MONEY Sep/Oct '11 - Issue 9

THE FINANCIAL ISSUE Issue 09 September/October 2011

MINISTER TONIO BORG ON PROMOTING MALTA ABROAD

THE FUNDS SECTOR Financial services

MARKETING A FINANCIAL CRISIS

Shadow minister Karmenu Vella on Malta’s finances

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LEVEL 0, BAYSTREET, ST. JULIANS, MALTA, T + 356 2372 0712 307, FERRERIA PALACE, REPUBLIC STREET, VALLETTA, MALTA, T + 356 2123 3877

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Welcome In the run up to the presentation of the budget for 2012, everyone starts forming an opinion about the nation’s financial situation.

Some will say that Malta’s economy is doing well – the financial services sector is growing while banks have largely averted the crisis that hit their foreign counterparts.

Others will counter that our current financial situation is worrying – we have a revenue shortfall yet keep overspending, and we have a massive loan burden which a small country like ours cannot support.

In this issue of Money, we do our sums and investigate the real situation of Malta’s economy.

From the government’s side, Foreign Minister Tonio Borg explains to Vanessa Macdonald how his ministry is using the reach of its diplomatic network to promote investment in Malta.

Earlier this year, Professor Joseph Falzon, Head of the Department of Banking and Finance at the University of Malta, presented an analysis of the productive sectors of the Maltese economy during the National Economic Forum, organised by the Malta Institute of Management. In this issue of Money, we publish an exclusive summary of this report.

In another careful analysis, Reuben Buttigieg explains how Malta should take a holistic approach to promoting financial services – it is the only way we can achieve growth and success.

In this issue of Money, we also travel to Africa, splash out on a luxurious fashion shoot, and confirm our design credentials.

Read on – it’s the best investment you can make.

In an interview with Money, shadow finance minister Karmenu Vella tells Eric MacRae that government is failing to generate revenues, manage expenditure, turn deficit into surplus and reduce debts. A Labour government, he says, would incentivise businesses and enhance Maltese families’ standard of living.

Contents 10 A very foreign affair Foreign Minister Tonio Borg explains to Vanessa Macdonald what role his ministry has in promoting investment.

14 Government is part of the problem Shadow finance minister Karmenu Vella talks to Eric MacRae about the Labour Party’s perspective on the current financial situation in Malta.

18 A new era for the funds industry

35 As though there’s no tomorrow Budget cuts and bruises, or a stitch in time, asks Michael Refalo as he focuses on what next year’s budget should propose.

38 Risk or investment With the right information you can turn credit into a long-term profit, says John Paris.

50 The first bastion of design Architecture Project has made it to the final round of the prestigious Inside Festival of Interiors Awards with a project that redefines creative re-use.

Kris Micallef climbs the doublehelix staircase.

60 Autumn hues Autumn has arrived, set a stylish mood in rich browns, purples and burgundies.

41 Cover versions 62 The taste In a changing business of home environment, insurance demands are constantly changing. Melvin Caruana explains how you can further close your risk gap.

Trattoria da Pippo and Zammeats butcher’s shop and delicatessen at Arkadia Food Store, Portomaso cook up a tasty collaboration.

The UCITS IV Directive encourages greater efficiency and enhanced transparency and cooperation, says Antonella Mercieca.

43 Getting caught in the web 64 Out of Africa

21 One Malta, one message

Leveraging the web is not just about online presence, says Kristoff Zammit Ciantar.

We need a common strategy to sell Malta, says Reuben Buttigieg.

45 Thrift or adrift?

24 Malta’s economic performance

In times of crisis, do you increase your marketing budget or tighten your belt, asks Chris Mifsud.

Professor Joseph Falzon presents an analysis of the productive sectors of the Maltese economy.

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48 Capital gains and losses The streets of London are no longer paved with gold, says Vanessa Macdonald.

A novel approach to hospitality shows how businesses can take less and give more to the community, says Mona Farrugia as she travels to Africa.

66 Go large or go home Amit Raab urges us to rethink how we spend our advertising budget.

Editor Anthony P. Bernard Email: anthony@moneymag.me Consulting Editor Stanley Borg Email: stanley@moneymag.me Design Porridge | www.weareporridge.com Email: hello@weareporridge.com Printing Progress Press Distribution Mailbox Direct Marketing Group Hand delivered to businesses in Malta, all 5 Star Hotels including their business centres, executive lounges and rooms (where allowed), Maltese Embassies abroad (UK, Rome, Brussels, Moscow and Libya), some Government institutions and all ministries.

For information regarding promotion and advertising call Tel: 00 356 2134 2155, 2131 4719 Email: hello@moneymag.me

Money is published by BE Communications Ltd, 37, Amery Street, Sliema, SLM 1702 All rights reserved. Reproduction in whole or in part is strictly prohibited without written permission. Opinions expressed in Money are not necessarily those of the editor or publisher. All reasonable care is taken to ensure truth and accuracy, but the editor and publishers cannot be held responsible for errors or omissions in articles, advertising, photographs or illustrations. Unsolicited manuscripts are welcome but cannot be returned without a stamped, self-addressed envelope.

The editor is not responsible for material submitted for consideration.

Interview

A very foreign affair Foreign Minister Tonio Borg explains to Vanessa Macdonald what role his ministry has in promoting investment.

Photos by Christian Sant Fournier

T

here were murmurs of approval from across Malta when Joe Zammit Tabona was appointed Malta’s High Commissioner to Britain. His experience at Malta Enterprise and FinanceMalta made his choice an inspired one, as it fitted in perfectly with the recent role that diplomats have in the promotion of Malta for foreign direct investment.

For years, this role had straddled both the Foreign Ministry and the Finance Ministry, with Malta Enterprise moving from one portfolio to another, until it ended up in the latter’s after the 2008 election.

Foreign Minister Tonio Borg stresses that this does not mean, however, that his ministry is detached from the efforts of the Finance Ministry – quite the contrary.

“Promoting trade is not our primary activity but we cannot ignore its importance. We offer our services and our diplomatic network to help investors abroad, and to promote investment in Malta, including promoting Malta as a financial centre and explaining the changes we have made to the infrastructure and legal framework to support it,” he says.

Another appointment which brought together the political and commercial was that of George Cassar to Libya–his experience at Lafico was crucial to his role as ambassador.

However, the ministry does not only take political issues into consideration when it comes to the reach of the diplomatic network. For example, it might not be the right time to open offices in particular locations – for various reasons – but Malta might still benefit from having a commercial representation there.

In this case, the ministry does not have to open an embassy in a capital city but rather considers opening a consulate in cities which are actually more relevant commercially, such as Sao Paolo rather than Brasilia or Cape Town rather than Pretoria.

One example which has worked well is Dubai where the ministry appointed Anthony Tabone as consul, who also acts as the Malta Enterprise representative in this vibrant city.

The ministry is currently working on a plan with Malta Enterprise on how to work together in other places.

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Another experiment has been the sharing of premises. In Ramallah, Malta shares premises with Cyprus, and in Tel Aviv, it rents part of the Cypriot embassy, with a separate entrance.

In some cases, an embassy is merited and Dr Borg reveals that Malta plans to open an embassy in Kuwait in the near future (which recently opened its own embassy here in Malta), while other offices like the Warsaw embassy and an office in Tel Aviv have had immediate impact on both trade and tourism.

The introduction of the European External Service – a diplomatic service for the EU as a whole – will not have as much of a country-specific impact when it comes to attracting investment – although the offices will clearly pass on any enquiries. But they could also help through the consular services they will offer – this will make it much easier for third country nationals to get visas to Malta. At present, Malta has a relatively limited network of 25 representations, including the UN and consulates. In fact, for the issue of Schengen visas, Malta already relies on assistance from Italian and Austrian diplomatic representations.

Of course, having a representative office at any level is only effective if the staff are experienced and informed. Dr Borg believes that the current split between career diplomats and political appointees could move further towards the former, although he stresses that every country needs some political appointees.

The ministry ensures that the annual conference held in Malta for diplomatic staff is used to its full advantage – in fact Joe Zammit Tabona had given them a briefing before this appointment, to tell them about everything that Malta was doing as a financial services centre. This year’s briefing was on the countries to the south of Malta – which are in a state of turmoil which will, however, one day come to an end.

The ministry helps in other ways, with double taxation agreements being the most obvious. But there are other initiatives. For example, the minister visited Benghazi when the situation there had stabilised as he believes that there will be tremendous potential there for Maltese entrepreneurs in areas like tourism, construction and retail. The ministry is now talking to Malta Enterprise about the possibility of organising a trade delegation there. But the ministry would help in a political as well as a commercial way.

Vanessa Macdonald is a freelance journalist in her spare time, covering a wide range of lifestyle and economic issues.

Why are we giving so much importance to the Western Balkans through bilateral visits?

Because the countries there will eventually join the EU, so we are trying to create links now, to create a political relationship which will hopefully flower into an economic one.

Money / Issue 09 - 11

Interview

“Rather than give some kind of loan to the Benghazi government we could give a line of credit as we would then be able to control how the money is spent – for example, making sure it does not get spent on weapons but exclusively for humanitarian purposes like medicine. Government would issue a tender and the Maltese could bid for the supplies to make sure money comes back into Maltese economy,” he explains.

Trade delegations have proved to be very effective. For the past three and a half years, government has also ensured that a trade delegation accompanies the President of Malta when he makes a state visit – such as those to Poland and Qatar, for example–which have proved to be very successful. In Qatar, the visit resulted in numerous agreements, not only government to government ones but also an aircraft maintenance agreement between Qatar Airlines and Lufthansa Technik.

“It is one thing for someone to go to Poland alone; it is quite another to go there as part of a delegation, whether headed by the head of state or a minister,” he says, adding that the decision on where to make state visits is itself a commercial as well as a political one.

“Why are we giving so much importance to the Western Balkans through bilateral visits? Because the countries there will eventually join the EU, so we are trying to create links now, to create a political relationship which will hopefully flower into an economic one,” he says.

Of course, once contacts are set up, they need to be maintained. Ambassadors are encouraged to organise conferences and to network.

“This is why I insist that my people attend receptions. This is where you hear the gossip and the comments, positive and negative. I try to attend to as many as possible as you really get a feel for what people are thinking.

Attending is not only a matter of courtesy but also a way of gathering information.

Many commercial contacts have been established with chairmen or CEOs from receptions,” he says.

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Interview

Government is part of the problem Shadow finance minister Karmenu Vella talks to Eric MacRae about the Labour Party’s perspective on the current financial situation in Malta, the euro crisis, the government’s record and the 2012 budget.

Photos by Christian Sant Fournier.

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Eric MacRae has been a journalist for 19 years, most recently on The Scotsman. He has written articles for the Edinburgh Evening News, the BBC Geographical magazine and the Independent newspaper in the UK.

ERIC MACRAE You were Minister of Tourism between 1996 and 1998.

How does your present position as shadow finance minister compare with that portfolio?

KARMENU VELLA There is very

little comparison as the two positions have very distinct characteristics, responsibilities and challenges. Working in government and shadowing from the opposition don’t compare. Since my time in tourism things have changed, for better and for worse, internationally and locally. Working within an EU framework also makes a difference. That said, the experience I gained as Minister of Tourism helps a lot. The one thing common to both is my full commitment.

EM What is your opinion on the current financial situation?

KV To put it mildly, it’s worrying. Every year, government fails to make revenues, manage expenditure, turn deficit into surplus and reduce debts. During this legislature, the deficit targets were exceeded by €405m, reaching €711m, and the debt targets got worse by €863m, reaching €4,248m. Deficit and debt growth are higher than that for our GDP.

During the same period, government missed out on €230m worth of grants, had a revenue shortfall of €439m, overspent €262m in recurrent spending and failed to deliver €301m of budgeted capital expenditure. The financial crisis is not a good excuse for these

discrepancies, because this negative trend started well before the crisis.

EM How much is Malta being affected by the crisis in the euro?

KV A lot. Financially, we went from a bad pre-crisis to a worse post-crisis situation. Unreservedly we want the euro and the eurozone economy to remain strong. We are in favour of supporting this endeavour. However, wanting to support it and affording to support it are two different things.

Malta’s loans and guarantees already exceed €850m (14% of GDP) and may be increased because government has not established a limit. Finance Minister Tonio Fenech argues that this is a good investment because we earn interest. No wonder we are in financial dire straits!

We borrow money against guarantees, to lend it to an underperforming country (with all due respect) with no guarantees.

What confidence does the Minister have that the interest payments and principal repayment will be honoured, even if the euro zone overcomes this crisis?

EM The Centre for European Policy said in July that Malta is in the highest-risk category for creditworthiness among the eurozone members. Do you agree?

KV One cannot analyse the local situation from a single report. However, reports cannot be ignored. This concern was also shown by two permanent secretaries who allegedly addressed all

government directors general and alerted them to the fact that the perception of the financial markets regarding Malta’s financial situation was not as government would have us believe. They also insisted on curtailing unnecessary expenses.

Furiously and lacking transparency, Prime Minister Lawrence Gonzi denied that this meeting took place. He is either not being kept in the loop or is not responsible for meetings outside the Office of the Prime Minister. Personally I would be more worried if such meetings were not happening. What is even more disturbing is the Prime Minister’s statement in parliament that the finance ministry had advised the authors to correct their report. Later the authors totally denied this statement.

EM What would you do differently if the Labour Party was in power?

KV There is a lot we can do better. Here are just a few examples. Labour will give taxpayers their tax’s worth. This government presents its budget annually with a number of projects to justify its tax revenues. Repeatedly the taxes are collected, but most of the projects are not executed. That is taking people for a ride.

Labour will deliver. Government has lost its credibility – it promises a lot but delivers very little. Without reducing spending, Labour will focus more on results. Government still underscores the spending and not the results in sectors such as health and education.

