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EXECUTIVE TRAVELLER OCTOBER ISSUE

LOOKING AHEAD MALTA’S POST COVID ECONOMY FREE COPY 1 executive traveller  OCTOBER issue PRODUCED BY AVIAPROS.COM/ETM

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Introduction The COVID-19 pandemic has hit hard on the global economy and has spared no mercy on Malta. Indeed, it the pandemic has led to a swing in economic growth from 4.7% in 2019 to a contraction of 6% in 2020, according to the European Commission. After several years of high growth fuelled mainly by domestic demand, Malta’s economy has slowed down with significant impact on the tourism sector and other key industries which form the backbone of the local economy. Notwithstanding the uncertainty looming on the global economy, Malta’s economic prospects remain encouraging. The numerous financial aid packages introduced by the government over the past months helped to cushion the economic impact on key industries resulting in modest recoveries in the construction and manufacturing sectors. Net exports are also set to contribute significantly to the rebound as global trade gradually normalises. Inflation is set to decrease from 1.5% in 2019 to 0.8% in 2020, driven mainly by falling services inflation, impacted by demand contraction and wage reductions. Headline inflation is expected to rise to 1.2% in 2021 in line with a recovery in domestic demand and a revival in tourist demand for non-essential services. The much-awaited Malta 2021 budget to be announced on the 19th October is also expected to serve as a further stimulus to the local economy. This issue seeks to analyse the impact of COVID-19 on the local economy and the government’s plan for a sustainable post pandemic economy. Malta’s prospective economy is seen in the context of various niche sectors which will certainly play a key role in the island’s post COVID-19 scenario. We wish you all a pleasant read! Andrea Trapani Editor and Publisher / Omar Vella Editor

THE MAKERS Publishing Editor

Andrea Trapani atrapani@aviapros.com Omar Vella marketing@aviapros.com

Advertising Executive Rebecca Pace adverts@unionprint.com.mt

Design

Robert Caruana design@unionprint.com.mt

Printing

Union Print Co. Ltd. www.unionprint.com.mt

Publisher

Aviapros International Ltd

Contributors

Special thanks for the production of the 14th edition goes to Executive Aviation Malta as the main contributor and sponsor, as well as all other contributor and sponsor, as well as all other contributors for their time and images. We also thank all advertisers for their support to ensure the constant growth of the magazine.

Advertising

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Subscription Executive Traveller Magazine is distributed for free to top hotels and venues, and is available at local and international business aviation conventions. The publication is also available online at: www.aviapros.com/ETM Disclaimer: Particular attention has been given to ensure that all the content of this magazine is correct and up to date as on date as issue. The views expressed in the articles and technical papers are those of the authors and are not neccessarily endorsed by the publisher. While every care has been taking during production, the publisher does not accept any liability for errors that may have occurred. Copyright© 2020.

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Malta in numbers

2020

514,564

Total population 2019

371,109 Total tourists Q1 2020

258,064 Employed Q4 2019

8,541

Unemployed Q4 2019

(€/year)

19,484

verage annual basic salary A Q2 2019 4

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1.64%

RPI inflation rate 2019

(€ million) 5,695.6

Government debt 2019

(€ million) 71.0

Government surplus 2019

GDP per capita (€) 5,475

Q2 2020

(€ million) 2,825 DP at market prices (ESA 2010) G

Q2 2020 executive traveller  OCTOBER issue

“I’m sure that this budget will be another step forward for our country. We need to keep working to achieve a better tomorrow, a better Malta, a Malta which strikes a balance between employers and employees, a Malta for those who need help the most to climb up.“

The next budget will be another good budget despite the difficulties that Covid-19 has brought. It will be another budget which confirms this Government’s social agenda, helping those who need it the most. Helping pensioners, workers and those who are finding difficulties. It would have been easy to simply increase taxes, and implement a strict cost cutting exercise, after being hit with the greatest crisis in decades, like what used to happen prior to 2013 when at that time there wasn’t any crisis. But that is not how we do things. We will once again stay away from austerity measures, that other countries will certainly put in place, and give incentives to people in Malta, because the quality of life of our people is what truly matters. In this budget we will boost the disposable income of families, particularly those on lower incomes. We will also start providing funds to transform Malta into a greener and more digital economy. The upcoming budget will also give further assistance and incentives to businesses who strived to keep their operations going,

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and that constitute a large portion of our gross domestic product. Businesses will be incentivised again to keep producing work and generate income. Other important pillars of this budget will be infrastructure, the development of our industrial areas, foreign direct investment and the environment. As usual, Government will continue to invest heavily and sectors like health and education. We will also continue to invest in our institutions and upgrading the governance of our country. I’m sure that this budget will be another step forward for our country. We need to keep working to achieve a better tomorrow, a better Malta, a Malta which strikes a balance between employers and employees, a Malta for those who need help the most to climb up. As Prime Minister, as Government, that is what we are going to deliver.

ROBERT ABELA Prime Minister of Malta

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Hon. SILVIO SCHEMBRI MINISTER FOR FINANCIAL SERVICES

REGAINING ECONOMIC MOMENTUM Courage and determination to pursue one’s goals, despite adversity is, I believe, the mark of true strength. With hindsight, it is therefore more than prudent to acknowledge that this government’s past economic decisions have served as a solid mainstay in the resulting economic efforts to safeguard as many jobs and businesses as possible. History has consistently revealed how catastrophic events, prompt societies to move in one direction or another; societies either prevail or else sustain long-term, often irreparable damage.

