to which kind of crossborder commercial transaction. In a worst-case scenario this would lead to distortions of competition undermining the level-playing field within the internal market. Maintaining the Commission's approach for a balanced EU legislative outcome It is against this backdrop that Maltese business augurs that the new EU regulatory roadmap proposed for enhancing consumer confidence in cross-border commerce comes to fruition in the shortest possible timeframes. Critically important, is the legislative process involving the Council of Ministers and the European Parliament on an equal political par – a protracted process that should not dilute, much less undo, the innovative policy approach undertaken by the Commission to safeguard consumer and business interests in a veritable balancing act, between what are often misleadingly perceived to be two poles apart.

BUSINESS AGENDA | Oct – Dec 2010

EU AFFAIRS

A COMMITTED AGENDA Having already served one legislature as MEP, what is next on David Casa’s busy agenda? KRISTA MICALLEF TRIGONA speaks to the Maltese MEP and finds out more about the highlights of his career as an MEP, his recent appointment as rapporteur on three VAT reports and the issues the European Parliament will tackle in the near future.

Q. You have already served one legislature as MEP – what has past experience taught you that will serve you in good stead for the next five years?

A. The legislative procedures in the

European Parliament (EP) are quite complex. In addition, in order to be assigned tasks of a certain importance, MEPs must prove their ability – both technically as well as their ability to negotiate and find compromise. The last years in the EP have enabled me to do just that.

Q. Just over a year has

passed since the June 2009 elections – what were the main highlights of the last 12 months, both for the European Parliament

as a whole, as well as for yourself as an MEP within the European People’s Party?

In the last 12 months the EP has had to tackle the vast array of dossiers that were presented as a consequence of the financial crisis. These have included issues related to regulation, supervision, funding, aid, recovery schemes, exit strategies as well as employment and social problems. We have experienced an incredibly productive year and all in all I believe that the EP has shown that it is capable of functioning effectively and expediently when the situation so requires. There have been various challenges in the first year, primarily originating from the ECON Commit-

tee where I have been nominated rapporteur on three VAT dossiers. With regards to the European People’s Party (EPP) some of the most interesting moments have been those involving highly politically sensitive issues, such as the freedom of speech in Italy’s resolution. These

are times when the EPP has shown its strength within the Parliament and has made me all the more proud to form part of this political group.

Q. You have been appointed rapporteur for a report that intends to amend the

“ It is important to note that the current VAT system that is in place was only intended to be a transitional system and that despite the Parliament having requested the Commission to put forward proposals on a definitive system by 2010, this has yet to be done.”

VAT Directive on the common system of value added tax. Can you elaborate on the proposed changes and your views in relation to these proposals?

A. I have been appointed rappor-

teur on three VAT reports. The first concerned the introduction of the reverse-charge mechanism that was intended to theoretically preclude the possibility of carousel fraud. This is a practice conducted by professional criminals and is costing member states' treasuries billions of euro. I was in favour of the introduction of this mechanism and ensured that more importance was given to the application of this mechanism in relation to the ‘Emissions Trading Scheme’

BUSINESS AGENDA | Oct – Dec 2010

EU AFFAIRS “ It is important to note that the current VAT system that is in place was only intended to be a transitional system and that despite the Parliament having requested the Commission to put forward proposals on a definitive system by 2010, this has yet to be done.” as there was a greater sense of urgency in this regard. On the VAT rules on ‘Invoicing Report’ I advocated placing electronic invoices on an equal footing with paper invoices. I also altered the Commission proposal so as to ensure that the obligations that would be placed on business would be minimised and that any obligations that would arise as a consequence of this dossier would be proportionate. Any tedious and costly obligations were completely removed from the proposal. I am now working on a report that concerns the minimum standardization rate of VAT. It is important to note that the current VAT system that is in place was only intended to be a transitional system and that despite the Parliament having requested the Commission to put forward proposals on a definitive system by 2010, this has yet to be done. The report will thus tackle these issues.

Q. The EP has recently

concluded negotiations with the Commission and member states for the establishment of the ‘European Systematic Risk Board’ (ESRB) and the ‘European Supervision Authorities’(ESA). Could you explain how these two new mechanisms will operate and what their main mandate will be?

The Commission sought to improve both macro-prudential as well as micro-prudential supervision at EU level. The ESRB will act as the body that oversees the EU and will be tasked primarily with issuing an early warning system so as to attempt to avert or pre-empt a future crisis. It however remains an advisory body with no hard law powers. The ESAs on the other hand deal with micro-prudential supervision and hence the overseeing of particular institutions. It is important to note that these bodies already exist as they form part of the Lamfalussy process, the difference being that at present they are referred to as committees and have limited influence and power. Their transformation into authorities is intended to give them legal personality so that they may take more concrete measures in crisis situations. The extent of such powers was the main cause of controversy and the reason for the pre-summer break deadlock. Nevertheless the EP and the Council have very recently compromised on all issues and the new framework should be effective as from the beginning of

2011. The major concessions that were made by the EP in this regard were that the authorities will remain in the cities where the Level Three Committees are currently located

rather than being located within the same city as was the wish of the EP. In addition, it will be the Council that will have the power to declare

a state of emergency. Lastly it was the wish of the Parliament that the ‘Transparency Directive’ be amended so as to require companies to provide financial information that is broken down country-bycountry. This will not occur.

Q. In your opinion,

what other issues will be demanding a great deal of the European Parliament's attention over the next 12 months?

A. In the Economic and Monetary

Affairs Committee it is likely that the most important new dossiers in the coming months will concern further

financial market regulation. In addition there has been news of at least six new dossiers concerning economic governance and will be proposed by the Commission. These are likely to be extremely controversial, yet crucial for the financial stability of the EU. With regards to Employment and Social Affairs, I foresee some important and interesting developments with regards to pension schemes, parental leave and working time. These will be difficult and challenging issues.

