INTERVIEW
Issue 97
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Distributed with Times of Malta
April 25, 2019
Malta Business Bureau CEO Joe Tanti believes small EU member states can play an active role in the EU’s legislative process and maximise on EU funding opportunities to the benefit of business. see pages 5, 6 >
ANALYSIS e number of new hotel beds in Malta could reach up to 20,000 in the next two to three years, creating unnecessary challenges for the local tourism industry, according to the MHRA. see page 9 >
Tax harmonisation prospects alarm Maltese businesses Commission reiterates benefits for all EU member states Rebecca Anastasi Business leaders in Malta are at odds with the European Commission’s push to reform tax legislation, despite what some in Malta see as the lack of clarity on the “exact effect and magnitude” such changes would imply. Perit David Xuereb, President of the Malta Chamber of Commerce, Industry and Enterprise, reiterated the entity’s position in favour of Malta’s fundamental right to defend its taxation regime, stating that while it is a strong believer in the European project, it believes a “one-size-fits-all principle cannot be applied.”
“e EU formula for the distribution of taxes among member states, derived from a multinational company’s global taxes, does not favour smaller markets.” – Simon de Cesare, President, Malta Business Bureau (MBB) Echoing the views already put forward by Malta’s MEPs, Perit Xuereb said that Malta’s fiscal policy was not “simply a way of collecting revenue” but a tool to
attract investment, stimulate growth and overcome its disadvantages of smallness and peripherality. He underlined the need for Malta to be “more positive and
decisive in arguing for our cause” when it comes fiscal policies, adding that the entity was prepared to “mobilise its expert members” in the face of growing international pressure. Malta Business Bureau (MBB) President Simon de Cesare concurred, stating that Maltese business is against EU tax harmonisation “because this erodes fiscal competitiveness” for smaller and peripheral countries, and works against Malta’s interests. He expressed the belief that the Commission proposal removes flexibility, while restricting intra-EU competition and creatContinued on page 3
NEWS e current labour skills shortage and the increasing amount of competition for employees is leading to the increasingly-frequent adoption of flexible hours. see page 13 >
STOCK MARKET REVIEW Earnings reporting season is a very important period for the local investing community as it provides indications of the immediate outlook and financial prospects. see pages 25, 26 >
e Malta Business OBSERVER
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April 25, 2019
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NEWS
Substantial opposition to decision-making reform in the arena of EU taxation policy Continued from page 1 ing a disadvantage when competing with non-EU tax regimes in the global economy. “The EU formula for the distribution of taxes among member states, derived from a multinational company’s global taxes, does not favour smaller markets,” Mr de Cesare stated. He said that Malta can expect to lose out if tax systems are harmonised across all member states, since it would be less able to “attract foreign companies to set up a physical presence here.” Yet, in comments to this newspaper, a European Commission official highlighted the benefits of a “pooled sovereignty” when meeting the challenges of the global capitalist system, in which multinational companies have taken advantage of the rules, to the detriment of the European pocket. “When certain business activities threaten member state revenues, it is only logical that swift, decisive and timely action be taken – together,” the official underlined, while noting that the Common Consolidated Corporate Tax Base (CCCTB) meets two key objectives of the Juncker Commission, namely fighting tax avoidance and boosting jobs and growth. “It would eliminate the mismatches and loopholes between national tax systems, which companies can currently exploit, while easing the administrative burden and cost on companies operating in the EU. It would create more transparency around each member state’s tax system and effective rates. This means fairer tax competition – no hidden rulings or special regimes – and a level-playing field for all businesses in the Single Market,” the official said.
When confronted with the concerns expressed by local business entities, the Commission official emphasised that the impact for small countries “should be the same as for all member states: a positive boost for the economy, as a result of a fairer, more business-friendly and pro-growth system.” A coordinated system will also “create a better business environment and help to attract foreign investment,” particularly for SMEs, since they would be able to “expand where previously they may not have been able to, which is crucial for growth.” These benefits would not “be limited to one or two member states. They are shared by all, objectively,” the Commission official stated. However, details on exactly how these aims would be achieved were lacking. And, it is this uncertainty which – perhaps ironically – lies at the heart of some optimism expressed by Paul Giglio, Tax and Assurance Partner at international audit and advisory firm Mazars. “Whereas the introduction of tax harmonisation could be problematic to a country like Malta, it is hard to determine the exact effect and magnitude that this would have on the Maltese economy,” he said. Mr Giglio listed the island’s regulatory system, its pool of professionals who are able to give a personalised service to their clients; the euro currency; economic stability; as well as less bureaucracy in the manner in which business is established as key selling points which would be retained even if the EU voted to implement tax harmonisation rules. He underlined the need for Malta to continue “providing different advantages and areas of specialisation, not merely tax advan-
“It would eliminate the mismatches and loopholes between national tax systems, which companies can currently exploit, while easing the administrative burden and cost on companies operating in the EU.” – Spokesperson, European Commission tages”, saying that any changes could be best countered by thinking “in terms of different products and ideas to sell, which are not tax-driven.” These, in his view, should include “value-added services, which allow for remote global working”; innovation hubs focused on developing cutting-edge products; renewable energy systems and new international financial products. “If our authorities start to give this direction now, it is possible that Malta will again reinvent itself even in the face of this new challenge,” he said. Moreover, in order to be at the forefront of any developments – “managing change rather than allowing it to manage us” – Mr Giglio stressed the need to improve the island’s reputation as a financial centre, in the wake of recent criticisms which have led to the European Parliament’s recent ruling labelling Malta as having the characteristics of a tax haven. This could be achieved by strengthening regulators; eliminating false advertising in the financial sector; ensuring that businesses which set up in Malta comply with tax substance standards and practicing judiciousness when it comes to client onboarding. Yet, despite the controversy the contentious proposals on tax har-
monisation have created locally, it may be some time before any modifications to the current system are implemented. While some of the “steps to a fairer and more tax efficient environment in Europe” have passed, many of the sticking points have been in discussion since 2016. Indeed, in order to speed up the process of decision-making in the arena of taxation, the EU Commission this year launched a debate to remove the current system of unanimity – in which all member states must agree to new laws before they can be implemented – and replace it with a scheme based on a qualified majority. The changes, known as the Passarelle Clause, would require 55 per cent of member states, representing at least 65 per cent of the EU population, to approve any new legislation – a system which is already employed for some decisions in the Council. The Commission noted that the proposed amendments “would usher in a new dynamic and revitalise decision-making in this area.” Yet, there has been substantial opposition to these proposals, particularly from small member states, with the Institute of International and European Affairs (IIEA), an Irish think tank on European and International affairs, underlining the challenges
the new clause faces. Locally, MBB President Mr de Cesare has also expressed concern, saying that “any compromise achieved as a result of unanimous adoption would surely reflect a much fairer outcome catering for the interests of all member states.” He also stressed the need to retain the current balance of power in matters of taxation, pointing out that “unanimity has not prevented the EU from making important decisions in the area of tax policy.” This was also echoed by Malta Chamber’s Perit Xuereb, who stated that “Europe must listen to small peripheral countries such as Malta which by their geographical characteristics remain vulnerable irrespective of their current economic well-being.” These views reflect some of the issues noted by the IIEA in their report, which stated that “the likelihood of qualified majority voting being introduced for any new policy area, particularly an area that is so traditionally tied to national sovereignty such as foreign policy or taxation, is close to nil.” This would result in the process towards tax harmonisation stretching out for much longer, until all member states are on board with the changes.
e Malta Business OBSERVER
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INTERVIEW
Joe Tanti – Malta has not yet fully harnessed its opportunities as an EU member state Marie-Claire Grima For Joe Tanti, CEO of the Malta Business Bureau (MBB), the idea of where Malta would be had it missed out on the chance to join the European Union is inconceivable. “I wouldn’t even like to think about it! We would have missed a golden opportunity,” he told this newspaper. “EU accession has been able to maximise the prospects for our people to study, work and travel abroad freely, and it has also provided new pathways and avenues to success for our businesses. I cannot fathom that Malta would have prospered so well, if it had not joined the EU.” The MBB, which was founded in 1996, represents the Malta Chamber of Commerce, Enterprise and Industry as well as the Malta Hotels and Restaurants Association (MHRA) in Malta and Brussels. It started out as an information-based organisation, but in recent years, it has become an important EU-accredited policy and lobbying organisation. “As an EU business advisory which is private and non-profit, we have had many local businesses knocking on our doors for support. Over the years, we have seen an increase in start-ups, design and tech-driven SMEs seeking our advice on how they can make the most of EU opportunities,” Mr Tanti said. “We have been able to tailor our business support services for these young companies, thanks to our Enterprise Europe Network (EEN) service and other EUfunded projects which we’ve been rolling out. Demand for business support has changed over the past 10 years, which has prompted MBB to regenerate itself accordingly.”