I believe that through our country’s collective effort, the coming together of our government and relevant industry stakeholders, Malta belongs to the former category. We have together prevailed and managed to weather the storm relatively well, given the more than challenging circumstances. It should be recognised that this is mainly the result of the Covid-19 Economic Regeneration Plan launched on June 8, a €900 million injection, allocating numerous funds

which managed to safeguard the livelihoods of Maltese families and safeguarded several businesses from bankruptcy and closure. Together with the COVID Wage Supplement we have extended an essential lifeline in ensuring not only the mere survival of our workforce but also a form of continuity. It is therefore good to note that Malta has succeeded where other, much wealthier, much bigger countries have failed. We have managed to retain employment, the cornerstone of every successful economy, with data even registering decreases in our unemployment numbers in spite of the hostile circumstances we are operating within. But ensuring stability should by no means be confused with stagnation. The government’s two-pronged approach, that of providing stability while at the same time fostering the regeneration of our economy guaranteed that even in these dire circumstances, we shall strive to prevent our economy from stagnating. The issuance of

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the €100 vouchers for all Maltese residents aged 16+, a measure costing €44 million, provided a much-needed boost of economic activity for all our businesses big and small, which have seen their business activity drastically reduced and have inadvertently lost substantial revenues during the height of the pandemic, while offering families some respite. Moreover, the electricity refund bill scheme was launched through which businesses benefitting from the Covid Wage Supplement will be reimbursed 50% of the electrical power bills for any covering the months of July, August and September. A lot of thought has been put into this scheme, hence a total budget of €35 million has been allocated with the aim to support over 16,000 businesses across Malta and Gozo. In much the same way we supported businesses during the past months, as a Government we continue to stand shoulder to shoulder with businesses and families throughout this journey for the regeneration of our economy. Our goal is to keep on safeguarding as many jobs as possible.

Good governance remains at the heart of all of our endeavours.

While across the globe this pandemic has usurped the landscape of the working industry as we know it, we believe that now despite such a chaotic scenario is as good a time as any to grasp opportunities, re-strategize our outlook and establish a long-term strategy. This government has unfailingly, throughout its tenure, adopted a proactive stance in all its policies and strategies. The launch of a holistic ecosystem based on five main pillars, which solidly cater for Malta’s continuous growth and stability continues on this vision, a vision wherein our country regains its momentum, both on an economic as well as a social level. Good governance remains at the heart of all of our endeavours. While as we have seen in recent weeks this was further sustained with the introduction of new laws, including those based on the recommendations of the Venice Commission, it is most heartening to note that several entities have, in the support of the reputation of our jurisdiction, implemented their own measures and policies to this end.

Education remains the key to a successful future, for current generations as well as future ones. A technology led approach with particular emphasis on AI and blockchain amongst others, paves the way for a revolutionary overhaul of our education infrastructure, another link in the drive towards maintaining our country’s economic momentum. Economic growth is by now the catchword of this government. However, in the current climate, we have recognised the need for quality. It is now imperative that in order to continue attracting big players and investors, with the resultant creation of quality jobs, we now need to look at the big picture and way beyond the here and now. The search for quality in our endeavours is our priority, ensuring that our long-term vision for the generation of wealth to be distributed justly amongst all strata of society, comes tangibly to fruition. However, no economic activity can be successfully generated without a robust infrastructure at its core. A massive €400

million investment shall mark a new chapter in the history of the Maltese industry and its evolution. A principle which in essence will firmly bolster the country’s productivity, while attracting new and further investment. This investment will serve not only as a valuable springboard for new start-ups, but also ensures greater accessibility, as well as adequate conditions for the complete regeneration of our industrial areas. These pillars, together with the last principle, that of a carbonpollution free Malta by 2050, as well as commitment towards the exploration of both the circular as well as the blue economy, are our guarantee that, despite the turbulence, our economy and consequently our citizens’ quality of life, is looking at a bright and prosperous future. Together, if we all stand shoulder to shoulder, if we manage to build on all that that has bound us over the past few months, I am more than certain that our country will not only regain its recent momentum, but in the long-term, successfully surpass it.

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COVID-19 and its

Aftermath

“A crisis like no other, an uncertain recovery,” is being used by the World Economic Forum to describe the current and future economic scenario and it definitely captures the spirit of the current situation. The forecasts by the main institutions including the World Bank and the World Economic Forum are suggesting that the impact of COVID-19 will be the deepest since World War 2, twice as deep as the 20082009 global economic and financial crisis. All of this is expected to be coupled with a significant decline in investment, income per capita, demand for goods, services, and commodities. On a global level, this would imply that unemployment is likely to reach a record high, with forecasts indicating that the rate of unemployment will reach its highest since 1965. In a nutshell, these forecasts indicate that we are experiencing a unique recession, nothing compared to what we have seen in the past decades.

The impact is of course different for each and every countries, depending very much on the scale and length of the COVID-19 pandemic within each respective country as well as the economic structure of each country. Unfortunately, some countries such as the US, Brazil and India, are still struggling to control the infection rates with an expected larger economic impact. Compared to these countries, Europe is faring relatively well although there seems to be a recent surge in new cases in some countries as was expected with the reopening of boarders. At an EU level, the prolongation of the economic COVID-19 impact on EU-27 countries and their main trading partners such as the US, and UK will have implications on EU trade, both intra-and extra-EU trade. In fact, between January and May 2020 extra-EU

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exports, imports and intra-EU trade fell by 12.9%, 12.7%, and 13.8% respectively compared to the same period last year. This trend is likely to persist throughout 2020 whereby European Commission forecasts indicate that a reduction of 9.2% in extra EU-27 exports of goods and services and an 8.8% decrease in extra-EU27 imports is expected in 2020. The downturn in trade (within and outside the EU-27), coupled with a downturn in consumption and investment will lead to around an 8.3% and 8.7% economic contraction in the EU-27 and Euro Area, respectively, in 2020. Malta, of course is not immune to this impact. The local economy’s impact is expected to shrink the local economy by 6%. Therefore, despite the country’s inherent economic disadvantages mainly related to its smallness, the impact of COVID-19 on the Maltese economy is likely to be more limited, especially when compared to other EU countries. In addition, the expected growth recovery in 2021 in Malta is expected to reach 6.3%, higher than both the EU-27 and Euro Area averages of 5.8% and 6.1%, respectively. Without the immediate and effective role played by Government in terms of health and economy-related interventions, the impact of COVID-19 would have been unimaginable. Government intervention has helped in mitigating the economic impact and in lifting the sentiment of consumers and producers through direct interventions that limited the borrowing costs, enhanced liquidity, and presented a surge in unemployment. Together with the gradual lifting of the temporary restrictions including those on non-essential travel has been an important step to restart the recovery.

