The Malta Business Observer

INTERVIEW

Issue 85

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May 31, 2018

Distributed with Times of Malta

John Gauci-Maistre, organiser of the Malta Maritime Summit, insists that EU regulations and bureaucracy have to act in the interest of the EU and its maritime stakeholders. see pages 5 and 6 >

NEWS Local business people weigh in on why they believe that Malta’s gender pay gap continues to persist. see pages 9 and 13>

INDUSTRY FOCUS

Demand for on-plan builds reaches fever pitch Marie-Claire Grima As property in Malta becomes an increasingly hot commodity, demand for on-plan builds has reached an all-time high, with most real estate projects now being sold long before construction has reached completion, according to various sources which spoke to this newspaper.

“Current demand is very strong,” said Sandro Chetcuti, President of the Malta Developers Association. “Most of the projects are being sold on plan. The demand is present for several reasons. First of all, people are confident that

they can honour their loan repayments, due to the strength of the economy. Ten years ago, people were afraid to invest. When your job is at risk, and the economy is at risk, people just stay put and keep playing the waiting game.”

“Second, people see property as an investment, and at the moment, there’s not really anywhere else you can invest. Third, renting demand is so huge, that besides being an investment, buying a property can generate a monthly income, once it is complete. It’s easier for speculation, and most people prefer to live in brand-new apartments, rather than used ones. And lastly, property in Malta is booming,

and people tend to buy more during a boom period than when prices are going down.”

Mr Chetcuti added that he believes that the demand for new dwellings will remain at a peak – “especially when the developer is much more competitive when it comes to things like prices and terms and conditions.”

Engel and Volkers Sara Grech’s Managing Director, Benjamin Tabone Grech, confirmed the strong demand. “I would say that from 100 enquiries, about 50 per cent are related to properties on plan, and 65 per cent of our portfolio Continued on page 3

What are the implications of Blockchain technology on your business, and how will it change the game? see pages 21 and 22 >

STOCK MARKET REVIEW In the past decade, the euro/US dollar (EUR vs USD) exchange rate has experienced significant swings, reflecting the crises faced by both regions. Is it time for the US dollar’s comeback? see pages 24 and 25 >

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NEWS

Property experts insist there’s no bubble in sight Continued from page 1 concerns on-plan properties. This has increased to more than double, compared to 10 years ago.” And while there’s still a gap between the price paid for an on-plan build, and the price you pay for a finished place, Mr Tabone Grech said it’s getting smaller. “Prices have increased considerably, marketwide. The gap between the price of what is being sold on plan and what you may move into immediately has become considerably less.”

Steve Mercieca, CEO of Zanzi Homes, said that Malta is currently living through a sellers’ market. “This has motivated property developers to invest and build a higher number of units, and together with the trend of building larger developments, the properties for sale on plan have increased. With a higher amount of availability, buyers have more options to choose from and therefore demand has increased. The increase in property prices has also led buyers to purchase more now, in order to secure today’s prices.”

He noted that as recently as 10 years ago, it was rare to buy on plan – it was much more common to buy finished, or at least, in shell form – which may also explain the vast increase in on-plan buyers. “The current situation offers people higher investment opportunities, increasing the demand for buy-to-let units which are generally purchased on plan. Furthermore, the higher availability of on-plan brand-new properties has increased the prices of second-hand properties. The latter are becoming scarcer because people today prefer to keep their first purchase, rent it out and invest in a second one, reversing the trend of a decade ago.”

Despite this, all of the property agents and developers this newspaper spoke to were adamant that there was no property bubble looming. “There is a very big difference between describing a rise in prices

“People are confident that they can honour their loan repayments, due to the strength of the economy.”

- Sandro Chetcuti, President, Malta Developers Association due to high demand, and a property bubble,” said E&V Sara Grech’s Mr Tabone Grech. “We have a large market for the size of our population and over the past few years there have been triggers in our economy that have contributed to a faster turnover of properties that in the past lay dormant. This includes international companies which are basing themselves out of Malta, and an increase in the number of individuals who choose to rent, which has given confidence to real estate investors. Maltese families have always had a strong culture of multihome ownership, and now they have even more reason to continue to invest in real estate. I would say that around 40 per cent of what is on the market is priced at market value, while the remaining 60 per cent is slightly higher. The main factor here is that the buildings being reno-

vated or newly-constructed to a high standard are achieving premium prices, as the number of properties built and finished to high standards is minimal.”

“I do not believe there is a property bubble,” Zanzi’s Mr Mercieca insisted. “Both the rental and property sales market are currently catching up to the level they should be, and have only responded to the increase in demand, which is a natural economic process. I also feel that before a bubble could happen, the market will stabilise itself.” The MDA’s Mr Chetcuti simply added, “sometimes the prices do not reflect the real market value, but it does not mean that there is a property bubble. A scientific study carried out by KPMG showed that there is no trace of a property bubble at the moment, and no one contested these findings.”

Even if there’s no bubble in sight, the constant uptick in property prices may have a detrimental effect on the economy as a whole, as even those working in the more well-paid industries are finding it harder and harder to cope with the cost of living.

In March, the Malta Employers’ Association warned that employers “could not compensate for the inflated property market,” and expressed concern that the existing workforce shortage is getting worse, because the option of recruiting foreign employees was becoming less viable. And in April, Ulle Skottling, COO of Videoslots Ltd, said that gaming companies were losing foreign employees, who were choosing to limit their contracts in Malta to a maximum of 18 to 24 months because of the high cost of living, especially property rental

prices – even with iGaming’s aboveaverage wages.

“We understand where they are coming from and we often set up meetings with iGaming companies to offer our support and knowledge of the current market prices,” said Zanzi’s Mr Mercieca.

“I agree that rental prices have increased exponentially over the last few years but I also do believe there are often unrealistic expectations from both the landlords and the tenants. This has motivated us to be the first letting agency to publicly share our data in an attempt to offer guidance both to landlords and tenants on the average prices to expect in the top 12 rental locations on the island.”

“We need to look into building typologies in more detail,” offered E&V Sara Grech’s Mr Tabone Grech. “It is clear that we either have a typical house for rent or a standalone apartment. I spent many years living, studying and working overseas in the UK and Germany, and building typologies catering for specific target markets gives people an opportunity to choose where would be most suited for them based on budget, services and location – for example, student accommodation, or aparthotels for business individuals on a medium-to-long stay on the island. We have none of these and this is what needs to be considered, among many other things, to begin to correct some of the issues in the rental market.”

He added that one of the reasons why building prices may be going up is because of the lack of workers and high demand for construction and renovations. “I look at this matter by means of opportunity.

Specialists are cropping up across the board, be it in old Maltese stone work or high-tech services installations, so the benchmark of quality for the traditional contractor has risen. This is something that we are in dire need of – higher quality across the board.”

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INTERVIEW

EU must act in the interest of maritime stakeholders, says Malta Maritime Summit organiser Martina Said The European Commission’s approval of Malta’s tonnage tax system last February – which came under fire in 2011 and triggered a long and complicated investigation – is welcome but still a sore point, said John Gauci-Maistre, CEO of GM International Services Ltd, and the organiser of the Malta Maritime Summit.

Following the investigation, it was found that Malta’s tonnage tax procedure was, by and large, in line with the Commission’s maritime guidelines issued in 2004, which state that income derived from maritime transport vessels, such as containers, bulk carriers and general cargo, are not subject to further tax. The vast majority of vessels registered under the Maltese flag fall under this structure.

“We had a tonnage tax legislation which was no different to that of any other jurisdiction, fully approved by the EU, and either due to certain bureaucratic shortcomings or because competition among flag states within the EU is getting tougher, we were under investigation for a very long time. I was personally very disappointed, and we suffered a lot because of it,” said Mr GauciMaistre. “I am pro-EU, but it is disappointing when EU regulations and bureaucracy do not act or perform in the interest of the EU and its maritime stakeholders. In the words of the famous Onassis, ships have propellers: touch them and they leave. A ship can operate from anywhere in the world, it doesn’t need to be in the EU – so why scare it away?”