FIMBank Group announces positive half-yearly results The FIMBank Group has announced an after-tax profit of USD4.08m for the six months ended 30 June 2011, an increase of over 20% when compared with $3.39m registered for the same period in 2010. This figure emerges from the consolidated interim results of the FIMBank Group which were recently approved by its Board of Directors. Other key financial indicators show that Group Net Operating Income rose to $18.95m (2010 - $15.64m) while total consolidated assets increased by 19% to top the $1b mark by 30 June of this year. Group basic Earnings per Share for the period rose to US cents 3.00 from US cents 2.50 in 2010. Averaging at 49%, liquidity ratios were well above the statutory requirements during the period under review, while Basle II solvency ratios, at 19.4%, remained robust and comfortably above the regulatory benchmark.

Commenting on the FIMBank Group’s results and performance for the first half of 2011, the President Margrith LütschgEmmenegger expressed satisfaction that, “The strategy of diversification and growth in both financial products and markets is clearly showing some positive results”, highlighting the encouraging contribution by Menafactors in Dubai, the promising start of factoring operations in India and FIMBank’s belief in the potential of other markets where it has set up factoring joint factors with major institutional partners, including Dubai, Russia, Egypt and more recently Brazil.

Money / Issue 09 - 15

Interview

Government is taxing businesses and families to sustain its financial failures.

Labour will be part of the solution and not the problem. For instance, while government acknowledges that inflation is the major obstacle to achieving economic growth, it hides the fact that the principal cause of this inflation is government itself.

Financial policies should incentivise businesses and enhance our families’ standard of living. Conversely, government is taxing businesses and families to sustain its financial failures. Labour will focus more on: cost effectiveness; higher efficiency and productivity; meeting timeframes and avoiding costly delays; eliminating wastages and overruns; eradicating bureaucracy; and introducing transparency and more accountability in public finances and public procurement processes. Labour will see that the nation’s wealth is better distributed.

EM Has government delivered on its pre-election promise to cut income tax and modify tax bands?

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KV Certainly not – this promise, which was similar to that made to all Air Malta employees, was an irresponsible electoral gimmick that the Prime Minister made in the knowledge that our financial situation would not permit it.

Government, now in panic mode, might deliver this promise before the next election to regain lost credibility and votes. Tax cuts will not be introduced for financial or economic reasons, but purely as a vote-catching electoral stunt. This is a massive abuse of the nation’s resources in the Nationalist Party’s interest.

EM Government has said its aim for the 2012 budget is fiscal consolidation.

What do you think it should focus on?

KV This aim encompasses the Maastricht criteria on inflation, deficit, debt and interest rates. Government repeatedly promised to reduce debt and turn our deficit into a surplus. In 2007 our deficit was 2.4% of GDP. In 2010 it exceeded the 3% Maastricht criteria and reached 3.6%. During the same period,

debt soared from €3,385m to €4,248m – an €863m increase. So firstly, the government must focus on achieving targets. Unfortunately for us, achieving targets is not this government’s forte.

It must focus on our own economic needs.

The Maastricht priority is eurozone price stability and not particularly Malta’s economic interest. What good would it do us if the euro zone achieves its aims and we lose ours? Any economic slowdown caused by fiscal consolidation is either maximised or subdued depending on the demand mood in our export markets.

Timing and such considerations are also important. An adequate timeframe is necessary. An economy might handle a gradual change of a number of fiscal measures, but it might not survive a shock approach to the same measures.

Most importantly, government must lead by example – it cannot convince the public that expenditure reduction is necessary when its Prime Minister and his ministers suspiciously seize a €500 per week increase.

Funds

Antonella Mercieca is fund consultant at Erremme Business.

A new era for the funds industry The UCITS IV Directive encourages greater efficiency and enhanced transparency and cooperation, says Antonella Mercieca.

T

he financial crisis may have resulted in certain investors experiencing a decline in the value of their investments. As the value of assets may have fallen, the revenues earned by investment managers may have similarly declined and besides a slow down of subscriptions, many funds may have encountered a record amount of redemptions.

In this regard, asset managers may have evaluated their strategies and tried to find solutions to cater for an era associated with more demanding investors. On the other hand, investors may be looking for more liquid, transparent and regulated products. In this context investors may look more favourably at regulated products such as

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UCITS changes will transform the funds industry and will enforce a panEuropean market for funds with the

possibility for synergies. undertakings for collective investment in transferable securities In 1985, the first UCITS directive created a European passport for UCITS. Since then significant amendments have been made in order to address the different challenges and financial markets circumstances. Under UCITS III, two directives were issued, namely Directive 2001/107/EC and Directive 2001/108/EC. Directive 2001/107/EC, also known as the Management Directive, aimed to give management companies a European passport and elaborated on the range of activities in which they could engage.

The directive also introduced a new type of prospectus – this simplified

prospectus is more investor oriented with the aim to facilitate the cross border marketing of UCITS. Directive 2001/108/EC, also known as the Product Directive, took into account market developments and has widened the eligible assets in which UCITS could invest. Therefore, UCITS may invest in transferible securities, money market instruments, bank deposits, index tracking and other collective investment schemes. UCITS could also invest as part of their general investment policy and for hedging purposes in financial derivative instruments.

UCITS IV Directive, which had to be transposed into the national law of each Member State by July 1, 2011 focuses on

five main areas: master-feeder structures, fund mergers, management company passport, key investor information document, and notification procedure.

It also provides for co-operation between competent authorities.

Under the master-feeder structure, a UCITS feeder invests in another UCITS which is the master UCITS. The feeder has to invest at least 85 per cent of its assets in the Master UCITS fund, while it may hold up to 15 per cent of its assets in ancillary liquid assets or derivatives which may also be used for hedging purposes.

Reduction in operational costs could be achieved in terms of fund management, administration and accounting in view of the consolidation of tasks.

Furthermore, the UCITS could be set up domestically or on a cross border basis – for instance, the master fund could be established in Malta, with different feeder funds in other member states. Alternatively, the master fund could be domiciled in Malta and the feeder in Luxembourg, while the latter could distribute in Ireland using the notification procedure.

With the concept of fund merger, many small funds could be integrated into one large fund and consequently this could lead to reduction in costs related to the management of a larger number of assets, safe custody of assets, settlement of trades, administration and accounting. Fund mergers could happen by absorption where all the assets and liabilities of a UCITS are transferred to another UCITS scheme, by creating

a new fund and the existing one is dissolved, or by amalgamation. There are various challenges that may render the merger more complicated due to cross border differences in, for example, taxation, means of distribution, facilities of transfer agencies.

is authorised in one member state may be distributed in another member state by an electronic transmission of the notification file between the competent authorities. This will enable a fund to be distributed in the EU at lower costs and within a shorter timeframe.

Through fund mergers and masterfeeder funds a UCITS fund could organise itself internally to achieve economies of scale.

Enhanced cooperation between competent authorities is necessary so as to ensure that UCITS and management companies comply with the provisions of the directive and in order to ensure the smooth functioning of the internal market. In particular, mechanisms need to be in place for on-the-spot verifications and for the exchange of information between regulators.

The management company passport.

Under the management company passport, a UCITS could be managed by a management company located in another member state, not necessarily in same domicile of the UCITS. This could help to increase efficiency and cross border distribution.

The key investor information document, which is to be written in nontechnical style, is replacing the simplified prospectus and should contain clear and comprehensive information and cannot be misleading. The KIID shall identify the UCITS, disclose the management company and the investment policy and objective, the risk/return profile, past performance, and provide information on charges.

With the notification procedure, the cross border distribution of an already established fund could be simpler. The factors fund managers may consider when setting up a fund include the type of investor to target and their location, the tax system in place and cultural differences. For example a UCITS which

The European Commission held a public consultation on UCITS V related to the current framework which is applicable to depositories of UCITS funds and to introduce provisions on the remuneration for UCITS managers.

Responses to the consultation have been received and proposed changes are expected in due course.

These UCITS changes will transform the funds industry and will enforce a pan-European market for funds with the possibility for synergies. It will affect fund administrators, custodians, asset managers, and fund promoters.

The protection of investors’ interest is given further importance in light of the financial crisis. In view of the above, Malta has even more challenges to face in order to remain competitive as it needs to review its strategies.

This article is intended solely for general knowledge. The writer makes no claims, promises, undertakings, guarantees about the accuracy, completeness or adequacy of the contents of this information. Any person engaging into any similar transaction is recommended to take the appropriate advice and not to structure any such transaction based solely on the information provided.

New appointment at Dominion Dominion Fiduciary Services Limited has appointed Sandro Bartoli as a new director to its Board of Directors. Mr Bartoli will operate from the firm’s Malta office, playing a key part in strengthening Dominion’s leading independent operation in the fiduciary and trust sector inside and outside the EU. Mr Bartoli will act as a key liaison between Dominion’s offices in Malta, London and Jersey, using his extensive management experience and contact base in Malta to develop new and existing business opportunities, both corporate and personal, for the firm’s ever growing portfolio. Mr Bartoli’s is a member of various associations and has received extensive training courses and certification in the areas of investment, pensions, funds, regulation, and company law offered by the Malta Financial Services Authority and various training centres. He pursued a business studies scholarship with Luther College, Iowa USA. Money / Issue 09 - 19

Advertising

Financial Services

Reuben Buttigieg is Managing Director of Erremme Business Advisors and President of the Malta Institute of Management.

one message We need a common strategy to sell Malta, says Reuben Buttigieg as he takes a holistic approach to promoting financial services.

F

inancial services have become an important contributor to Malta’s Gross Domestic Product. Many attribute this to the building of appropriate regulatory structures over the years. The agreement with the European Commission in 2007 helped Malta in gaining further access to European markets and in tapping into some opportunities in other countries. Moreover, the 2008 financial crisis led Malta to experience an unprecedented growth in certain subsectors such as the funds industry.

However, recent studies, particularly the one published during the National Economic Forum organised by the Malta Institute of Management last May, provides a lot of food for thought.

According to this study by Prof Joseph Falzon, the three sectors that are truly growing in Malta are the i-Gaming sector, the financial services sector and services supporting these two sectors, including accountants and lawyers. The i-Gaming sector is currently pushing the costs of salaries up and the other sectors are finding it hard to retain employees to maintain the human capital at their firms. This is certainly unsustainable to the extent that certain firms are already seeking alternative solutions by importing employees from other countries.

A further alarming note is that when one compares the value added by full time employee per sector per country, Malta seems to be already less attractive than it used to be a few years back in the financial services sector. The i-Gaming sector was entered into quite appropriately, but like similar sectors these are short-term niches. On the other hand, financial services and traditional sectors such as tourism are long-term realities if managed efficiently.

The financial services sector has certainly room for growth. However, this needs to be complemented by various other sectors. One of Malta’s winning formulae was the

Certain ambassadors categorically refuse to consider attracting business to Malta as part of their remit. responsiveness of the regulator to the market’s changing needs. Yet competing jurisdictions have become even more pro business. Perhaps an injection of adrenaline would boost our authorities’ confidence in this area.

One example of how we can consider proceeding is Luxembourg, which regularly announces changes to attract more business. Luxembourg is using all its embassies and encouraging its ambassadors to assist the financial services industry all over the world to attract more business to its hub. Unfortunately, Malta does not seem to have the same co-ordinated effort. Certain ambassadors, for instance, categorically refuse to consider attracting business to Malta as part of their remit. Other ambassadors, to their credit are proactively working in this direction.

The tourism sector, particularly the five star sector, seems to have fallen behind in maintaining the required standards.

Therefore, an investor may no longer look at these services as a further encouragement to invest in Malta. This framework extends to other services such as yacht marinas, where some are far from providing the kind of high level services certain investors expect. The general infrastructure still does not complement what the financial services industry is trying to achieve in spite of one administration after the other promising plans to catch up with our European counterparts.

The financial services industry itself has a lot to improve as well. On many occasions, the industry focuses on what Malta

Money / Issue 09 - 21

Financial Services

is doing and fails to study and analyse competitors’ legislation and the legislation of the investor’s jurisdiction. Such a comparison and advising the investors on their own country’s legislation would certainly give Malta a competitive edge.

Continuous training and education is critical if Malta is to remain competitive. Professional bodies should show a much more coordinated effort in promoting such concepts and in encouraging proper training. Having continuous professional education schemes in place may not be enough. Furthermore, there needs to be more dialogue between the bodies focussing on education if we are to ensure that the necessary training is available from the early stages in one’s education.

Promoting the financial services sector is, as is the case in other sectors, a fragmented effort. Finance Malta did manage to inject a lot of improvement. Still, first and foremost there must be a national consensus between all the sectors concerned on what message Malta wants to give. Unfortunately, this has yet to happen because what was designed or took place to date left much to be desired.

The inter-Ministerial committees seem to not have done enough to achieve this goal so one needs to go deeper to

identify in detail what is holding Malta from delivering one coherent message.

The image we are still giving is that Malta has various republics on the archipelago, with each republic giving its own message of what Malta represents.

Malta Tourism Authority, Malta Enterprise, Finance Malta, Malta Stock Exchange, Malta Financial Services Authority, Lotteries and Gaming Authority, the education sector, Malta International Airport, Air Malta, and Transport Malta, together with the social partners, should come together in a forum to discuss a common message.

Our nation’s reality needs such an agreement on a common strategy which, then, could be adapted to the circumstances of each sector.

Such a strategy needs to look and go beyond Europe.

Unfortunately, it seems that in their international campaign, many organisations are still at the pre-2004 stage. EU membership by itself is not the best part of Europe. We need EU membership also to focus on other regions of the world, including the MENA region.

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The general infrastructure still does not complement what the financial services industry is trying to achieve.