BUSINESS AGENDA | Oct – Dec 2010

Business News MBB Update

5th August – MBB stands by its Impact Assessment on the Revision of the Maternity Leave Directive.

26th August MBB Partner in ‘AIME’ Project

Following the MBB’s detailed Impact Assessment Report on the potential effects of the proposed EU proposals related to revision of the pregnant worker directive (Council Directive 92/85/EEC) - including the extension of maternity leave and the introduction of paternity leave, MEP Prof. Edward Scicluna, had followed with a publication of a report and comments which had questioned the results of the MBB impact assessment report on the effects of the proposed changes to the Maternity Leave Directive. Following the publication of MEP Prof. Scicluna, the Malta Business Bureau had reiterated its stands by the results issued in its technical report. The MBB stated that its impact assessment was carried out in a methodologically correct manner and presented clear, factual and realistic findings. The evidence presented by the Scicluna Report did not lead the MBB to alter the views and opinions submitted in its original report, which maintained that extending maternity leave and introducing paternity leave in Malta would clearly carry the risk of significant additional costs onto the productive economy without resulting into any materially-quantifiable benefits. While the Scicluna Report clearly acknowledged that the MBB’s report is based on a correct technical approach, it questioned the assumptions made by the MBB. In so doing, the Scicluna Report marked two fundamental departures from the MBB report on maternity leave, stating that the economic benefits of extending maternity leave in Malta can be estimated, yet the costs of the proposed changes to the directive can-

not be estimated at this stage, and called for further surveys in this regard. The Scicluna Report went on to state that: it estimated that the benefits of the implementation of the proposed changes to the directive would amount to an increase in female participation rate of nine percentage points; • it estimated that the costs of the proposed changes would not exceed €5 million per year, which is less than half the potential estimated cost of €12 million per year, as stated in the MBB report. • advocated the use of a national survey exercise to estimate the costs that would be incurred should maternity leave be extended. As acknowledged in the Scicluna Report itself, these finding are somewhat sui generis, especially when considered against the background of previous reports. In response to the above points issued in the Scicluna Report, the MBB believes that: • the assumption that female participation in the workforce will increase by nine percentage points is very high, especially when one considers that an average of 4,100 children are born each year. • not with standing the fact that the Scicluna Report is calling for additional research exercise to be able to estimate the potential costs of extending maternity leave, the Scicluna Report goes on to make an estimate, placing such costs at no higher than €5

million per year. This assumption is based mainly on the premise that economic costs should only reflect the wage element and not include foregone profits and other costs such as substitutability of workers. • it is the MBB’s opinion that any additional research and surveys would replicate, and indeed most probably verify, the findings of the MBB report, which are themselves based on Labour Force Survey findings. • Furthermore, the MBB states that one must appreciate that the realisation of the benefits of increased labour participation rates as postulated in the Scicluna Report are totally dependent on the assumption that the women induced to join the labour force would actually find employment. Otherwise, higher costs associated with unemployment benefits may actually take hold. The MBB also believes that the Scicluna Report also makes valid observations which are in line with the MBB’s own report, including the need for any costs arising out of extended leave not to be borne exclusively by employers and the need for more detailed statistical information leading to better decision-making on this subject. The MBB in its press release had also maintained that resources in the country can be more productively utilised in improving support structures which simultaneously help to increase labour market participation, and bridging worklife commitments by contributing towards the proper upbringing of children.

On the 26th August 2010 the MBB was informed that one of the project proposals it had submitted in collaboration with a number of international partners, which is called “Ambassadors in Malta for Increasing female Entrepreneurship” also known as “AMIE” under the “European Network of Female Entrepreneurship Ambassadors” call for proposals had been accepted by the European Commission. The MBB will be a partner on behalf of the Malta Chamber and MHRA to promote Female Entrepreneurship in Malta through the establishment of a Network of Women Ambassadors. The main objective of AMIE is that of promoting Female Entrepreneurship in Malta through the establishment

of a Network of Women Ambassadors. This Network, which shall be part of the European Network of Women Entrepreneurs, shall campaign amongst unemployed women, women in active professional life as well as students to set-up their own businesses and become entrepreneurs. Furthermore the objective of the Ambassadors are to act as role models so as to raise women’s ability to create a vision for themselves as entrepreneurs as well as the required motivation and selfconfidence in setting up and creating a successful business. The Ambassadors shall be role models to inspire other women to become entrepreneurs by ‘telling their story’.

1st September Submission of Life+ Project Proposal: ‘Investing in Water: Achieving Reduction in Water Consumption by Business in Malta’ For a number of months throughout 2010 the MBB together with Malta Chamber, MHRA and a team of experts have been developing a project proposal under the LIFE+ Information and Communication funding programme. The proposal was submitted to the European Commission on the 1st September and is called; “Investing in Water: Achieving Reduction in Water Consumption by Business in Malta.” The main objective of the project is to achieve behavioral change that will lead to increased adoption of best practices for water conservation amongst the target economic sectors during

the project lifetime. This project aims to raise awareness on issues related to the water scarcity problem in Malta and the importance of water conservation among the target economic sectors. This will also serve as an example to other sectors to adopt similar measures thereby helping reduce pressure on groundwater resources thereby contributing towards Malta’s EU obligation to achieve good status under the Water Framework Directive. The project has received support from the Office of the Prime Minister and if accepted by the Commission, will commence in October 2011 and run until March 2014.