Despite the setback, Malta’s merchant ship registry continued to grow. In 2017, it

registered a growth of over 8 per cent, and with 75.2 million registered gross tonnes, it remains the largest registry in the EU and the sixth largest globally. Mr Gauci-Maistre asserted that the industry’s success today goes back to its very beginning, when the Merchant Shipping Act was passed unanimously in Parliament in 1973, establishing a solid foundation.

“Since then, there has never been political disagreement between parties on Malta’s maritime sector, and both the industry and the authorities showed that they were there to listen any time there was an issue. From then on, Transport Malta has been – and remains – a listening ear, and tries to accommodate without jeopardising safety. In fact, we have a reputation for being a bit too strict, but even though the ship owners complain, they respect us for it.”

Mr Gauci-Maistre added that, with regards to fiscal advantages, Malta is more or less on the same platform as other countries which have an open registry like Malta’s. “The biggest issue we have is that, since we’ve been growing steadily over the years, we’ve automatically been creating adversaries within the EU, which are targeting the same sector and which see us as a threat to their tonnage.”

Malta’s yachting industry has also been growing steadily, and in 2017, a 97 per cent increase was recorded in the number of new registrations. Mr Gauci-Maistre said that while the figures are certainly encouraging and the yachting industry has come a long way, it is still facing difficulties of its own.

“One important issue which we will be discussing at the Malta Maritime Summit this October is Blue Flag marinas. We talk a lot about Blue Flag beaches, but what about

JOHN GAUCI-MAISTRE PHOTOS: ALAN CARVILLE

“We talk a lot about Blue Flag beaches, but what about striving to achieve Blue Flag status for our marinas?”

striving to achieve Blue Flag status for our marinas? I’d like to see us get to the stage where the yacht owner and the marina regulator are on the same page, where one knows they’re entering a marina which follows regulations on one hand, and where there’s zero tolerance for pollution, waste dumping and sub-standard vessels on the other, making the marina suitable for swimming.”

With 45 years of experience in this sector, Mr Gauci-Maistre asserted that the maritime industry is a dynamic one that is constantly changing, and therefore a more

proactive approach is needed from all stakeholders to remain ahead of the competition. “We’ve always had the full support of the authorities, but the biggest concern is that success could make us rest on our laurels, which is risky. The registry has to remain, at all costs, avant-garde, and it has to think ahead in all sectors related to the industry, be they environmental, managerial, related to regulation, crewing, port automation or cyber security.”

Continued on page 6

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e Malta Business OBSERVER |

May 31, 2018

INTERVIEW

“e registry has to remain, at all costs, avant-garde” Continued from page 5 Automated ports are gaining traction the world over – one of the largest automated container terminals worldwide, the Shanghai Yangshan Deep Water Port, began trial operations last December. Mr GauciMaistre said this is where the industry is heading, as it enters a phase of digitalisation, both for ship owners as well as ports.

“If a port is automated but a ship isn’t, then it won’t be allowed in. On the other hand, if a ship is equipped with an automated chip but the port isn’t adequately geared up, it cannot enter the port. Another concern is cyber security – if a cyberattack

“It is disappointing when EU regulations and bureaucracy do not act or perform in the interest of the EU and its maritime stakeholders.”

takes place while a ship is sailing in remote locations, it is powerless,” he explained. “A ship’s ability to reduce emissions also comes into play here – if a ship enters the harbour but the port doesn’t have a shore supply powerful enough to help it switch off its generator, then the ship owner cannot be blamed for polluting if the port isn’t adequately equipped to help it. Ships need to be run and cargo needs to be delivered, so all parties need to ensure they’re in sync in order for the industry to operate at optimal level. They’re challenging times, but very interesting times too.”

The second edition of the Malta Maritime Summit, which will be held between 1st and 5th October, will be addressing these issues and more, and will follow the success of the first edition, which took place on the eve of Malta’s Presidency of the Council of the EU in 2016.

Mr Gauci-Maistre said that, as international players in the maritime industry, it is fitting that Malta hosts a summit of this kind as other maritime countries do. But although it is being held locally, it is not about Malta.

“It’s an international summit, and the theme this year is ‘The Voice of the Industry’. The aim is to be as diplomatically provocative as possible with heated yet constructive debate, and for questions to be answered,” he explained. “We need to address issues and call a spade a spade, which is why we’ve created a system where delegates

can ask questions anonymously and without fear of repercussion.”

The summit will raise questions about the impact and effectiveness of the 2017 Valletta Declaration, the impact of Brexit on the EU maritime economy, the value of the EU’s maritime policy in light of a demanding and successful industry, the environmental sustainability of automation in the industry,

and whether banking regulations, due diligence and demands are stifling economic growth. Speakers will include, among others, Nigel Lowry, Greece Correspondent at Lloyd’s List; Mohamed Zaitoun, President and CEO of Zaitoun Green Shipping Ltd; and Angelo Scorza, from online maritime and transport economics magazine, Ship2Shore.

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NEWS

Malta’s persistent gender pay gap partly due to lack of flexibility, short school hours, experts claim Rebecca Anastasi Men in Malta are more likely to get the better-paying jobs on the market due to a number of reasons, including a lack of flexible working hours, short hours of schooling, and possible gender bias in headhunting, according to local employment experts.

Employment lawyer Roselyn Borg Knight told The Malta Business Observer that the gender pay gap – which, although generally perceived to be slight in Malta, rose from 7.7 per cent in 2011 to 11 per cent in 2016 – is indeed, “very worrying” and stressed that it must be addressed without any delay.

“An in-depth study should be carried out to fully understand the complexities of the situation and the precise reasons why it is getting worse. Perhaps it may be that there is an increase in income inequality. The highest-paying jobs today have even better salaries and more men than women are getting those jobs.”

She asserted that a debate needs to be had, not only about increasing female participation in the labour market, but also on “what jobs women are doing”, to ensure that they are “contributing when it comes to decisionmaking and influencing our country’s agenda.” Decisions to address the disparity should not be made according to perceptions, according to Dr Borg Knight, who emphasised the need for women in influential positions and for a proper plan, with a timeframe, which needs to be implemented “across the board, from the media, to the workplace to Parliament.”

And this plan needs to be on the Government’s agenda and a top priority, Dr Borg Knight asserted. “It is so frustrating that in 2018 we are still talking about

these issues and yet we are seeing no actual results.” She praised the initiative of free child care but emphasised that “one measure is not enough, and we are still lagging behind.” She also went on to list some of the other issues stopping women from achieving parity such as “the lack of flexible working and school hours not being long enough.”

Women’s participation on boards of directors is another “topic that we have been discussing for years on end,” she stated, and there has been little improvement. “There still are not enough women in the boardrooms,” she asserted, stressing the need for a plan in this regard too.

“Further opportunities are given by implementing measures which will ensure that women get a place in the boardroom and we need to ensure that they are given an equal opportunity. We need resources to focus on this issue as well as gender equality across the board. We need to set targets, have a plan on how to achieve those targets and give it the priority it deserves. It cannot be an afterthought!”

Echoing Dr Borg Knight, the President of the Malta Employers’ Association (MEA), Joseph Farrugia, pointed out that “more women may be employed in lower-paying jobs than men,” but in his view, this was “probably on the decline” as more women were achieving higher standards of education and “thus have access to higher-paying occupations.” Indeed, he linked the increased level in education to the rise in the number of women in senior management positions, asserting that more women are moving up “the structures of many organisations.” This, in his view, could result in an increase in female participation in the boardroom itself. “Any progres-

“It is so frustrating that in 2018 we are still talking about these issues and yet we are seeing no actual results.”

– Dr Roselyn Borg Knight, employment lawyer

sion should be based on individual merit, not tokenism.”

He pointed out that the figures on gender disparity “do not reflect differences in pay for the same job, but a comparative aggregate of earnings between men and women in the labour force,” and stated that “more female students taking STEM subjects might also help in reducing the pay gap.”

Yet, he noted that the gender pay gap may also be the result of women working “fewer hours due to other commitments. As long as many women opt to work shorter hours, the gender gap will remain, and possibly, increase even further,” he claimed. In the meantime, he said that the child care measures introduced by the Government, as well as family-friendly initiatives in

many workplaces, were positive.

“This is resulting in a transformation, due to a complex mix of socioeconomic factors, such as men’s increasing participation in the family. In the longer term, shifting family responsibilities might also lead to women working more and thus reducing the pay gap further.”