Forward looking professionals are anxiously waiting to see the North African region settling down to start reaping the opportunities the region provides. Is Malta prepared to engage in a proper national drive towards attracting the necessary investment from Middle East and North Africa? The achievements so far are just a millionth of a fraction of what Malta can aim at.

Fine wines and gourmet food tasting Zammeats, quality meat importers in collaboration with Corinthia Hotel St George’s Bay in St Julians and Camilleri Wines premium wine producers jointly hosted a gourmet food and wine evening at Grill 3301, Corinthia Hotel St Georges Bay. This unique event was attended by some 300 distinguished guests, who were greeted by Mr Mark Zammit, Managing Director of Zammeats, Mr Louie Camilleri, General Manager Camilleri Wines and Mr Mounir Sami, General Manager Corinthia Hotel St. George’s Bay. Guests were treated to a fine selection of Zammeats’ food products and wines from the Laurenti and Pianoforte range.

Main Speakers: Hon Mr Tonio Fenech

Minister of Finance, the Economy and Investment

Dott Roberto Geraci

VAT and the EU

Dottori Commercialisti Associate, Italy

Dr Robert Attard

Director of Tax Services, Ernst & Young

Conference 2011

Mr Chris Borg

Conference Chair: Mr Chris Naudi Partner, International Tax Services, Ernst & Young

Dr Sarah Aquilina

20 October 2011 th

Senior Tax Manager, KPMG

Mr James Farrugia Manager, PwC

Senior Manager, Tax, Deloitte

Mr James Bonavia

PANEL DISCUSSION: Future of VAT

Moderator Mr Noel Grima

Editor in Chief, The Malta Independent

Mr David Casa

Member of the European Parliament

Mr Donato Raponi

Head of Unit, Directorate C, Indirect Taxation & Tax Administration, European Commission

Mr Stephen Coleclough

President, Confederation Fiscale Europeenne (CFE)

Mr Charles Vella

Director, International and Legal Affairs, VAT Department

Manager, Tax Services, Deloitte For further information kindly contact: Malta Institute of Management FRCC Building, Alamein Road, Pembroke PBK 1777 Tel: 21453097 Fax: 21451167 email: tzahra@maltamanagement.com www.maltamanagement.com

Mr Michael Smyth

Main Sponsor:

Hon Dr Charles Mangion

Sponsors:

Collaborating Partners:

President of the Section for Economic and Monetary Union and Economic and Social Cohesion, European Economic and Social Committee (EESC) Main Spokesman on Economy Financial Services and Pensions

Media partner Money / Issue 09 - 23

Finance

Malta’s economic performance Professor Joseph Falzon presents an analysis of the productive sectors of the Maltese economy.

T

his paper, which was presented in its entirety at this year’s National Economic Forum, organised by the Malta Institute of Management, is composed of two parts. The first part presents an economic analysis of the fifteen productive sectors of the Maltese economy between 1995 and 2009. The second part consists of a comparative analysis of each economic sector of the Maltese economy with the corresponding relevant sector of each of the EU27 Member States.

The first part of the paper analyses the real gross value added and its components (real compensation of employees and real operating surplus), together with employment for each sector during the 1995-2009 period.

Subsequently, real gross value added per full-time equivalent (the productivity ratio), employee compensation per fulltime equivalent (FTE) and profits per worker were derived. The paper confirms that some of the traditional economic sectors (manufacturing, wholesale and retail, hotels and restaurants, and transport and communication) that account for a substantial share of total employment (44.5 percent) are going through difficult economic times. On the other hand, smaller sectors in terms of total employment (20.2 percent), (financial intermediation, personal services and business activities) have been experiencing fast economic growth.

Between 1995 and 2009, the Maltese economy added 27,835 net full-time equivalent jobs, growing with an average annual growth rate of 1.3%. During this 15-year period, the average real economic growth was of 6.2% per year between 1995-2000, and of only 0.9% per year between 2001-2009. Due to this uneven growth, real gross value added per FTE increased by €4,618 or 26.7% between 1995 and 2000, but witnessed no growth during the past decade. Consequently, real wages per FTE increased by 28.5% from 1995 to 2001 (from €8,726 to €11,219), but registered no growth between 2001 and 2009.

Manufacturing lost 9,600 jobs (29.6%) between 1995 and 2009. Real gross value added per FTE has been declining

24 - Money / Issue 09

in wholesale and retail since 1999, in hotels and restaurants since 1999, and in transport and communication since 2001.

This implied that, in the last decade, real wages per FTE have declined in hotels and restaurants and in transport and communication, while real profits per FTE have declined in wholesale and retail and in hotels and restaurants.

On the other hand, the number of FTE jobs in financial intermediation, business activities (including accountants, lawyers, real estate) and personal services (including e-gaming) almost doubled in 15 years, from 17,500 in 1995 to 34,250 in 2009. All three sectors witnessed explosive growth in their total real gross value added produced. Also these three sectors had the highest gross value added per FTE in 2009.

In the coming years, this uneven distribution to domestic growth will very likely continue to accelerate the growing discrepancies in wages and profit levels between traditional and service oriented sectors.

The second part of the paper looks at the unit labour cost of each economic sector and compares every Maltese sector with the corresponding sector in each of the EU27 Member States.

Between 2000 and 2007, the unit labour cost in manufacturing increased by 33% compared to an increase of 14% in EU27; hotels and restaurants increased by 36% compared to an increase of 11% in EU27; wholesale and retail increased by 44% (EU27 14%); transport and communication increased by 18% (EU27 10%); business activities

increased by 75% (EU27 24%); financial intermediation increased by 77% (EU27 just 2%); while personal services decreased by 33% (EU27 increase of 26%) due to the large increase in real value added per worker witnessed in the E-gaming sector.

The second part of the paper continues by ranking the gross value added per worker for each sector for all EU27 Member States in 2007. It also ranks the compensation per worker and operating surplus per worker for each sector in all EU27 States. The paper shows that the EU27 States are segmented into three categories: the core most competitive and rich Continental Europe (with the highest gross value added and wages per hour worked), the peripheral Mediterranean Member States (with the middle gross value added and wages per hour worked), and the least competitive Eastern European countries (with the smallest gross value added and wages per hour worked).

Among the six Mediterranean EU countries (Italy, Spain, Portugal, Malta, Cyprus and Greece), the Maltese economy ranked fifth overall in term of gross value added per hour worked in 2007. Manufacturing ranked fourth, while business activities ranked fifth.

All the other sectors ranked sixth as well. Personal services ranked first (it ranked second in all EU27 countries) due to the high gross value added per hour of the e-gaming sector in Malta.

The structure of the Maltese economy has gradually shifted from a traditionally based economy where primary and secondary sectors drive economic growth to a more service oriented economy.

Indeed, from this research, it is conveyed that while the manufacturing industry registered the highest real gross value added in 1995, the highest contributor to gross value added in 2009 was the business activities sector, followed by the manufacturing sector.

Employment-wise, in 1995 the manufacturing industry employed most of the domestic workforce, followed by the wholesale and retail sector. In 2009, the manufacturing industry ranked second, where it was superseded by the wholesale

Professor Joseph Falzon is Head of the Department of Banking and Finance at the University of Malta.

An evaluation of the Maltese macroeconomic performance (1995 – 2009) and retail industry as the primary source of employment. The most evident increase in job demand has been manifested by the business activities sector, while the most stable sector in terms of job opportunities between 1995 and 2009 was the mining and quarrying sector.

In terms of real gross value added per full-time equivalent, the highest contributor to GVA per FTE in 1995 was the business activities sector, followed by financial intermediation sector. In 2009, the highest GVA per FTE was registered by the personal services activities and business activities in that order. Indeed, the personal services activities sector registered the highest rate of change during over the period 1995 to 2009.

Conversely diminishing real GVA per FTE in between 1995 and 2009 has been recorded by the industries of business activities, wholesale and retail, and hotels and restaurants industries. Both fishing and construction industries registered minimal variations in terms of real GVA per FTE. In terms of real labour remunerations per FTE, in 1995, the public administration sector handed out the highest remunerations. Conversely, the worst financially rewarding sector in 1995 was the agricultural industry. In 2009, the financial sector ranked at the top of the classification with respect to real labour compensation per FTE, followed by the sector of public administration. On the other hand, the least financially rewarding sector in 2009 was the fisheries industry, followed by construction and mining and quarrying industries. The highest rate of change in real labour compensation between 1995 and 2009 was manifested by the financial intermediation sector.

Conversely, the hotels and restaurants industry underwent the highest negative revision in terms of remuneration per full-time equivalent.

Profit-wise, the personal services sector registered the highest increase in real profits per full-time equivalent between the period 1995 to 2009, followed by the mining and quarrying and the agricultural sectors. The registered increase in profits pertaining to the personal services sector is attributable to the dominant influence of e-gaming activity within the total economy over the past five years.

Conversely, the highest drop in profits over the same period was registered by the wholesale and retail industry.

Over the 15-year period spanning from 1995 to 2009, the Maltese economy continued to increase its economic activity in favor of the services sector at the expense of the primary and secondary industries. From 1995 to 2009, domestic primary and secondary industries reduced their contribution to the aggregate Gross Value Added of the total economy from 3.2 to 2.4%, and from 26.6 to 17.2%, respectively. In turn, this implies that the tertiary industry expanded its Gross Value Added as a share of the total economy from 70.2 to 80.4% between 1995 and 2009.

Employment-wise, the recorded trend follows a similar path as employment pertaining to the tertiary industry increased by 10.5 percentage points from 1995 to 2009. This increase was registered at the expense of employment pertaining to both the manufacturing and construction industries as their employment shrank by 9.5 percentage points from 1995 to 2009.

Data by sector indicates that the over time, the structure of the Maltese economy has evolved into a dual economy. On one hand the industries of manufacturing, hotels and restaurants, and wholesale and retail have experienced economic problems. On the other hand, the industries pertaining to business activities (including real estate), personal services, and financial intermediation have become the leading drivers to domestic macroeconomic growth.

Over time, the public sector remains stable, contributing to a quarter of the aggregate workforce and a fifth of the gross value added pertaining to the total economy. In the coming years, this uneven distribution

to domestic growth will very likely continue to accelerate the growing discrepancies in wages and profit levels between traditional and service oriented sectors.

The prosperous economic sectors, namely personal services, business activities and financial intermediation, demand highly skilled and educated workers. Conversely, declining traditional sectors employ less educated, semi-skilled or unskilled workers.

However, the declining sectors still employ the largest volume of workers (63,000 full-time equivalent). Indeed, the share of employment of prosperous sectors is still relatively small, employing a volume of 34,240 full-time equivalent workers.

From a short-term perspective, the major challenge for the Maltese economy is to foster sufficient economic growth in the sectors that employ the majority of workers with their present skills and low level of education. Unless a shortterm solution to this economic challenge is sorted out, many low skilled workers will experience a decline to their living standards. If the decline experienced by these sectors cannot be averted, on a longer-term perspective, economic policy should be aimed to help shift low educated workers from declining sectors to the growing industries. This substantiates the predominant role of education to the development of the Maltese economy.

Furthermore, strategies should focus on fostering research and business innovation. This will help to increase the value of Maltese products and services and hence lower the unit cost of labour.

The aim should be to exploit market niches and to find ways of operating businesses in more cost-efficient and cost-effective ways. This would help increase the productivity in the private sector. Moreover, cost-efficiency should also be an important milestone in the public sector. This, coupled with an increased quality of public sector investment in human capital, would cultivate the necessary conditions required to increase the productivity levels in the different sectors of the public sector.

Money / Issue 09 - 25

Finance

A comparative macroeconomic analysis between Malta and the EU 27 In terms of the aggregate economy, Malta ranks at the 16th position (out of 27 Member States), registering an hourly GVA per employee of €15.02. Luxembourg, Ireland and the Netherlands qualify as the leading countries in terms of hourly GVA while Latvia, Romania and Bulgaria are the least performing economies with respect to hourly GVA. When compared to the average hourly GVA for the EU27, the Maltese economy falls short by €10.57. In relation to Luxembourg, hourly GVA per employee for the total economy of Malta falls short by €72.29. Conversely, when compared to the least performing Member State of Bulgaria, hourly GVA for the Maltese aggregate economy outperforms that for the Bulgarian economy by €11.94.

registered for Malta fall short from those pertaining to Luxembourg by an extent of €38.17. Conversely, hourly profits pertaining to the total economy of Malta surpass those registered by Bulgaria by an extent of €43.78.

When analysing sectoral GVA per hour for Malta vis-à-vis the fellow Mediterranean Member States, research shows that Malta ranked at the last positions across all sectors with the exception of personal services. On the premise that this sector includes the e-gaming companies, hourly GVA for the domestic personal services toppled almost all other 27 Member States, ranking second in 2007.

In the same section, a comparative exercise between the 27 EU Member States is conducted with respect to the hourly ratios of labour remuneration to GVA and gross operating surplus to GVA as at 2007. On the premise that this research has been conducted in terms of cross-sectional data rather than time-series data, it does not provide conclusions with respect to the manifestation of economic convergence across the EU 27. Yet this research does indicate that in terms of the hourly ratio of Gross Operating Surplus to GVA and Labour Compensation to GVA, the 27 EU Member States are segregated into three distinct categories, namely, the core European advanced countries, the Mediterranean peripheral countries, and the Eastern less developed countries

When analysing labour compensation across the EU 27, the Maltese economy ranks at the 18th position with a registered hourly pay of €7.54. As conveyed by the figures, it is evident that Luxembourg pays the highest overall remunerations with a registered hourly figure of €41.67.

Conversely, the Bulgarian economy ranks at the bottom with a registered hourly pay of €1.22. In comparison to the EU 27, the hourly pay in Malta falls short by €6.40. In terms of the sectoral labour remuneration per hour for Malta vis-à-vis the fellow Mediterranean Member States, research shows that Malta ranked at the last positions across many sectors.