BUSINESS AGENDA | Oct – Dec 2010

MBB Update

7th September – MBB Hosts Lithuanian Delegation A delegation from the Lithuanian Association of Business Centre (ABC) visited the Malta Business Bureau amongst other various institutions and organisations related to business in Malta during the second week of September. The Lithuanian Association of Business Centre incorporates a network of institutions consisting of tourism and business information centres and business incubators. The network covers the entire territory of Lithuania. The employees of the network institutions provide easily-accessible, publicly-financed business services: information, consultations, training and informational seminars for businesspeople and employees of compa-

nies. These services are provided as part of programmes financed by the Ministry of Economy and the municipal governments of the districts in which the centers operate. The Malta Business Bureau was approached to welcome the delegation at its offices and to give a presentation outlining what is MBB, its work and mission. The meeting resulted in a very positive outcome where good links with various business institutions around Lithuania have been established. The MBB also prides itself in the fact that the delegation found the presentation very interesting and served as an inspiration for ideas to the visiting representatives.

4th – 6th October – President’s Visit to Brussels MBB President Mr. John A. Huber visited Brussels on the 4th of October on a three day visit to attend meetings with EU representatives as well as distinct Maltese figures in order discuss matters in relation to Maltese business interests.

Leader of the Enterprise Experience Programme at DG Enterprise and later met Mr. Karel Lannoo (CEO - Financial Markets, Centre for European Policy Studies (CEPS) and Ms. Rym Ayadi (Head of Financial Institutions and Prudential Policy Unit (CEPS).

On the first day of his visit, in separate meetings, Mr. Huber met with Mr. Bruno Pragnell (Head of Unit, Human Resources), Dr. Joanna Drake (Director SME Policy), and Mr. Bonvini, the Team

On Tuesday 5th October, Mr. Huber attended a workshop entitled “Creativity and Innovation in your region: better use of talent for competitiveness and job creation”, followed by a meeting with

4th October – New appointment at the Malta Business Bureau Mr. Daniel Debono has joined the Malta Business Bureau team as Projects Coordinator. Mr. Debono is a B.A. (Hons.) International Relations graduate from the University of Malta and has recently completed an M.A. in International Political Economy at the University of Bir-

mingham, U.K. While welcoming Mr. Debono on board, the Malta Business Bureau would like to thank Ms. Amanda Sciortino for her dedicated work throughout her time at the MBB, wishing her best of luck for a prospective career.

8th October – Regional Development for Sustainable Tourism The Malta Business Bureau, with the Malta Hotels and Restaurants Association, organised a business seminar entitled ‘Regional Development for Sustainable Tourism’ on the 8th October at the Hotel Phoenicia, Floriana. The event addressed a number of issues related to the future challenges for Malta's tourism industry, according to European trends. It also delved into how EU funds can be used to support the sustainability of the tourism industry by developing the full potential of Malta’s localities. Full article on page 30

Mr. Dirk Ahner (Director General, DG Regional Policy). Mr. Huber later attended another workshop entitled “Public-private partnerships and green economy”. The second day was concluded with a visit to Maltese Ambassador Clive Agius and a reception hosted by Commissioner John Dalli to mark the opening of an exhibition by Maltese artists. On Wednesday 6th October, Mr. Huber attended a workshop entitled “Energising the 2020 strat-

egy: Innovative uses of communications technology for energy efficiency”. A second workshop called “European Small Business Act, better governance, partnership and simplification: Keys for better benefits of structural funds for small and crafts enterprises” followed. Subsequently Mr. Huber had the pleasure to attend the inauguration of Malta Week by Commissioner John Dalli. Later, together with Commissioner Michel Barnier and Malta’s Finance Minister Hon.

Tonio Fenech, Mr. Huber attended a panel debate entitled “Europe’s new Financial Supervision Package: Challenges and Opportunities for the Financial Services sector”. This debate was moderated by Maltese MEP Prof. Edward Scicluna. Throughout the visit Mr. Huber was also assisted by Mr. Omar Cutajar, Permanent Delegate in Malta Business Bureau’s office in Brussels.

14th October European Parliament of Enterprise; Maltese business well-represented at the second edition of Eurochambres The MBB Brussels office coordinated a visit for a delegation of no less than twelve senior representatives from the Malta Chamber of Commerce, Enterprise and Industry to participate in the 2010 edition of the ‘European Parliament of Enterprises (EPE)’ organised by Eurochambres – the European association of national Chambers of Commerce. The Malta Hotels & Restaurants Association was also invited to participate in this event. The EPE brought together the equivalent number of entrepreneurs from the EU-27 member states equal to the number of MEPs sitting in the European Parliament. Thus a total of 751 entrepreneurs, mainly from small businesses preceded the European Parliament for a day of discussions on topical EU regulatory issues, affecting economic operators across the European single market. This year’s EPE’s opening session included addresses by the European Union’s highest officials; Jerzy Buzek , President of the European Parliament; Mr Herman Van Rompuy, President of the European Council; and (via video link) José Manuel Barroso, President of the European Commission. The European Parliament of Enterprises created a “live” parliamentary session with a difference. European entrepreneurs were given the opportunity to debate a series of topical issues grouped under the three broad themes of ‘conditions’, ‘resources’ and ‘markets’. The issues debated under these three broad topics are very wide-ranging in their scope and incorporated current EU legislative dossiers such as the recast of the late payments directive, the proposal for a directive on consumer rights, the Commission’s plans for a revamped EU economic governance structure as well as ongoing Continued on next page

BUSINESS AGENDA | Oct – Dec 2010

MBB Update matters of debate amongst the European business community. The latter included the implementation of the Small Business Act, the discussion on the pros and cons of collective redress, the long-standing proposal on origin marking and the cost-feasibility of mandatory environmental standards amongst other issues. The Malta delegation was led by Mrs. Helga Ellul in her capacity as President of the Malta Chamber. Malta’s representation at this second edition was in line with the new Lisbon Treaty, which entitled the EU’s smallest member-state to a minimum European Parliamentary representation of six MEPs, thus Maltese business was represented by six MEPEs. These

were Mrs. Helga Ellul, Mr. Tancred Tabone, Mr. John A. Huber, Mr. Anthony J. Tabone (from the Malta Chamber) and Mr. Anthony Zahra (from the MHRA) who were accompanied by Mr. Omar Cutajar as the national coordinator.