There is still a long way to go to reach the pre COVID-19 economic status. This will depend not only on local Government policies, but also on the timing of the EU recovery plan, the Next Generation EU. The 750 billion euro plan is geared toward a green and digital Europe, when the aim of rebuilding a better economy than the one we had pre COVID-19. This will require an economic redirection, toward a more sustainable future which will generate new requirements including education and skills requirements, and new jobs. More importantly, it needs to give direction and serve as a guidance to local policy-makers in building an economy that strikes a balance between quality and quantity. An economic transformation is a long, strenuous and ambitious mission, involving complex processes and numerous decisions. The effectiveness this process depends heavily on the clarity of the local economy’s vision. It is only through this vision that government and local businesses can strategize and plan in terms of their current and future investments. The absence of this vision will limit the economy from reaching its full potential post COVID-19. In the past months, we had a reconfirmation after the 2008 crisis of how resilient and agile the Maltese economy can be. It is now time to look ahead, time to focus on our competitiveness, and time to value the social growth and economic quality, as much as the economic quantity.

Dr. Stephanie Fabri

ECONOMIST & LECTURER AT THE UNIVERSITY OF MALTA

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Recovering to create

Miriam Dalli VICE-PRESIDENT OF THE SOCIALISTS & DEMOCRATS GROUP IN THE EUROPEAN PARLIAMENT HEAD OF THE LABOUR PARTY DELEGATION

Will the Recovery Plan prove to be the EU’s saving grace? After almost five days of gruelling negotiations, Europe’s heads of states shook their hands on a ground-breaking €1.82 trillion agreement, €750bn of which have been dedicated to a post-coronavirus recovery package. The rest will go for the seven-year budget of the 27-member bloc. It took a number of months for the leaders of the different Member States to reach an agreement but when the agreement was reached, this was indeed a historic moment. For the first time, the EU moved away from a policy of austerity. The 2008 financial crisis saw Member States reacting with an iron fist: attacking the welfare state, slashing public expenditure and cutting down pensions and health services with the ensuing result of mass unemployment and reduced private spending. This time round we saw a different attitude. One that is welcomed. I do understand that finding a compromise was not easy, and whilst the final agreement was not as ambitious as I would have liked to see, however I do realise that bringing together so many opposing views and different realities was no easy feat. The decision to set up a recovery fund reveals a different frame of mind; one that truly places citizens’ interest at the core of decisions taken. This agreement is far from being perfect. Nonetheless, it cannot be brushed off.

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Which brings me to a very important aspect of futureproofing our societies. To think about tomorrow is about not being short-sighted. It is evident that the future of our country’s economy, job stability and a better quality of life are all dependent on sustainability. The time is up for economic policies that are detached from any social and environmental impact. The ultimate beneficiary of any policy should be the citizens’ wellbeing. And there is no wellbeing without a healthy planet. Whilst the Recovery Fund is indeed a huge deal, there is much more work to be done on the seven-year budget plan. I am proud to say that Malta has managed to negotiate a very good financial package. At the same time, I want to make sure that very important programmes such as Horizon Europe, the Child Guarantee, the Health programme, the Just Transition and many others are given the adequate funding to move forward. It is the European Parliament’s role to fight for adequate funding for these different programmes which can help our members states and their people. As a Maltese citizen first but also as S&D Vice President I want to ensure funding to help make the EU greener, more innovative and above all with a social heart. As the citizens’ direct representative, I want to make sure that these tools are used to their fullest, in an efficient and transparent manner too.

The European digital agenda and the Green Deal need to be strengthened and not take a backseat. Moving away from this or providing cosmetic actions means that our citizens will be the ones to suffer in the long-term. There is no question as to where the future lies. Things will not, and cannot, happen on their own. To push businesses, enterprises and industries to be more conscientious they require the infrastructure to support them. Governments must lay down policies that attract investments whilst market players need to be able to invest and take up these opportunities. Incentives create and protect jobs whilst policies should give businesses enough time to plan and prepare for what are unavoidable changes. As S&D Vice President for the European Green Deal, I will keep on pushing for those policies and measures that bring together economic growth, environmental protection and social justice. Economic development and efficient work do not mean cutting jobs or replacing workers with automation. It means training, reskilling and upskilling workers to be able to fill tomorrow’s jobs. It is also critical that the gender perspective is taken into account. Women are part of the workforce as much as men, but it is a fact that for most women the struggle is uphill. We need a change in mentality, where the father is part of a child’s upbringing as much as is the mother and where spouses and partners must be able to share and balance their work and private life responsibilities. The recovery plan is a historical agreement: but the EU must be clear on how the money will be disbursed and repaid. More importantly we need to make sure that the EU budget for the next seven years actually delivers on what we want to achieve – a sustainable way of doing business where money is invested in digital innovation and the European Green Deal. This is the way forward, and we should not let this opportunity slip by.

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Building JP Fabri organisation resilience in a post-COVID world

CO-FOUNDING PARTNER OF SEED CONSULTANCY

COVID-19 is a stark reminder of the fragility of life. As the pandemic started to gain traction globally, an invisible threat began to take away the lives of thousands; young and old; healthy and not. Health authorities launched response mechanisms with massive deployments going to the health sector to prepare for the worst. Concurrently, economies started feeling the brunt too. Companies stalled, savings coming to a standstill. It all soon became a question of survival for many firms, and layoffs became an inevitable reality. There is no doubt that no economy will remain unscathed, and many firms must adapt and transform to survive in the new normal. The effects of COVID-19 will be long-lasting and will span across different sectors. However, crises mark transitions and turning points. It is precisely at these turning points that crises are productive. This is the moment when we can remove the aftertaste of catastrophe and use it as a “decisive turning point”, as per the meaning of the Greek word krisis. The COVID-19 reality has brought national governments but even more so business leaders with the necessity of contingency and business continuity planning.

As companies navigate the ongoing COVID-19 crisis, there are several vital issues corporate leaders should be thinking. Since the lockdown started in March, companies entered into unchartered territory where they had to and still juggle and plan their strategic decision-making across three distinct phases; survival, stabilisation and success. Each phase will require different foci, analyses, data and mind-sets. However, companies need to keep them as one integrated process as the demarcation line between each phase remains blurred. As the pandemic gained traction, business leaders were focused on surviving the economic shock, and the focus is on ensuring liquidity and business continuity.

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Currently, businesses are in the stabilisation phase given that the restrictions have been lifted and it is now within their discretion to restructure and transform present business models in preparation of the new normal. It is therefore critical that for the business to enter into the third phase, success in the long-run, business leaders need to have made the right decisions during the previous two phases. To navigate this process, Seed has identified six mutually reinforcing priorities that leaders should consider and should use as a framework for overcoming these challenges. This framework is part of a research publication we launched entitled “Agile. Perspectives on Malta’s economy post-COVID-19.”

