The Malta Business Observer, 28th May 2020

NEWS Issue 110

| May 28, 2020

Distributed with Times of Malta

Freeport volumes drop by a third during pandemic

If tourists do not start trickling in by this July or August, hotels would have to depend on state assistance until next summer, according to MHRA President, Tony Zahra. see pages 5, 6, 7 >

Ray Bugeja The volume of containers handled by Malta Freeport terminals in March and April dropped by 36 per cent, and transport and logistics operator Express Trailers posted a yearon-year drop of 40 per cent over the same period as a result of the COVID-19 disruptions, according to the entities’ respective heads.

“Operations at the Freeport have been challenging due to this global turmoil, heavily impacting volumes. The months of March and April this year have seen a 36 per cent drop in volumes when compared to the same period last year,” Malta Freeport Terminals Ltd Chief Executive Officer Alex Montebello said.

Malta Freeport, which is connected to over 90 other international ports, including 50 in the Mediterranean, employs more than 1,500 workers including licensed port workers, and its operations are crucial for the island’s economy, Mr Montebello asserted. Indeed, it was particularly instrumental during these difficult times, supporting the nation’s needs through continuous activity.

However, the shipping industry has been severely affected by the pandemic, Mr Montebello underlined, and the situation is posing significant challenges to the Malta Freeport operations, he explained. Twenty-one sailings that were due to call into Malta over the past weeks were cancelled, a situation that is expected to extend to June.

Indeed, both imports and exports were impacted by the coronavirus outbreak since Malta

BUSINESS OPINION

Economist Dr Stephanie Vella, the co-founder and Executive Director of E-Cubed Consultants, says a concerted effort is required from Government, as well as social and civil stakeholders, to adapt to a new, sustainable reality. see page 11 >

Freeport’s performance does not depend on the operations of the local market or sectors of the Maltese economy.

Its main line of operation is transhipment, Mr Montebello explained, adding that Malta Freeport depends on the global economy with 94 per cent of the containers it handles being transhipped. And, since the pandemic is exerting a severe toll in mainland Europe, what is being experienced now is a lack of shipping demand from European countries.

While reflecting some of these concerns, the Group Chief Executive Officer of Simonds Farsons Cisk plc, Norman Aquilina, also pointed

to the disruption the beginning of the pandemic had on exports from mainland China to Europe via containers. These were crippled, he said, thus causing shipment delays locally and additional costs in instances where the shipping port of origin had to be changed.

He also noted a general lack of availability of containers during the pandemic, particulrly within northern European ports, like Hamburg, adding that this disruption mainly affected businesses stocking up on raw materials and consumables. continued on page 3

NEWS

Social partners say unemployment is expected to rise across a variety of sectors and that further tangible action is required to safeguard business, as the economic fallout from the pandemic continues. see pages 12, 13 >

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Logistics firm reports 40 per cent decline in activity compared to 2019 continued from page 1 Despite this, Mr Aquilina added, many businesses have swiftly adjusted to ensure continuity in their logistical operations and supply chains, even though the traditional distribution routes were totally disturbed, making planning to maximise loads efficiently, while still maintaining a high level of service, more difficult. Indeed, supply flows remained fairly constant and pressure on prices is now possibly easing, also in view of the downward trend of the price of oil, among other factors.

“Clearly, in spite of the evident sudden challenges and pressures placed on the supply chain of most businesses, the market continues to be well serviced. In fact, as can be vouched by the public at large, retail outlets in general, bar a few days of initial panic buying, have consistently remained well stocked and public demand continues to be adequately satisfied,” Mr Aquilina remarked.

However, the prevailing situation, he pointed out, does not allow for effective medium- to long-term planning, given the general and wide uncertainty in international trade flows. Besides shipping restrictions and other international logistics-related implications, an undesirable scenario could be prevalent with companies stocking up more than necessary on raw and other materials for contingency and

business continuity purposes, most probably paying higher prices at source, he observed.

Moreover, short-term disruption and delays were experienced as a result of changes in processes which were sudden and not fully planned and tested beforehand, Mr Aquilina noted. This was because, traditionally, many shipping administrative and customs procedures, were extensively paper-based and required visits to certain offices.

And, while these have become mainly online due to the pandemic, it took some time until the procedures and processes were comprehensively communicated and tested, with some requiring adjustments. However, technology played a major part in enabling safe communications between stakeholders and continuity of operations, Mr Aquilina said.