The personal services sector, however, in terms of hourly labour remuneration, ranked at the third position out of the six Mediterranean Member States, while manufacturing and hotels and restaurants ranked fourth in terms out of labour remuneration out of six Mediterranean states.

Profit-wise, when compared to the EU 27, the Maltese economy ranked at the 16th position with a registered hourly profit of €7.47. Total economy hourly profits

When analysing hourly profit generation for the sectors of Malta vis-à-vis the fellow Mediterranean Member States, research illustrates that Malta ranked either fifth or sixth out of the six Mediterranean Member States across almost all sectors with the exception of personal services. On the premise that this sector includes the e-gaming companies, hourly profit generation for the domestic personal services toppled almost all other 27 Member States, ranking second in 2007.

While the most developed centrally located European Member States registered high ratios of labour remuneration to GVA and Gross Operating Surplus to GVA, Eastern developing countries registered the lowest ratios out of the EU 27 Member States. In terms of the same ratios, peripheral economies residing across the Mediterranean ranked in between both extremes. Moreover, there is a clear overlap between some Eastern developing economies and some peripheral Mediterranean Member States. On the premise that on average, the Maltese economy ranks at the lower levels with respect to other Mediterranean Member States, it risks to be caught up, and surpassed by, the less developed eastern Member States.

The Unit Labour Cost index across the EU 27 In line with the registered trends across the EU 27, the Unit Labour Cost indicator for the total economy of Malta has been on the rise over the period 2000 to 2007. On a sectoral level, the domestic sectors of personal services and health and social work registered a gradually declining trend to their Unit Labour Cost index. These results are to be considered within the context of the EU 27. Indeed, the same industries across the EU 27 registered consistently increasing trends to their ULC index over the same period under review (2000-2007).

As for the remaining economic sectors (excluding agriculture, fishing and quarrying due to missing data), results for the period 2000 to 2007 in terms of increasing ULC indices for the Maltese economy coincide with the registered trends across the EU 27. Several important sectors like manufacturing, hotels and restaurants, wholesale and retail, and financial intermediation, witnessed significant increases in their unit labour cost indexes, making these sectors even less competitive internationally.

26 - Money / Issue 09

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Banking

Bank on us

Money presents the banking special and all you ever needed to know about trade finance, interest rates and credit on account.

In this banking special, Margrith Lutschg-Emmenegger, FIMBank President outlines the main contributors to FIMBank Group’s 20 per cent increase in profit, Ray Busuttil CEO, IIG Bank (Malta) Limited explains how IIG adds flexibility, without compromising security, to its products, and Tonio Depasquale CEO, Bank of Valletta, shows that innovation and customers’ trust is what makes a bank successful. Andrew Zarb Mizzi, General Manager and Executive Director at RTFX Limited, highlights the opportunities that the Foreign Exchange market – the largest financial market globally – presents.

28 - Money / Issue 09

A positive account MONEY FIMBank Group posted an after-tax profit of $4.08m for the first six months of 2011. What were the main contributors to the positive 20 per cent increase in profit?

MARGRITH LUTSCHGEMMENEGGER

A major contributor remains our focus on our key strengths: cross-border trade finance with an emphasis on emerging markets. FIMBank’s approach to developing new banking and structured trade finance business, in these conditions, remained selective and focused.

Our fully owned subsidiary, London Forfaiting, maintained a strong trading performance and contributed a significant portion of the revenue while our factoring joint ventures continue to report significant progress.

As at 30 June 2011, total consolidated assets exceeded, for the first time ever, the $1b mark, standing at $1,021m.

This means an increase of 19 per cent over the levels reported at end 2010. When I joined the bank in 2002 the balance sheet size was $120m, meaning that it has increased eightfold since then. This is considered to be a great achievement by the team.

M The net impairment

charges for the Group decreased by $1.68m (79 per cent) over the same period in 2010. Could you outline the reasons behind this positive development?

MLE The main reasons were

a continued cautious approach in the Group’s risk appetite coupled with an improvement in the MENA region’s overall business environment.

Conditions for MenaFactors, our Dubai-based subsidiary,

Margrith LutschgEmmenegger is President, FIMBank.

continued to stabilise as market sentiment improved and thus helped it achieve a positive performance.

our shareholders for their trust throughout this project, as well as our advisers staff for their hard work.

M FIMBank recently obtained funding of $60m from the IFC and Saudi Development Fund. How are these funds being utilised?

M How are FIMBank’s factoring joint ventures faring in these market conditions?

MLE The funds are being

used to finance and support trade in emerging economies, especially Africa and the Middle East. The IFC, a member of the World Bank Group, has been a shareholder in FIMBank since 2005.

Moreover, it is also a jointventure partner in FIMBank’s FactorRus, EgyptFactors and BrasilFactors joint ventures.

We consider the support and backing of partners such as the IFC and the Saudi Development Fund as an important vote of confidence in the FIMBank Group.

M FIM Holdings p.l.c. made a share-for-share exchange offer to all shareholders of FIMBank p.l.c. however the 80 per cent acceptance threshold was not achieved.

MLE The 80 per cent acceptance threshold required to declare the offer unconditional was not reached. The support of certain shareholders could not be secured due to the fact that the share-for-share exchange could prejudice the position of such shareholders at this particular point in time. The project, however, was received with wide approval throughout, not least at the annual general meeting and has only been postponed, not cancelled. We continue to firmly believe in the objectives of the exchange offer and will seek to propose the project again at a future appropriate date. In this regard, I would like to thank

MLE India Factoring has experienced an encouraging start to our operations, while in Dubai we hope to see a continued strengthening of the business and economic environment in the region, which will boost the performance of MenaFactors.

We continue to believe in the medium to long-term prospects of markets such as Russia, where FactorRus is already breaking even.

EgyptFactors faces a difficult environment as the country seeks to implement political and economic reforms.

However the team we have there is well organised to take advantage of market opportunities. The economic growth and trade expansion in Brasil should enhance the prospects for our BrasilFactors venture.

M What are the potential business opportunities for FIMBank in North Africa as the region takes on a new guise?

MLE The Group remains cautious of these regions and is monitoring them closely However, it is also looking ahead to the opportunities that may present themselves once things become more stable.

M What can you tell us about FIMBank’s new head office in St Julian’s?

MLE The architectural design of our head office has been crafted by some of the finest Mediterranean architects. FIMBank considers

location, functionality, flexibility and sustainability as the four key objectives of our new head office. Although independent in terms of structure, the character of the FIMBank building will be complementary to the adjoining towers and will be linked at the lower floors to the rest of the complex, effectively forming an integral part of The Exchange financial and business centre, of which FIMBank is the anchor tenant.

The Bank appointed internationally renowned Real Estate Solutions as project manager to provide end-toend support at all levels and throughout the business transformation process.

M Following the meltdown, how did FIMBank maintain its customers’ trust ?

MLE Being a specialist trade finance bank, our customers take huge comfort from our expertise and commitment.

We have therefore been able not only to maintain our client portfolio but indeed to grow.

Trade finance is critical for the global economy and therefore essential to be supported by the financial markets – it has generally a much better track record as trade has a preferred payment status for countries, corporates and banks. These facts have of course boosted our efforts to grow our customer base and maintain a strong position with all our customers.

Money / Issue 09 - 29

Solid growth

Ray Busuttil is CEO, IIG Bank (Malta) Limited.

Malta’s geopolitical position and ability to do business across time zones has led the Group to choose Malta and to invest here with a long-term vision MONEY What is IIG’s growth plan for Malta?

RAY BUSUTTIL IIG stands for the International Investment Group based in New York.

The name is synonymous with pre-export and international trade financing in Latin America. While loans are given to producers of commodities in South America, the financed goods are exported to over 60 countries globally. Therefore IIG is not new to managing risk associated with international receivable financing.

Throughout its 15-year plus history, IIG has managed receivable credit risk of the product end-users globally.

IIG Bank Malta therefore adds a new dimension to the Group, as it offers an opportunity to diversify the Group activity and asset base to a new region that is ideally located for the promotion of international trade finance.

Malta’s geopolitical position and ability to do business across time zones has led the Group to choose Malta and to invest here with a long-term vision for a global presence in trade finance.

M Do you plan on being more visible on the high street?

RB We are based in Portomaso, a prestigious

30 - Money / Issue 09

location in Malta – however we believe that we can get closer to our depositing customer base by gaining more visibility. Primarily for this reason, we have decided to open an additional office that is very accessible on the Qui-Si-Sana sea front, where existing and prospective customers can walk in and receive service.

M What new products will

you be offering in the immediate future?

RB We shall strive to be a step

ahead of the competition by offering our customers a better deal than what is available at any particular time and offer varied term deposits with premium rates and flexible interest payment terms, compounding, credit on account and paid by cheque to complement our existing staple products including our tracker accounts which offer a minimum interest rate.

M How do you plan to add flexibility, without compromising security, to your products?

RB Flexibility does not compromise security. Our products primarily consist of capital guaranteed time deposits that offer fixed or variable interest rates throughout the tenor and negotiable interest payment frequency and method of

paying out such interest.

Our products also allow for compounding within the term, meaning that the customer could benefit from an even higher rate (A.E.R.) at the end of the term. In fact we go beyond and our current base rate tracker accounts offer a minimum interest rate too.

funding elsewhere or paying higher interest or both. IIG Bank Malta participates with IIG Group and continues to lend to an established borrowing customer base.

M Following the meltdown, how did IIG maintain its customers’ trust?

RB IIG Bank is following the events in Libya and other Maghreb countries with great interest as we are hopeful, like everyone else, that once the dust settles and these countries acquire their legitimate governing status, there would be opportunities of business development. IIG Bank does not yet have the resources to venture actively, but would certainly seek to position itself well to develop a capacity when an opportunity to venture into this region is identified.

RB IIG Bank Malta was set up after the meltdown, but during the 2008 market meltdown, IIG Group did not suffer any loss of confidence from its borrowing customer base. It is widely recognised that trade finance weathered the crisis remarkably well.

On the contrary, the crisis created more demand for financing by existing and new customers and interest margins widened as a direct result of increased demand for financing. Many large traditional banks, which were hit by losses in other sectors of their business, faced a squeeze on their capital adequacy resources – one way of protecting themselves was to withdraw credit lines or refrain from lending. Since trade finance is relatively short-term borrowing, this area of bank lending became particularly vulnerable, leading borrowers to seek new

M What are the potential business opportunities for IIG in North Africa as the region takes on a new guise?

M What is the outlook for IIG’s business for 2011 in the current world order?

RB IIG Bank is a newcomer to the Maltese banking community. Our primary focus for 2011 is to establish ourselves on a solid footing, seeking to provide a quality service to all our customers, and to establish strong reciprocal relationships within the banking community, with a long-term vision of consistent and sustainable growth.

Banking Tonio Depasquale is CEO, Bank of Valletta.

Shaping our economy MONEY What is Bank Of Valletta’s growth plan for Malta?

TONIO DEPASQUALE BOV is both a participant and a shaper of the Maltese economy. Our growth plan is very closely aligned to the Maltese Government’s strategic vision for the country – namely, a European open-market economy based on financial services, ICT, tourism and high valueadding industries such as technology, aircraft and ship maintenance, and pharmaceuticals.

BOV continues to support economic growth through the support we continue to provide to local businesses, even during periods of financial and economic uncertainty. From microfinancing schemes for small businesses to funding the major pillars of Maltese industry, BOV continues to expand its business and shape the future of our economy.

M How do you assist your clients in managing their wealth and planning for the future?

TD Wealth management is one of the pillars of BOV’s future growth plans, along with other investment-related services such as fund servicing and custody. It is a growth sector which we are cultivating, and which is resourced with highly-

trained and well-motivated persons.

We offer customers bespoke advice on the financial solutions best suited to their needs – in fact, our investment products aim to satisfy quite a wide variety of financial needs and risk appetites. The tone of our products generally verges on

M How do you plan to add flexibility, without compromising security, to your products?

TD Flexibility is best achieved by having on your shelves a wide range of products and services to suit every appetite. Customers can thus choose the optimal combination of products to

M What are the potential business opportunities for BOV and its clients in North Africa as the region takes on a new guise?

TD Like Malta, BOV has always enjoyed a close relationship with North Africa. We are familiar with the region’s peoples, history and culture. As you can

Our closeness with our customers, transparent communication and our generally low risk appetite all played their part to maintain public confidence in BOV. the conservative side, as we do not offer exotic or highlystructured investments.

The overall aim is always to optimise return within the particular risk profile of the product.

M What new products will you be offering in the immediate future?

TD Product innovation is a key feature of BOV’s business strategy and the bank has a solid reputation of regularly bringing products to the market that add value to customers and of sharpening its service offering with a view to enhancing the overall customer experience.

Innovation cuts across all business lines. Over the coming period, new deposit products will continue to be launched and tailor made credit packages will continue to be made available.

Significant innovations will be made in the cards and payments business as well as in our multi-channel banking proposition.

suit their financial situation and expectations. They can also opt for discretionary portfolio management, for non-discretionary portfolio management guided by BOV’s expert advice, or for execution-only transactions.

M Following the financial meltdown, how did BOV maintain its customers’ trust?

TD During and after the crisis, BOV maintained an open line of communication with its customers, explaining the developments in the markets and offering advice on positioning. Our closeness with our customers, transparent communication and our generally low risk appetite all played their part to maintain public confidence in BOV. In fact, at the height of the crisis, we experienced an inflow of funds arising also from repatriated deposits.