A COVID-19 business survival framework 1.

Prioritise flexible working arrangements.

Following lockdowns and restrictions; the concept of remote working has becoming ingrained and will definitely be part of a new normal going forward. One of the adjustments companies must make is to initiate or expand flexible work arrangements and other policies that allow people to work remotely and safely. Therefore, investment in digital equipment is critical. Depending on the sector, companies will want to reorganise teams and reallocate resources and establish employee well-being programs and policies that support a safe working environment.

Identify support measures and grants.

Several supporting measures and initiatives have been launched to assist companies in this phase. There are also several other schemes that the government had started in the past, including grants and support measures that if used wisely, can support the business to undertake the required changes. It is therefore critical for companies to identify such steps and grants both by banks and the government.

4. Transform business models The structural changes that will happen both in the economy and in firms will require companies to be agile and transform business models. Leadership needs the foresight to understand how to transform businesses that will deliver sustainable value and growth in a changing world.

5. Embrace digital transformation The crisis has shown the importance of digital transformation. Social distancing has evidenced the need for being connected digitally across the supply and value chain of service or product delivery. Businesses that had not started to invest in their digital transformation programmes scrambled to do so. However, going forward, companies need to fully embrace digital transformation including shoring up against cybersecurity threats and more importantly delivering value through digital tools.

2. Reshape strategy Ahead, businesses need to adapt to a new reality. Several companies have faced significant disruptions and depend on the opening of external markets too. Besides, consumer habits and behaviours are likely to change. Thus, business leaders need to reshape their strategy and pivot where necessary by identifying new service lines, product lines and even markets. It is also critical for business leaders to communicate changes in strategy to staff and to involve them in the process. Strategic thinking will determine the long-run winners.

3. Adopt resilience-building This experience has shown the importance of contingency planning, risk management and building inherent business resilience. Disruptions are typical in business and economies, meaning that companies need to develop a level of preparedness in dealing with such events. Capacity needs to build around crisis management and not management by crisis, and these elements of building resilience within organisations should be a leadership priority.

Although the COVID-19 crisis was impossible to predict and negatively impacted business, there are many lessons companies can learn and carry forward. In the meantime, In the coming months it will be clear which companies have the resilience and agility to reshape their business strategy and to thrive in the future. The same applies on a national level, and that is why, as a country, we need to use this time strategically and reassess our economic vision. As a country, we need to rally behind one national vision which will focus on transforming Malta’s economy to one which is rooted in sustainability and a focus on long-run success. There is no room for complacency.

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MALTA’S POST COVID-19

ECONOMY

Interview with

Heathcliff Farrugia Chief Executive Officer

It is being said that many operators are leaving Malta or reducing the operations in Malta. Is it correct and if yes, how come? We are not seeing operators leaving Malta. As regulatory landscapes continue to change across Europe and the world, and in particular with the economic challenges being faced at the moment – to which the industry is, of course, not immune – it is expected that structural changes are carried out by operators that are particularly hard hit by certain changes. It has been commonplace in recent years, as the industry matures, for mergers and acquisitions to take centre stage in the industry, as operators consolidate and make efforts to reduce operational costs in order to retain profitability. This can only be exacerbated by a shock such as the Covid-19 pandemic. However, we are not seeing any movement beyond what is normally expected. Did changes in legislation in other EU countries (such as Germany) impact the industry in Malta? What mitigation strategies has MGA taken? Absolutely, the introduction of a national licensing regime in another EU country will naturally impact operators that are active in that country. Not only is it normally accompanied by the imposition of a tax on the revenue of the operator generated from players residing in that country, but it creates operational costs to ensure compliance with the specific requirements of that regulatory framework. The MGA is very active both in terms of dialogue with foreign regulators as well as EU institutions and seeks to ensure that any licensing regime is compliant with the freedoms envisaged in the EU Treaties and is in fact duly justified by the relevant country as an exception to the general principle of freedom to provide services throughout the EU. Moreover, whenever possible dialogue is always established to seek to align regulatory standards across jurisdictions to make it easier for industry to comply with

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what is expected of it, since oftentimes the principal regulatory objectives that a licensing regime seeks to achieve are common amongst the various Member States. However, one must bear in mind that Malta is not only attractive due to its robust but modern regulatory regime, but even more so as a place of establishment due to the gaming ecosystem that has been created in the country. Indeed, many large operators that are established in Malta have licences in multiple jurisdictions and operate them all from their headquarters here. Did Covid-19 impact Gaming companies and how do you see the recovery of the industry? Covid-19 impacted gaming operators principally in two ways. Firstly, due to the postponement of certain sports events, the sports betting industry took a considerable hit. Secondly, with people around the world spending more time at home, certain casino-type games and peer-to-peer games saw a rise in popularity. Albeit positive from a revenue perspective, this also meant that operators had to scale up their monitoring of players to ensure that if a person is at risk of developing addiction issues, that person is identified and helped accordingly, as is their obligation at law. This increased compliance efforts, at a time when the industry was adjusting to the new normal of working increasingly remotely. Hence the challenges were substantial. It is still too early to tell as regards recovery, as it remains to be seen what larger-scale economic impact the pandemic will have on the world at large and on consumers’ spending behavior in relation to entertainment products. In the short term, we are hopeful that the continuation of the major football leagues and other major sporting events will help the industry start recovering.

If pressure continues on the tax harmonization in the EU there may be a further disadvantage for the industry. Is MGA contemplating new strategies to overcome these challenges? Malta’s competitive taxation regime is attractive not only to the gaming industry but also to other industries that also form major pillars of our country’s service-based economy. As has been made clear by Government, this is something that Government is following closely and with the attention it deserves. It is not an issue which the MGA, as the regulator of the gaming industry, is empowered or tasked with handling.

Your message to the industry. Covid-19 has been a challenge in the early months of the year, and will most likely continue being a challenge for the remaining months of 2020. This said, the gaming industry has shown it can be flexible enough and quick to adapt to change, whilst at the time ensuring the necessary safeguards to ensure gaming is fair and transparent, whilst protecting vulnerable players remain intact. Dialogue with the industry throughout these challenging times proved to be key towards ensuring the right balance was kept between regulatory intervention and initiatives driven by the industry.