Continued on page 13

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e Malta Business Observer is Malta’s leading business newspaper distributed with Times of Malta every month.

Managing Editor Marie-Claire Grima

EDITORIAL

Publishers Allied Newspapers Ltd. Content House Group Ltd.

e price of growth The news that Bet365 will be relocating to Malta caused quite a stir – and not without reason. The group, which is one of the largest betting companies in the world, and registers annual revenue of €2.5 billion, was said to not only be acquiring a Maltese gaming licence and opening up a major new branch, but also reportedly set to relocate around 1,000 employees from its operations in Gibraltar, as soon as Brexit materialises. The Sunday Times of Malta, which originally broke the story, also revealed that the company has already signed a promise of sale agreement to acquire a large part of a new property development on Sliema’s Tigné peninsula for around €70 million to serve as the company’s hub of operations. While a statement from the company issued after the story broke downplayed the number of people who would be relocated to Malta, and pledged its commitment and presence in Gibraltar, the confirmation of Bet365’s Malta move is expected to make the company one of the biggest employers in Malta, and continue to supercharge Malta’s iGaming industry.

As an industry insider commented, it is not every day that 1,000 well-paid employees are relocated to Malta – but indeed, thousands of well-paid employees have been trickling into Malta ever since the country started seeking to establish itself as an iGaming giant. Due to the highly-specialised nature of the industry, much of the iGaming workforce is foreign, having been recruited for their skills – although more Maltese people are gradually joining the industry. The iGaming industry has created a powerful knock-on effect on industries across Malta, and the increase of affluent business professionals on the island has made every type of company which has dealings with the industry raise its game. From real estate companies which have seen their lettings business skyrocket, to catering establishments which marvel at the industry’s spending rate, both for business and pleasure, to hotels whose rooms now fill up with ease as soon as there’s a conference in town, even during shoulder periods, to software design companies that need to provide impeccable and tailor-made solutions to what are essentially sophisticated tech companies, the effect that the industry has had on a broad spectrum of sectors in Malta is hard to fathom.

Of course, there’s always the other side of the coin. While the influx of people moving to Malta has made the island a lot of money, it has also made Malta’s infrastructure – which unfortunately, has not been modernised with the same speed and agility as its regulations – creak under pressure. In fact, the European Commission has sounded the alarm over increased pressure on Malta’s infrastructure, natural resources and the environment, saying that tourism – another vital industry for Malta – could be under threat. “Robust economic growth has increased pressure on infrastructure and natural resources. In particular, the road transport sector faces major infrastructure and long-term sustainability challenges. Insufficient transport infrastructure and rising congestion costs are a barrier to investment,” the European Commission’s Country-Specific Recommendation (CSRs) on Malta’s 2018 National Reform Programme read. It also noted that “the increase in the number of vehicles and in traffic leads to rising greenhouse gas emissions and negatively affects air quality. They may also negatively impact tourism, which represents an important pillar of Malta’s economy.”

And it’s not just tourism, of course. People are coming to Malta to live here, and finding that they have nowhere to send their children to school or to day care, and no open spaces to take them to play. They have to pay outrageous prices to live in areas that are within walking distance of work, because transport links are still despicably backwards, and traffic jams abound, making the air unbreathable (where everywhere else in Europe is making efforts to go green, Malta’s addiction to private cars running on diesel and petrol is stronger than ever). When Bet365’s workers relocate to Malta – be there a thousand or a hundred of them – what will they find that will make it worthwhile for them to stay here? When other iGaming workers arrive here, will they think that the much-vaunted sunshine is enough to make them stay, especially if they can barely see it through a fog of exhaust? It’s time that everyone made a real effort to push Malta forward sustainably, rather than think far too short-term and burn through all our resources at once. The repercussions if we don’t are incalculable.

Advertising Enquiries Tel: 2132 0713 Email: info@contenthouse.com.mt Advertising Sales Matthew Spiteri Head of Advertising Sales Paul Azzopardi Jean Mark Meli Brand Sales Executives Advertising Sales Coordinators Lindsey Napier Marvic Cutajar

Printer Progress Press Ltd.

BUSINESS OPINION

10 key changes GDPR will bring about

Dr Wayne Pisani The General Data Protection Regulation (GDPR) introduced on 25th May is meant to harmonise data protection standards across the 28 EU member states and ultimately reduce compliance costs, complexity, risks and uncertainty, by ensuring that people’s data is adequately protected. A properlyimplemented data security policy will help your organisation handle this new law. Here are the top 10 key changes that the new rules will bring about.

1. Significant penalties The penalties for businesses or organisations that do not comply are now hefty. Any company holding the personal data of EU individuals will have to ensure they are compliant. The penalties for breaching the legislation can be high, with fines of up to €20 million or up to 4 per cent of a company’s annual revenue, whichever is higher, depending on the circumstances.

2. The right to be forgotten Thanks to very restrictive data handling guides, the GDPR puts

additional emphasis on the right of an individual to request that unnecessary personal data is deleted, which necessitates that the organisation ensures it has the processes and technologies in place to tackle such requests efficiently. Organisations are also required not to hold data for any longer than required, and not to change the use of the data from the purpose for which it was originally collected.

3. Enhanced obligations for organisations Data subjects need to have access to more information on how their data is being processed and where requests are specifically made, these have to be fulfilled within one month of receipt of the request. Where requests to access data are manifestly unfounded or excessive, organisations will be able to charge a fee for providing access. Subject access requests must also give all the information relating to purposes that should have been provided upon collection.

4. Stringent consent requirements For marketers in particular, there has been much debate about the

type of consent that might be required under this new regulation.

The GDPR requires that consent must be explicit, freely given for a specific purpose and easy to retract. The purpose for which the consent is obtained needs to be obvious to the data subject, including what their data is going to be used for, at the point of data collection.

5. Stricter breach reporting Significant data breaches will need to be notified to the local data protection authority within 72 hours and sometimes also to the individual. For many businesses, this may require quite a bit of training. It may require making changes to internal data security policies and how this is promoted in the organisation to ensure data breaches are properly understood and will be recognised easily.

6. Increased privacy impact assessments The GDPR requires organisations to carry out privacy impact assessments and formally identify emerging privacy risks, particularly for new projects. This means before organisations can even

begin projects involving personal information, they will have to conduct a privacy risk assessment and work with the Data Protection Officer (DPO), to ensure they are in compliance as projects progress.

7. Thinking of privacy in advance Termed as Privacy by Design, data protection safeguards must be designed into products and services from the earliest stage of development. Data controllers already need to implement appropriate technical and organisational processes to protect data against unlawful treatment, but the GDPR requires organisations to consider privacy from the very beginning of the planning process.

8. Increased record keeping Organisations must maintain registers of the processing activities they carry out, with mandatory data protection impact assessment (DPIA) for high-risk data processing. This applies to all organisations with more than 250 employees, as well as smaller enterprises where the data processing is likely to result in a risk to the rights of affected employees, the processing is not occasional

“e GDPR requires that consent must be explicit, freely given for a specific purpose and easy to retract.”

or the processing includes special categories of data. In practice, most small and medium size enterprises will be obliged to keep a record, covering the controller, data processes, categorisation of data and data subjects, erasure periods and data protection measurements.

9. Appointing DPOs Any business that depends on processing personal information will have to appoint a DPO, who will be an extension of the data protection authority to ensure personal data processes, activities and systems conform to the law by design. According to a study by the International Association of Privacy Professionals (IAPP), this requirement means that in Europe alone, 28,000 DPOs will have to be appointed in the next two years.

10. Wider regulatory scope The GDPR allows any European data protection authority to take action against organisations, regardless of where in the world the company is based. In the past, only data controllers were considered responsible for data processing activities, but the GDPR extends liability to all organisations that process personal data.

What’s more, the controller processor relationships must be documented and managed with contracts that mandate privacy obligations.

Dr Wayne Pisani is the Grant Thornton partner responsible for the corporate and financial services team in Malta.