“I cannot fathom that Malta would have prospered so well, if it had not joined the EU.”
JOE TANTI, CEO, MALTA BUSINESS BUREAU. PHOTO: INIGO TAYLOR
According to Mr Tanti, MBB is a living example of how organisations from small member states can play an active role in the EU’s legislative process and maximise on EU funding opportunities for the benefit of the Maltese business community. “EU projects are an extremely useful tool to implement EU policy in Malta. Projects enable us to engage with businesses and help them understand more how they can truly reap the full benefits of EU membership. The MBB has been successful in the submission and implementation of a number of EU-funded
projects, ranging from design-driven innovation, internationalisation, financial and digital literacy and sustainable development. We have developed a strong support network of experts and organisations related to the MBB’s work areas and objectives, in both Brussels and Malta, raised the organisation’s profile in Malta, and increased the organisation’s visibility within the Brussels-based professional network. I believe that there remains a gap between the EU vision and our local businesses, however; there is still so much we can do to link the two.”
With 2019 marking Malta’s 15th year as an EU member state, Mr Tanti says that since 2004, Malta has had a stronger concentration of services and businesses, with a better chance at penetrating the single market and tapping EU funds. “All of these have added to the advancement of our economy and improvement in our infrastructure amongst other things,” he explained. “This said, we haven’t completely exploited the opportunities membership has presented. There are several available direct EU funds, which we haven’t yet harnessed as a country. It is also quite disap-
pointing to see that EU membership has not necessarily resulted in a change of mindset and betterquality standards that should be upheld in Malta – particularly with regards to better regulation in construction, alleviating traffic congestion and adequate protection of our environment. All of which, if not addressed, will continue to affect our well-being in general. We could do so much more!” The much-anticipated MEP elections are coming up in May, and in the shadow of various challenges such as Brexit, international protectionism, climate change, digital transformation and lack of labour supply and skills, Mr Tanti expects a stronger Eurosceptic wing to be elected to the European Parliament. “With diminished centrist pro-European parties, this could have repercussions on the Parliament’s ability to negotiate future EU legislation,” he stated, with concern. “Polls are indicating that the two biggest parties, the EPP and the S&D will not be able to broker a majority alone. They will require the support of the Liberals and Greens to pass legislation, which shall mean tougher negotiations in a bid to find compromise. This may delay the progress of much-needed reforms; and at a time where EU trust among citiContinued on page 6
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e Malta Business OBSERVER |
April 25, 2019
INTERVIEW
A clear sustainable vision with more than one contingency plan needed Continued from page 5 zens is faltering, this does not bode well for the implementation of EU policy, particularly with respect to the Single Market.” Mr Tanti explained that as the elections and new EU legislature draw closer, the MBB has published a business manifesto reflecting on current political trends, analysing outcomes from the last legislature, and communicating the expectations of the Maltese business community from the EU in the next five years. “The MBB manifesto proposes a set of guiding principles to MEPs, backed by policy recommendations that we believe should guide their work during the next EU mandate. In the face of challenges that there will undoubtedly be in the coming years, the MBB will continue to ensure that the decisions taken by the legislators reflect the aspirations of businesses and citizens at the local level. We will also support the elected MEPs in their work
in Brussels and Strasbourg, by providing them with our feedback on the impact that legislation could have on the sustainability and competitiveness of Maltese businesses.” He went on to say that even though Malta’s economy was undeniably strong, a clear sustainable vision with more than one contingency plan was needed. “It would be foolish to think that we are not vulnerable to world events beyond our shores. Take Brexit for instance – no one knows exactly what is going to happen, but we do know that it will create an inevitable ripple effect.” The MBB has a number of initiatives in the pipeline related to various economic sectors. “The plan is to continue focusing on supporting businesses to capitalise on EU direct funding opportunities. In this regard, the MBB will be proactive and continue to help increase access to direct funding and encourage the business community to manifest its ideas through European funded projects.”
“I feel fortunate to have been a part of this journey and to lead such a dedicated and committed team of professionals. We thrive because of our people.” “In view of the importance of the financial services sector for Malta, the MBB intends to increase the resources for advocacy work in Brussels throughout the legislative process, build and maintain a network focused on this area, and learn from best practices by other governments and private stakeholders in the field,” Mr Tanti said. Other pipeline initiatives are in the area of energy which forms a big part of the MBB’s sustainable development portfolio. “At this point in time we have also realised that many businesses face difficulty
raising finance for energy efficiency projects. As a priority we are also exploring what financing can be made available for businesses to tap into to continue to drive energy efficiency on the ground. This approach of informing policy makers, developing initiatives aimed at translating policy from paper to projects, and seeking the financing for these projects, covers every aspect of a policy implementation cycle. We are very excited about this work and look forward to continuing to support the achievement of Malta’s 2020 and even 2030 energy efficiency targets.”
Reflecting on his 10 years at the MBB, Mr Tanti concluded, “I feel fortunate to have been a part of this journey and to lead such a dedicated and committed team of professionals. We thrive because of our people. Throughout my career, my background in people management and strategy development has helped me to build effective and results-oriented teams. At MBB, my greatest satisfaction has been giving young university graduates the opportunity to develop themselves and to shape a new future for the organisation. Their work is a testament to the opportunities Europe has to offer. As for myself, I will continue to give back the knowledge and experience that I have gathered along the way to our next generation of business leaders. People are the only resource Malta has and we must ensure that we continue to develop our future leaders, so that they can contribute to the economic and social well-being of the country.”
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April 25, 2019
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ANALYSIS
Number of new hotel beds could reach up to 20,000 in next few years Vanessa Conneely The number of new hotel beds in Malta could reach up to 20,000 in the next two to three years, a situation which could create unnecessary challenges for the local tourism industry, according to the President of the Malta Hotels and Restaurants Association (MHRA), Tony Zahra. According to figures released by the National Statistics Office (NSO), total guests in collective accommodation establishments in Malta reached almost two million, an increase of 8.4 per cent over 2017. Total nights spent went up by 5.6 per cent, surpassing 10.1 million, while the net use of bed-places advanced by two percentage points to 67.6 per cent – a figure that is set to keep on growing. Mr Zahra said he was aware that a lot of applications for the development of new hotels as well as extensions of existing ones had been submitted to the Planning Authority, and that the vast majority had the potential of coming on stream in the next two or three years. “We calculate that the number of new hotel beds could reach up to 20,000 beds, if not more. These hotel beds must be added to the substantial number of beds we have in other accommodation types, as well as to unlicensed accommodation, and the possibility of further growth in these types of accommodation,” he told this newspaper. Indeed, another situation which is highly troubling is the fact that there are almost half as many unlicensed, unregulated beds in Malta as there are regulated ones. Besides around 40,000 licensed beds on the islands, Mr Zahra believes there are an additional 20,000 beds in unlicensed accommodations. “The problem lies with the very high number of unlicensed accommodations offered in what is referred to as private rented accommodation, which is mainly made of apartments, entire bedand-breakfast residences and accommodation in private homes,” he said. “Traditionally these used to operate in the peak months to meet the extra demand for
beds, but nowadays they operate on a yearround basis.” While traditional hospitality operators may blame sharing websites such as Airbnb – which features about 7,000 listings in Malta and Gozo – for the boom in unregulated accommodation, Mr Zahra insisted that Airbnb is helping to support the hotel industry and is not taking profits directly from it. “It’s not a matter of feeling the pinch. The hotel sector in Malta, as in other countries, is not against accommodation offered through Airbnb platforms and the likes. What we are against is the unlevel playing field we are faced with, as authorities allow accommodation providers to compete and operate in the market without the necessary licenses and permits and without paying due statutory taxes. Furthermore, this accommodation is not subject to any quality or safety controls,” he said – emphasising that this could end up being highly damaging to Malta’s reputation as a tourist destination, especially if tourists end up lodging in sub-optimal conditions. “This rate of growth in the accommodation supply is unsustainable. This kind of
“What we are against is the unlevel playing field we are faced with, as authorities allow accommodation providers to compete and operate in the market without the necessary licenses and permits and without paying due statutory taxes.” – Tony Zahra, President, Malta Hotels and Restaurants Association (MHRA) development has other implications that go beyond infrastructure development,” Mr Zahra said. “We have other challenges such as space limitations and the labour supply. We also need to consider the impact on the quality of life for the local community as well as the tourist experience. Hotels have to look at longterm sustainability and beyond shortterm gains.”