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Being Part of

Malta’s Success Story The Maltese islands are historically associated with a multitude of attributes. A favorite sun and sea holiday destination, a strategic location at the heart of the Mediterranean, a rich melting pot of culture and a nation whose hospitality is documented in ancient literature. More recently, the Maltese islands became increasingly known as an economic innovator and an attractive destination for individuals with a wealth of experience, who are engaged in various global industries and sectors. In fact, the Maltese Government has recently announced new regulations that are intended to welcome the best pool of talent and business acumen to the centre of the Mediterranean. The existing Individual Investor Programme is soon coming to an end, reaching the pre-determined capping of 1,800 families who have successfully invested in the islands. The Government will reform all residence regulations and establish a new agency that will be responsible for the administration and the running of all paths leading to Maltese citizenship and revise the related legal framework. The new regulations will be in the form of a residency plan that has the potential of leading to citizenship. In order to improve on the previous programme, stakeholder consultations were carried out over the past two years, including with the European Commission.

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A new Agency will be set up, implementing the toughest criteria for citizenship around the world. The Maltese Government values a strict policy of due diligence, because it wants to distinguish itself from other programmes and initiatives that are offered in Europe and around the world. For this reason, residents wishing to apply for citizenship will be required to apply beforehand for an eligibility assessment. An independent regulator will continue to audit and scrutinize the application process executed by the Agency and all resultant decisions. In this way, the Maltese islands have sought to strike a rational balance, between opening their doors for people who have distinct attributes in their field and maintaining exclusivity when it comes to potential citizenship. This is a subject that the Maltese treat with great pride and caution. The nation has proven time and time again that it possesses a unique element of resilience. It has certainly stood out in the way it has handled the global pandemic, its methodology being recognized and acclaimed by the World Health Organization. This track record of resilience was also proven in times of a global economic crises, during which the Maltese islands were far less impacted than its surrounding neighbours. The Maltese are aware that the sustainability of such success depends on their constant willingness to innovate, together with the diligent manner in which they do business. The new regulations concerning the naturalization of individuals will be capped to 1,500 families.

These are families who will be able to carry the Maltese flag with pride, because they will have worked arduously on their life accomplishments and on their disposition to invest in the Maltese islands. Such people will be part of the success of the nation’s future.

Alex Muscat PARLIAMENTARY SECRETARY FOR CITIZENSHIP & COMMUNITIES

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Enticing excellence by

Jonathan Cardona CEO - MALTA INDIVIDUAL INVESTOR PROGRAMME AGENCY

Malta has always thrived on trade and human capital. Its natural resources are limited, and it prospered through the ingenuity of its inhabitant.

Throughout the years many initiatives were introduced to attract individuals of excellence to contribute to the economic growth. The Individual Investor Programme was another such initiative which is now coming to an end. Launched in 2013, it brought with it fiercely debated arguments. There were people who had doubts about it, as the concept of citizenship was never considered as a tool to create wealth before. Citizenship is sovereign, and one on the very few, if not the only, areas which remains the competence of states. And even this is sometimes debated. The programme also brought with it controversy as some perceived it to offer a new path for undesirable individuals to perform illicit activities.

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Investment migration is no different. It is a field which can be used to create good,

Several years down the line the Programme has created over 1.4 billion euro worth of direct wealth into Malta’s economy. It has created hundreds of jobs and provided part of the economic muscle that helped in combating the fallout of COVID-19. A great deal of experience has been gained. Malta has attracted numerous successful global investors who would not have considered visiting the Islands and invested in it had it not been for this opportunity. Were they all good, and was everything perfect? Surely not. Have lessons been learnt? Definitely yes. There are quarters who ask for investment migration to be stopped, because it has the potential to allow individuals with the wrong intentions to exploit weaknesses. On the other hand, all the monies that move around because of such initiatives are monies that are already deposited in banks and transferred through banks which are rigorously regulated. When banks are exploited, we don’t shut down the banking system. They are regulated even more to ensure transparency and strengthened systems. Regulations have been developed along the years to mitigate the creative ways that rogue individuals find to perform their illicit deeds. Evidence to this are the numerous anti-money laundering and financing of terrorism directives and legislations that are put in place. There are regulators with a strong oversight of banks to ensure that the checks and balances are in place. And when things go wrong, action is taken and lessons are learnt and systems and legislation are improved. Investment migration is no different. It is a field which can be used to create good, and like everything else can be used by some for the wrong purpose. It is the role of the legislators to ensure strong regulation to prevent the latter. Malta has been at the forefront of this industry, and has some of the most sophisticated tools and processes

to mitigate the inherent risks. Some claim that Malta has established a gold standard of due diligence in this field. It has been a painstaking process to identify gaps and fill them with policies and educating stake holders of what is expected of them. We were pro-active and focussed to put in place a fully auditable process for scrutiny. Whilst it is not fail proof, we have made great strides and became a global reference point on how to conduct due diligence on high net worth individuals, focussing on their source of wealth and funds, and how they got to be where they are today, starting from their first significant transaction. It is now time to take the next step, and the government is seizing the moment to put into legislation more rigorous regulations taking into account the experience gained during the past seven years. It would be a pity if Malta didn’t, and leave others to thrive at our expense. The new regulations provide for a more transparent process, and allow honest individuals a path for residence and eventual citizenship through exceptional investment in the country. It is also high time to ensure that the funds generated reach the widest number of people possible, and that benefits are felt throughout the society. We, as the agency administering this initiative should continue to focus on attracting individuals who have created wealth and success, attract them to our shores and ensure we have the right systems and processes in place to weed out the unwanted ones. Criticism will not seize, and there will surely be no lack of scepticism from sections in our society who either don’t agree with the concept of acquiring citizenship for investing in a country, or who believe that this is simply an evil plot of sorts. It is not. It’s with keeping this in mind we perform our job. Being wealthy and successful is a good thing as long as the wealth was created in lawful means, and it is our duty to attract such individuals of excellence to our shores and safeguard healthy prosperity.