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NEWS

Gender bias in headhunting could also account for income disparity Continued from page 9 But education, working hours and job roles are only part of the story. According to Marisa Xuereb, Raesch Quarz (Malta) Ltd Managing Director, the persistent pay gap can also be attributed to the rise in job mobility. She stated that while people are changing jobs more frequently, and increasing their wages with each move, “working mothers are typically less likely to change jobs at every opportunity because they need to take into consideration how their move would affect their family life.” Moreover, the fluidity in the labour market is resulting in an increased incidence in poaching, either by the employer, or, indirectly, through a recruitment agency. “There could be an element of gender bias in headhunting as well” said said.

Ms Xuereb praised the free child care initiatives implemented by the Government, stating that these had resulted in a surge in the female participation

rate but insisted that Malta needed “a major change in culture to be able to bridge the gap – something that realistically can only be achieved for the next generation.” She also noted the rise in female participation on boards, but remarked that this was increasing “very slowly”.

“At the rate it is going, it will take decades to close the gap. But we have to take into consideration the fact that for more women to be in the boardroom, some of the men already there have to leave it.

And you wouldn’t expect any volunteers for that,” she wryly noted.

She implied that quotas were not the answer to this, since it could “backfire on women” and encouraged women to “lean in” so that they become obvious choices on the basis of their “capabilities and apparent readiness to rise to the challenge, particularly in situations when even their male counterparts would hesitate.”

She said the perception that Malta’s gender pay gap was less than other countries could be be-

“At the rate it is going, it will take decades to close the gap.”

– Marisa Xuereb, Managing Director, Raesch Quarz (Malta) cause “in bigger countries there is often a significant element of commuting to and from work,” which affects the amount of time a parent has to take care of the children. Furthermore, “a relatively large portion of the local workforce is employed with the Government, where most jobs fall

within a system of gender-neutral pay scales.”

Indeed, according to Ms Xuereb, it is still “a challenge for working mothers to keep a fulltime job and raise a family,” particularly when working hours do not coincide with school hours.

One of the solutions she proposed

was educating children of both genders to grow up understanding that it is both men and women’s responsibility to take care of the family, both in financial and practical terms. This would go some way in addressing the stubborn reality created by the gender pay gap.

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CASE STUDY

e value-added business proposition of forfaiting London Forfaiting Company (LFC), established in 1984, was acquired by the FIMBank Group in 2003, giving the bank the opportunity to enter new markets and increase its global trade footprint. “LFC’s extensive market network enables its customers an extensive range of risk capacity and tenors for their cross-border transactions,” said Lorna Pillow, Senior Vice President of London Forfaiting Company. “LFC, a subsidiary of the FIMBank Group, is complementary since it acts as the forfaiting service provider.”

Ms Pillow explained that forfaiting is a form of receivables purchase, consisting of the without recourse purchase of future payment obligations represented by financial instruments, or payment obligations, normally in negotiable or transferable form, at a discount or at face value in return for a financing charge.

“A typical example of a traditional forfaiting transaction would be a client selling machinery out of Malta to India,” Ms Pillow stated.

“The debt is evidenced by a deferred 180-day letter of credit. The client would approach LFC for a quote on the Indian bank issuing the letter of credit. LFC would confirm whether it is willing to take the risk, and gives a cost indication. At this stage, LFC would need to know the country of the importer, the importer’s name, the underlying goods, the value of the contract, the expected shipment date and the repayment terms being sought by said importer.”

Once the terms of the contract are established between the im-

porter and the exporter prior to when the contract is signed, the client would ask LFC to issue a binding agreement. “Once the client ships or performs duties under the contract, they will present the documentation to LFC who will discount the Letter of Credit in our example, at a discount. Since this transaction would be closed on ‘Without Recourse’, the client has no further interest in the transaction and it is up to LFC at its own risk to collect the proceeds at maturity,” Ms Pillow added.

She stated that, in general, any document that evidences a payment claim which is valid and legally binding – bills of exchange, promissory notes, documentary credits, guarantees, book receivables and any other instrument that reflects a debt undertaking – can be discounted. With respect to size and tenor, a transaction can range from 100,000 US dollars to millions of dollars, with tenors ranging typically between one to two years. Nevertheless LFC can consider credit risks for up to seven years.

“Forfaiting enables an exporter to transfer various risks that accompany global export contracts by removing country (both political and transfer), interest rate and exchange rate risks, as well as commercial or payment risks,” Ms Pillow went on to say. “As well as transferring risk to the forfaiter, exporters benefit from this tool by selling receivables off the balance sheet whilst offering extended credit terms to their customers.

For example, an exporter may find

it beneficial to accelerate receivables at key accounting periods to improve their balance sheet position. Essentially, forfaiting allows exporters to offer longer-term credit solutions to their customers, making their products and payment terms more attractive, while at the same time cashing the receivables on their book.”

The Senior Vice President made a distinction between the primary and secondary markets. “In the primary market, transactions are originated and obligations can be purchased from sellers of goods and services or their buyers. In our earlier example, we described supplier credit transactions; however, LFC could also finance buyers. Pure working capital for the general financing of a company can also be provided. Therefore, in the primary market, the typical forfaiting client would be a company that exports or imports their goods and/or services.”

“The secondary market is conducted between finance providers who look at buying or selling the receivables originated in the primary market. Whilst banks, insurance companies and forfaiting houses are typically buying and selling such receivables, institutional investors such as asset managers, fund managers and pension plans are increasingly attracted to the forfaiting market, as assets are liquid and viewed as generally safe since the default rates are historically low.”

LFC maintains a dynamic and well-balanced portfolio of trade finance assets. It builds and structures deals with clients in the

LORNA PILLOW, SENIOR VICE PRESIDENT, LONDON FORFAITING COMPANY, A FULLYOWNED SUBSIDIARY OF THE FIMBANK GROUP.

“Forfaiting allows exporters to offer longer-term credit solutions to their customers, making their products and payment terms more attractive, while at the same time cashing the receivables on their book.”

primary market, and invests in a vast variety of trade finance products sourced from the syndicated loan and forfaiting secondary markets. “Syndication is the process by which a number of investors provide loans to a borrower, either

corporate or institutional. LFC participates in both primary and secondary syndicated loans,” explained Ms Pillow.

Although LFC has a global mandate, over the last few years, the market has seen a shift in trade

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from Europe to Africa and LFC’s demand for these assets has moved in unison. The excess liquidity in the market, heightened demand for trade finance assets, falling deal volumes and margins together with innovation in technology have opened the doors to institutions like LFC that can offer a specialist expertise in relation to emerging markets, Ms Pillow affirmed. “LFC has strategically located offices to capture these transactional flows and the resources to properly evaluate the risks that are associated with them at a ground level.”

With increased competition, market liquidity and falling margins on short-term funded forfaiting assets, LFC expanded its suite of finance products to provide increased risk capacity and products. “LFC is no longer a company purely focused on supplier credit forfaiting, but instead provides a wide range of trade finance and loan facilities. For example, LFC is now active in bilateral/syndicated loans as well as selling Loan Credit Default Swaps. LFC also works closely with the insurance market in securing longer transactions in more exotic markets.

An additional service that LFC now offers is that of football financing. Whilst football financing is undoubtedly a very specialist

area, the discounting of future cash flows from receivables is a perfect adaptation of LFC’s financing capabilities.”

Asked what differentiates London Forfaiting from its competition, Ms Pillow stated that the way LFC was set up gives it a unique place in the trade finance market.

“Rather than competing with banks in the primary market in terms of origination volume, we endeavour to create bespoke solutions to their highly specific needs, which tend to be out of scope for commercial banks.”

“LFC’s risk appetite is more holistic than that of traditional banks. This distinctive approach has been developed over a number of years and allows LFC to move seamlessly into frontier markets where the volume of transactions is greatest. LFC’s knowledge of foreign market conditions, expertise in documentation and trading requirements, coupled with a fast, efficient and quality service, is what distinguishes it from its competitors.

The close alignment between front, middle, and operations teams brings a focus on client relationships. I would therefore conclude by emphasising that it is indeed this focus on service that enables us to stand out when compared to our competitors.”

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Tektraco pioneering innovative optical LAN solution Rebecca Anastasi A passive optical local-area network (LAN) solution, designed to provide converged video, data, wireless access and telephone services at gigabit speeds, over single mode fibre, is being pioneered by Tektraco Ltd, suppliers of telecommunications equipment.