Mrs Ellul encouraged her fellow entrepreneurs and European leaders to go beyond discussion about employability. “We need to act now” she said, “Employers and employees must concentrate on improving skills and mobility.”.

Mrs Ellul also addressed the event during the second session, on the need for flexibility in the labour market. “Europe needs growth – to achieve growth we need competitiveness,” she stated, stressing that “we can only be competitive if we are flexible.” Mrs Ellul also pointed out that flexibility, through banking hours, is what will bring more job security. “But security can no longer be guaranteed. The concept of a job for life is gone.”

“Let us be sensible, practical and in tune with the competitive realities we are facing every day. Above all, let us be flexible,” she concluded. The participation of Malta’s contingent at this prestigious event was supported by Air Malta. For further information on the EPE visit: www.parliament-of-enterprises.eu/

UPCOMING EVENTS 27 – 30th October - HOTREC 61st General Assembly in Budapest MHRA President Mr. George Micallef, MHRA CEO Mr. George Schembri and MBB CEO Mr. Joe Tanti, will be attending the 61st General Assembly (GA) of HOTREC in Budapest between the 27th and 30th October. At the GA, 39 hotel, restaurant and café associations from 24 European countries will be discussing the new framework

for tourism, the economic / financial crisis in relation to where the hospitality industry stands at the moment, and the Commission CALYPSO project. On the occasion, participants will also be presented a report on the European Hospitality Foundation, and the Future communication strategy of HOTREC.

2nd december Business Meets MEPs 3rd Edition The third in a series of events entitled Business Meets MEPs organised by the MBB, is set to take place on the 2nd December. The schedule of regular meetings between Maltese MEPs and the local business community in the shape of an open forum of Q&As and an open-floor debate will see

the participation of Hon. Louis Grech MEP, who will be interviewed by a local journalist. These meetings are open to the members of the Malta Chamber of Commerce, Enterprise and Industry and the Malta Hotels and Restaurants Association, and to interested business entities and

management staff who would like to have an exchange of views with Hon. Grech on the: 'Relaunch of the Single Market and what it means for business'. For further coverage and information about the events can be obtained by logging onto our website: www.mbb.org.mt

BUSINESS AGENDA | Oct – Dec 2010

case study

CAFÉ JUBILEE: ‘ISLAND HOPPING’ ONTO THE INTERNATIONAL MARKETS What started out as a quaint but highly successful café in the heart of Gozo has turned into one of Malta’s best internationalisation success stories. OMAR CUTAJAR finds out more about this project’s journey from the Maltese islands to the rest of the world. Alex Scicluna lies resting after another hard day of work at the Shanghai International Expo, going through the papers for the scheduled meetings with a new business contact he plans to meet the following day in Beijing. For the duration of the Expo, Mr. Scicluna is no less than 9,374 kilometres away from his home country; or rather home island of Gozo. For this ambitious businessman, the past 15 years have been an entrepreneurial journey that started

out by crossing from one tiny island to another in the Maltese archipelago, yet has led him to ventures on the European continent and now further afield into more exotic destinations notably India and China. Just like many others who dream of bigger things, Mr. Scicluna started from humble beginnings. After he had finished a course in Management at the Institute for Tourism Studies (ITS) and after barely a year in full-time employment, he decided

to take up the challenge of ‘going solo’. Together with his brothers, Mario and Anthony, he submitted an offer to a call for tenders to manage the catering establishment of the ‘Otters Waterpolo Club’ in Gozo. Their entrepreneurial spirit prevailed and the Scicluna brothers moved on and quickly grabbed the next opportunity that came their way in the form of a bar called the ‘Silver Jubilee’, in the centre of Victoria, Gozo. The place was later

renamed ‘Café Jubilee’ and the Scicluna brothers set about catering for the demands of the Gozitan market, targeting a niche client base that was previously almost ignored. With a strong brand identity, innovative decor and Mediterraneaninspired menus, Café Jubilee’s identity became more reminiscent of the typical French bistro-café style of the interwar years. The eclectic mix was a resounding success, but following one year of business operation in Victoria, it quickly became

evident that the seasonal slump in clientele would prove challenging for the brothers to survive the slow winter seasons, and so, Café Jubilee, barely two years after opening its doors, opened in Malta, right in the heart of the capital, Valletta. The second outlet was even more successful than the first and soon after, a third outlet, this time in Gzira, followed. The Next Step After more than eight years overseeing the slow but steady expan-

BUSINESS AGENDA | Oct – Dec 2010

case study sion of his business Mr. Scicluna was often asking himself the question, ‘what next?’ With the consistent demand for the availability of Café Jubilee products on sale from supermarkets, he decided to diversify the operation through the setup of a corollary business baptised ‘Jubilee Foods’, thus effectively turning ‘Café Jubilee’ into a group of companies, distinguishing the operation from the original catering remit of the Scicluna brothers’ business. ‘Jubilee Foods Ltd’ was set up as the manufacturing and retailing company of home-made, ready-tocook frozen foods, offering a products prepared with fresh local produce, free of any preservatives or additives. The company took off as an instant success, testified by the rapid rate with which three retail outlets were opened over a span of three months in late 2009. Meeting the structural challenges for internationalisation It became evident following market research carried out with the collaboration of local experts, that a franchise-driven model of internationalisation was the only viable option worth considering from the outset to actualise Mr. Scicluna’s long-term dream of opening a Café Jubilee outlet abroad. International expansion of the ‘Café Jubilee’ chain would be possible since the resources would be obtained from a third party, consequently limiting to a significant extent the financial exposure of the investments. Moreover, for a company whose business practices had been forged in a minuscule insular market, the franchise method emerged as an appetising prospect given the possibility of attractive returns on large-scale markets on the European continent. Going International Mr. Scicluna started working to establish the international division of Café Jubilee since 2005. To this end, the services of Howarth Franchising UK Ltd – the largest European franchise development consultancy company, was commissioned to assist Café Jubilee with the formulation of its international franchise offer. Following detailed study, it was advised to the Scicluna brothers to concentrate their efforts on developing the franchise offer into Central and Eastern European countries, already EU member states or (at the time) accession countries, whose citizens are culturally already well-versed with the café/ bistro concept.