“There is no doubt that Valletta 2018 helped to boost Malta’s image overseas and was beneficial in many ways. But tourism is very volatile, and we need to be prepared to face the challenges prevalent in any business cycle. We need to work harder to increase the value-added of tourism and maximise on the socio-economic benefits of the sector. This is certainly not achieved by an oversupply of beds on the market.”
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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
A critical vote The Europe-wide vote that will take place between 23rd and 26th May is shaping up to be a significantly weightier affair than the usual MEP elections. It will be the first European Union election after the UK, an important member state since 1973, made the decision to leave the bloc, and will feature clashes over fundamental values and policies, including international protectionism, climate change, digital transformation and lack of labour supply and skills. In another first, the latest polls indicate that the two biggest parties, the EPP and the S&D, will not be able to broker a majority alone. There’s also a real possibility that Eurosceptic or anti-EU parties could win enough seats to disrupt legislative business rather than just rally against it, which could substantially hamper the progress of muchneeded reforms. The consequences of the elections, whatever they may be, will go beyond the European Parliament, and the ripple effects will be keenly felt within other European institutions and national politics, not least our country’s very own. Indeed, Emmanuel Macron, the President of France who defeated former anti-EU MEP Marine Le Pen in France’s 2017 election, has declared more than once that the upcoming ballot is a choice for or against Europe. Are the EU’s citizens for it or against it? Attitudes towards the EU are still broadly positive. In 2018, the European Parliament conducted surveys on citizens’ attitudes toward the EU and found that 62 percent regard their country’s membership of the bloc to be a good thing – a record-high for Europe. Meanwhile, 68 per cent believe their country has benefited as a result of EU membership. Malta is one of the most pro-EU countries in the bloc, with 69 per cent of Maltese people believing that membership is a good thing, and an overwhelming majority of 91 per cent agreeing that the country has benefitted from being a member of a powerful community of states. On the other hand, many EU citizens, including in Malta, still view lawmakers and bureaucrats with suspicion, feeling a much closer connection with political figures with a stronger local presence than
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the ones in Brussels. Are our MEPs doing enough to bridge the distance between Brussels and Malta, and effectively communicate the value of having a voice in the European Parliament to the people on the street? It’s also an important election for the business community in Malta. There’s no way our current economic growth and success would have been possible without our having joined the EU in 2004. The importance of the connection we established with Europe can never be understated, and even though it may feel that we’re too small to matter, this simply isn’t true. However, we must work harder than most. Smaller countries such as Malta needed to punch far above their weight in the European Parliament, and our MEPs need to be able to parse EU legislation, identify opportunities and divert possible dangers. With just a handful of them representing our national interests, there is simply no room for slackers or underachievers – we need high-quality candidates with the right competences and experience. MEPs need to make sure that their actions reflect the aspirations of businesses and citizens at the local level, providing the people’s representatives with feedback on the impact that legislation would have on sustainability and competitiveness of Maltese businesses, especially on contentious issues such as tax harmonisation. However, they also have to be careful not to go down the route of populism, which is one of the core problems facing the EU and its 28 member states. No country is immune to extreme and populist notions – look around and you’ll find plenty of examples to illustrate this situation, including the entire Brexit debacle. These have presented the EU with unprecedented challenges, landing it in completely uncharted territory. As a small island, Malta will hopefully keep on seizing the advantages that being a member of the EU provides, and recognising the value of being a member of something greater than the sum of its parts. The repercussions if we start taking these things for granted would be unthinkable.
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BUSINESS OPINION
Making a difference in an increasingly challenging economic environment
David Xuereb
The past few weeks have been a very exciting time for the Malta Chamber of Commerce, Enterprise and Industry, as the organisation went through the electoral process which it customarily holds every two years, electing a new President and Council that will serve for the period 2019-2021. This process provides the Malta Chamber with an open and transparent democratic system which necessitates the choice of the right leadership to propel the Chamber’s priorities at any point in time. This means that the Malta Chamber, within its most intrinsic design, holds the mechanism to allow the organisation to reinvent
itself with fresh perspectives and ideas on a regular basis. This is a very important time for our organisation, as we look ahead to continue building on the work and heritage of our past, while taking all necessary action to be even more relevant in the future. As happens with every new Presidency, I hope to provide the necesary direction to the Chamber’s vision for the upcoming 24 months. Central to this vision is relevance to members and to the economic scenario, both in the immediate term as well as for the future. I believe that the Chamber should strive to achieve this by reaching out to tomorrow’s members, hearing them out and bringing them on board to learn from them, and aligning the Chamber’s strategy to their needs and aspirations. The Chamber is very aware that the business community is working in an ever-changing digital and technological environment. In this light, the organisation will endeavour to continuously keep abreast with the latest disruptive business models to match and even potentially lead the way, when it comes to state-of-the-art stan-
dards and systems. These in turn will allow the Chamber to deliver its service to an exactingly high level of professionalism, reaching out to new and wider audiences, while identifying new areas of development. In gearing itself up in the coming months, the Chamber will strive to reinvest itself through an extensive and ambitious business plan. The plan is expected to guide it in adapting to opportunities which it hopes to embrace in the next few years. This ambition, which will eventually be communicated to all members, will be testament to the Chamber’s commitment to remaining a central player in Malta’s socio-economic and environmental scenario. I am truly appreciative of the fact that the Malta Chamber can boast of a team of brilliant individuals coming from all the economic sectors of the country, who form the newly-elected Council. In fact, the Chamber’s highest structure consists of a strong mix of experience and young energy – all highly successful entrepreneurs that can guide the organisation towards the challenges of the years to come. Further to this, I am honoured to note that my Presidency marks 10 years since the merger
e Chamber’s highest structure consists of a strong mix of experience and young energy – all highly successful entrepreneurs that can guide the organisation towards the challenges of the years to come. of the Malta Chamber and the Federation of Industry in 2009. This was a watershed moment for the two organisations which rose above any differences they might have had in the past, and appreciated the strength of collaboration in the interest of their members. The result is that today, businesses have a stronger ally to represent them in matters that concern their day-to-day needs. I remain steadfast in my belief that the Malta Chamber of Commerce, Enterprise and Industry is nothing more than the members that make it, and their needs remain the top priority. So it is only natural for me to appeal to all members of the business community to
come forward and connect with us, to explore how we can make a stronger difference together. I am honoured to take the helm of this great organisation at such exciting times. I pledge my service to the Chamber but also to Malta’s business community as a whole to work together. It is now time to make the necessary difference and benefit from the opportunities that will arise from the increasingly challenging international business environment, and therefore continue to build on the current successes of our country. Perit David Xuereb is the President of the Malta Chamber of Commerce, Enterprise and Industry.
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NEWS ??