The technology allows enterprises such as hotels, schools and hospitals to upgrade or replace their infrastructure in a cost, and energy-efficient manner, Tektraco’s Head of Telecoms Paul Salnitro said. Mr Salnitro, an electrical engineer who graduated from the University of Malta in 2012, spent three years at ST Microelectronics Malta in the final test area of the plant, where he developed an affinity for test procedures and management.

As Tektraco's Head of Telecoms, he is responsible for the division and has taken a keen interest in fibre-optic technologies.

The passive optical LAN may save companies tens of thousands of euro in prohibitive capital and operational costs.

Indeed, the system introduced by Tektraco reduces the amount of cabling and hardware required, creating a seamless, neat solution to providing fibre-optic level data and voice services with capabilities even able to stretch over 20km.

“It takes a different design philosophy which is much more flexible than is the norm,” Mr Salnitro explained. “You have your Optical Line Terminal (OLT), which sits in the server room, linked up with the single mode fibre, possessing a 20km range, and which we can split 64 ways.

The network ends at the Optical Network Terminals (ONTs) – the modem-like devices which deliver network connectivity by converting back to the good old RJ 45 to which we are so accustomed,” he expounded. “Furthermore, the new network can run in parallel to an existing one. The OLT seamlessly interacts with switches and routers, and to a certain extent so do the ONTs.” The technology is known as GPON (gigabit passive optical network) and carries the technical moniker of ITU-T G.984. You may know it as ‘fibre to the home’ or the acronym FTTh, which is the de facto standard for large telecom operators. But the revolution, in Mr Salnitro’s words, “is moving into the building itself.”

The result is a simple and efficient network – without the convoluted set-up frequently required. “Deployment time is shorter as cable runs are reduced by twothirds; there is no need for cabinets and there is centralised commissioning via the OLT,” the Head of Telecoms continued to explain. Moreover, the equipment is

“e specific cabling hardware being introduced

by Tektraco has also been designed to strengthen network performance, while mitigating the downsides which usually accompany fibre-optics.”

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“much easier to maintain due to the centralised provision and management via the OLT.” Mr Salnitro went on to specify that Tektraco also provides extensive after-sales, with its 24/7 service-level agreement, ensuring longevity.

The specific cabling hardware being introduced by Tektraco has also been designed to strengthen network performance, while mitigating the downsides which usually accompany fibre-optics.

Mr Salnitro clarified by demonstrating the different types of cables usually used, from the thick Cat-6 to the more delicate standard 2mm fibre-optic cable. “Break-out or patch cord fibre-optic cable usually consists of the fibre-optic core and a jacket, wrapped in Kevlar or aramid yarn for strength, and wrapped again in another jacket. But we soon realised that this cable was unsuitable for long conduit pulls,” he asserted, while pulling apart some cable in front of us.

As a result, Tektraco was determined to utilise a cable which is substantially thinner than the Ethernet Cat-6, but very difficult to pull apart. The new iteration selected consists of two strength members and a single fibre.

Other challenges usually associated with fibre are the large bend radius and expensive termination but Tektraco uses the G.657 cable, which has an increased bend radius tolerance, reducing this radius down to 5mm, and a field installable connector which reduces costs substantially.

“Usually, you would need to use a fusion splicer – a specialised piece of welding equipment – to fuse the pigtails,” Mr

Salnitro described. Floor, rack, and cabinet space are thus significantly reduced, thereby decreasing associated costs and allowing for a smaller footprint, essential for enterprises seeking to maximise their network capabilities but not necessarily possessing a large-enough area which can be dedicated specifically to the purpose.

In addition, Tektraco is the only contractor on the island that tests the fibreoptic for dirt before installation. “The equipment is expensive, and this prohibits other companies from doing it,” Mr Salnitro said. “The most important element in fibre-optics is dirt. It’s a real issue and is part of the reason you don’t find the technology everywhere, so we test every connection and make sure it adheres to the industry standard of IEC61300-3-35. This is our definitive procedure since once you connect the cables you’re unlikely to remove them,” he affirmed.

Mr Salnitro specified that companies can reduce up to 30 per cent of their network energy use, when compared to standard active Ethernet solutions. This is because the passive architecture requires no power within the outside cable plant, known as the Optical Distribution Network (ODN), thus doing away with any of energy requirements related to this infrastructure. This increased efficiency and the stringent controls affected by Tektraco ensure that the cable and network topology lifespan can be measured in decades as opposed to years.

Another major advantage, according to Mr Salnitro, is enhanced security. The

“e most important element in fibre-optics is dirt. It’s a real issue and is part of the reason you don’t find the technology everywhere, so we test every connection and make sure it adheres to the industry standard.”

PAUL SALNITRO, HEAD OF TELECOMS, TEKTRACO. PHOTOS: ALAN CARVILLE

technology enables Tektraco to know “how far and when the fibre has been tampered with,” and comes with a standard 128-bit optical encryption, with “the added benefit of being immune to broadcast storms and man-in-the-middle attacks,” he specified.

This allows the system to be futureproof, not solely in terms of innovation, but also in terms of its durability and longevity.

For further details, call on 2137 4329, or email telecomsales@tektraco.com

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Don’t leave succession planning too late, warns Family Business Office Regulator The greatest advantage of a family business is the sense of value that its family members and employees tend to have, according to Nadine Lia, the Regulator for the Family Business Office. “They value and cherish the business.

They respect their forefathers’ legacy, and they have certain expectations that they should excel.

So when they go through a difficult period, they’re more likely to accept tightening the belt, and taking the necessary measures.

Also, there’s an instinctive passion put into their work. For them, it’s not just a nine-to-five job; it’s a lifestyle,” Dr Lia said.

Naturally, there are downsides to working with some of your closest relatives. “When you work within a family business, you are mixing the emotional with the practical, because at the end of the day, you may have to go home and live with your employees! It’s not necessarily a disadvantage, but it can become difficult if the situation is mismanaged. Additionally, when working with family members, the business may not benefit from certain external expertise – it may lack good governance, or not have effective management. You could be excellent at what you’re doing, but not doing the best when it comes to managing it.”

The Family Business Office opened in March 2017, following the adoption of the Family Business Act on 1st January 2017. “There’s long been a call for policy makers to give focus and assistance to family businesses, and this had also been expressed by the European Commission,” Dr Lia explained. “Malta has taken the initiative to be the first country to assist family businesses, in this respect. Our aim is to help family businesses in their growth, as well as their crucial transfer stage. The reality is that although most of the businesses in Malta are

DR NADINE LIA, REGULATOR, FAMILY BUSINESS OFFICE.

family-owned, the majority of them fail to set a suitable plan to transfer the family business when the time comes. Our aim is to help them bridge that difficulty and ensure that they do not encounter pitfalls over the next decade.”

There are a number of incentives for family businesses which have been recognised as such, and most of them fall under three categories – fiscal, tax credits or governance. “All of these incentives,” Dr Lia expanded, “have been designed to provide help throughout every stage of the family business, whether it’s in the operational part, the planning stage,

“Communication in a family business can be quite sensitive, but the more you do it, the better it is.”

or the transfer phase. Take-up has been good, with around 200 companies signing up for the incentives introduced by the Act, and another 50 waiting for approval.”

Most family businesses in Malta are small-to-medium enterprises (SMEs), employing between five and 20 people, Dr Lia said, but there are no boundaries on who can make use of the Family Business Office’s services. “We work with everyone from the largest to the smallest business, as well as firms which don’t actually fall under the category of family businesses, but still work with their family members. We take an open approach because we

know that a business restructures itself as it goes along; in terms of size, there’s no distinction.”

Many of the pitfalls that family businesses tend to stumble into concern governance and succession planning. “Through the Family Business Office, we aim to provide assistance and incentivise family businesses which look into these elements to make sure everything is in order. At the same time, a lot of them have fiscal and financial difficulties, so we’re hoping to give them a motive to address that situation, and have a central guiding door to knock on.”

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Communication is key to overcoming some of the thorniest issues that these businesses face.