From Budapest to Shanghai in 30 days The breakthrough overseas occurred on the tenth year anniversary of ‘Café Jubilee’. It was all made possible through the establishment of a direct business contact between Mr. Scicluna and Alfred Pisani, Chairman of Corinthia Group, who opted to enter into a joint partnership that would allow the opening of the first international outlet of the Café Jubilee chain in an overseas property owned by the Corinthia Group. Just a few months have passed since that remarkable moment and though it is still early days, Mr. Scicluna can nonetheless assert with a certain degree of confidence that so far the customer response has been encouraging. Following hot on the heels of the opening of its first outlet abroad, ‘Café Jubilee’ soon found itself involved in another overseas venture, this time in Shanghai, China, for the World Exposition. Mr. Scicluna was approached by Malta Enterprise to set up a temporary outlet on the premises of the Maltese stand with the intent of improving the overall attractiveness and consequently the average visitor stay there. For him it provided the timely opportunity to explore firsthand the potential of further developing the chain in the Far East. A bright future beckons… Despite the everyday challenges related to the management of the chain, Mr. Scicluna remains keen on his vision of incepting the first-ever Maltese café/bistro franchise on a wide international footing through operations in different countries and why not, even different continents. 2010 started well for the Scicluna brothers with the opening of their first overseas outlet in Budapest, the setting up of the temporary café at the Malta Pavilion in Shanghai but also the start of proper exploration of the café/bistro franchise market potential in India. Perhaps one of Mr. Scicluna’s core business strengths is his optimistic forward-looking perspective and his ongoing quest towards the establishment of the first Maltese café/bistro café chain abroad. As business meetings progress in India with the adapted brand concept increasingly taking shape, Mr. Scicluna can certainly look back with pride, but he is also excitedly looking forward to what is to come next.

“After more than eight years overseeing the slow but steady expansion of his business Mr. Scicluna was often asking himself the question, ‘what next?’ ”

BUSINESS AGENDA | Oct – Dec 2010

AWARENESS

PROGRESS PRESS INVESTS € 26 MILLION IN NEW PRINTING PRESS Progress Press has just invested over €26 million in a new printing press facility at Mriehel. “The new machinery is at the cutting edge of technology in the printing sector and the new premises are commensurate with the volume of work the company has taken on throughout the past years. This will allow us to enter into many more variations of print, will vastly improve the quality of our newspaper and other products to the benefit of our clients and readers, and will be more cost-competitive. Once again, Progress Press is leading the develop-

ment in its field, locally,” asserted Adrian Hillman, Managing Director. The new premises facilitate linear production layouts and on-line handling, storage and transportation of materials, thus increasing efficiency, productivity and competitiveness. The state-of-the-art equipment provides the possibility to print a new range of products, with increased pagination, larger volumes, and at faster rates. Automated controls are designed-in to achieve high printing quality at reduced set-up times and waste levels.

“This project is a great achievement and continues a vision of excellence which was sought from our very beginnings,” concluded Adrian Hillman. “Indeed, this is an achievement for Malta as a country and puts us firmly on the printing map, competing against the best industry leaders beyond our shores,” concluded Mr Hillman.

www.progresspress.com.mt info@progresspress.com.mt

MIRA MOTOR SALES LTD LAUNCHES NEW CHEVROLET WEBSITE Based on international brand guidelines and featuring the entire Chevrolet range, the website is powered by a customised version of the WordPress Content Management System, consolidating Isle Creative's reputation as experts in tailoring WordPress to the varying needs of our clients.

The new Chevrolet website was built with user interaction as its cornerstone. Quick links such as the Test Drive and Brochure Request forms make it easy for customers to get a better feel of the Chevrolet range and aid their buying decisions. The whole Chevrolet vehicle range is showcased on the site,

where users can view the exterior and interior images as well as find all the technical details and pricing for each model. www.chevrolet.com.mt

BUSINESS AGENDA | Oct – Dec 2010

INVESTING IN YOUTH

Taking a closer look at structural debates among national governments, public and private agencies and youth organisations about youth employment is a priority in today’s agenda. Why should this play such a prominent role in European societies and what are the prospects of investing in youth for the business community? By Pavel Jackovlev & Joanna Grima According to a report published by Generation Europe Foundation, the younger generation has the highest potential to contribute to a lasting recovery from the current crisis. The report states that today’s youths aged between 19 to 29 years are one of the best educated generations. They are familiar with new technologies, more flexible and open to new opportunities. Taking this into consideration, Tina Radinja, President of the ‘European Youth Forum’ made a valid point when stating that “losing this potential will have long-term negative effects, whereas an effective investment in youth will be crucial

for a successful recovery, both in the mid and long term.” In support of the above argument, Eurostat has carried out a case study on employment and R&D guidelines for big businesses and SMEs, where the main area of investigation focused on opportunities available to fresh and upcoming participants in the EU’s labour market. It concluded that both national and regional actors can benefit from investment in youth employment. The new Lisbon Strategy encourages economic concepts of innovation acting as motor for economic change, the “learning economy” and social and environmental develop-

ment. Since the upcoming working generation has the highest learning potential and is familiar with newest technologies as well as is always eager to increase their level of personal and professional development, businesses enjoy prospects of ‘quasi-perfect’ candidates for future employment. In fact, the Lisbon Strategy envisages hard work in coordinating economic policies across the union for its ten year stratagem in promoting jobs and growth. In support of the new plan, Commission President José Manuel Barroso established an initiative to create a more diverse and dynamic single market that coheres with one of the main