executive traveller  OCTOBER issue

TALKING

AVIATION LEASING WITH CIVIL AVIATION DIRECTOR CAPTAIN CHARLES PACE

A few weeks ago the government announced that Malta would be trying to attract aircraft leasing companies to Malta. What does this entail? Airplanes are very expensive. New airlines cannot afford to invest such large amounts of money in buying planes. Existing airlines may not want to put all their money into buying one aircraft. Instead they can operate aircraft on lease and focus on route development. From less than a 1% share in the 1970s, aircraft leasing has since grown its market share of the global fleet to over 40% and has held steady at around 42% in the last decade while the global fleet continued to grow. While there are over 160 operating lessors globally, the sector is dominated by players with 50 or more aircraft in their portfolios. Of the top 12 lessors currently, four are from China, whereas there were none just ten years ago. Lessors acquire their fleet either from the

manufacturers directly or from the secondary market. The business of aircraft-leasing requires highly technical skills that are different from running an airline and which carriers do not typically possess; they include building infrastructure that supports remarketing and sales, contracting, configuration, and strong technical management of the assets to extract the most value from the aircraft. Pre-Covid the business of aircraft operating leasing offered investors predictable and stable cash flows, given that leases typically have a very long tenure at a predictable rate giving higher and more consistent profitability. For investors who have access to capital and technical expertise needed to manage an

executive traveller  AUGUST issue

aircraft leasing business, it has been shown to offer a higher and more consistent ROE than running an airline business. Many airlines lease their aircraft from leasing companies who have access to the required funds to purchase such equipment. Leasing companies specialize in this activity and are an integral part of the aviation ecosystem. This allows airlines to pay monthly for the assets they utilise without major capital expenditure. Airlines will decide what type of aircraft they want to operate, the interior design and colour schemes are agreed upon and the aircraft are usually delivered to the operating company after they are registered on a registry agreed upon by the operator in conjunction with the “owner”.

During the lease period the operator is responsible for maintaining the aircraft in good order and periodical checks are done to confirm this obligation. At the end of the lease period the aircraft is returned in a good state to the lessor who in turn needs to decide whether to put the aircraft out again to another company or whether the asset has reached its end of life and therefore part it out. The key value generating asset is the aircraft itself. Under each lease agreement, the lessee is primarily responsible for maintaining the aircraft and complying with all regulations on aviation safety and airworthiness. Newer technology aircraft may impact aircraft values and returns of older aircraft. The introduction of new technology could affect the values of older aircraft in the long term, which would impact returns. The impact varies for different aircraft types, and is largely dependent on operator base, fleet size, production run and order backlog. The larger the operator base, existing fleet size, production run, and order backlog, the better the mitigation. Why did Malta decide to go for aircraft leasing? Well, the Malta aviation cluster has been growing rapidly lately. The registry has gone from 120 aircraft to around 500. The number of AOCs has risen to nearly 40, many ATOs, CCTOs and part 147s have moved to Malta. The MRO scene was expanding and demand was high. It seemed natural that we would close the loop and delve into the only aspect of the aviation ecosystem that was not that prominent in Malta. We had also been discussing the leasing niche with various

players who have aircraft registered in Malta or who needed to transfer aircraft after lease. This industry would contribute to the economy by creating jobs for law firms, accountants, insurance companies together with the normal aviation technical jobs. Our main goal was to add another niche to Malta’s economy and to create bigger and stronger synergies amongst other players who are already here in Malta; making Malta a jurisdiction where all activities are provided for is really desirable and achievable. So what have you done to date? Well we started off with a comparative study to see how Malta fared with the other major leasing hubs. The study did not identify any major drawback or any area that needed a major upheaval as the structures were more or less favorable. A second round of discussions then focused on what improvements could be made to further improve our product. We changed a few of our legal notices and revised some old laws to make them more transparent and lessor friendly. We introduced changes to the companies act and to the registration act and started work on widening our double taxation agreements. We opened up dialogue with companies and law firms to see how processes could be streamlined and bureaucracy removed. We wanted companies to have the freedom to operate within an open environment without having any restrictions slowing them down. Law firms, accountants, banks all needed to gear up by training their staff or acquiring expertise that would be ready available for companies willing to move to Malta.

What would you say are Malta’s stronger points? Our legal system is based on the British system which is widely used in aviation. We speak English and all our laws are also published in English. We have a highly competitive personal and corporate taxation system which is easy to understand. We have an extensive double taxation treaty network and a robust legal system and landscape. There is robust legislation which caters for the registration of aircraft in Malta and protection of rights of owners, lessors and financiers. There is certainty for financiers through the ratification of the Cape town Convention CTC. The local mortgage registration protocol grants mortgagors and security interest holders’ rights in addition to access to self-help measures which do not require non contentious recourse to the courts. What is your next step? Well basically the world is undergoing rather turbulent times due to the pandemic. One needs to evaluate the situation and react to any new reality. More efficiency and cost reduction need to be provided to the aviation industry in general to help them out of this nightmare. We need to remain vigilant and attentive to the industry’s needs so as to grasp any opportunity that comes our way and help the system regenerate. It is our duty as a regulator and a jurisdiction to assist and not hinder recovery. We need to partner with aviation companies and lessors to come out stronger and safer. There can be no compromise on safety but there could be new ways of looking at things and new opportunities if a partnership is formed. We need to continue communicating that we are open for business and that we want to be a major player in years to come.

executive executivetraveller travellerOCTOBER AUGUST issue

MDIA Certification of Innovative Technology Arrangements ITAs shall be required to be audited by systems auditors (SA) registered with the Malta Digital Innovation Authority (MDIA) in terms of the Innovative Technology Arrangements and Services (ITAS) Act. The Sandbox Framework established the possibility to accept Virtual Financial Assets as a means of payment and confirmed the use of DLT within the Gaming Industry.

In September 2019, the Malta Gaming Authority announced the launch of the second phase of the Sandbox Regulatory Framework during which the MGA accepted applications for the use of Innovative Technology Arrangements (ITA), including Distributed Ledger Technology (DLT) platforms and smart contracts. 24

executive traveller  OCTOBER issue

MDIA’s role within the wider DLT regulatory framework is to certify the underlying technology upon which the ITA is based. In essence, we aim to ascertain that the technology does precisely what it declares it can do. Consequently, MDIA certification provides assurances to end users and fosters trust within the market. With this in mind, innovators can be rest assured that with MDIA certification of the technologies they deploy, will be well received by the market and will benefit from regulatory compliance in an ever-evolving environment. The systems auditors’ roles in this is to ensure quality, review code and verify blueprints that adhere to MDIA requirements which include that of the technical administrator and forensic node. The accreditation of SAs serves as a seal of approval that certifies the service provider(s) possesses the necessary technical skills, aptitude, capability, and experience to handle systems audits related to ITAs. The certificate is timestamped and verifiable via the blockchain. The MDIA has a total of five confirmed Systems Auditors, with more in the pipeline. This further complements MDIA’s work in terms of ITAs certification, as we are committed to protect and support all users and encourage all types of innovations, while providing assurance and ensuring trust.