“Some people we talk to think that because they work with their parents or children every day, they don’t have to communicate clearly what they want. They’ll say things like ‘look, my parents know I’m unhappy,’ but those are just the nonverbals that you take for granted because you’re related. In reality, in a non-family business, you’d go to the Human Resources Department or speak to your boss, and say, ‘listen, I’m thinking of moving on,’ or ‘I need different resources to what I have so far’. Communication in a family business can be quite sensitive, but the more you do it, the better it is,” she advised.

The Family Business Office has been open for just over a year, but Dr Lia explained that its greatest impact has been increased awareness among the businesses which sought out its free services. “A lot of family businesses work in isolation, unaware of what other family businesses do, and not knowing how to handle their own difficulties. They just assume that this is their situation, their problem, and theirs alone. Through the Family Business Office, we have created a lot of awareness – it’s like we’ve lifted the lid, and shown businesses that this is how other fami-

“e issue of how to manage and run the business can end up being the elephant in the room.” lies work, this is how you could consider working, this is what you could do to better your situation, and so on. Many businesses tell us that prior to working with us, they didn’t know how to go about addressing their situation as they never had a reference point.”

Dr Lia warns businesses not to leave the planning stage for when it’s too late. “You can never plan the future of your business early enough, and it is the responsibility of the owner to ensure that he or she does the job and doesn’t avoid it. Unfortunately, the issue of how to manage and run the business can end up being the elephant in the room – the issue of who’s going to take over rears its head, children become frustrated employees, cousins come into the picture, the company’s founder

reaches his or her 80s and is still there, so it becomes a whole, uncomfortable silence. You need to plan and you need to communicate – continually – with family members, employees, and advisers. Look at your best options –

you have to know who’s interested, who’s capable, and who’s confident enough to take over when the time comes.”

The Family Business Office will be present at the B2B Expo and

Conference taking place on 1st June at the MFCC in Ta’ Qali.

For more information about the Family Business Office and other upcoming events, visit www.familybusiness.org.mt or FB: FamilyBusinessOfficeMalta

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INDUSTRY FOCUS

What effect will Blockchain have on your industry?

It’s early days yet for Blockchain, the decentralised, distributed and public digital ledger that is used to record unalterable transactions, but with Malta taking the lead when it comes to the regulation and utilisation of this ground-breaking technology, it’s impossible not to look to the future and envision its effects on your own sphere. A number of leading businesses shared what they believe will be the implications of the technology on their business, and how these will change the game.

NAJI AL-SADI NM Group, Cryptocurrency Consultant As the use of Blockchain becomes more mainstream, how do you think it will revolutionise the financial services industry?

Just a few short years ago, the internet was a technology used by professionals to carry out business tasks. Nowadays, we use the internet to do everything from sending a work email to ordering a pizza delivery at home.

As new technologies continue to grow and become more mainstream, they not only lose their exclusivity, but with widespread use, the dynamic becomes far more collaborative, leading to further developments.

This is the current situation with Blockchain. As time goes on, we have been embracing this technology heavily and finding new ways to use it. With

Blockchain technology, the finance sector will see services like cross-border payments, and share trading become increasingly facilitated. Blockchain will also bring with it other benefits like smart contracts, improved identity management and added transparency, and traceability of transactions. When it comes to Blockchain, with a bit of innovation and creativity, the possibilities are endless.

Dr WAYNE PISANI Grant Thornton, Tax and Regulatory, Partner What is the most significant change that Blockchain will bring about in the field of financial services?

Wherever transparency, auditability and trust are needed, Blockchain will be a

game changer, introducing efficiency and hence reducing costs if planned and developed strategically. Regulated financial services pivot around an independent trusted third party; central banks, stock exchanges, clearing houses, card acquirers, settlement organisations, custodians, and the list goes on.

In a Blockchain world, resorting to a permitted Distributed Ledger Technology environment, each of the respective regulated firms (banks, fund managers, payment services providers, and insurers) would maintain an identical copy of the ledger – tamper-proof with no room for dispute or error. The intermediary party of trust will become superfluous, reducing the intermediaries in a transaction.

Reducing costs in the regulated financial services world automatically translate to

lower own funds requirements and therefore more capital available for new ventures, improving capital growth.

Dr IAN GAUCI GTG Advocates, Communications, Media and Technology, Partner How do you think the legal sector is likely to be revolutionised through the introduction of Blockchain?

Technological innovation, including Blockchain, is set to regenerate as well as disrupt the legal profession. Blockchain could alter the landscape of contractual law, and in future, even dispute resolution.

Dry code will fuse with wet code and we will have instruments like smart contracts Continued on page 22

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Ushering in a new technological era Continued from page 21 which will be autonomous, self-enforcing as well as solution-driven and intelligent, with the aid of big data, digitalisation and Artificial Intelligence (AI).

The technological innovation will also usher in a new echo system and new value streams, as well as gravitate the legal industry to better economies of scale and scope, particularly when the technology becomes more mainstream and affordable.

I do not envisage that innovation will remove the need for lawyers, however. On the contrary, I believe that lawyers will be a main lynchpin in the new ecosystem if they emancipate themselves. Innovation will usher in a new breed, a rise in the lawyer who can leverage technology and bring legal domain expertise to clients. This will add to the intrinsic value of the lawyer, as a human with a combination of skills and empathy, in the role of a trusted advisor.

Educational institutions, including universities, will need to create new and innovative cross-sectorial courses to empower the new generation of legal students for the new paradigm they will be facing. The legal profession as an employer and owner of a business will also need to assess what kind of workforce it is going to train and how, depending on the anticipated skill set which will be required because of this technological innovation. There are interesting times ahead for sure.

DAVID GALEA BEAT Ltd, Chief Executive Officer How will the rise of Blockchain facilitate business transactions whilst ensuring proper authentication of identities carrying out such transactions?

Blockchain technology is a revolutionary enabler that is bound to dissolve and create new business models in a variety of industries and in all walks of life. Most new business models will be forged to exploit two key benefits of the technology, namely lower transaction costs and greater security in the authentication and verification, not only of transactions but also of identities.

Under traditional systems, identities are authenticated for different purposes through multiple un-coordinated central authorities that verify a set of parameters for their myopic purposes. Hence, individuals develop multiple identities in various forms including identity cards, passports and driving licences among others.

Multiple identities do not only carry additional processing costs in terms of authentication by third parties but are vulnerable and exposed to identity theft due to a single point of failure. Through a Blockchain-based platform, control over identity management is delegated to the owner who in turn retains a single coherent identity used for multiple purposes – as

opposed to multiple identities for specific purposes – that is independently verified and confirmed by the majority of the nodes in the network possessing a copy of the encrypted data. Hence not only are transaction costs with a third party greatly reduced due to simplification in the authentication process, but risk of identity theft is minimised due to no single point of failure in the process.

The process is, however, not without its challenges. Blake Hall, CEO of Id.me posits that the creation of synthetic or fake identities and identity verification are critical hurdles yet to be overcome. Since Blockchain systems are nothing more than decentralised ledgers, they cannot yet be used to replace the independent process of identity verification by formal authorities who would often require the physical presence of the actor for whom the identity is originally created.

PHILIP REUCHLIN Henley & Partners, Senior Project Manager What are the implications of Blockchain for the residence and citizenship-planning industry?

The use of Blockchain, while still a very young technology, could have major implications for the residence and citizenship-by-investment industry.

While the mainstream focus to date has

been on cryptocurrencies and their use as a payment method for citizenship programmes, this area is perhaps the least interesting and is also more than likely to be regulated.

On the other hand, identity is one area where Blockchain might be a useful tool, notably for self-sovereign and decentralised identity management. In this case, identity data would be owned not by any central authority but rather by users themselves, whose claims about their identity would be verified by trusted parties. Citizenship under these conditions would be a verifiable attribute of a person’s identity and could be revoked, granted, and so on by the issuing government.

Another area where Distributed Ledger Technology might be applied is the due diligence and background screening of programme applicants. Rather than going through these checks again and again, with Blockchain technology, a single background check could be performed and then reused during various subsequent applications.

However, given the public and immutable nature of Blockchain, great care has to be taken with regard to what data is stored. On the other hand, many electronic ‘Know Your Client’ identity solutions work well using ‘traditional’ technology.

Blockchain thus still has to prove its worth as a replacement technology.