People were bringing back their life savings from other jurisdictions, preferring the safety of the conservative Maltese banking system.

imagine, we are very excited about the future of North Africa, and especially about Libya, where we have a representative office. We believe in the vast economic potential of the region and have great confidence in the people. Our aim is to participate in the economic development which will most surely follow the greater political freedom which the nations of the region are aspiring to.

M What is the outlook for BOV’s business for 2011 in the current world order?

TD BOV’s business model is conservative, based on high capital and liquidity buffers, reliance on retail funding and a prudent risk appetite. It is a model which has served us well, especially during the financial crisis, when BOV continued to make consistent profits and to supply credit to the economy uninterruptedly.

It is a model which will take us through the current turbulence and provide us with a solid basis for the future growth which we are planning.

Money / Issue 09 - 31

Foreign Exchange

Participate in the world’s largest financial market

The Foreign Exchange (Forex/FX market, with a daily turnover of $4 trillion, is indisputably the largest financial market globally offering retail investors distinct advantages compared to other investment classes. The market is experiencing rapid growth mainly due to electronic trading since it offers ease of participation and speed of execution. Moreover, it offers the longest trading hours, deepest market liquidity, lowest transaction costs, the ability to use leverage and all within the comfort of your home.

Within the local context, the FOREX market has been traditionally viewed as a means to acquire foreign currency in times of travel. Similarly, traditional stock markets have been considered as the only investment channel by the majority of the investing public.

In April of last year, 53 Central Banks and Monetary Authorities participated in the 8th Triennial Central Bank Survey of Foreign Exchange and Derivatives Market Activity. The objective is to provide the most comprehensive information on the size and structure of the global FX market.

The survey revealed considerable growth in the FX Market between April 2007 and April 2010: global FX market turnover increased by 20%, while average “daily” transactions increased from $3.3 trillion to $4 trillion per day – of these, average daily spot transactions increased from $1 trillion to $1.5 trillion.

Moreover, spot transactions represented 37% of global FX market turnover.

With trading reaching $4 trillion per day, the FX market is larger than the combined equity and bonds markets.

Additionally, while equity and bond markets close for business each day, the FX market never closes for business, other than over the weekend, Christmas and New Year’s Day.

Mr Andrew Zarb Mizzi is General Manager and Executive Director at RTFX Ltd.

Thus, it is evident that the FX market provides infinite trading opportunity, liquidity and flexibility.

FX investments operate with leverage – this means that you may enter into transactions for an amount greater than the total margin available on your account. Margin is just another name for the available funds which you have deposited. Thus, trading on margin means that the resultant profit/loss from each transaction is subsequently added or deducted from this margin deposit (your investment).

For example, let’s assume you open an FX Account with a €1,000 investment (the margin) which account allows a maximum leverage of 100:1 (i.e. 100 times the margin). This means that you can opt to invest (or take positions of) up to €100,000. Once understood, leverage provides investors with the possibility of enhancing profits while keeping capital at risk to a minimum, since even if the investor holds a €100,000 position (maximum leverage), it is only the €1,000 investment that is at risk. Should the market turn against the open position, the investor cannot lose more than the original investment or margin. Should the market support the open position, the upside potential is far larger.

Managed correctly leverage allows investors participation in the FX market without the need to invest large sums of money.

It also allows you to amplify your overall investment portfolio returns, by allocating only a small percentage to FX. Take a traditional investment portfolio valued at €100,000 returning 10% per annum. Now, assume that on January 1, 2010 you allocated 10% of this portfolio to an FX investment returning 87% (net reinvested performance return on RTFX Asset Management Service between January 1,

2010 and June 30, 2011). The resultant total portfolio return over this 18-month period ending June 30, 2011, would have increased from 15% to 22%, representing an increased portfolio return of 47%, with an FX allocation of only 10% within the overall total portfolio.

Investment portfolio structure Your financial profile is not fixed. Certain factors should be considered such as age, family, marital and employment status.

Since few things remain unchanged during your lifetime it is important that your financial profile is reviewed regularly.

Risk appetite (reluctance or inclination to accept the uncertainty that the risk reward trade-off presents) has an important bearing on how your investment portfolio should be structured.

Your portfolio should attempt to reflect your changing life profile over time, since not only do your personal circumstances change, but also external factors such as general global economic considerations.

The inclusion of FX within your portfolio provides additional diversification; the golden rule of investment. It also has the potential to contribute to your portfolio return, although represented in a small percentage allocation, with the added benefit of deep market liquidity which is not always the case with other asset classes.

FX offers the exciting advantage to profit from rising, as well as falling, markets while in traditional stock markets, you only profit from selling at a price above your purchase price. In the FX market you can profit by taking a ‘long’ position (buying and selling at a higher price) or a ‘short’ position (selling first and buying back later at a lower price).

Learning and understanding RTFX offers free demonstration accounts to learn and improve your FX skills, along with live breaking FX news, charting tools, tutorials and trader tips. These are all valuable resources to sharpen your skills prior to opening a real account. For the fourth successive year, RTFX is sponsoring the Forex Championship. Participants from all over the world will compete to share the monthly prize of over €20,000 in free margin. The Forex Championship is a great way to familiarise with currency trading and improve your trading skills and strategies. To participate, visit http://championship.rtfx.com/

32 - Money / Issue 09

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Investing in your future

Budget 2012

Dr Michael Refalo is a former Minister for Tourism, Justice, Culture and the Arts. He is a Companion of the Order of Merit of Malta, a Fellow of the Royal Society of Arts and a former High Commissioner to the Court of St James’s.

As though there’s no tomorrow Budget cuts and bruises, or a stitch in time, asks Michael Refalo as he focuses on what next year’s budget should propose.

M

alta’s pre-budget statement urges caution. Should government fritter away hard earned gains and indulge mindlessly in a game of Russian roulette for populist electoral expediency? Even if blinded momentarily by an insatiable desire to pander for popularity, the choice between steady as you go and let it rip with its attendant risks is a definite non-starter.

The current volatility in financial markets and economic scenarios near and far do not augur well. Did anyone expect that Standard & Poor’s would downgrade the US’s credit rating? Although the only agency to dent the US’s seemingly impregnable credit rating, decisions that potentially cause ripples let alone shockwaves in the financial world are never taken lightly. Popular consensus points to President Obama’s slide in the polls and the long Democrat versus Republican budget standoff. Only time will tell what convinced the number crunchers at Standard & Poor’s to stick their necks out.

Closer to home, thoughtless risktaking in Ireland brought the former Celtic Tiger to its knees while the Greeks perfected the art of creative accounting and cheating the taxman. Moreover, unwise and lax financial management in Lisbon has constrained the EU – at a considerable cost to their Euro zone partners – to bail out these countries.

Cyprus was hit by a crisis of its own making. In Italy and Spain, whose nationals are often known to bury their snout in the black economy, are keeping their fingers crossed that austerity measures will lead to a recovery and a return of budgets in the black.

Further north, the UK’s kitty is as bare as Old Mother Hubbard’s cupboard.

Quantitative easing – printing money – is the name of the game. The Tory-led coalition government has introduced massive, highly unpopular cuts as it struggles to right the wrongs of more than a decade of profligacy and blatant electoral vote-catching. Despite the

sniping and snide criticism of an antiEuro rump in Malta and the United Kingdom, the Euro continues to plod along steadily albeit unspectacularly.

Malta has brought its act together and weathered a recession that in spring 2008 swept through Europe and around the world. The Maltese economy is small and extremely exposed. Libya, our most valuable trading partner, is in the throes of civil war. It will recover but needs time. Government’s firm handling of a humanitarian and bloody crisis on our

Government has invested wisely in skills and services, utilised EU funding well, put its money where its mouth is and kept a tight rein on unnecessary expenditure. doorstep drew plaudits from people who matter and has kept the door ajar for Maltese businessmen and workers to pursue investments and their livelihood in Libya.

Given this scenario, it is a minor miracle that Malta’s budget deficit by the end of 2011 is expected to be less than 3%.

Results do not come about by chance.

Government has invested wisely in skills and services, utilised EU funding well, put its money where its mouth is and kept a tight rein on unnecessary expenditure.

Unemployment is down to 4.3%.

GDP is expected to grow by 2.5%.

The gainfully employed and female

participation in the labour market stand at record levels. Recent measures include the removal of succession duty on one’s home, the flight departure tax, the credit card levy, TV licences for more than one set and increases in social, health and education benefits. Although government has satisfied more than 80% of its electoral pledges, Labour opinion formers harp continually on its failure to implement a measure which in their view swung the 2008 election.

This measure regards widening the 25% income tax band into 35% territory for persons earning less than €60,000 a year. The process started when government widened lower tax bands which, while exempting persons with an annual income of less than €12,000 a year, namely most state pensioners and 38% of workers from paying income tax, has also benefitted taxpayers in higher income brackets.

Unless Malta strikes oil, gas or some hitherto hidden stream of gold it would be foolhardy and indeed signal unnecessary panic and insecurity to introduce the measure at this late stage.

In my book, high employment, firm financial management and a steady hand at the tiller are greater vote winners.

Government has got its priorities right. In view of the threat of a double dip recession and worldwide uncertainty in financial markets, government has prudently placed the measure temporarily on hold. This does not imply that affordable tweaks to lower taxbands should not be introduced. However, the top priorities should continue to be maintaining current VAT exemptions on food and other items, student stipends, free health care and medicines, further increases in allowances and social benefits and continued progress in the fields of tourism, investment and employment.

Embarking on untimely measures at this moment in time and spending money as though there is no tomorrow have no place on the nation’s agenda.

Money / Issue 09 - 35

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The changing world of bank deposits

Money / Issue 09 - 37

Credit

Risk or investment?

With the right information you can turn credit into a long-term profit, says John Paris.

Is doing business becoming more risky?

JOHN PARIS For every successful business there are four failed ones, so definitely doing business has become riskier than ever. When someone invests money into a business, their intention is to be their own boss and hopefully make a profit. To achieve this, it is crucial to have a long-term business plan – unfortunately, in Malta there are still many entrepreneurs who do not plan properly and therefore end up with a failed business.

What is the current status of Malta’s trading environment?

JP Until a few years ago agreeing on a business transaction was simply done through a gentleman’s agreement – unfortunately today this can no longer be applied. With increased competition in all sectors of the economy and now an increase in the water and electricity bills, the strain on managing a successful business has become more challenging.

Well-managed companies have thrived and grown throughout the years. Some have even ventured into foreign markets and registered substantial success.

However, this cannot be said for all businesses especially SME’s. Having a healthy cash flow is like having fuel in a car – without it you cannot go far.

In Malta transactions are usually on cash or credit basis. When dealing on a cash basis there are no risks as one immediately gets paid for the item or service purchased. With increased competition some business introduced the concept of selling on credit, therefore giving the customer the opportunity to purchase the goods or service and pay for this at a later stage.

38 - Money / Issue 09

One big advantage to this is the fact that if one is feeling hard up with cash one can still acquire the object or service and pay for this through an agreed payment schedule, which should have been agreed to by both the seller and the purchaser.

To a business selling on credit, this cost must be calculated in the price quoted otherwise they will eventually experience cash flow problems. The more credit one offers the less the profit on that sale.

What elements are unique to the Maltese market and how are credit and risk management practices adapted to these elements?

JP Since we are a small island, some

businesses feel that it is not that difficult to track down a debtor when money is long overdue. Unless the debtor leaves the island to avoid paying up dues, there are means available to find out one’s official address.

Whenever a business issues an invoice there is always an element of risk involved. Having the right information available in order to assess the risks involved is fundamental in any business.

In today’s difficult financial times even accepting a cheque has its risks. Some companies also use bills of exchange

in order to secure the transaction but unfortunately even here debtors have also defaulted on these commitments.

As a leading credit reference agency, Creditinfo offers a system that enables companies and traders to analyse the risks involved in any transaction. Today many Maltese companies are using these systems – some use them in a very subtle way while others use them in such a way that at the initial point of contact between the customer and the trader, the customer would be informed that a Creditinfo check would be made prior to the conclusion of the transaction.

What national and international debt collecting practices do you employ?

JP As Creditinfo forms part of an international group today the company is present in 10 markets. These markets are Iceland, Czech Republic, Georgia, Kazakhstan, Latvia, Lithuania, Romania, Slovakia, Ukraine and most recently in Jamaica. Malta was the group’s first venture outside Iceland.

As part of our credit risk management services we use the same practices that are used by all our subsidiaries. In some specific markets we also have systems

John Paris is General Manager of Creditinfo Malta Limited, Malta’s leading Credit Rating Company.

Granting credit can be very expensive yet in the long term, and if managed correctly, it could be a form of long-term investment. such as the predictor score – this enables companies to summarise complex credit reports and give a specific score to each of their customers.

Our pressure letter has been specifically created for the Maltese market. This service is used to put pressure on late payers or defaulters without the necessity of opening a court case.

Granting credit can be an expensive practice. Yet can it also be seen as a form of investment?

JP Granting credit can be very expensive yet in the long term, and if managed correctly, it could be a form of long-term investment. The problems that some companies experience in Malta results from the fact that when they decide to expand and sell on credit they don’t calculate that selling on credit involves a cost which needs to be handled carefully. As a simple example in Malta companies tend to allow 30 days credit however when this 30 day credit is then extended to 60 days the profit of that transaction has decreased and the longer the customer takes to pay this profit keeps on decreasing. As some point the

company may experience a cash flow problem which could lead to problems for the company to pay its own suppliers – eventually, this could force the company into bankruptcy.

How can operating efficiency be improved through the use of credit?

JP By offering credit facilities, a

business makes it easier for one to purchase something, enjoy the immediate benefits of using that item without having a burden on one’s finances. This facility is a very important factor to attract new business – this generates an increase in revenue which therefore means a healthy balance sheet.

When managed properly this could also lead to expanding the business.