EU2020 flagships – Youth on the Move, which promotes investment in young skilled workers. The ‘European Youth Forum’ reacted by calling upon European Ministers of Employment to express concerns of young people and requested for these suggestions to be taken into account, whilst developing employment policies. The skills that young people can acquire through non-formal education and volunteering activities, as well as through vocational training, is of great importance to their future development in this regard. Recognising the value of professional guidance that includes bet-

ter interaction between educational institutions, together with social partners and the professional sectors is also key to this debate. Furthermore it is important to focus on internship schemes, which are extremely beneficial for personal development and serve as a valuable step in the transition from academic to professional life. Having said this, such schemes should not encourage an employment trend that would replace paid work. Malta is unsurprisingly becoming an attraction for the provision of such internships with a number of companies actively embracing the opportunity to train and invest in young workers. Michelle Seguna,

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Human Resources Manager at the Westin Dragonara Resort, established a system of employment through training schemes that identify prospective future employees from students still in initial years of their post-secondary studies. “Our business benefits from young workers. They tend to bring fresh ideas and are usually very flexible. This year was a very successful one in terms of placing the right people in the right positions,” Ms Seguna explains. “Since the hotel business industry in its majority depends on youth, our suggestion is to invest in the younger generation for potential employees that will most probably retain their employment with the business. The Westin Dragonara Resort, as part of their employment/training strategy, is devising a relationship with the students’ tutors to create a multi-cultural professional environment.”

Andre Bartoli, a Sales Executive with the Westin Dragonara Resort, has worked for the company for over three years, after successfully being recruited while still in his first year at the Institute for Tourism Studies. He confirms that internships and training opportunities provided to him served as an excellent stepping stone to ensure a successful career. He explains, “My training had 100 per cent relevance to my career. Westin gave me an opportunity to grow within the company through training and re-training.” BTS Malta is another company that recognises the benefits derived when investing in youth. Simon Alden, General Manager of BTS, explains that the company has engaged in various forms of training employment, mostly apprenticeship, for students with Engineering degrees. “Through our experience, training needs to be well managed. We had both success and failure

“Our business benefits from young workers. They tend to bring fresh ideas and are usually very flexible. This year was a very successful one in terms of placing the right people in the right positions.” Michelle Seguna cases. In my opinion, the success of an internship often depends on the student’s dedication and personality,” he explains. “It is crucial to find the balance between the student’s application and the company’s requirements.” Training schemes may also serve as screening models that provide youth with enhanced employment opportunities. This may help change the traditional way

of employing people based on their experience that is mostly popular till today. Caroline Magro, who has been with the company for five years, currently occupies the position of Administration and Finance Executive. She explains how she benefitted from work placements while studying for her ACCA qualifica-

tion. “The experience I gained during this time is now helping with my work. I am currently implementing new ideas in practice at work based on what I have grasped during my ACCA study-units and work experience. In my opinion, in order for traineeships to be successful, youth workers require a balance between the accumulation of knowledge and its application. This would guarantee a better understanding of that particular job.” UDKA Ltd, which operates in the health sector, has actually gone beyond the EU’s borders in their selection of interns. John Vella, Director of UDKA Ltd, Health Sector explains that “the company had successful internships with various nationals coming to us from countries such as Belgium, Poland and Serbia.” He concludes that “it is an experience which can open one’s horizons through cross-cultural exchange of ideas. There is a need to increase the cross-border training exchange schemes. Both parties are exposed to different work practices and work ethics, which can be highly beneficial. During her final year of Pharmacy Degree, Ghislaine Calleja was employed as an apprentice with UDKA Ltd. “My vocational training experience was very helpful for my studies, as well as to establish a solid start to my future career. Not only I am now well trained in operations of community pharmacy’s work routine but also I am potentially employable once I graduate,” she explains. “In my opinion interns are at an advantage when it comes to future employment because they learn how to apply their knowledge to everyday situations that they encounter at work.” To conclude, from a socio-economic perspective youth employment plays an influential role. The case studies above are witness to a number of success stories confirming that the integration of youths in local workforce can produce excellent results. It is of the utmost importance however that such schemes are conducted in the most organized and efficient manner, whether through systematic training programmes or apprenticeships, in order to attract the best possible candidates and provide them with the best experience for their future careers. Maltese businesses are already understanding this importance and actively participating in such schemes. We call on authorities to actively promote and expand such participation for the benefit of the Maltese economy which would eventually enjoy a higher degree of skilled youths.

Mr. Jackovlev and Ms. Grima are two promising students reading a Bachelor’s Degree in European Studies at European Documentation and Research Centre (EDRC) within the University of Malta. They have undergone a traineeship experience offered to them by the Malta Business Bureau.

BUSINESS AGENDA | Oct – Dec 2010

FINANCE EUROPE’S NEW FINANCIAL SUPERVISION PACKAGE: CHALLENGES AND OPPORTUNITIES FOR THE FINANCIAL SERVICES SECTOR A panel debate on the impact of the new EU financial regulatory package was held on the fringes of the inauguration ceremony launching “Malta Week”. The panel debate was organised by Finance Malta, in close cooperation with the offices of Malta’s MEPs Simon BUSUTTIL and edward SCICLUNA. The panel discussion was aimed to shed light on how the various EU regulatory initiatives – some already enacted and some still in the pipeline – are and will be affecting the prospective market development of Malta’s financial jurisdiction. The implementation of the recentlybrokered EU financial supervision package will usher in a new set of EU banking and finance regulations that should help buttress the credibility of EU member states’ jurisdictions in hosting finance business operations, whilst better containing any potential risks of instability emanating from, for instance, short-selling activities during times of crisis. The reform of financial supervision was spearheaded by the European Commission in a bid to put in place a robust regulatory framework that would prevent a return to situations where public funds would have to be channelled into bail-outs for commercial banks that due to undercapitalisation would have overstretched their credit manoeuvrability. The core change to the current financial supervision architecture, ushered in proposals formulated by the European Commission and subsequently agreed upon following modifications by the Council (member states’ governments) and the European Parliament. To this end, the new EU financial supervisory framework will consist of an interconnected network of three new ‘European Supervisory Authorities’ (ESAs) operating under