An Enhanced Systems Audit (ESA) is obligatory for ITAs that are either deemed to be safety-critical or operate in a domain for which the relevant Lead Authority requires additional security. An infrastructure is considered critical if damage to such an infrastructure, its destruction, or disruption, may have a significant negative impact for the security of the country and the well-being of its citizens, which could result in loss of life, casualties and/or other health risks. Malta was indeed the first jurisdiction that developed a legal framework totally and specifically dedicated to DLTs. Different to most other regulatory advances where best practices have long been developed across multiple jurisdictions, Malta has had to develop a framework most have thus far shied away from doing. To do this, we have identified few of the best minds in the field and today we can boast of an extensive regulatory framework upon which we can process and certify not just current DLTs but also emerging technologies such as Artificial Intelligence. The primary aim is to instil peace of mind, provide transparency and legal certainty, as society places more trust in innovative technology. Furthermore, this regulatory framework positions Malta at the forefront of technological business opportunities in a number of industries including gaming, as it creates a sound platform for innovators.

Malta should sure be a key consideration for anyone wishing to deploy new technologies onto the market, giving both end users and market stakeholders trust and stability, whilst enjoying enough flexibility to support further innovation. Key to our success is the small size of Malta, not just in terms of geographical size but also that of its institutions and governing structures. This allows us to be agile to respond to market exigencies and developments, with our institutions being nimble enough to effect the regulatory changes needed at a fast and determined pace. Crucially whilst the regulatory role of MDIA is paramount, we also understand that we are an important stakeholder in the deployment of these innovative technologies onto the market, and hence are always willing to meet with market operators in order to assist and give direction as the case may be. The regulatory process, whilst depending on fairly novel concepts and mechanisms, has been meticulously developed and streamlined through the various guidelines which have been issued by the Authority and can be found on our website at https://mdia.gov.mt.

Whilst the development of this framework was not as straight forward as one would have wished, we did not reinvent the wheel. Malta has long established a very competitive yet robust regulatory environment that has proven to be very attractive to key players in those areas. That same approach has been deployed with regards to DLTs and emerging technologies, and

executive traveller  OCTOBER issue

Malta’s geographical barrier has been counterbalanced with its digital capability and readiness together with its human-centred approach to digitalisation Dana Farrugia, CEO - Tech.mt

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Tech.mt

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tech.mtMalta

executive traveller  OCTOBER issue

opport Malta’s digital success story – a gateway of opportunity

tries to experience a positive economic performance during the pandemic. Furthermore, Malta has also become one of the most successful econobeen described as one of the top emerging ecosysurope. It has been classified as one of four tems in the Global Startup Ecosystem, as an innovaUnion countries with the biggest advance in tion-driven economy by the World Economic Forum Technology and digital transformation l Economy and Society Index (DESI) over the and as one of the strongest economies in Europe with critical in ensuring that Malta’s economy c ears and was one of the few European counminimal unemployment levels by Moody’s, S&P and thrive almost uninterruptedly, particularly perience a positive economic performance Fitch. On a European platform, Malta has also recently pandemic. While other countries str e pandemic. Furthermore, Malta has also secured the biggest allocation of EU funds in its cope, Malta continued to use its resi cribed as one of theMalta top emerging ecosysTechnology and digital transformation become one of the most successful to adapt have to new unpreceden history, has a mammoth package worth €2.25 billion for infrastructure he Global Startup economies Ecosystem, as an innovabeen critical in ensuring that Malta’s economy in Europe. It has been classified as the financial period of 2021 - 2027. Technology and digital totransformation have been n economy by the World Forum continued thrive almost uninterruptedly, one of fourEconomic European Union countries with the critical in ensuring that Malta’s economy continued to e of the strongest biggest economies in Europe with Economy and particularly during the pandemic. While other advance in the Digital thrive almost uninterruptedly, the nemployment levels byIndex Moody’s, countries struggledparticularly to cope, Maltaduring continued to Society (DESI) S&P over and the past five years countries struggled use itsother resilient digital infrastructure to adaptto to and Malta was one of the European pandemic. countries to While a European platform, has alsofew recently new unprecedented experience a positive cope, Malta continued to usenorms. its resilient digital he biggest allocation of EU fundseconomic in its performance during the pandemic. Furthermore, Malta infrastructure to adapt to new unprecedented norms. mammoth package worth €2.25 billion for also been described as one of the top What does all this mean for Malta’s ial period of 2021 has - 2027. emerging ecosystems in the Global Startup digital future? Malta’s geographical b

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education and commerce have become important acting as thean gateway for tech businesses to access the Robotics, Internet of Things, Distributed L ms to attract investors in ICT and other techasset in increasing the attractiveness Malta. Maltese of and European market. With Malta boasting a nology and Quantum indicate exciting tim gments, and the result is a reputable and highly industrialised and service-based economy with spot for the integration of digital technoloThrough its drive a more diversified a strong regulatory framework, especially for to emergeover, the guaranteed access to affordable Malta is basing ing technologies, there is a economy, lot that can be learnt andits long-term str https://tech.mt/ d internet, free public Wi-Fi, and the digital economy ind offered for the future. The exploration in new and fieldstechnological of nt of ICT technologies in areas of health, Techmt.Contact@tech.mt outcome and magnitude of such a strateg emerging technologies such as Artificial Intelligence, and commerce have@Tech.mtMalta become an important tech.mtMalta @TechmtMalta propel Malta’s economy Tech.mt Robotics, Internet of Things,toDistributed Ledger Tech- forward. creasing the attractiveness of Malta. nology and Quantum indicate exciting times for Malta.

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Through its drive to a more diversified and robust economy, Malta is basing its long-term strategy on its digital economy and technological industries. The executive traveller  OCTOBER issue outcome and magnitude of such a strategy will serve to propel Malta’s economy forward.