How can a business make an informed decision on whether extending credit can, in the long term, be profitable, or else result in bad debt?

JP Having the right information in order to assess the risks involved when granting credit is fundamental to any business. Through our credit management system one will be able to evaluate the risks involved. The processes used in our systems – which are fully compliant with data protection regulations – enable the business to see if the customer has problems related to paying their bills. Just as important as viewing one’s report it is also crucial to also monitor that customer just in case the situation may change. Through Creditinfo’s monitoring service this is also possible and thus may be an important tool to avoid a bad debt which could cost the company dearly.

In what scenarios is extending credit feasible?

JP Extending credit facilities is feasible as long as it is managed correctly. In some sectors, where competition is vast and very aggressive, it is the only means of survival.

Our customers vary in size and type of business. We have clients in utility services, telecommunications,

manufacturers, mobile telephony and internet services, importation, distribution, hotels, car importers, media, advertising, insurance, audit, accounting firms, law firms, government departments and financial institutions including banks.

The fact that the banking sector is using our service as part of their vetting processes makes us a very important tool to any business that sells on credit.

When a defaulter applies to a bank for a loan or credit card facility, the bank uses our system as part of its due diligence and when defaults appear on a report pressure is put on them to regularise his position.

With regards to international business the risks involved are much greater.

Again depending of the type of business one is involved in, offering credit facilities is very normal. As local agents of D&B (formerly Dunn & Bradstreet) today it is possible to acquire business information reports on any company worldwide. These reports will give a company a quick assessment on their potential customer and through the credit score which is given in every report one can quickly assess the level of risk involved in the transaction.

Do Maltese creditors have enough legal protection?

JP Maltese creditors have enough legal protection – however, a legal process costs money. Although the process has somewhat improved over recent years, it still takes too long and does not guarantee that a creditor will get the money that is due.

Our motto at Creditinfo is ‘prevention is better than cure’. In today’s uncertain times it is fundamental to know who you are working with, that is why we strongly believe that our system works. Having a tool available to assess the credit risks of a customer within a couple of seconds could help a company save money in legal expenses. The system also usually pays for itself as by avoiding just one bad debt could help a company save a great deal of money.

Money / Issue 09 - 39

Melvin Caruana is a chartered insurance broker and is Chairman of Smart Insurance Brokers Ltd. and Chairman of MIM Training and Development Ltd.

Insurance

Cover versions In a changing business environment, insurance demands are constantly changing. Melvin Caruana explains how you can further close your risk gap.

D

ifferent changes in awareness bring different levels of responsibilities both to individuals as well as to organisations. But to what extent are we aware of the actual responsibilities that we carry?

Responsibilities vary in their nature, ranging from those emerging out of statutes, as well as those relating to the moral aspect of individuals as well as organisations alike. These responsibilities need both be observed in order to avoid civil as well as criminal proceedings.

One needs to be continuously updated on the various levels of responsibilities which emerge from time to time.

Organisations and legal persons are continuously being bound to carry responsibilities, due to the fact that these are more prone to various liabilities.

One area which is of particular concern is the responsibility carried by organisations and directors.

Directors of organisations carry personal responsibilities for acts which take place during their course of appointment.

Health and safety issues are constantly evolving due to the nature of incidents which occur from time to time.

Authorities impose hefty fines on those who do not abide with health and safety regulations. Furthermore, directors of organisations could be held personally liable in the event of an incident occurring in the course of an employment, for which incident, the organisation

is found to be liable, and it is proved that the director has not taken all measurable actions to avoid the incident, such as providing safety wear to employees.

Another employmentrelated responsibility emerges out of the fair employment of personnel and employment relations, varying from sexual or racial discrimination to harassment at the workplace and unfair dismissals.

Directors’ responsibilities go beyond employmentrelated issues and are extended towards the routine practices within the organisation. Directors have responsibilities towards various stakeholders, mainly shareholders, lenders such as banks and creditors, as well as customers in general.

But how can a director be held responsible towards these people?

There are various instances where a director could be held liable towards stakeholders.

One of the common risks which could give rise to liability is when a defective product on the market causes damage to property or injury and illness to consumers or customers. This would give rise to civil or criminal proceedings against the manufacturer. Should the manufacturer or director be unsuccessful in defending the claim, the damages caused to the injured party should be compensated in monetary values. Furthermore, the relevant authority could impose fines for breach of duty and failure to comply with set standards.

One must also note that directors are jointly and severely liable for acts commissioned by one director or more. Unawareness of an act is not usually considered as a defence grounds in the event of a court procedure. Thus, directors must ensure that they are all aware of the situation going on within the organisation they hold directorships in.

But can one manage the risks encountered by these responsibilities?

One way of managing risks is by having an adequate level of insurance cover which will respond to liabilities against directors or organisations.

One product which has been introduced to cover these types of risks is the Directors and Officers Liability insurance. The scope of this product is to give financial cover for claims arising out of the post of director, where such claims would result in being fortuitous and beyond the control of the director facing charges.

Within this product, there would be a pre-agreed monetary limit between the insured and the insurer, up to which the insurer would be liable to pay in the event that the insured would be held responsible for their acts.

Furthermore, there have been enhancements to certain policies, widening the scope of cover to meet the added responsibilities carried by the directors. There are also products which would extend cover to include liabilities arising out of the course of the employment. The Employment Practice Liability insurance caters for liabilities which the director or the organisation may face following a claim made by any employee with regards to the Employment and Industrial Relations Act. These products even cover the insured for any legal expenses incurred by the director insured to defend the claim.

Another product which is constantly being updated to cater for added responsibilities imposed on the organisations is the Employers Liability insurance. This is different to the Employment Practice Liability insurance, in that this would not cover the employer or director for employment irregularities, but would cover the insured in the event that one would be found liable towards an employee during the course of employment.

Such claims could arise following an injury suffered while the employee is carrying work for the insured. Here, the employee has to prove that the insured was negligent towards him or her and must result in the employee suffering damage to property or belongings, injury or death.

Are all perils covered by a form of insurance product? Surely not. There are certain perils which are to date either not covered or else excluded under the policy, for which the insured has to carry the responsibility of. Various pressures on insurers are being continuously made by brokers in order to ensure that enhanced cover is given to their clients. This is done in order to ensure that the client is closing the risks gap as much as possible.

Money / Issue 09 - 41

175

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Kristoff Zammit Ciantar is a business analyst by profession and is founding director of Infusion Solutions Ltd. www.infusionmalta.com

Technology

Getting caught in the web Leveraging the web is not just about online presence, says Kristoff Zammit Ciantar. There are significant financial benefits too.

N

owadays going online is no longer about having a simple website that acts like a virtual shop window or a brochure site. Although many businesses have turned to the web to drive sales, most haven’t maximised the opportunities the web presents us with.

The internet provides opportunities for businesses to take their transactions and processes to a new level. Significant cost inefficiencies arise in business through moving information around or transferring it between different systems, departments, stakeholders and personnel.

Leveraging the web allows organisations to eliminate those overheads and sources of error simply by integrating all corporate information into a unified and shareable knowledge and resource base.

In a globalised world, businesses are realising the benefits of automating processes and are moving more of their core systems to the web to generate income or increase efficiencies.

Businesses can leverage the power, flexibility and connectivity of the web in a number of ways, whether via web services or web solutions that integrate with the rest of the business, or systems that slash operating costs, as well as streamline the business through real time information sharing, business automation and staff, stakeholder and client collaboration.

As application development has undergone a transition over the last few years, with the migration of applications from traditional client/server designs to the internet, it is important to understand what has driven this change and the advantages and disadvantages of implemented web-based solutions in your business.

One of the most important advantages web-based solutions present is that an online software can be accessed from anywhere in the world. Today, remote and mobile users make up a large part of system users. Freed from the constraints of the traditional office,

Instant communications among employees, customers, suppliers, and other strategic partners – no matter where they are – is becoming increasingly critical. these users expect to access corporate information and applications from anywhere in the world, any time of day, from virtually any type of device. Instant communications among employees, customers, suppliers, and other strategic partners – no matter where they are – is becoming increasingly critical.

In addition, online solutions do not require a large up-front investment in software or support contracts. A webbased product also changes the database licensing cost from a per-seat model to a concurrent user model. This results in decreased deployment costs ranging from 25 to 75 per cent.

Another advantage of web-based applications is the reduced cost to install and deploy, upgrade and support the application. Web-based applications are installed centrally on a single server.

For businesses this means substantial savings because there is no need to visit each user PC to install the software.

Ongoing maintenance is also easier as new releases of the software are installed centrally, eliminating the need to update each workstation.

Online software facilitates safe transfer of data files and built-in security features can also be integrated with other applications and platforms. Good online software also makes provisions for creating back-ups for your data. As the software is online, it also reduces the burden on your computer systems and allows an organisation to benefit from the associated cost benefits as the amount of hardware required to run their systems is reduced.

Web-based solutions offer a lot of flexibility for future changes as they

are typically highly scalable. Another plus is that the front-end interface of a web based system tends to be more user-friendly since it incorporates the design conventions we have all become accustomed to on the web.

One possible disadvantage to a webbased application is performance. If the application is not written correctly it will perform badly. This can spell disaster for users if the application is meant to function well in real-time. As we all know the web in general is prone to delays – however, these delays can be minimised by placing the application within the intranet and ensuring high-speed communications to the servers and quality hardware to publish the website.

Technology is constantly upgrading and it is important to be savvy cognizant enough to leverage it and its advantages.

Software development has shifted towards web-based solutions. However websites are like the tip of an iceberg – what’s visible is only a small part of your business. What really keeps the clock ticking is the 90 per cent below the waterline – the rest of your business. It is here that you can easily leverage the range of powerful capabilities that the web provides to provide a host of financial and operational efficiencies.

Converting business processes to web-based applications provides organisations with the opportunity to save time and money, and improve the way they interact with clients, suppliers and business partners, from turning a website into a virtual 24/7 sales person with the power to drive sales around the clock, to online document management systems or intranets for sharing across locations, to billing systems, online project management and payroll.

Money / Issue 09 - 43

Marketing

Chris Mifsud is a director of a marketing communications agency and holds an MBA from SDA Bocconi, Milan.

Thrift or adrift?

In times of crisis, do you increase your marketing budget or tighten your belt, asks Chris Mifsud.

I

wonder, what did people complain about around boardroom tables before the more recent spate of recessionary events in the global economy? Well that’s stretching it slightly – after all, we’re hardly a nation that believes in holding back and suffering in silence. In fact, we are what we complain about.

But I haven’t even started and already I digress. Looking back just a few years, and having started my professional life in an industry that worships buzzwords, I recall the odious debut of the cost-cutting movement. Of course very little of us natives actually knew what the dynamic behind this global phenomenon really meant, but of course it’s not what one knows but what one gives the impression they know.

In practice, from Black Monday in the late 1980s up until the more recent palm-sweating sub-prime adventure, financial crises are not recent incidents.

Evidently, over the centuries nothing has changed in principle except possibly the speed of contagion. It used to be said that if the USA sneezes, Great Britain catches a cold, and if today Argentina takes to promiscuity, South-East Asia is already picking at scabs. So enter the great costcutting parade and all the uncomfortable moments between CFOs and marketing directors that it brought with it.

Now I’m a firm believer in the advancement of progress, which of course relentlessly demands greater efficiencies and the proverbial trimming of the fat. Because in fact, waste is one of the few absolute episodes in life that finally makes no one better off.

But of course, like most other members of the animal kingdom, the human species only really acts when driven to the limit. Just consider how the height of human efficiency and focus is reflected in the common Sunday night school

homework stretch – you had all weekend to do it, but you didn’t have to do it on Friday or Saturday. So of course we only proclaimed cost-cutting in the interest of achieving efficiency because we knew that something, now, had to give.

campaign to increase brand loyalty of your products notwithstanding your high-priced position. Not the same thing is it? Will it work? Yes of course it will, but it’s not tangible, resalable or adjustable for depreciation.

And now we enter the countless and endless sessions of the battle for budgets.

From personal experience, media and communications professionals are cursed with a few nuisances relevant to economic climate that are idiosyncratic to this sector. First, the marketing budget is usually one of the larger outlays of a company. Secondly, regardless of the scale of the budget, the ad agencies only take a very small slice of the fees, but are still regarded as the ones taking the whole pie. And finally, the industry does provide metrics for ROI,

This brings me to the central chapter of modern day financial struggles the world over. When the pressure is on, margins are squeezed, borrowing rates are tight and market shares are falling, do you gird your loins and increase your marketing efforts? Or is this the proverbial rainy day and you need to choke spending to all but the inexorable? I don’t have the answer to this conundrum, but I will propose some scenarios that will sift the legendary from the factual.

When the pressure is on, margins are squeezed, borrowing rates are tight and market shares are falling, do you gird your loins and increase your marketing efforts? but providing a service that focuses on increasing brand equity is not tangible or instantly obvious, thus possibly making it a pet hate of CFOs everywhere.

I’ll explain. Invest in a new IT set-up costing €50,000. The hardware arrives, the software is hitched on, you paid for it, and you got it. Now get the same amount and brief your ad people on a

The question of whether one invests more or less in communications during more austere cycles of the economy depends mostly on the type of business model. Let’s use two very elementary examples.

My first case study is the insurance sector. Highly competitive, saturated and commoditised in nature means margins are pruned, competitive gaps are small and filled very rapidly. This in itself would mean that the task of gaining precious market share points is arduous to say the least. This could also mean that when the economy dips, enough of a ripple could be created to stir the status quo and allow the bolder of players to invest further in their communications tactics while their competitors are distracted by the macroeconomic climate, and thus emerge as a net winner once the storm subsides.