Concluding, he predicts the general air of uncertainty regarding economic factors, both short term and longer, to persist significantly as the pandemic’s effects on the economies and international trade from a demand and supply side become more apparent over the next few months.

On his end, Franco Azzopardi, Express Trailers Group’s Chairman and Chief Executive Officer, noted that the COVID-19 pandemic and the resultant restrictions, including in movement and travel, served to bring to the fore the importance of logistics, a sec-

tor that was often overlooked and taken for granted.

The logistics sector and the supply chain guaranteed that the country does not grind to a halt and that both imports and exports continued uninterruptedly, he explained.

Yet, according to the National Statistics Office, both imports and exports suffered in March, when the travel ban, and other restrictions, were imposed by the Government to contain the spread of the coronavirus. The value of imports dropped by €622.5 million and exports were down by €61 million in value during that month, while, in the first quarter, Malta imported €1.5 billion worth of goods when exports were valued at just over €820 million.

Mr Azzopardi corroborated this information with his experience on the ground. In the realm of imports, Mr Azzopardi said the decrease was a result of reduced consumption. While an estimated average of 500 tons of food items are normally consumed on a daily basis in Malta by both residents and visitors, over the last two months, due to the sudden drop in tourists, demand for imports plummeted, he said.

This was largely due to the fact that most of what visitors consume while in Malta is imported and, therefore, those sectors that suffered as a result of the travel ban stopped bringing over such goods. In addition, Mr

Azzopardi said, many thousands of foreigners who worked in the tourist sector became idle and, possibly, departed, again adversely affecting consumption and importation. “We felt that immediately,” the CEO of Express Trailers said, in relation to how this impacted his firm’s bottom line.

“It is a chain reaction and it was a sudden shock,” Mr Azzopardi said, adding that his company experienced a year-onyear drop in movement of 40 per cent at the end of March and the beginning of April. A “slight upturn” was registered in the first half of May, in the movement of non-essential items, with this shift also actually being registered five weeks beforehand.

Another challenge facing the sector was the imbalance between imports and exports. This posed a logistical issue for firms working in the sector, who, Mr Azzopardi pointed out, needed to send empty trailers abroad, pushing up costs.

The CEO underlined the need to encourage exports. Such activity could bear a lot of fruit since, over the past few years, the nature of exports has changed, becoming “more sophisticated”.

Indeed, while, in the past, high volume and high weight items made up the bulk of what was exported, today the market was driven by high value, low volume, and low weight goods, such

as the ‘chips’ manufactured locally by STMicroelectronics.

Looking ahead, Mr Azzopardi said it was impossible to predict how the situation would develop as this experience is unprecedented. What he would really like to see is the Maltese spending their money here. “Charity begins at home,” the Express Trailers CEO said.

Moreover, Mr Azzopardi said that if there was pain to endure, it should be the shareholder that should shoulder the responsibility and not the employees who are the company’s economic engine. “I wanted to avoid this sinkhole and was even prepared to borrow money if need be. If I am willing to get a loan to purchase equipment, so why should I not do it to pay my employees?” he argued.

Keeping his feet firmly on the ground, the head of the logistics company said it would take longer than the year’s end to get back in line and a lot depended on the reopening of the airport and on people regaining confidence to start travelling again.

In this regard, he spoke very highly of his colleagues in the tourism sector, saying they have the energy and the determination to rebuild the industry. “There will be lesser activity until the end of the year, but the economic activity will get better and, all things being equal, confidence will grow,” Mr Azzopardi said.

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If airport does not reopen soon, Government must help hotels until June 2021 – MHRA President Ray Bugeja If tourists do not start trickling in by this July or August, hotels would have to depend on state assistance until next summer, according to Malta Hotels and Restaurants Association (MHRA) President, Tony Zahra.

“Unless airport operations resume, there is no reason to reopen hotels,” he argued. While a decision was made on when to reopen restaurants, it had still to be determined when hotels could resume operations, Mr Zahra said. Once that is decided, then the sector can move on to see how best they can work within the prevailing circumstances, he added, making a categorical proviso.

“If Malta International Airport is not opened again – so we can start seeing some clients in July and August – then it would not be worth reopening during the winter months. So, we would have to wait until March next year,” he said.

And that, Mr Zahra was quick to point out, would mean that the assistance package offered by the Government to hotels to retain their workforce would have to be extended to June 2021.