AIRCRAFT LEASING M A L T A

executive traveller  OCTOBER issue

SHAPING EUROPE’S DIGITAL FUTURE by

Claude Calleja

EXECUTIVE AT ESKILLS MALTA FOUNDATION

The EU Digital Strategy sets out the path Europe needs to take to go its own way, with a digital Europe that reflects the best of Europe. It defines how technology will be used to achieve climate neutrality objectives and the role of the digital economy in the future. Among other things, the EU plans to publish the first version of the EU Digital Strategy and the European Data Strategy in 2021 (third quarter 2020). The European data strategy is the result of cooperation between the Commission and the EU Member States. The Commission has concluded that digital transformation must work across the EU, while recognising that everyone must participate in it in order to be successful, including citizens, businesses, civil society and the public sector. For their part, the major commercial digital players must assume their responsibilities and give Europeans access to the data they collect. Overall, this is an important step towards making Europe a major digital player in the global economy. Many European countries including Malta are certain to benefit from this effort. In line with the EU Digital Strategy, the eSkills Malta Foundation launched the National eSkills Strategy in 2019 which compliments the Digital Malta Strategy launched in 2014. The vision is for “a digitally-enabled country empowering its people, communities and entrepreneurs through the intelligent and universal use of ICT”. It’s about making citizens’ lives better, improving community services and helping enterprises to flourish and become more competitive through ICT. The point is that Europe’s digital transformation must protect and strengthen citizens, businesses and society as a whole. It must not be bound to the profit of the few for the insights and opportunities of the many.

Europe will continue to preserve its open, democratic and sustainable society, and digital tools can support this principle. Having said that, Europe needs to become a world leader in developing technologies such as artificial intelligence (AI) and blockchain systems that can be used and applied safely. Working closely with international partners, Europeans must develop and pursue the vision of becoming a value-based digital economy while remaining an open, rules-based market. The Digital Services Act was announced in Mrs von der Leyen’s programme and reinforces the scope of technology that works for people. Unsurprisingly, the law, originally intended to replace the central e-commerce directive, should broaden the scope of the internal market, a task that will undoubtedly create a number of new challenges for the European Commission and its member states. The Commission will present the Digital Services Act later this year with a number of proposals, including the creation of a single regulatory framework for companies that have access to the internal market, strengthening responsibility for online platforms and the protection of fundamental rights. A revision of eIDAS (an EU regulation on electronic identification and trust services for electronic transactions in the European Single Market) rules is being proposed to allow for a more secure electronic identity that gives people control over the data they share online. The fight for our digital future requires that Malta, together with its European partners, ensures that economic growth and innovation are reconciled with industrial protection and privacy. The continent has a responsibility to find ways of facilitating access without sacrificing the public interest. This article was prepared by researching various publicly available content online.

executive traveller  OCTOBER issue

Interview with

Karl Izzo

Karl Izzo is a name which certainly rings a bell or two in the local busines industry as well as in other circles including waterpolo. Executive Traveller recently caught up with Karl to discuss his entrepreneurial journey and why Malta continues to be an attractive place to invest in.

Richard Branson, once noted; “My biggest motivation? Just to keep challenging myself. I see life almost like one long University education that I never had -- everyday I’m learning something new.” To what extent do you agree? I fully agree with him as I believe that life is one big journey during which you should keep on developing your knowledge and be open to new ideas. What defines your way of doing business? I consider business a passion which continues to stimulate me to invest more in key niche sectors. Doing business offers me the opportunity to consolidate my current network and invest further in business development to seek new busines partners. What’s your definition of success, and do you believe you’ve achieved it yet? Through my own entrepreneurial endeavours, I learnt that success boils down to the your thirst for knowledge and your determination to develop your business project from the ground up. As a company, we strive to grow by means of very strong brands we currently represent in Malta. Yet that is not enough. We complement such brands with a top notch service which ensures the best experience to each customer based on our core values to develop meaningful and mutually rewarding relationships with all our customers, suppliers, employees, business partners and shareholders. This has led to customer loyalty which has definitely contributed to our success over the past years. Yet what we achieved to date should not be seen as the finish line but rather as a solid base on which to develop our objectives for the coming years.

executive traveller  OCTOBER issue

Looking back, is there anything you would have done differently? I am sure there are a number of decisions I could have taken differently, yet as wisely noted by Richard Branson; “You don’t learn to walk by following rules. You learn by doing, and by falling over.” How do you find a compromise between work, sports, and a personal life? It is a way of life that has hardly changed over the past two decades. I plan my day well ahead so as to allocate time for every sector I am involved as well as to my family and friends. As it is often said; “Never get so busy making a living that you forget to make a life.” How has the brand industry developed over the past years in Malta? The local brand industry has developed significantly in line with changing consumer behaviour. Millenial consumers are more capricious and less loyal. They have less time but are more conscientious. Today’s consumer is an entirely different animal—and unrecognizable from the classical consumer we were generally accustomed to. It appears as if there has been a seismic shift in the consumer’s mindset and choices. In line with this paradigm shit in consumer behaviour, Malta has stepped up its pace in this sector which has developed substantially and can gradually develop into a fully fledged retail destination. What makes Malta an interesting place to do business in? The Maltese business environment has flourished over the past decades thanks to its economic shift towards key niche sectors including; technology, pharmaceuticals, engineering, IT&C, tourism, financial, aviation and maritime, thus providing many investment opportunities in these domains. Many foreign investors have also been attracted by Malta’s infrastructural development that allowed them to carry out their activities in optimal conditions. Malta also supplies one of the best and cheapest workforces in Europe for companies operating in the country.

In what way has the COVID-19 Pandemic affected your business? No one really saw it coming. It is not easy for us and for the business sector at large but hard times will pass and together we will see the light at the end of the tunnel. How do you see Malta’s post COVID-19 economy? The COVID-19 pandemic created the biggest economic uncertainty in several decades for economies worldwide including Malta. The projections for Malta’s short-term economic prospects are hard to predict yet the first signs of response by the local industry are encouraging. I believe together we can ensure Malta will thrive post COVID-19 pandemic. However, Malta’s post COVID economy will primarily depend on the government. The government’s measures as part of a financial package to help the Maltese economy during the outbreak, mainly aimed at easing pressures on the liquidity of businesses, protecting jobs and helping the most vulnerable during this challenging period have certainly helped yet the long term sustainability of the country’s economy is also a must. What advice would you give to someone considering Malta as a place to invest in? Do your homework well and stick to your business plan. Never divert your vision to other sectors until you have fully developed your concept and have achieved your pre-set goals.

executive traveller  OCTOBER issue

VALUES WE CAN ALL AGREE ON. Call E-mail Visit

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executive traveller  OCTOBER issue

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