Competitive ‘employees’ market’ prompting companies in Malta to adopt flexible hours Vanessa Conneely A growing number of companies in Malta are giving their employees the opportunity to work more flexible hours than the standard nine-to-five, spurred on by factors including the current labour skills shortage, and the increasing amount of competition for employees. “Flexible working hours are definitely trending strongly in the market, mainly driven by a skills shortage and a new mindset which sometimes values flexibility over monetary considerations,” said Christian Xuereb, Marketing Manager for recruitment specialists Castille. “International companies are the ones leading the trend, but Maltese companies are increasingly following suit in order to remain competitive in the local market for talent.” “A recent study conducted by JobsPlus showed just how many flexible working arrangements have become integrated at different work places,” said Abigail Mamo, CEO of the Malta Chamber of SMEs (GRTU). “With the current lack of human resources across the board, businesses are engaging employees according to their availability to work. The need to win over employees and retain them has caused businesses to change their perspective, and this is a step they will continue building on in the future. If a family’s choice is for both parents to work, then both parents will require a certain degree of flexibility.” “It is definitely the case that more employees are working on flexible hours than they did previously,” said Joseph Farrugia, Director General of the Malta Employers Association (MEA), adding that the type and extent of flexibility is normally
agreed on an individual basis and depends on the type of job and also on the company’s situation. In early April, the European Parliament gave the green light for parents across Europe to start benefiting from 10 days of paternity leave. This means that both mothers and fathers are now allowed to take up to two months parental leave each, until their child is eight years old. The new law also introduces the right for employees to request flexible working arrangements when needed, such as those wanting to take care of sick relatives. The new legislation aims to increase women’s employment rate, create incentives for fathers to take family-related leave, and promote gender equality and equal opportunities. But not everyone is convinced this new EU directive is the way to go. “It’s more challenging for micro-enterprises to introduce flexible hours,” said MEA’s Mr Farrugia. “Also, in general, service companies are more inclined to offer flexible hours due to the nature of the work performed. From Government’s side, any familyfriendly measures should be statefunded. Legislation shouldn’t be over-prescribed while the basis for flexible work agreements should remain on a case-by-case basis and subject to an agreement between the employer and the employees involved.” One such company which recently adapted its working hours policy to better cater to its employees’ needs is food and beverage conglomerate Farsons. After years of requests from staff asking for more flexibility, the company decided to introduce a more formal structure. “We live in an employees’ market,” said Group Human Resources Manager Antoinette Caruana. “Employers have a tough time
trying to find good quality employees - that’s why they are more likely to be receptive to the demands for flexible working hours.” “Of course, adaptable working hours also benefit working mothers and fathers who need to find a balance between their home and work responsibilities. It also may encourage more fathers to take an active role in rearing their children. The benefits extend to those who have responsibilities for caring for elderly parents as well as those who have hobbies and interests which are greatly important to them. The demand for working time flexibility is also a reflection of the society we live in. The younger generation are entering the labour market with different expectations. They are not only interested in an attractive financial package, but also other conditions. The realities of the vastly changed family units from those
“e need to win over employees and retain them has caused businesses to change their perspective, and this is a step they will continue building on in the future.” – Abigail Mamo, CEO, Malta Chamber of SMEs (GRTU) we have been more traditionally used to is also a factor. This requires a change in the way we think about working time.” Meanwhile, leading local bank HSBC Malta has been offering its staff flexible working hours since June 2015. Head of Human Resources Caroline Buhagiar said that it had been a success and encourages other businesses to make
the change. “This is something to embrace, since being a high-performance company requires attracting, retaining and motivating the best employees. In today’s world, flexibility and agility are essential in business, and with the advent of new technologies, it is also much easier than was the case in the past to operate flexible working practices.”
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BUSINESS UPDATES
REYL & Cie confirms main sponsorship for FinanceMalta conference REYL & Cie, a global financial services company which offers fund depositary services to a professional client base consisting of financial institutions as well as fund managers and administrators, has been confirmed as diamond sponsor for the FinanceMalta 12th annual conference, titled Malta: A Platform for Innovation. The conference will be held from the 5th to 6th June at the Hilton Conference Centre, with the main conference on the Thursday and an evening networking reception taking place on the Wednesday. Teaming up with FinanceMalta and a line-up of high calibre speakers is Federica Taccogna, a compliance professional who leads the FTI consulting team that performs investigations on behalf of regulators, and assists financial services organisations to achieve compliance. Federica will be chairing the conference throughout the day, alongside moderating a panel discussion
and delivering the concluding remarks. To add to the quality of speakers, FinanceMalta has also invited the Prime Minister of Malta, Joseph Muscat, and the Parliamentary Secretary for Financial Services, Digital Economy and Innovation, Silvio Schembri, to address delegates about Malta’s achievements in innovation and financial services. Other participants and speakers include Michael Imeson, Senior Content Editor of Financial Times Live and a Contributing Editor of The Banker, Mario de Marco, Opposition Spokesperson for Finance, Joe Cuschieri, CEO of the Malta Financial Services Authority (MFSA), and Wayne Pisani, President of the Institute of Financial Services Practitioners (IFSP). Commenting about the annual conference, FinanceMalta Chairman, Kenneth Farrugia said that “during this year’s conference we will be discussing the challenges and op-
portunities that the domestic and global financial services sector is going through in view of technological advancements and innovation. The conference is timely and relevant at a time when AI and blockchain technologies are starting to transform, if not disrupt, payment systems, core banking activities, portfolio and asset management and the insurance industry. Fintech and regtech are becoming buzzwords”. Together with REYL & Cie, this year’s conference has also attracted a number of highprofile partners and sponsors including Vacancy Centre who are platinum sponsors,
Francis J Vassallo & Associates, Apex Fund Services (Malta) Limited, Western Union and Dolfin who are gold sponsors, while Computime and alterDomus are silver sponsors. Other partners and sponsors include Castille Resources who will be sponsoring the pre-conference networking event, Equiom as sponsors of the lunch and networking breaks, and WorkingTown.com, Active Services Ltd and Vodafone who are bronze sponsors. Further information about our sponsorship packages is available on www.financemalta.org/conference-2019
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INTERIORS
Loft – the interiors des When Loft first opened its doors in Naxxar in 2012, it was considered very avant-garde for the local market at the time. “We had recycled pallets on the floor, in contrast with the delicate and trendy items on sale, all with the aim of creating a space that feels comfortable and changing the perception of the typical furniture showroom,” said Director Josette Schembri Vella. “We used raw metal for functional parts of the interior, but the rawness and types of sections and sheets also added another element to the interior finishes. I remember many people walking in feeling quite uncertain and asking whether the shop was even finished!” Mrs Schembri Vella said that Malta’s interiors scene has come a long way since that time. “It has certainly made up for the stagnant past decades! At Loft, we are always looking to lead the way in interiors. We like to reinvent them by looking back at traditional materials and finding ways to implement them into our contemporary spaces.” Loft aims to be a one-stop destination for all its clients’ interior needs. “What we do not directly supply, we are able source both through local partners and foreign contacts. We can also design anything your heart desires and have it made just for you,” explained Mrs Schembri Vella. “In our general product portfolio, we carry suppliers for outdoor and indoor furniture, fabrics for curtains and upholstery and even outdoor fabric, wallpaper, blinds, accessories, tableware, home linens, home fragrances, decorative lighting and a whole lot more. We aim to make interior planning and outfitting hassle-free for our clients.” She emphasised that Loft is not simply a retail outlet. “We offer full design services through our Projects office, which is headed by Shaun Fenech. This is a very large part of our work. We also offer interior styling services, which we believe is also a very important
JOSETTE SCHEMBRI VELLA, DIRECTOR, LOFT. PHOTO: ALAN CARVILLE
part of finishing off your space and ultimately creating the desired atmosphere. Leaving a space without the appropriate accessories is like wearing a gown with-
out shoes, jewellery, a handbag and without hair and makeup! Styling the space is ‘the finishing touch’, and we offer this service free of charge. We feel that many
A LOFT PROJECT IN TIGNÉ
businesses, hotels and restaurants could really use a little ‘styling’ or possibly ‘restyling’ to enhance the interior and create the desired atmosphere and client experience.” The process starts with an initial consultation at Loft, where the client is asked to bring photos of the spaces which need styling. “Together, we explore ideas and have a look through our finishings gallery – wallpaper, fabric, rugs, blinds, and paints, depending on what is necessary. The second step involves another meeting to review the proposal. And lastly, a site visit is carried out to ensure the proposal will indeed be possible and effective.” Director of Projects Shaun Fenech said that the perception of an interior designer’s role has changed over the years. “In the past an interior designer’s influence was considered to be focused more on style and colours after a building is complete. Nowadays, an interior designer has a more technical and integral role to play in a project, working hand-inhand with architects from the very early stages of a project, dis-
cussing desired effects and detailing the interior of the space in sync with the architecture for a more harmonious effect.” “Within the project side of the business, we learned to adapt to a more commercial side of projects while still retaining our knowledge and experience in home furnishings to make any given space feel more homely and welcoming. We focus on offering a professional service where a dedicated team provides an efficient service both from an office and on-site. Loft has set a standard and influenced a style of living that is different. It has gathered a good following in the few years that it has been operating and continues to help and inspire up-and-coming designers and architects.” Mrs Schembri Vella said the company is making a significant investment in its Projects team. “In the past year our team has more than doubled in manpower. We have welcomed our newest member only this month! We are very proud of our staff and although we have recently been successful, finding great team
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INTERIORS
stination for dreamers “Many businesses, hotels and restaurants could really use a little ‘styling’ or possibly ‘restyling’ to enhance the interior and create the desired atmosphere and client experience.”