the aegis of the European Systemic Risk Board (ESRB). The three new authorities are the European Banking Authority (EBA) based in London, a European Insurance and Occupational Pensions Authority (EIOPA) located in Frankfurt and a European Securities and Markets Authority (ESMA) to be established in Paris. The set-up date for the new European Supervisory Authorities is 1st January 2011. The panel debate featured a mix of high-level political and technical expertise. The political perspective from both the community and national member state level were assured thanks to the participation of Internal Market Commissioner Michel Barnier and Malta’s Finance Minister Tonio Fenech. Certainly, the regulators’ expert viewpoint did not go amiss as a result of the interventions pitched in by Eddy Wymeersch, former chairman of the Committee of European Securities Regulators (CESR) and Prof. Bannister, Chairman of the Malta Financial Services Authority (MFSA). Commissioner Barnier delivered the opening shot in the debate commenting on the general thrust of the EU supervisory package as recently endorsed by the European Parliament on 22nd September 2010. The importance of having the right supervisory authorities in place was stressed by Commissioner Barnier as the lynchpin for ensuring that cross-border financial services operations are regulated transparently and proportionately in a smart

manner which is not conducive to adding on costs to operators in the industry. “We have to put the financial services markets to the service of the real economy,” commented Mr. Barnier in an appeal to ensure that access to finance for smaller businesses is maintained despite the credit crunch. A watchful eye should also be kept on the regulatory reforms being introduced by other leading jurisdictions notably the US, where the legislative path is also being pursued through the staggered implementation of what is known as the Dodd-Frank Act. The crisis exposed series shortcomings in the regulatory supervisory structures. “Responsibility and transparency had to be imbued back into the system,” remarked Barnier. In this regard, the supervisory package constitutes the framework within which new action will be conceived and pursued. Commissioner Barnier concluded by reminding that EU discussions

are also advanced on hedge funds regulations and equity products. Minister Fenech appealed for the new EU regulatory framework to be a best practice in the global architecture, to be properly imbued with a risk-management approach. The Finance Minister recalled how financial institutions in Malta have proved to be prudent in their approach with a strong depositbase and sound capitalisation, thus making the point that no Maltese bank had defaulted during the crisis. Besides sound operational management, this is also attributable to the fact that Malta had opted for strong regulation in order to attract financial service providers, while most other jurisdictions had opted for deregulation. Minister Fenech remarked that the political agreement on the new EU supervisory package was a recommendable first step but more needs to be done, not least to make the new supervisory bodies more effective. This statement met with the warm concurrence of the reg-

ulators’ perspective, represented on the panel, by Prof. Bannister. The latter welcomed the closer involvement of national regulatory authorities in the peer review process to be established by the new EU supervisory system, adding that for a small yet important jurisdiction like Malta this was a challenge to which the MFSA had already anticipated and prepared to adapt to. In fact, it already vaunts a track record of undertaking annual internal reviews by independentlycontracted consultants. Therefore, Malta’s national regulator is wellprepared for undertaking the EU peer review process for financial services, insurance and fund management activities. The last intervention by Mr. Wymeersch dovetailed with the previous arguments. “The creation of the new authorities is a major step forward produced by the De Larosiere Report,” commented Mr. Wymeersch. The De Larosiere Report was the result of the work of a high-level group of experts in financial services appointed by Commission President Barroso to advise on the future of European financial regulation and supervision. Mr. Wymeersch stressed the importance of having an enforcement mechanism, ending the era of voluntary compliance. In addition, he stressed that national governments would no longer be in a position to add their own interpretations to EU rules concerning the financial sector. In conclusion, it was remarked that from a Maltese financial business perspective, it is critical that Malta has a sound international financial environment in which to operate. When the political decision was taken to endeavour regulation of the financial services markets, the political thrust was to develop strong regulation. It is with this spirit that the Maltese Government has supported the Commission’s efforts in constructing a collaborative yet supranational supervisory system. The certainty of regulation is critical in times of crisis. The new EU financial architecture should therefore provide an equitable balance between the European interest and the national member states’ sensitivities.

BUSINESS AGENDA | Oct – Dec 2010

ENSURING A SUSTAINABLE TOURISM INDUSTRY The tourism industry plays a key role in the European economy, and Malta is no exception. With its significant contribution to GDP and thousands of jobs it generates, the industry’s sustainability is certainly a high priority for all those involved. BUSINESS AGENDA explores the main issues that were discussed during a business seminar that dealt with sustainable tourism through regional development. Speaking at an event organised by the Malta Business Bureau and the Malta Hotels and Restaurants Association, MBB President John A. Huber stated that it is necessary “to make an effort to re-create an image for Malta and to exploit our historical and cultural richness.” Mr. Huber spoke about the way in which Malta’s tourism industry needs to reassess its positioning to be better suited to meet the challenges that the industry is facing today. He affirmed that “in order to reach this desired objective, it is important to use all the resources and the potential of all stakeholders interested in increasing the tourism based economy of the islands of Malta and Gozo” “Today’s business world has become intelligent, interconnected and instrumental. Tourism still retains a soul; a human soul that us Maltese, us Mediterraneans, us Europeans endear and cherish. Hence my conviction is that we will succeed in what we endeavour to do, no matter how courageous and ambitious our task may be,” he continued. The need to recreate and promote Malta’s image as a sought after tourist destination ‘with a difference’ was not the only issue that was discussed during the event. According to Prime Minister Hon. Dr. Lawrence Gonzi, despite the economic slowdown, Malta’s tourism industry was managing to bounce back from the difficulties it faced in 2009. The Prime Minister however cautioned that “if we are to continue on the success achieved so far, there is a need for a concerted effort by all stakeholders and at all levels – this is the only way that Malta’s tourism industry will develop in a competitive and sustainable manner. There is absolutely no room for complacency despite the positive results achieved this year.” The Prime Minister also made reference to the significant contribution of the tourism industry to the local economy and called on all stakeholders to face challenges with determination, innovation and a clear drive to deliver quality products and services. “Innovation and dedication to ensure the best customer satisfaction will be the key to the future success of the industry – we need to capitalise on our uniqueness, on our culture, on our