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STOCK MARKET REVIEW

e return of the US dollar

Christopher Mallia The US dollar and the euro are the two most traded currencies in the world, reflecting the leading economic position of these two regions across the globe. In the past decade, the euro/US dollar (EUR vs USD) exchange rate has experienced significant swings, largely reflecting the crises faced by both regions and the responses from the relevant authorities, as well as political developments on both sides of the Atlantic.

Since currencies are priced against one another, the performance of a currency signifies relative strength or weakness against another currency. In this article, the convention being used to quote

the EUR vs USD exchange rate signifies the amount of US dollar required to purchase one unit of euro. Hence, a higher absolute value refers to a weaker US dollar or stronger euro, and vice-versa.

Prior to the 2007 and 2008 global financial crises, euro strength was evident with an exchange rate of USD1.60. However, the US dollar gradually gained ground as the swifter and more expedient response to the financial crises by the US Federal Reserve compared to its European counterpart, enabling the North American economy to emerge from recession in a shorter timeframe. In fact, by the end of 2008, the US Federal Reserve had reduced its benchmark interest rate to a range of 0 per cent to 0.25 per cent from 5.25 per cent. Apart from a significant reduction in the interest rate in just 16 months, the US Federal Reserve also embarked on an extraordinary asset purchase programme as it grew its balance sheet by around USD3.5 trillion over seven years.

This aggressive monetary policy expansion led the US Federal Reserve in September 2014 to outline a plan of monetary policy normal-

isation whilst the European Central Bank (ECB) was still cutting its benchmark rate, as the region was also seeking to counteract the adverse effects of the sovereign debt crisis across the eurozone. As a result, the exchange rate fell to USD1.36, and as the US Federal Reserve actioned its monetary policy tightening with a rate hike in each of 2015 and 2016 (whilst the ECB maintained an accommodative stance), the EUR vs USD exchange rate approached parity as it hit the USD1.035 level – the lowest level in 14 years.

On the other hand, as the US Federal Reserve accelerated its monetary policy tightening in 2017 (comprising three rate hikes of 25 basis points each), the US dollar unexpectedly started to weaken against the euro and the exchange rate trended higher towards the USD1.10 level. This turnaround was likely triggered by the uncertainty surrounding the policies (including budget deficits, tax cut plans and protectionism measures) of the then newly-elected US President Donald J. Trump, as well as the surprise €20 billion a month reduction in the monthly asset

purchases of the ECB in late 2016, which overshadowed the fact that the ECB actually expanded its stimulus programme further into the future. In September 2017, the ECB then announced a further reduction in its monthly asset purchases with effect from January 2018 to €30 billion. These actions, coupled with a wave of upbeat economic data from the eurozone, fuelled speculation that the ECB was moving closer to its first rate hike since 2011. As a result, the EUR vs USD exchange rate reached USD1.2555 in mid-February 2018 – the highest level since mid-December 2014.

Nonetheless, in yet another turn of events, the EUR vs USD exchange rate subsequently started easing as the US dollar strengthened in line with the incongruent pace of the economies within the respective regions. In fact, prospects of a rate hike in Europe were being pushed forward further into 2019 on the back of a string of disappointing data including lacklustre inflation readings. In this respect, the ECB’s latest economic forecasts published in March 2018 revealed a lower estimate for inflation in 2019 (1.4 per cent compared to the previous forecast of 1.5 per cent) and also show that the region’s inflation rate is not expected to come close to the ECB’s target of just below 2 per cent until 2020. The latter is also confirmed by forecasts published by the European Commission, the Organisation for Economic Co-operation and Development (OECD) and the International Monetary Fund (IMF), among others. Furthermore, the ECB projections also indicate that in 2019 and 2020, real gross domestic product (GDP) growth is projected to slow as the impact of past monetary policy measures should dwindle going forward.

In contrast, the economic momentum in the US is expected to remain supported as the latest projections by the US Federal Reserve (also published in March 2018), indicate an inflation rate of 1.9 per cent for the US in 2018 (as opposed to 1.4 per cent for the eurozone) and is expected to reach 2 per cent in 2019 and 2.1 per cent in 2020.

Additionally, the unemployment rate in the US of 3.9 per cent is al-

ready significantly below that of the eurozone at 8.5 per cent and is expected to reach 3.6 per cent in 2019 whilst the ECB anticipates an unemployment rate of 7.7 per cent next year. This economic progress should enable the US Federal Reserve to continue pursuing its monetary policy normalisation plans which anticipate that the federal funds rate should exceed the 3 per cent level by the end of 2020 (compared to the current range of 1.5 per cent to 1.75 per cent). In contrast, the ECB does not provide any official forward guidance on its benchmark interest rate and its governors have been sending out vague and mixed signals on when the central bank will be considering actioning a rate hike.

Apart from economic considerations, the exchange rate is also heavily influenced by developments in the political sphere.

Again, the eurozone is facing greater challenges in this respect than its counterpart across the Atlantic. Currently, the Five Star Movement and the Northern League in Italy, two parties which

“Apart from economic considerations, the exchange rate is also heavily influenced by developments in the political sphere. Again, the eurozone is facing greater challenges in this respect than its counterpart across the Atlantic.”

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gained most votes in the recent general elections, have failed to form a government. Their populist and Eurosceptic views have created a lot of uncertainty and more importantly have once again highlighted the fragmented nature of the political scenario in Europe.

Meanwhile, in the US, the political model is more unified. Although the current President is unpredictable, the US has made political strides under Mr Trump’s leadership including the recent agreement with China, whereby the Asian country has committed itself to increase its purchases of US goods whilst the US will suspend the planned imposition of trade tariffs which had raised fears of a trade war between the two largest economies in the world.

These latest developments have led to an increased demand for the ‘safe-haven’ US dollar with the EUR vs USD exchange rate dropping to a new six-month low of USD1.1715. The significant differences between the two regions both from an economic perspective as well as from the political sphere, are reflected in the respective bond yields. In this respect, it is important to highlight that the spread on the two-year yield (namely the difference between the yield on a two-year US Treasury and the German Bund) has

reached its highest levels in almost 30 years.

Although volatility is likely to persist going forward from one week to the next as currency markets are influenced by wide-ranging factors, prevailing conditions indicate support for a stronger US dollar. Meanwhile, although the structural issues in European politics could very possibly derail or

slow down the economic progress achieved so far, other factors, such as the recent surge in the price of oil to USD80 per barrel for the first time since late 2014, could impinge on this latest bout of strength of the US dollar. In fact, it is worth noting that analysts are not in agreement over the path of the EUR vs USD exchange rate. This is reflected in recent publications by some major

research houses, with one bank forecasting the EUR vs USD at the USD1.15 level by the end of 2018, while another bank predicts a scenario with a stronger euro at the USD1.28 level.

Christopher Mallia is the Head of Research and an Investment Consultant at Rizzo, Farrugia & Co (Stockbrokers) Limited.

Rizzo, Farrugia & Co. (Stockbrokers) Ltd, “Rizzo Farrugia”, is a member of the Malta Stock Exchange and licensed by the Malta Financial Services Authority. This report has been prepared in accordance with legal requirements. It has not been disclosed to the company/s herein mentioned before its publication. It is based on public information only and is published solely for informational purposes and is not to be construed as a solicitation or an offer to buy or sell any securities or related financial instruments. The author and other relevant persons may not trade in the securities to which this report relates (other than executing unsolicited client orders) until such time as the recipients of this report have had a reasonable opportunity to act thereon. Rizzo Farrugia, its directors, the author of this report, other employees or Rizzo Farrugia on behalf of its clients, have holdings in the securities herein mentioned and may at any time make purchases and/or sales in them as principal or agent, and may also have other business relationships with the company/s. Stock markets are volatile and subject to fluctuations which cannot be reasonably foreseen. Past performance is not necessarily indicative of future results. Neither Rizzo Farrugia, nor any of its directors or employees accept any liability for any loss or damage arising out of the use of all or any part thereof and no representation or warranty is provided in respect of the reliability of the information contained in this report. © 2017 Rizzo, Farrugia & Co. (Stockbrokers) Ltd. All rights reserved

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GTG announces participation in DLT and Blockchain events GTG Advocates is pleased to announce its participation in a number of events over the coming months with meetings and discussions among other industry professionals.