members has been a challenge, in this present economic climate. And we are excited to grow the team even further, to be able to offer the best service to our Project clients.” Loft’s past commercial projects include The Thirsty Barber in Paceville, QIVY spa’s first location in Naxxar at the YUE health centre, and 66 St Paul’s boutique hotel in Valletta. “We were contracted by owners Emma and Piero Vernacchia to choose and supply all the loose furniture and soft furnishings,” said Mrs Schembri Vella, about the latter project. “It was very rewarding, considering the beautiful outcome!” The company’s most-recently finished commercial project is the Golden Care home for the elderly in Naxxar. “It may not be five-star hotel, but it is a five-star old persons’ home,” the Director stated. “The team enjoyed working on this, as we all have older family members, and one day we will be elderly ourselves. Being part of the team responsible for the design of the interiors gave us an opportunity to create a welcoming, serene
space that would allow our elderly to feel comfortable, and most importantly, dignified.” Presently, the company is hard at work on an automobile showroom, offices, a couple of hotel projects, some full design, as well as area refurbishments. “We also have some retail design work always going on. Our project list changes very often, thus the constant need to expand our team!” Meanwhile, its ongoing residential projects range from small, challenging apartments to highend luxury villas. “We’re working on a large apartment in Sliema where we have really been given creative freedom to come up with a fitting interior for the owner,” Ms Schembri Vella said. “We are really excited to have this complete and will be posting progress shots on our social media in the coming weeks!” Besides its flagship outlet in Naxxar, LOFT also has a retail presence in Sliema’s Tigne Point. “We opened another Belgian brand outlet called Flamant in the Pjazza only a year and a half ago – a brand which many Maltese are familiar with from trips to Brussels. We have also opened a point of sale at Minus Three inside The Point shopping mall just a few months ago.” And that’s not all. “We are always dreaming up new things – that is what we are good at, dreaming,” Mrs Schembri Vella enthused. “We are passionate about creating spaces, so we see every derelict, neglected space as a gem which just needs a little polishing. Loft is up to something in the near future. Keep an eye on us!”
SHAUN FENECH, DIRECTOR OF PROJECTS. PHOTO: ALAN CARVILLE
LOFT’S INTERIORS TRENDS FOR 2019 Cane weave: “It has been coming for about two years but I have finally seen it in local interiors!” Mrs Schembri Vella said. “This is such an important part of our local interiors and furniture history and it is seeing a very big revival! It’s a pity our market doesn’t embrace trends quicker – we suggested this material to a client over a year ago but sadly he didn’t go for it. Now it’s everywhere.” Pinks and reds: “I would say the deep red, burgundy, and terracotta spectrum is seeing a return, as is – dare I say it – peach. Pinks are big at the moment.” Ralph Lauren: “We love Ralph! Everybody is familiar with this American icon, and the Ralph Lauren Home range covers a line of exclusive products, from frames and desk accessories to tableware and home linens. Having just visited the Milan Design fair this month, we will be introducing some beautiful product ranges in the coming months.”
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CASE STUDY
ERA calls on public to participate in National Strategy for the Environment Vanessa Conneely
“We would especially like to hear from young people and engage with their ideas about how we can build a better future for them.” AN ERA FOCUS GROUP
The Environment and Resources Authority (ERA) has launched the first phase of its National Strategy for the Environment (NSE) by asking those living in Malta to take part in the development of the strategy. The first step is a strategy vision till 2050, which has been published this month, and which will be followed at the end of this year by the publication of a set of strategic priorities. “We encourage the public to have their say,” said ERA Director Michelle Piccinino. “We would especially like to hear from young people and engage with their ideas about how we can build a better future for them.” “We’ve seen a sharp rise in awareness about the environment over the past few years,” continued Perit Piccinino. “Influential figures like Sir David Attenborough have brought the issue to the public’s attention. Social media is also playing its part, as are young people who are concerned about their future. This can be seen around the world, including here in Malta.” Since its inception in 2016, ERA has been analysing how Malta is doing when it comes to its environment, which culminated in 2018’s far-reaching State of the Environment Report, available on the ERA’s website. The report used around 80 indicators across nine sectors to check how healthy the environment is in Malta. These included air, water, waste, land-use, climate change, environmental health and biodiversity. “Some of the results were encouraging,” Perit Piccinino said. “For example, we found that 40 per cent of
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species and 43 per cent of habitats have a favourable conservation status. There is also the fact that 35 per cent of our seas are now Marine Protected Areas, so we now know that our efforts did have a positive impact.” ”Of course, there is still a lot more work to be done. For example, the report found that most groundwater bodies show high nitrate levels. It also revealed that land use efficiency required significant improvement. But now, the ERA will be using that information to develop the next phase of its work – the NSE. By the end of this year, it wants to have a vision in place on how to move forward between now and 2050.” ”We don’t just want to develop something that looks good on paper but means nothing. We want to really think about our children’s future and create something that makes a difference to them,” Perit Piccinino said. “We want to think longer than the usual five-to-10-year cycles. We’d also like to break down the strategy into bite-size pieces, so we’ll have a plan that will be rolled-out between 2020 and 2030, another one between 2030 and 2040, and a third between 2040 and 2050.” “Detailed objectives and measures will be included in these 10-year action plans. And
“As well as consulting with people who have a stake in various sectors that influence the state of the environment, we’d also like the general public to take part.” each action plan will consist of timeframes, budgets and responsibilities for each of the measures, to ensure that the strategy is a workable plan of action with clear parameters for its implementation. Sets of metrics will also be developed to assess progress towards the strategy’s objectives and priorities. Progress will also be reported on regularly and the strategy will be reviewed in line with results of these reports, to make sure that actions continue to target the right improvements.” While the strategy will engage with decision makers, such as the ministries responsible for sectors that drive the environment, such as the economy, agriculture and tourism, the ERA says it’s not only duty-bound, but very keen to include the public at each point in the process, starting from the ini-
tial first phase. One way the ERA is encouraging people to get involved is to use its website to have their say. “On era.org.mt, there is a public consultation section where thoughts and opinions can be shared,” Perit Piccinino said. “We will also be holding a series of focus groups as well as roundtable talks in the coming months. As well as consulting with people who have a stake in various sectors that influence the state of the environment, we’d also like the general public to take part.” By the end of this year and onwards to 2050, the ERA is promising a list of goals that Perit Piccinino says will include “ensuring a better and sustainable quality of life for our communities, as well as providing clear and long-term direction for our environment.”
MICHELLE PICCININO, DIRECTOR, ERA
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CASE STUDY
Planning Authority promotes measures for better work-life balance The Planning Authority (PA) has introduced several work-related measures with the aim of fostering a better work-life balance for its employees, alongside numerous other benefits relating to the well-being of employees and their professional and personal development. Miriam Bartolo Abela, HR Manager at the PA, said that the organisation has been strategically working on building its employer brand. “Our aim has been to strengthen our reputation as an employer,” she said. “We not only want to ensure we retain the quality talent we currently have but also want to attract the best talent available in the marketplace. We are aware that the upcoming generation of job seekers have different demands and expectations to what we were accustomed until a few years ago. Over past years we have introduced a number of advantageous measures that contribute towards a better work-life balance. Among these are flexible working hours, tele-working and hot-desking.” “Having flexible hours means that, unlike companies that have fixed working hours, PA employees can clock in and out within a three-hour timeframe. This measure gives employees the benefit of greater flexibility in order to accommodate personal responsibilities, whether related to family, to pursue a hobby, a sport, an errand, or even to continue with personal studies, especially when one considers that the working hours start from 6am and employees can clock out at 3pm. This goes hand-in-hand with the ability to save vacation leave hours – although we work 8.5 hours in winter and 6.5 hours in summer, employees may opt to apply for
“Having flexible hours means that, unlike companies that have fixed working hours, PA employees can clock in and out within a threehour timeframe.”