My second example concerns a telecommunications provider. Firm believers in concretising their brand equity (again because the service has been commoditised) on a corporate and product level, during economic slumps, a

Money / Issue 09 - 45

Marketing

Mediterranean Islamic Finance Conference 2011

New Openings

Dates: 27th - 28th October 2011 During the past decades, Islamic Finance has experienced an unprecedented phenomenon of growth and scope. Its importance has consistently spread its roots across all continents. Its impact is also evident in small states such as Malta. The high turn out for the various Islamic Finance events organised by the Malta Institute of Management in the past years which attracted participants from various EU Member States, Gulf states and other countries situated in the MENA region supports such assertions.

The Malta Institute of Management will in October hold the Annual Mediterranean Islamic Finance Conference 2011 - New Openings. The conference will bring to the fold key speakers including highly renowned international Scholars to discuss practical issues and opportunities. The conference will shed further light on the opportunities Malta is already beneting from and the opportunities that exist which may lead Malta as being the Islamic Finance centre in the Mediterranean.

not uncommon occurrence is to minimise corporate branding spend aimed at keeping audiences engaged with broader and more emotional connections at corporate level, while keeping product level tactics going strong. Typically the latter are deemed as an objective pleasing quick fix since this communications is aimed at generating rapid return in sales or consumption. This is not to say it is correct, but arguably regarded as an inevitable lifeboat strategy that, though not long-term, is neither considered knee-jerk.

Finally, and to neatly tie up with my Sunday night homework hypothesis, another admirable trait of mankind and particularly evident in us islanders, is the phenomenon that whenever resources are scarce, clever solutions typically emerge that proffer a higher level of efficiency than before.

So the result of economic challenges also leads marketing spenders to fine-tune their efforts and reach higher levels of precision targeting and tactical methods. Once again, digital marketing has saved the day for many blue-chip ad spenders who in the face of restricted budgets have found solace in the lower cost, flexible content offering and precision targeting attributes of digital media.

The maxim that necessity is the mother of invention has a very real, modern dimension to every R&D, brand and business development team who will tend to shine if or when the anxiety of economic struggle is not seen on the horizon, but staring us right in the face.

Main Conference Sponsor – Al Baraka Bank

Gold Conference Sponsors – Ernst & Young, HSBC Bank Conference Sponsors – ANSAR Financial, Country Proler, Emirates Islamic Bank, Erremme Fund Advisors, Finance Malta, Institute for ISLAMIC Banking and Finance (IFIBAF) Conference Media Partners – Islamic Finance Information Service, MENA Fund Manager, Red Money Group, Money Magazine

Interested parties in the opportunities being shed by Islamic Finance in particular across the Mediterranean region should therefore register their participation for the conference electronically on www.maltamanagement.com (News & Events section).

The Mediterranean Awards for Global Excellence in Islamic Finance will be held under the Distinguished Patronage of His Excellency, Dr. George Abela, President of Malta.

Media partner

46 - Money / Issue 09

One shot, one thrill To mark World Photography Day, Avantech and Canon organised a photography competition with a €1000 voucher up for grabs.

Six judges were given the hard task of choosing 15 finalists from the more than 200 photographs submitted.

Judges were Times of Malta photographer Darrin Zammit Lupi, Kevin Casha, president of the Malta Institute of Professional Photographers, Louis Agius, president of the Malta Photographic Society, Mario Sammut of the BOV Photography Club, Mario Mintoff of Photocity, Valletta and Daniel Cassar Alpert representing Avantech.

The final 15 photographs were exhibited at Avantech’s new premises in San Gwann. The public had the opportunity to view the works and by voting for their favourite, stood a chance of winning a €200 voucher.

The winner, Stephen Buhagiar, was chosen during drinks held at Avantech’s premises. His winning shot ‘Thoughts and smoke’, as well at the other 14 finalist photographs can be viewed on the Canonmalta.com facebook page. The winner of the €200 voucher drawn during the event was Emile Vassallo.

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Country Profile

Capital gains and losses The streets of London are no longer paved with gold, says Vanessa Macdonald.

I

f you talked to anyone about London’s economy a few weeks ago, their eyes would have sparkled. The Olympics are energising the British capital and according to a 2006 study has the potential to pour £600m into the east of England.

But what a difference a few weeks make. All of a sudden, the sparkle has been dimmed by shock as pundits try to analyse what caused the unexpected rioting in Tottenham, which spread to so many other places in the UK. The riots may have been the “shopping riots” but the impact on the economy – even if not yet to be fully understood – is clearly far from ideal.

How were things before the riots? On paper, the economy in London was vibrant and was outperforming the UK’s economy as a whole, even though forecasts for the future for both were still tepid – with many downside risks.

Still, there are some encouraging factors in place, if you are an optimist. A Lloyds TSB study found that firms in London were the most confident of any region, with the retail sector faring better than in the rest of the UK (although a consumer confidence index by GfK found that consumer confidence is still going down in both London and the UK), and annual output growth up 2.5 per cent in the first quarter of 2011 (2.7 per cent in the fourth quarter of 2010). The index of business activity indicates that there were increases month after month in the second quarter.

This has had an impact on the number of jobs created with increases also being reported in the second quarter. Of course,

48 - Money / Issue 09

this also helped reduce the number of unemployed seeking jobseekers’ allowance, which was just 4.3 per cent of the resident working age population, as at the end of July 2011. The Olympics will help directly with jobs: £600m spent on the infrastructure is compounded by the creation of 40,000 training places and 50,000 people getting support to return to work.

London’s housing market is, on the whole, stronger than that of the UK. In fact, while annual house price inflation in the UK was -3.5 per cent in the second quarter of 2011, in London, house prices were going down by only 1.4 per cent. The forecasts are for house prices to rise in London but to fall even further in the rest of England and Wales.

Again, these figures mask the fact that London homeowners faced more pressure than the rest of the British when the housing market started to crash. One investment manager reported earlier this year that mortgage repossessions were higher in London than the average for the rest of the UK. What impact will the riots have outside the direct impact of looted and destroyed businesses, lost working days, claims on insurance companies and the damage caused to the retail sector?

The British Retail Consortium estimates that the cost to high street stores alone will reach £200m and statistics from the Local Data Company indicate that more than 48,000 of the 476,000 outlets surveyed had been affected either through direct attacks on their premises, or indirectly through lost trade.

Vanessa Macdonald is a freelance journalist in her spare time, covering a wide range of lifestyle and economic issues.

Fast facts Is London on the way to recovery?

What impact will the riots have outside the direct impact of looted and destroyed businesses, lost working days, claims on insurance companies and the damage caused to the retail sector?

Not the brightest picture – but we haven’t yet spoken about financial services, which accounts for 20 per cent of London’s Gross Value Added and which employs some 352,000 people. The financial sector paid £53.4b in taxes in 2010 (11.2 per cent of total government tax receipts), down from £61.4b the previous year. So that sector too is under pressure, with the past few weeks adding more gloom to the European economic scenario which will have a ripple effect through financial institutions.

•R etail sales in London are holding up, especially in the West End, with sales up 6.8 per cent on the year compared with a UK figure of 0.6 per cent •E mployment statistics do not tell the whole story, as the unemployment rate is not evenly distributed across London. Moreover, one in three of London’s unemployed are aged under 25 •T he financial services sector accounts for 20 per cent of London’s Gross Value Added and employs some 352,000 people

London has survived much worse over its millennia of history and the forecasts from the Greater London Authority are that London’s net contribution to the UK fiscal position will actually rise substantially by 2015/16, with the financial and business services sector remaining a core driver of growth.

London definitely has an important role to play in the UK’s economy – it accounts for over a fifth of it – and with over 1.7 million graduates, and 14.7 million international visitors who spent over £8.7b in 2010, there are still sound foundations on which the city can grow.

Nothing like a touch of London optimism to keep the wheels of business turning.

Bricks and mortar - the cost of living a capital life Nine out of the top 10 most expensive neighbourhoods in the UK are in London, with the only exception being Virginia Water in Surrey. That’s no surprise, given that half the UK’s property millionaires live in London.

Kensington Palace Gardens, also known as Billionaires Row, is the most expensive neighbourhood in the UK. The average property price in Kensington Palace Gardens – which is home to Saudi and Brunei royalty, Russian oligarchs and Lakshmi Mittal, Britain’s richest man – is £19.2m.

Money / Issue 09 - 49

Design Kris Micallef is a junior architect and photographer.

The first bastion of design Architecture Project has made it to the final round of the prestigious Inside Festival of Interiors Awards in Barcelona with a project that redefines creative re-use. Kris Micallef climbs the double-helix staircase.

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he Inside Festival of Interiors Awards is being held this year for the first time in Barcelona, Spain from November 2-4.

Architecture Project at work.

Photo by Kris Micallef

The Inside Festival follows the success of the World Architecture Festival and celebrates interior design and its creators. Awards are given in 11 categories, including bars and restaurants, creative re-use, cultural and civic purposes, display, education, health, hotels, offices, residential, retail and transport. Apart from awards for each category, an overall entry will be chosen as the World Interior of the Year.

Architecture Project (AP) submitted its recently completed project for the conversion of a historic property on St Barbara Bastion in the creative re-use category. It was recently shortlisted to the final round of the competition. The project undertook to completely remodel older commercial premises into a mixeduse building. Included in the project were office spaces at the lower levels with related necessary amenities and a luxury apartment above overlooking the Grand Harbour.

View of reception. Photo by David Pisani

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Located on the edge of the historic inner-harbour of Valletta it provides breathtaking views of the area. With a view towards the capital being named European Capital of Culture for 2018, the project seems to underline the need for the promotion of the right level of

Double-helix staircase from above. Photo by David Pisani

investment towards Valletta and for encouraging private investors to take on board the many challenges the city poses to create renewed high standard properties, capable of attracting new tenants and residents back to the city.

Among the many challenges that AP faced as it developed its ideas for the project was the planning requirement for mixed-use buildings of offices and residential units, in Valletta as elsewhere around the islands, to have two separate staircases designed to avoid day-to-day interaction between the occupant-groups of the building.

Most urban planners recognise the importance of mixed day and night uses in the urban environment as they add vitality and encourage social interaction to the day-to-day activities of the residents and occupants.

Entrance to public facilities. Photo by David Pisani

Certain of our local planning regulations hinder rather than encourage this process and creative solutions need to be found to stay within the requirements and promote the spirit of mixed-use buildings. In the case of

Double-helix staircase. Photo by David Pisani

Money / Issue 09 - 51

Design

the property on St Barbara Bastion the building’s footprint was small and little space was available to have two separate staircases. The project team overcame this limitation by designing a doublehelix staircase, providing separate, even if intertwined, access to both offices and residential units.

The architects succeeded in guiding visitors and occupants through the vertical void within which the doublehelix sits, providing them with a unique experience of light, materials, sounds and views interacting while climbing and descending the double-helix.

Meeting this design challenge required a unique solution and this was key to the project making it to the finals of the Inside Festival this November.

For the passionate, dynamic man

Detail of split-level in the offices.

Photo by Architecture Project

52 - Money / Issue 09

Zen for Men White Heat Edition Eau de Toilette by Shiseido is a fragrance which adds spice to life with its free, dynamic, vigorous feel with absinthe accord. It’s wickedly seductive from start to finish, from a surprising icy freshness to an extreme bitterness elegance. The top note of icy mint leaves and crunchy green apple accord makes for enduring, powerful freshness, lifting a blend of sparklingly zesty lime and hassaku. The middle note has the elegance of the woody rhododendron, twisted with sparkling nashi, elegant juniper and spicy cardamom. The last note is an addictive absinth bitterness underlining a sensual masculine trail of musk, sandalwood and sage leaves. Available in 50ml. Shiseido is exclusively represented by C+M Marketing Ltd.

French Connection sunglasses, €61.00 Ecco leather business card holder, €44.90 Tommy Hilfiger cardigan, €149.00 Ecco leather agenda €59.90

Work & play Photography: Kris Micallef - www.krismicallef.com Styling: Carina Camilleri Model: Matija at models.com.mt Location scouting: Peter Carbonaro, Ian Causon Shot at an apartment in Valletta.

Mexx jacket, €139.00 Mexx shirt, €42.95 Ecco leather business laptop bag, €194.90 Mexx trousers, €75.00 Ecco brogue shoes, €164.90 Tie, stylist’s own

Mexx tie, €27.95 Mexx shirt, €42.95 Tommy Hilfiger jeans, €99.90 Tommy Hilfiger belt, €49.90

French Connection tracksuit pants, €31.50 French Connection hoodie, €34.50 Ralph Lauren vest (pack of two), €39.00 Ecco trainers, €159.95 Opposite Tommy Hilfiger v-neck, €109.00 Esprit jeans, €89.95

Tommy Hilfiger shirt, €99.00 Ralph Lauren underwear, €25.50 Opposite Ralph Lauren bathrobe, €150.00 Ralph Lauren underwear, €25.50

Autumn hues Autumn has arrived. Set a stylish mood in rich browns, purples and burgundies.

Photography: Tonio Lombardi / Stylist: Kira Drury

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01. Tommy Hilfiger socks, €11.95 / 02. Ecco Shoes, €159.90 / 03. Ralph Lauren zip-up jumper, €155.00 / 04. Piazza Italia hat, €5.99 / 05. Mexx purple polo top, €42.95 / 06. Debenhams beige trousers, €45.00 / 07. Springfield checked shirt, €31.99 / 08. Debenhams watch, €33.00 / 09. Mexx belt, €37.95 / 10. French Connection dog-tag necklace, €25.00 / 11. Carpisa bag, €115.00 / 12. Esprit light brown polo top, €39.95 / 13 Tommy Hilfiger checked jumper, €129.00

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01. Accessorize scarf, €21.50 / 02. Carpisa bag, €25.90 / 03. Piazza Italia cardigan, €22.99 / 04. Esprit floral skirt, €49.95 / 05. Mexx beige trousers, €27.50 / 06. Debenhams mac jacket, €89.00 / 07. Springfield boots, €70.99 / 08. Ralph Lauren knit dress, €80.36 / 09. Tommy Hilfiger heels, €109.90

Money / Issue 09 - 61

Cuisine

The taste of home Trattoria da Pippo and Zammeats butcher’s shop and delicatessen at Arkadia Food Store, Portomaso cook up a tasty collaboration.