Dr Ian Gauci, a partner at the firm, will be contributing to a panel discussion at the upcoming B2B Expo here in Malta and subsequently analysing the proposed laws on Virtual Financial Assets, as well as the creation of a DLT Regulator with oversight on Innovative Technology Arrangements at an event organised by the Embassy of Malta in Warsaw in June.

GTG will also be attending and participating in the upcoming London Blockchain Summit and Blockchain Expo Europe in

Amsterdam, as well as the RegTech Expo London Trade Exhibition. Later on this year, GTG will also be taking an active part in the highly-anticipated DELTA Summit, and the Malta Blockchain Summit, which are expected to attract thousands of delegates worldwide promoting DLT technology and its related business opportunities.

We believe the next few months will cement Malta in the crypto/DLT sphere as it prepares to implement the new laws regulating cryptocurrencies, Distributed Ledger Technologies (DLT) and smart contracts, and we hope this will continue to attract innovative technologies and platforms to our island.

Join the Malta Pavilion at Cityscape Dubai

Global leader in residence and citizenship planning

Maltese property developers, estate agents and other organisations are being invited to participate with Property Malta at the Malta Pavilion at Cityscape Dubai in October.

The event is the largest of its kind in the Middle East, spread out over 42,000sqm and attracting no fewer than 45,000 visitors from more than 190 countries.

“We firmly believe that this is the next big step in our endeavours to promote all that Malta has

to offer, and the top investments available in the Maltese real estate market,” explained Sandro Chetcuti, Chairman of Property Malta, stating that the support shown by 10 exhibitor partners at the Cannes Property Expo last year will be even bigger for this larger presence in Dubai.

Cityscape Global is being held from 2nd to 4th October. As part of its proactive approach and in order to broaden participation as

much as possible, Property Malta subsidises costs for Maltese operators, through its own substantial investment in the event.

To register their interest in participation, enterprises must submit their corporate profile by no later than 15th June. If there is more demand than can be accommodated, the allocations will be made by lottery draw.

For more information visit www.propertymalta.org

Henley & Partners is the global leader in residence and citizenship planning. Each year, hundreds of wealthy individuals, families and their advisors rely on our expertise and experience in this area. Our highly-qualified professionals work together as one team in over 30 offices worldwide.

The concept of residence and citizenship planning was created

by Henley & Partners in the 1990s. As globalisation has expanded, residence and citizenship have become topics of significant interest among the increasing number of internationally-mobile entrepreneurs and investors whom we proudly serve every day.

The firm also runs a leading government advisory practice which has raised more than USD 7 billion in foreign direct investment.

We have been involved in strategic consulting and the design, setup and operation of the world’s most successful residence and citizenship programmes.

Henley & Partners Malta Ltd, Aragon House, Dragonara Road, St Julian’s. T: 2138 7400; www.henleyglobal.com PARTICIPANTS ON THE MALTA PAVILION ORGANISED BY PROPERTY MALTA AT THE CANNES PROPERTY EXPO IN OCTOBER 2017.

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e Malta Business OBSERVER |

May 31, 2018

BUSINESS UPDATES

ANOTHER FIRST FOR HSBC MALTA, FOLLOWING THE LAUNCH OF TOUCH ID AND CONTACTLESS CARDS.

HSBC first bank in Malta to launch Face ID technology HSBC has become the first bank in Malta to provide corporate customers access to the HSBCnet mobile banking app using facial-recognition technology, speeding up the log-in process and increasing account security.

The launch marks another first in local digital achievement for the bank following the introduction of Touch ID for iPhone users in February 2018 and contactless cards for Premier customers in October 2017.

Clients can now use Face ID to log into the bank’s award-winning HSBCnet mobile app, which already offers Touch ID log-in. The new functionality speeds up log-in times to less than a second.

HSBC is already one of the world’s biggest users of biometric technology for financial services.

Customers can use Touch ID fingerprint-recognition, voice recognition and ‘Selfie ID’, to log in with a photo. Some of these features will be rolled out in Malta in due course.

HSBCnet is the bank’s awardwinning internet banking service for all its business customers. It’s designed around the three concepts of efficiency, convenience and control.

In addition to Malta, Face ID is available in 24 HSBC markets with another 20 to be added later this year.

For more information about how to log-on to HSBCnet using Face ID, visit www.gbm.hsbc.com/ hsbcnet-mobile-app-with-face-id or www.gbm.hsbc.com/hsbcnetmobile-app

“e launch marks another first in local digital achievement for the bank following the introduction of Touch ID for iPhone users in February 2018 and contactless cards for Premier customers in October 2017.”

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e Malta Business OBSERVER |

May 31, 2018

BUSINESS UPDATES

Ensure your compliance team is working at optimal efficiency An essential part of a KYC and AML compliance solution is transaction monitoring – software designed to oversee customer transactions in real-time or on a daily basis, as well as detecting any possible risks hidden in business relationships. The need for a reliable compliance system is becoming more and more urgent in order to prevent financial crime and fraud from spreading, which means that transaction monitoring is now no longer optional but a necessity.

AXON enables you to automate and optimise your regulatory and compliance functions by tracking and reporting on critical data in real-time. This provides a major benefit in time-saving, versus a

manual process where you are limited to performing individual checks on each data source.

THE IMPORTANCE OF AML TRANSACTION MONITORING An AML transaction monitoring solution is meant to identify and prevent any ongoing transactions that may lead to fraud, financing terrorist organisations, and money laundering. Proper risk analysis is carried out by using adequate KYC procedures to gather information, then AXON uses its rules engine to build scenarios for monitoring transactions. This is how AXON achieves full automation and a smoother transaction monitoring process.

AUTOMATED AML TRANSACTION MONITORING AXON offers a complete ongoing monitoring solution through the profiling and analysis of customer behaviour from a transactional perspective. It constantly checks customers in real-time to meet AML requirements on threshold of deposits or withdrawals. Furthermore, the payment method and deposit or withdrawal values are utilised to drive logical checks and the related triggers to the KYC system.

This provides your compliance team with a single place to manage all the data related to KYC activity for your entire customer base.

AXON also takes into considera-

tion the current KYC status and level of documentation attained on each customer to only trigger notifications when required.

SUSPICIOUS INFORMATION AND RAISING ALERTS When a suspicious transaction is identified, AXON is designed to alert the compliance team to review and reassess any potential risk. In doing so, it reassures companies and regulators by giving them extra

confidence in their compliance process. Advanced checks, such as beneficiary monitoring, are provided via access to watch lists and PEPs whilst the system can also be customised to include validations and various AML checks.

If you’re interested in learning more about AXON’s AML transaction monitoring solution, visit www.computimesoftware.com/axon-gaming or email info@computimesoftware.com

Growing number of businesses pledge support to Fondazzjoni Pippo Having launched just a few short weeks ago, Fondazzjoni Pippo is making a splash across the Maltese islands, with numerous local businesses, including Dino Fino, Trimer, Footy4U, Brincat Pianos and NM Group signing up to work with the foundation on their upcoming Corporate Social Responsibility (CSR) projects.

Fondazzjoni Pippo is a non-profit organisation which seeks to unite the CSR goals of Maltese businesses with the needs of the local community. By means of a comprehensive onboarding process, CHRISTABELLE BORG Fondazzjoni Pippo is able to match businesses with NGOs and local charities, so as to facilitate an effective and efficient supply-and-demand process.

Current beneficiaries of Fondazzjoni Pippo include Hospice Malta, Richmond Foundation, ALS Malta, Karl Vella Foundation, and Beating Hearts Malta, and the Foundation’s high-profile supporters include Valletta FC, former Playmobil CEO Helga Ellul, and Christabelle Borg.

In addition to the coordination of CSR events, Fondazzjoni Pippo also offers businesses the option of running social awareness campaigns which can be supported through fundraising and crowdsourcing in the name of a particular beneficiary. In fact, Fondazzjoni Pippo will be launching its first partnership collaboration for V&C Contractors, with a focus on mental health.

Visit Fondazzjoni Pippo on Fb: fondazzjonipippo or Ig: fondazzjonipippo