PA EMPLOYEES SHARING THEIR JOB SHADOWING EXPERIENCES AT LAST YEAR'S PROFESSIONAL DEVELOPMENT DAY
full days of vacation leave which amount to less than 8.5 or 6.5 hours and then work the difference (shortage of hours) during specified periods. Employees may also apply for leave on a halfhourly basis, which gives them ample flexibility to make the best use of their leave.” Tying in with the Authority’s move towards a flexible office is a new strategy introduced by management for hot-desking and teleworking, both of which give employees the opportunity to work both from home and from the office. “The aim behind introducing these measures is to create a sustainable work environment for our employees, and to set them up with a portable working station through a laptop
equipped with the latest technology and their phones,” Ms Bartolo Abela said. “This started out as a pilot project, and so far, 37 employees are working with this arrangement. The concept behind it was to make better use of the resources within the PA, including space.” These measures opened up opportunities for the PA to explore new means through which employees can improve their efficiency and productivity, namely through video conferencing. “Through video conferencing, one can still conduct meetings with colleagues, without the need to be at the office. After this measure is tested internally among staff, the aim is to implement it with clients too,” she
added. “We can conduct meetings with architects, for instance, from our respective offices through a video-conference, which saves everyone involved a lot of time spent commuting, and also helps to reduce the number of cars on the road at any given time of the day.” Besides this new working strategy, the Authority offers teleworking, as a family-friendly measure, which so far has been utilised by 12 per cent of the PA’s employees. Staff can tailor their working hours according to their needs and management exigencies. “Someone might require one hour per day working from home, while someone else might need to tele-work for a whole day – requests for tele-work vary among
employees but each request is reviewed and actioned on a case-bycase basis.” As part of employees’ development path, the PA provides a number of incentives for employees to develop their skills and competences. “Last year, the PA provided its employees with 7,237 man-hours of training. They can also make use of training systems and resources, as well as training reimbursement, and an allowance to pursue courses, seminars and conferences that contribute towards their personal development whilst also enriching their work-related skills and competences within the Authority.” The Authority also reimburses its employees with the annual membership fees in a recognised professional body to ensure they keep abreast with the latest developments in their respective area of expertise. As part of the PA’s Succession Planning measures, in collaboration with the University of Malta, an extensive training pro-
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gramme targeting existing employees starting from basic certification all the way up to a bachelor’s degree was launched. “The course is fully sponsored by the Authority, and they get one day of paid leave per week to allow them to balance work with their studies,” said Mrs Bartolo Abela. “This has offered a platform to employees who, for instance, started out in one role within the Authority but wished to move on to a new role, and it also provides the Authority with the necessary human resources to cater for the future, with staff we already know. Paid study leave is also available to employees pursuing Master’s and Doctoral study programmes which are research-based.” Through various EU funding schemes, such as (ESF) PA+ project, PA employees can undertake specialised formal training, namely in ICT, customer care, operational management, urban design and EU funding. Moreover through the Erasmus+ projects employees can apply to spend two weeks in a host organisation overseas. “So far, 36 personnel have benefitted from job shadowing experiences in Germany, Austria, Belgium and the UK,” said Mrs Bartolo Abela. “Upon their return, they are encouraged to share their
experiences and knowledge acquired with fellow colleagues, as well as the best practices, approaches and processes of overseas organisations.” On the health and well-being front, Ms Bartolo Abela said that the employees of the Authority also benefit from free private clinic health insurance, which can be upgraded by the employee to include additional benefits applicable to private hospital at favourable rates. Employees can complement this with subscription at a charge to the Preventive Care scheme, which includes preventive screenings and tests, namely for skin, prostate and breast cancer. “We also collaborate with the Government Health Department to host events whereby experts from the Department present information sessions on health, nutrition, besides testing employees for glucose and blood pressure among others, whilst providing individual advice to employees on these matters.” “A few years ago, the PA introduced a green travel plan, which offers different measures for employees to adopt depending on what suits them best. In recent years, we have realised that a onesize-fits-all approach does not work, as everyone has different patterns of how and when they
“As part of employees’ development path, the PA provides a number of incentives for employees to develop their skills and competences.”
get to work,” concluded Ms Bartolo Abela. “Therefore, PA staff can choose to cycle, walk or use a motorbike to travel to work and get an annual allowance; receive a monthly reimbursement of their Tallinja Card, subject to certain minimum usage; get a full reimbursement of a weekly block ticket for using harbour ferries; as well as benefit from a reserved parking within the PA premises for car sharing with a minimum of two persons.”
MIRIAM BARTOLO ABELA, HR MANAGER, PA
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BUSINESS UPDATES
Improving quality standards in restaurants George M. Mangion The predicament currently facing restaurant owners is a real one, and unfortunately there is no champion among the 2,300 owners to represent them in their quest to improve quality and raise standards. A smart solution which would lead to better operational efficiency would be a tax reform intended to achieve parity in VAT rates. The obvious solution is to reduce them to match those charged in other Mediterranean countries. A smart initiative can, if wellstructured, lead to a level playing field. One acknowledges that cases exist within the sector which under-declare sales in an effort to meet increasing overheads and fierce competition. The problem of true costs in catering and resulting benefits to society is not being tackled. There is a silent majority which says that it is better not to rock the boat – let sleeping dogs lie and try make hay while the sun shines. Such an attitude exacerbates the dire sustainability of the industry in the longterm. This brashness may well be anathema, and if left unchecked and allowed to reduce quality levels in such an unbridled fashion, it may lead to tomorrow’s deterioration of our image as a high-cuisine resort. The sustainability of catering establishments (whether they are fast food or silver service) can be improved by lowering VAT to match the rates charged by our competitors in the Med. Everybody knows that the Malta Hotels and Restaurants Association (MHRA) conducts quarterly surveys to assess the competitiveness and occupancy rates registered by hotels. This is a quality survey conducted by a Big Four audit firm and is sponsored by a leading local bank. No similar survey is conducted in the restaurant sector. PKF offered to prepare such a study on a complimentary basis, having obtained details of revenue and associated costs from restaurant declarations and NSO data from past years. PKF started its review by checking what other countries charge on food and drink. It is no surprise to note Luxembourg charges only 3 per cent on food. Another novelty is Greece. At the peak of the Greek financial crisis in September 2011, the VAT rate for non-alcoholic restaurant sales increased from 13 per cent to 23 per cent, yet following pressure from the sector, government was persuaded to reduce it to 13 per cent in August 2013 for a two-year experimental basis. It is no exaggeration that during this period, more taxes were collected. If Dr Konrad Mizzi, the minister responsible for tourism, takes up the challenge to start the reform, one hopes there will be a commensurate reduction in menu prices, and more VAT will be collected. A reduction in dining costs will partly reverse the high inflation pressure on food prices reported by NSO last month. This mitigates social exclusion for pensioners and lower-income persons. Therefore, there is scope for a scientific study which PKF has now conducted showing the effect of positive indirect and induced multiplier effect from a VAT reduction. The root of the problem lies in the evasion of VAT, payroll and corporate taxes. Kitchen and waiting staff from non-EU countries are engaged for long hours at low rates, while chefs, who are the fulcrum around which quality turns, demand ever-high salaries – which are sometimes only partly declared. In a nutshell, restaurants located in prime sites are facing increasing rents, a severe lack of
entry-level staff, and last but not least, can we ask ourselves why there has not yet been one Michelin outlet? These combined factors push owners to either abuse the system or conversely, be tax-compliant and trade on low margins. Some face failure. The spectre of rising rents and licences makes one doubt if the landlord is earning more than the catering operator, who risks so much time and energy to meet all the health and safety requirements and manages to retain an adequate number of qualified staff. In a spirited drive to float above the water, this may ultimately lead to money laundering, arising by way of undeclared sales and wages, thus evading VAT, social taxes and finally corporate taxes. It goes without saying that such abuses will create a dichotomy – those who abide by the fiscal rules and suffer a lower return on capital, and all the others who abuse the system. The Finance Minister is well-aware that abuse exits. He is reported to have said that “this is a continuous struggle. Abuse can be limited, but never eliminated. What we need to do is address the black economy and treat it as a beast on its own. It creates unfair competition and loss of revenue.” When foreigners are employed to fill the gaps, patrons complain that they cannot communicate their orders properly. Equally, there is a problem when engaging untrained locals, as they are often found unreliable. Readers may disagree with such arguments. Some accuse restaurant owners of pretending to be high class and over-charging. Others disagree with my arguments, saying restaurants are always full – especially the good ones – and business is brisk, expecting diners to book in advance for a good table. This bonanza comes not only as a result of the heavy increase in tourist arrivals, but also due to more spending power in the hands of locals. At the time when more promotional effort is being applied by Government agencies such as the Malta Tourism Authority to attract
high spenders (the Prime Minister plans to attract visitors who can afford €5,000 a night), one cannot but note how Malta charges a higher rate of tax on eateries when compared to the rate levied by competing Mediterranean countries, such as Italy and Cyprus (at 10 per cent and 9 per cent respectively). On a positive note, one observes that patrons staying in hotels serving all “inclusive food and accommodation” in Malta enjoy a lower rate of 7 per cent on their bills. George Mangion is a senior partner of an audit and consultancy firm, and has over 25 years’ experience in accounting, taxation, financial and consultancy services. Through his efforts, PKF has been instrumental in establishing many companies in Malta and has become one of the foremost professional financial service providers on the island. George can be contacted at gmm@pkfmalta.com or on 2149 3041.