heritage, and on our Mediterranean environment.” The Prime Minister also highlighted the fact that the tourism industry is a clear example of the need to reconcile economic growth with sustainable development, and explained how government has, to date, invested over €26 million in regional development projects. “Financial investment is needed for the industry to tap niche markets and for innovative ideas to become reality and for this reason, government has made funds available for this aim,” he added. “However, this is only one part of the equation and we must all accept the fact that success will only be achieved if a national effort is made – all socio-economic players have a part to play in ensuring that Malta’s tourism industry remains competitive, and is above all, sustainable,” Dr. Gonzi concluded. Michel Laine, (Head of Unit within the European Commission’s Directorate General for Employment, Social Affairs and Equal Opportunities) was also a keynote speaker during the event and addressed funding opportunities available to businesses operating within the tourism industry. Mr. Laine highlighted the fact that Europe is the world’s leading tourist destination, enjoying around 40 per cent of global tourist arrivals, which leeds to the tourism industry playing a key role in Europe’s economic and social development. He also pointed out that Malta’s dependence on tourism, coupled with the fact that it does not have a much diversified tourist base, makes innovation and the targeting of niche markets all the more important for the sustainable development of the local tourism industry. “The European Union provides essential support when it comes to financing projects that will improve the tourism product. Investment in infrastructure, training and education are a few examples of the different types of projects that can benefit from EU funding,” he explained. Francisco Calheiros, (President of LAG Vale do Lima (Portugal) and also President of TURIHAB, the Association of Manor Housing Tourism) was also present for the event and tackled the development of regional networks and how this

innovative approach contributes to the development of the tourism industry across Europe. Mr. Calheiros explained his involvement in an innovative project entitled ‘Europe of Traditions’, which brought ten European destinations together to offer a traditional and unique taste of their culture by offering accommodation at a selection of exquisite houses of historical importance. He explained how this approach targeted visitors who wanted a different, yet a quality experience, that would truly introduce them to the country’s unique heritage, history and culture, allowing the host country to capitalise on its unique characteristics. Mr. Calheiros also shared his extensive experience within the Portuguese tourism industry and highlighted the fact that a number of successful projects had come to fruition thanks to the financial assistance made available by the European Union. George Micallef, President of the MHRA also spoke about projects that came to fruition thanks to EU funding opportunities that were being made available to the local business community. “EU funding is helping our industry to improve the product and standards as well as expediting this process, at a time when disposable capital is in short supply,” he asserted. However, Mr. Micallef also highlighted the fact that the bureaucratic process involved to apply for such funds is often compounded by the administrative procedures imposed for eligibility.

“In order to encourage a better and wider take up, the process needs to be more user friendly, particularity for micro enterprises, which find the procedures associated that EU funding, not only daunting, but sometimes intimidating,” he argued. In the second part of the seminar, a panel discussion addressed the theme ‘Making Better Use of EU Funding’. The panel was composed of Marlene Bonnici (Director General of the Planning and Priorities Coordination Department), Marie Louise Mangion (Head of the Tourism and Sustainable Development Unit from the Office of the Prime Minister), Michel Laine and George Micallef, all contributing to the discussion. Maria Joao Rauch an expert on EU Funding in the Fields of Local Development, Employment and Vocational Training moderated the panel debate. This was followed by a number of interventions by the audience present. The seminar was concluded with an address made by Josef Formosa Gauci, Chief Executive Officer Malta Tourism Authority. Cultural Visits Following the business seminar, the distinguished guests were accompanied by the Presidents and CEOs of both MBB and MHRA on some cultural visits. They were invited by Fondazzjoni Ulied Qormi to experience several activities organised in honour of their visit in the locality of Qormi. The activities were organised by various associations represented within the Fondazzjoni Ulied Qormi led by Chairman Carmelo Debono and CEO

Hon. Marie Louise Coleiro Preca. The guests were welcomed by a reenactment representing the proclaiming of Qormi by Grandmaster Pinto. This was followed by Maltese ‘danza’ with dancers dressed in national costumes. The guests were then lead to the St. Sebastian parish church where a short version of Good Friday’s procession was re-enacted. The group then walked through the narrow streets in the old part of Qormi and were shown restorations taking place in several small chapels in the area. The guests were also taken to one of the oldest bakeries in the area and were also shown round the Museum of Antiques in St George’s Church. Eventually the group were taken to St. George’s Band Club where they met with the leaders of all the associations in the Qormi area during a small reception. On Saturday morning, the guests were taken to Birgu where they met with the locality’s mayor, Mr. John Boxall and members of the local council of Birgu at the refurbished Auberge de France. They also had the opportunity to see the stables beneath the Auberge populated with live animals, actors dressed in 16th century uniforms and streets decorated for the ‘Birgu by Candlelight’ activities that evening. As a Knight Member of the Order of St John, Mr. Calheiros confirmed on his departure that he was going to plan to bring over to Malta a group composed of members of the Knights of The Order of St John from Portugal and would like MBB and MHRA to assist in a programme for their visit.

BUSINESS AGENDA | Oct – Dec 2010