Photos by Christian Sant Fournier

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rattoria da Pippo in Melita Street, Valletta is the home of good, simple food. Patron Francesco Cutajar and his kitchen brigade make sure that the menu changes depending on what’s freshly available on the day – one ingredient that is always available is fine meat imported by Zammeats butcher’s shop and delicatessen from Millers of Speyside, Scotland.

Based in the heart of the Scottish Highlands, Millers sources and produces quality beef, lamb and pork and is a certified member of Quality Meat Scotland’s Specially Selected Scotch beef, lamb and pork schemes.

All pork supplied by Millers comes from one producer, which is an absolute guarantee of traceability, consistent high quality and knowledge of excellent farming and welfare practices.

The Ballindalloch Beef Collection is the new premium brand from Millers of Speyside – the brand has been designed to showcase the best of Millers’ locally sourced beef from farms in the Spey valley. Millers is also renowned for top quality Aberdeen Angus rib eye beef.

Millers also specialises in dry ageing, which improves the texture and flavour of bone in beef.

01 Fresh appetiser This appetiser of fresh goat’s cheese, sundried tomatoes and Sicilian olives is beautiful in its simplicity and the perfect introduction to a hearty meal. The goat’s cheese, sundried tomatoes and Sicilian olives are available from Zammeats delicatessen.

02 Grilled Aberdeen Angus beef rib eye You need

Method

350 gr beef rib eye from Millers of Speyside, imported by Zammeats

Season the steak well then grill the steak over a high heat.

Allow three to five minutes on each side, then rest for about five minutes. Reheat the steak in a high temperature oven for a few minutes.

5 tbsp olive oil Salt and pepper

For the roast potatoes, drizzle the potatoes with olive oil or duck fat, add a sprig of rosemary, salt and pepper and cook in the oven for 20 minutes.

For the rucola salad, dress a bunch of fresh rucola leaves with olive oil, add some parmesan shavings and serve.

03 Sweets for my sweet A dessert inspired by Italy’s beautiful south – cassatella siciliana, fresh ricotta cannoli and kiwi and custard treats.

62 - Money / Issue 09

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The finest foods All the fine ingredients used in these recipes come courtesy of the Zammeats butcher’s shop and Zammeats delicatessen at the Arkadia Food Store, Portomaso and Zammeats butcher’s shop at Giuzeppe Calleja Street, Swatar.

Zammeats are the top local importers and distributors of quality meats, including Charolais, Aberdeen Angus and other

premium meats from France and Italy.

Zammeats also import and distribute Wagyu-Kobe beef, renowned for its texture, tenderness and flavour.

For more information visit www.facebook. com/Zammeats, send an e-mail at zammeats@onvol.net or call on 7940 5205.

The Zammeats delicatessen stocks the finest foods, including quality hams, salamis, foie gras, compotes and the best cheese selection on the island.

At Zammeats, food just tastes better.

Money / Issue 09 - 63

In business class

OUT OF AFRICA

A novel approach to hospitality shows how businesses can take less and give more to the community, says Mona Farrugia as she travels to Africa.

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Town, has lately been referred to as, “One of the best GMs in the industry” by the Financial Times.

You can always tell when a board is male-heavy because the modus operandi is so formulaic. Years ago, I worked for a huge banking corporation which, under tremendous pressure to look like it had moved with the times, finally placed a woman on its board. And guess what her role was? The corporate charity of course.

Pace introduced me to Debbie Meyer, the CEO of &Beyond, an ecotourism hostelry which spans Botswana, Kenya, Mozambique, Namibia, South Africa, Tanzania, India, Victoria Falls and Zambia.

t took us long years to realise that in business, men and women do things differently.

Industries are now admitting that this is an untenable situation and that it is affecting the way they do business – they are now open to real change. The hospitality industry is slightly different as women have made tremendous inroads in the posts that matter already. The way women CEOs and directors work is somehow less fusty, less fussy, more real. Moreover, with hotels, they have changed the way we live whenever we pack those bags and go off on our holidays.

When I walk into a hotel, I can immediately tell whether it’s managed by a woman because everything, from the towels to the layout of the rooms, will have the kind of touch that somehow seems beyond male capabilities. Before the male readers start to object, read on.

When you stay in a hotel, do you prefer something that feels like the home you would love to have, or a corporate layout?

In Africa, that huge continent which is impossible to visit and not fall in love with, this is now palpable as women rule the hospitality industry. This is not to say that there aren’t brilliant male general managers: Nigel Pace, who is Maltese and runs one of the best hotels in the world, the Cape Grace in Cape

64 - Money / Issue 09

Meyer’s target is always to blend the beautiful surroundings of wherever &Beyond (quite literally) set up camp with integrated architecture and top notch accommodation.

They even have a charity foundation which allows the local community to blend in with the staff and the guests seamlessly.

It is as if they do not invade, as many hotels tend to do, but ask to be invited. Then they are warmly taken in with open arms and through them, so can we.

In all the camps which &Beyond manages, the food is sourced locally – the bacon on your breakfast plate may come from a pig which is reared a few metres away by a local farmer.

In Tembo, the ladies of the community grow the chickens the staff eat in their canteen. In Kichwa, the vegetables come from underneath your feet.

The non-profit charity, called Africa Foundation, covers everything from education to production, giving a whole new meaning to the proverbial giving the fishing rod, not the fish.

Children in the community are schooled in tiny colleges. When they leave to become doctors and teachers, instead of then trying to find work in cities, they return to their birthplace and pass on their knowledge to the new generations, creating a happy loop which makes both economic and social sense. It may take longer

Mona Farrugia edits and writes for food, travel and review website www. planetmona.com

peelings from our kitchens, we all consciously seek ways to leave a positive legacy.

“Even though we have a relatively small physical footprint, in terms of buildings and number of guests, we can have a disproportionately large positive impact on the wildlife and people. Our entire group of lodges comprises less than 450 bedrooms, which is smaller than a mid-size city hotel, yet we help sustain more than two million acres of the world’s wildlife.”

If you have never been to Africa, then maybe all your visual information will have come from something like the nature channels on television, or, terribly, from negative media coverage of droughts and poor people.

“When these regions have a sustainable means of income they will not use the land for mining, subsistence farming, consumptive hunting or abandonment and relocation to the cities,” Meyer tells me. Sounds simple enough.

than just collecting money from staff and distributing it, but this model has more emotional logic to prop it up.

Guest participation goes well beyond that of many hotels worldwide which simply do things like emblazon rooms with instructions to re-use the towels. Clean up operations by guests are very paternalistic and always turn into a local PR disaster: ‘Hello, I’m from Europe and I’ve come to sort out your dirty village, you dirty villagers.’ &Beyond Phinda, a camp stunningly situated between the Mkuze and Makasa game reserves of the lush KwaZulu-Natal region in South Africa, has pioneered a way for small land owners to manage wildlife on their properties – this, in turn, led to the formation of the Phinda Private Munyawana game reserve. It is a pioneering project as land management in such huge areas is a massive crux but it is also an obvious example of how small decisions can have large impacts.

The buzz word at &Beyond is ‘care’.

“We care for the land, care for the wildlife and care for the people,” Meyer says. “We have set standards and managed to create a world-class travel business built on ethics. It is through this that we drive meaningful benefits back into the community. We do so intuitively and maybe that is why our guests find their experiences with us more rewarding.”

“We believe all businesses can take less and give more, and we seek to do this through our actions, big and small, every day. Whether it is pioneering the reintroduction of endangered species, such as black rhino, or cheetah breeding, preserving threatened sand forests or simply managing the vegetable

Through a simple innovation, &Beyond and the Africa Foundation have helped address one of the more urgent issues – water supply. They introduced hippo water rollers, drums that hold 90 litres of water and are easily rolled along the ground by means of a stainless steel holder. Traditionally women and children carry five-litre containers on their heads. When pushed, the relative weight of the roller is 12 kilos, which means that even children can operate them with ease – one roller can alleviate water supply problems for a family of eight.

Nature programmes are a wonderful introduction to the continent but you can never actually realise how simply outstanding being there with the cheetahs, the lions and even those menacing-looking hyenas can be. Years ago in South Africa’s Kruger National Park, I was woken up by the ranger at one in the morning. “Come,” he urged me. We joined a group of very stunned guests (most of us were still drunk from the very good South African wines) in the jeep and were driven to a spot in the middle of the camp where two leopards had decided to spend the night mating. The experience was overwhelming.

The camp’s respect for the environment, in such surroundings, becomes overwhelmingly important. Every single step a camp takes has to be measured and respectful.

Things we take for granted as guests, such as finding fluffy towels every time we take a shower, become a logistical nightmare. Asking for kobe beef instead of eating local meat would be ludicrous – kobe will need to be transported hundreds of thousands of miles.

Guests play a role which goes well beyond that of cleaning up – the guest does not dirty in the first place. The camp’s management helps you do this. In the case of &Beyond so do the other guests and the people in the immediate community.

Now that’s the kind of holiday you want – not just guilt-less but one that has you glowing from the real good you’re doing.

Mona Farrugia edits and writes for food, travel and review website www.planetmona.com.

Money / Issue 09 - 65

Advertising

Go large or go home Amit Raab urges us to rethink how we spend our advertising budget by looking at the most creative campaigns from this year’s Cannes Lions International Festival of Creativity.

Amit Raab is a digital marketing consultant.

“Half the money I spend on advertising is wasted, and the trouble is I don’t know which half,” William Lever, founder of Unilever, once said.

An advertising budget is very easy to spend, but hard to spend right. Yet every year, there is one award ceremony that inspires us to ask more from our advertising and shows us what can be done with courage, determination and innovation.

The Cannes Lions International Festival of Creativity celebrates the world’s most creative work in advertising. With over 8,000 delegates from more than 90 countries, this year’s edition yielded the usual selection of inventive and creative advertising gems. Three jewels shone brighter than the rest.

The first advert is for the National Australian Bank, which wanted to show that its brand was not in collusion with the other major banks in Australia. It also wanted to reassure its customers that it does not trick them by abusing an oligopoly, but actually veers away from the policies of the other institutions to provide its clients with better rates.

The public perceived NAB to be in a relationship with the other major banks, so NAB created a national break-up campaign. It publicised it just like a romantic break-up between two lovers but on a much grander scale. The bank created YouTube videos of NAB crashing its rival CEO’s meetings, holiday retreats and restaurant meals with letters, loudspeaker messages and even singing waiters, communicating the message that it had been dumped. It also posted live news of the break-up on Facebook and Twitter and collated all its efforts on an all-encompassing blog.

On this blog (http://breakup.nab.com.au/) clients could also see news stories about the break-up and most importantly, why NAB were breaking up with the other banks. The creative and innovative approach was a success. NAB got more than $5m worth of PR and was the number one trending story in Australia on Twitter. In terms of results, it received 80 per cent more loan enquiries, 50 per cent more credit card applications and 20 per cent more account openings per week. The NAB brand didn’t fight public perception, but embraced it and flipped it around using a risky but effective campaign.

Volkswagen Sweden’s ‘the fun theory’ campaign aligns the brand with the concept that people can be encouraged to do social good through making it fun. For the latest in the series of initiatives. VW placed a speed camera on one of Stockholm’s busiest roads. Drivers below the speed limit would get rewarded by being placed in a lottery to receive a substantial amount of money, from a pot created by fines from speed limit abusers.

The campaign earned a lot of traditional media exposure with prime stories on the BBC world service and The New York Times.

VW also posted the campaign through viral videos online and on its site, encouraging debate on blogs and social media worldwide.

The campaign saw a 22 per cent drop in average speed on this busy Stockholm road during the campaign and an increase of 84 per cent market share for VW Sweden in the targeted eco car market.

Finally, a campaign which challenged a nation’s patriotism and won. Romania’s national chocolate bar ROM was losing popularity, with Romanians opting for newer Americanised 66 - Money / Issue 09

bars, ROM decided to test the nation’s patriotism and launched a one-week campaign through social media, on the news and in stores, to promote the new all American, ROM bar.

ROM produced a huge viral and traditional ad campaign stating that if customers wanted American chocolate bars, then ROM would deliver, with its new red white and blue persona. It encouraged forums online to discuss the American takeover of the ROM chocolate bar and set up a brand team to give 24/7 answers to online discussions, fuelling the patriotic fire.

As expected, Romania’s chocolate enthusiasts revolted. In only one week ROM had 75,000 visits to its website, all to protest against the brand’s new identity. A huge flash mob was organised to combat the change by fans

of the old ROM bar and over 10 groups were created on Facebook to rebut the new take on the traditional and loved ROM bar. After one week, ROM ran its apology to the public, as planned, saying that the chocolate would stay all-Romanian, and urged all fans to be at ease.

Despite its edgy and provocative nature, the campaign was a total success.

ROM saw a 20 per cent increase in market share and 80 per cent rise in favour from the Romanian public.

A great campaign doesn’t need to come from a great budget, but from a great idea.

Cannes Lions International Festival of Creativity has given us that yearly boost to be courageous and more creative. It has taught us that like in finance, in advertising, sometimes high risk is high yield.

partnership stores sliema · 48, tower road · the point shopping mall · level -1 · tigne valletta · 26, merchants street · tel: 2060 1075 email: info@espritmalta.com