GEORGE M. MANGION, SENIOR PARTNER, PKF.
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STOCK MARKET REVIEW
Explaining the earnings yield
Josef Cutajar
With the month of April soon coming to an end, most companies listed on the Malta Stock Exchange (MSE) that have a December yearend have published their annual financial statements. This is in line with the Malta Financial Services Authority (MFSA) listing rules that stipulate that a company needs to publish and make available an annual report and audited financial statements within four months from the end of the financial period. So far, 14 out of the 19 companies that have a December yearend published their 2018 annual financial statements with the remainder doing so over the next few days. The remaining five companies which are listed on the regulated main market – namely Simonds Farsons Cisk plc, Trident Estates plc, PG plc, Santumas Shareholdings plc and MaltaPost plc – all have a different accounting reference date. In May, Farsons and Trident will be publishing their annual financial results for the year ended 31st January 2019. In August, PG and Santumas will issue their financial statements as at 30th April, and in December, MaltaPost issue their full-year results for the financial year ending in September. The earnings reporting season is a very important period for the local investing community as it
provides a broad assessment of the financial performances of the various reporting companies and, more importantly, indications of the immediate outlook and financial prospects. After the reporting season, many investors may consider changes to their investment portfolios in order to earn more attractive returns, compared to the very low deposit rates currently on offer by local banks, reflecting the prevailing record low interest rate scenario in the eurozone. The main objective for the majority of Maltese investors is that of generating a sustainable income stream from the various securities within their investment portfolios. While most investors have a general tendency to favour bonds, a growing number of investors have been realising the benefits of also including an exposure to dividend-yielding equities in their investment portfolios to supplement the interest income they receive from their various bond exposures. This trend has been especially evident in recent years and is reflected in the increased turnover on the secondary market for local equities which, for
each of the past four years, amounted to close to or above €80 million per annum. Although many Maltese investors view an investment in equities from a dividend perspective, others seem to forget that the more important objective for investing in equities is that of capital growth over a long period of time. When buying shares and in effect becoming an owner of a company, the focus should be on the creation of long-lasting growth-enhancing measures that ultimately translate into the generation of shareholder value. While the conventional measures for equity-based investors are the price-to-earnings multiple, the price-to-net asset value or the Enterprise Value-to-EBITDA multiple, the earnings yield is a metric that is often overlooked by local investors. The earnings yield shows the return that the company generates when compared to its market value and is calculated by dividing the earnings per share of a company by its share price. It is basically the inverse of the priceto-earnings multiple and illustrates
the percentage rate of return that an investor gets when investing in an equity. Sometimes, investors may not consider the difference between the earnings yield and the dividend yield, as a company may elect to distribute most or all its earnings to shareholders as cash dividends. In this case, the dividend yield would be very close to the earnings yield, indicating that the company has a generous payout ratio. For example, the equity of Main Street Complex plc currently offers a net dividend yield of 2.6 per cent and an earnings yield of 2.9 per cent, reflecting the company’s “objective to distribute a total dividend … equivalent to the distributable profits earned during the year” as stated in the IPO Prospectus dated 23rd April 2018. Similarly, BMIT Technologies has a very high dividend payout ratio policy and indeed the forecasted net dividend per share of €0.022 for the 2019 financial year translates into a dividend yield of 4.1 per cent based on the current share price of €0.535 whilst the forward earnings yield is 4.7 per
cent based on the projected earnings per share of €0.025. In other cases, when a company distributes dividends in excess of its earnings, the dividend yield would be higher than the earnings yield. A case in point is Mapfre Middlesea plc which is recommending the payment of a final ordinary net dividend of €9 million for the 2018 financial year apart from a special net dividend of €8 million. The ordinary dividend is higher than the net profit of €8.59 million generated by Mapfre Middlesea in 2018. In fact, the equity is currently offering a net dividend yield of 4.1 per cent (based on the final ordinary dividend) compared to the earnings yield of 3.9 per cent. The earnings yield is often used for gauging the attractiveness of investing in an equity when compared to other asset classes. In fact, it is common to find international financial analysts commenting on the earnings yield of the S&P 500 index for example (which currently stands at approximately 4.6 per cent), comparing this to the benchmark yield of the 10-year “risk-free” US Treasury (presently at 2.6 per cent) and arguing whether the spread between the two rates of around 200 basis points is sufficient to cover the higher risks associated with investing in equities. Moreover, the earnings yield can provide investors with an indication of market valuation. For instance, if the earnings yield of the S&P 500 is less than the 10-year US Treasury yield, equities (in general) may be considered to be overvalued. Conversely, if the earnings yield climbs much higher than its historic average, the equity market may be considered to be relatively undervalued. The earnings yield has widespread scope for application to the local market as it provides additional perspectives and draws atContinued on page 26
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Making more sophisticated investment decisions Continued from page 25 tention to investment opportunities that would otherwise be largely undetected. A clear example is Lombard Bank Malta plc. Lombard’s equity is offering a net dividend yield of only 1.4 per cent which, in turn, is not attractive when taken in isolation and when compared to the average gross yield of 1.04 per cent on the 10-year Malta Government Stock (MGS). On the other hand, the earnings yield of 8.4 per cent of Lombard is attractive and certainly provides space for deeper analysis rather than just limiting an investment decision to a single metric like the dividend yield or the more conventional valuation multiples. A similar example is Simonds Farsons Cisk plc which based on the current share price of €9 offers a net dividend yield of 1.3 per cent but an earnings yield of 5.3 per cent. The latter is also much higher than the current median earnings
yield of 3.9 per cent for all companies listed on the MSE’s Regulated Main Market. Nonetheless, the median earnings yield of 3.9 per cent also includes the performances of those companies which results are notoriously distorted by “one-off” items, like in the case of Malta Properties Company plc and Malita Investments plc through the yearly changes in the fair value of investment properties, and by loss-making companies like Medserv plc. Among the large companies by market capitalisation, Bank of Valletta plc has the highest earnings yield of 7.4 per cent mainly as a result of the sharp decline in the share price over recent months while the bank remained profitable in 2018 despite the significant litigation provision of €75 million. Nonetheless, a high earnings yield should not be immediately interpreted as a sign of an attractive investment proposition but rather it should be seen together with other valuation metrics
(such as the price-to-net asset value) and financial indicators like the return on equity. Similarly, despite the considerable contraction in profitability over recent years, the equity of HSBC Bank Malta plc offers an earnings yield of 4.6 per cent which is higher than the median yield of 3.9 per cent for all companies listed on the Regulated Main Market. In contrast, the earnings yield of GO plc, Malta International Airport plc and FIMBank plc are all below the median rate. GO offers an earnings yield of 3.8 per cent based on a share price of €4.90. However, as the equity begins to trade without the entitlement to the total net dividends of €0.55 per share as from 25th April 2019, the share price is likely to adjust downwards and thereafter result into a higher earnings yield. Conversely, although the earnings yield of MIA (3.4 per cent) and FIMBank (3.2 per cent) are lower than the current median of 3.9 per cent, both offer a spread of over
200 basis points over the average gross yield of 1.04 per cent on the 10-year MGS. The focus on the income-generating aspect of investing is likely to remain very high on the agenda of local investors for many years to come. This is partly a reflection of general preference which is also dictated by demographical needs in a period where interest rates are expected to remain very low for the foreseeable future. Nonetheless, the local investing community also needs to become more sophisticated, and this includes taking investment decisions that consider a wider variety of ratios and metrics in order to better evaluate the investment case in an equity, especially in view of the expected growth in the number of equity listings on the MSE Regulated Main Market in the coming months and years. Josef Cutajar is a Research Analyst 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. © 2019 Rizzo, Farrugia & Co. (Stockbrokers) Ltd. All rights reserved
e Malta Business OBSERVER
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April 25, 2019
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BUSINESS UPDATES
Littering regulations updated to achieve better waste management Earlier this year, the European Union concluded negotiations related to the circular economy on the revision of the waste package, with new rules and more ambitious measures being introduced in the continued fight to prevent waste generation, increase reuse and boost recycling. Specifically, higher waste recycling targets were introduced to the Waste Framework Directive and the Packaging Waste Directive, whereas further restriction on waste sent to landfill was introduced through the revision of the Landfill Directive. These laws aim to increase the amount of municipal waste recycled across the EU. Negotiations started earlier this year on a new proposal for a directive banning certain single-use plastic items from being put on the market, along with an obligation for each member state to separately collect 77 per cent of plastic bottles by 2025, increasing to 90 per cent by 2029. The Maltese Government is also concentrating its efforts to continue the fight against waste. The recent introduction of the nationwide collection of organic waste, the public consultation and the recent signing of a Memorandum of Understanding with private industry on the introduction of the Beverage Container Refund scheme, the construction of a new waste-to-energy facility in 2023, and the recent amendments to the littering regulations are just some of the initiatives that underline this. The aim of these amendments is to
Some existing offences Dropping/leaving/depositing any litter in public areas
Penalty prior to amendments
Current penalties
€58.23 - €116.47
€150 - €300
Tampering/vandalising any waste collection infrastructure
€58.23 - €116.47
€150 - €500
Repeat offences
€4,658.75 - € 11,646.87
€6,000 - €15,000
strengthen existing legislative and enforcement provisions and to reinforce the commitment to penalise those who don’t adhere to the waste collection schedule of the respective locality, whilst introducing stiffer penalties for those who relapse. These regulations together with
the intensive awareness campaigns, as in the case of the Don’t Waste Waste Campaign and the Sort it Out Campaign, will encourage a more positive sense of civic duty and foster a culture of ongoing environmental stewardship, even through public place recycling.
In a nutshell, these amended littering regulations make it an offence to take out the wrong waste bag on the wrong day, in contravention of the respective Local Council’s waste collection schedule. Also, there is a fourhour grace period between when the bag is placed for collection
and when it is collected, with penalties varying between €150 and €300 for those who take out the bag earlier than four hours, or just after the time of collection. This acts as a prelude for the forthcoming introduction of new legislation on the obligation to separate all waste. In order to simplify the process and avoid lengthy court procedures, administrative fines have been introduced which will allow those penalised to pay their fine directly. This essentially means that anyone with a fine can enter into a written agreement with the Environment and Resource Authority, and the minimum penalty amount can be settled without criminal liability. Court, however is being given the power to order the removal of any dumped material within a period of three months before passing on this authority to the local council to carry out the necessary procedures itself and recuperate expenses from the offender. Furthermore, a daily penalty can be imposed for every day the default continues after the expiration, which may amount to between €50 and €130. MESDC will continue to work closely with the local councils to ensure that these regulations are adhered to, in a collective bid to prevent littering and increase recycling rates to work toward achieving the new EU waste management targets. For more information on waste management practices please visit dontwastewaste.gov.mt
e Malta Business OBSERVER
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April 25, 2019
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BUSINESS UPDATES
Achieve peace of mind with Cloud ERP processes can be automated by Cloud ERP software. When your employees are not inundated with spreadsheets and manual processes, they can focus more on strategic tasks and problemsolving without the need to constantly call IT for assistance.
With the commercial landscape gravitating more and more towards being data-centric, the larger a business grows, the greater the need for software solutions to manage data and information. If you’re constantly struggling to obtain business-critical data in real-time, then you’re probably falling behind in the race against your competition. Through seamless integration, automated processes, and unhindered mobility, implementing a modern Cloud ERP solution will go a long way in bringing efficiency to the workplace, thus allowing everyone to focus on what’s important. From the way you manage and access data to the way you work, here are some distinct advantages of modern Cloud ERP systems. Full system integration provides instant performance visibility The beauty of most Cloud ERP solutions is their integration capabilities. It puts your core business processes and data in a single place, covering all functions such as finance, sales and marketing, project accounting, distribution, and manufacturing. This empowers users across the organisation to work more effi-
ciently with the same up-to-date information, whilst also providing an on-demand 360-degree view of business performance in a single dashboard.
Business process automation removes human error With legacy ERP systems, certain everyday processes will still include manual tasks. Other
than the potential for costly human error, this hands-on data management is inefficient and presents a high opportunity cost when you consider that all such
On-the-go access anytime, anywhere In the past, significant amounts of information came in the form of paper documents but nowadays the majority of data is transferred digitally. Likewise, processing capacity and availability wasn’t as demanding as it is presently. This is why modern ERP solutions are built for the cloud – enabling users to tap into their business documents, customer data, product or service information, reporting, and more from any connected computer or device, no matter where they are. Cloud ERP has the added benefits of being faster, more cost-effective, and easily scalable. To find out more about Acumatica Cloud ERP and how it can take your business to the next level, visit www.computimesoftware. com/acumatica-erp or email info@computimesoftware.com
HSBC Malta appoints seasoned banker as Executive Director and new Head of Business Development
Turkish Airlines takes seventh Turkish Airlines World Golf Cup to Malta Turkish Airlines, the global carrier that flies to more countries than any other airline in the world, brings the seventh edition of its widely-heralded amateur Turkish Airlines World Golf Cup to Malta at Royal Malta Golf Club on Friday 24th May. More than 8,000 players will tee it up in more than 100 tournaments across the globe, with the victors securing places in the Grand Finals in Antalya. Turkish Airlines, Turkey’s national flag carrier, established the World Golf Cup in 2013 as part of a groundbreaking golf programme that includes the Turkish Airlines Open European Tour tournament, the Turk-
ish Airlines Challenge Tour event, and backing for women’s golf. The winner of countless awards for its unparalleled flight experience, Turkish Airlines’ move into golf – a sport enjoyed by a remarkable amount of its passengers – was a natural one. The Turkish Airlines World Golf Cup is now one of the most sought-after events on golfing calendars around the world. Turkish Airlines carries the first set of golf equipment on flights free of charge. Golf players interested in participating at the Turkish Airlines Wold Golf Cup Malta qualifiers are kindly requested to send their details by email to marketingmalta@thy.com
Michel Cordina has been appointed as Executive Director on the HSBC Bank Malta plc Board, as well as the bank’s first Executive Head of Business Development, a new role created to usher the bank in its new phase of growth. Mr Cordina has been the Head of the bank’s Commercial Business for the past eight years. His banking career started in 1981 with Mid-Med Bank Limited and he joined HSBC in 1999. He has worked in both Personal Banking and Commercial Banking business units. He has also led a number of operational and support functions of the bank. Mr Cordina has occupied various executive roles within HSBC Malta, including Deputy Head of Operations and Head of Business Transformation. He was also the Programme Manager responsible for bringing the HSBC UK Contact Centre to Malta. In 2010, Mr Cordina was seconded to HSBC Commercial Banking in London where he performed the role of Head of Sales Performance. In his new capacity, Mr Cordina will work with all global businesses and functions to develop the bank’s business with the bank’s primary clients and external stakeholders as it focuses on a balanced return to growth. Facilitating growth in HSBC’s corporate business will be a particular priority.
MICHEL CORDINA WILL DRIVE GROWTH FROM THE BANK’S CORE BUSINESS
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e Malta Business OBSERVER |
April 25, 2019
BUSINESS UPDATES
Sparkasse Bank Malta announces share capital increase
GO introduces new and improved mobile packages for roaming in nonEU countries Post-paid customers roaming in non-EU countries can now enjoy better and cheaper rates with GO’s new and improved mobile packages. “Our customers’ roaming experience and peace of mind are our top priorities,” said Nikhil Patil, CEO of GO plc. “In addition to ensuring that we are on point from a technical perspective, we have undertaken every effort to improve our partnerships with foreign providers to ensure that we can indeed deliver the best service possible to our esteemed customers.” “This has allowed us to improve our pricing, as well as revise our zone distribution, based on data we have gathered over the past months on countries our clients visit most regularly.” “We strongly believe that these new GO packages and new zone distribution truly reflect the needs of our customers. We have listened to and processed their feedback, and are essentially delivering higher value
to them,” added Chief of GO Business, Arthur Azzopardi. All customers subscribed to Mobile Infinity 3 and Freedom Beyond mobile plans will benefit from 50 per cent discount on the roaming rates in non-EU countries. For further information on these plans visit www.go.com.mt/business
Sparkasse Bank Malta has increased its share capital to €30 million, leading from a positive set of results in 2018. The bank announced further investment in its Maltese operations, by an injection of an additional €4 million into its share capital. The additional capital was derived from retained earnings generated by the bank. Commenting on this development, Paul Mifsud, the bank’s CEO stated, ‘’As the bank continues to grow its business locally and internationally via its branch in Ireland, the bank will continue to invest and improve its capital position.” “Capital will be used in its broadest sense as the bank continues to make significant investment in human resources, IT infrastructure and logistics locally,” Mr Mifsud continued. “The bank is committed to providing services locally and continues to see its Malta operation as the backbone to its initiatives in Ireland and in Luxembourg in due course.”