Hotel accommodation in the first quarter of this year stood at 281,253, down from 349,380 in the same period in 2019 according to figures by the National Statistics Office. In parallel, Flughafen Wien

Group reported that MIA, in which it has a strategic investment, handled just over one million passengers in the first four months of this year, a drop of more than 45 per cent over the same period in 2019.

Flights movements were down

38.1 per cent and cargo also declined by 2.5 per cent.

There are 126 hotels offering just over 39,000 beds, according to data just published by the NSO. Most, 48, are in the three-star catecontinued on page 6

“Unless airport operations resume, there is no reason to reopen hotels.” – Tony Zahra, MHRA President

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Travel agents left with liquidity shortfall as a result of pandemic continued from page 5 gory, followed by those having four stars (44), two stars (19) and five stars (15).

Mr Zahra explained that, when discussing the way forward to ease the pandemic’s restrictions, there are two main decisions to make: timing and conditions. Indeed, when the restrictions imposed to contain the outbreak could start being eased has to be determined first with the view of lifting them altogether. Once that is established, then how to go about it could be discussed and decided.

By way of example, he pointed to the lifting of restrictions when it came to restaurants, saying that the MHRA had done its duty and persuaded the Government to decide on a date when the reopening process could start. It then proceeded to hear what members had to say with regard to the conditions.

“One can be as critical as one can be, but the reality is that, up until just a few days before the protocols on the reopening of Malta’s tourism infrastructure were published, restaurants were still struggling,” Mr Zahra pointed out. Now that the decision to start the reopening process has been made, the conditions can continue to be discussed and, where necessary and feasible, changed, he underlined.

“Why be so polemical on everything? Now that restaurants can reopen, we can change the conditions, if necessary,” Mr Zahra asserted. He said he was certain that both the Tourism Ministry and the Malta Tourism Authority would be willing to make changes that were felt to be reasonable and, indeed, improve the situation.

The greatest challenge now, he noted, is getting people to restaurants. That is something that owners and the operators themselves have to do, so every individual responsible for such outlets must focus on marketing, he said.

“We are in the post-COVID-19 stage and what happened previously might not work anymore.

One cannot expect that the preMarch situation will prevail now just because restaurants have been given the green light to reopen,” Mr Zahra warned.

In his opinion, restaurant operators should actively consider offering incentives to attract

clients. Also, they need to focus on their ‘regulars’, the MHRA President suggested.

In the case of travel agencies, the President of the Federated Association of Travel and Tourism Agents (FATTA), Iain Tonna said they are not only reporting zero income but also experiencing a “negative” financial situation. In addition to having no sales at all, travel agents have to also settle refunds with clients who had booked holidays and who did not accept the voucher option.

Indeed, travel agents, too, are banking on the airport reopening as soon as it is deemed safe, hoping to see some sales for, otherwise, Mr Tonna, warned, further lay-offs and Government liquidity support would be inevitable.

There are about 200 licensed travel agents on the island.

Some travel agents were constrained to shed staff and others resorted to reduced working hours and applied to benefit from the Government’s wage supplement scheme.

Acknowledging that the travel and tourism industry is facing liquidity constraints because no new bookings are being made and – on top of that – players in the sector are having to deal with unprecedented numbers of reimbursement claims for cancellations, the European Commission (EC) recommended issuing vouchers to passengers and travellers as an alternative to reimbursement for cancelled package travel and transport services in the context of the COVID-19 pandemic.

The EC stated it wants to ensure vouchers become a viable and attractive alternative as reimbursement for cancelled trips and urges carriers and travel operators to offer passengers and travellers an attractive and reliable choice between a cash refund, in line with their legal rights under EU law, or accepting a voucher instead.

As an incentive for vouchers to become the preferred choice – and therefore aid in buffering the

“We must acknowledge that we are only at the very beginning of what I fear is going to be an extremely challenging and rocky journey in our attempt to try and find the new sustainable economic norm.”

– Raphael Aloisio, Leader Financial Advisory, Deloitte liquidity shortfall – Brussels suggested that vouchers should also be flexible in terms of the range of services for which they can be used and also their transferability.

Mr Tonna explained that the majority of those whose prebooked holidays were cancelled, as a result of COVID-19, preferred refunds rather than vouchers. By law, such refunds had to be settled within 14 days, although, in view of the pandemic, the Government

introduced a six-month buffer period, thus giving the agents some additional time to retrieve the funds from the end suppliers, such as airlines. Still, he noted, in the meantime, agents had to respect other financial commitments, whether with their employees or air and sea carriers, as well as other suppliers.

He said FATTA agreed with the European Commission’s suggestion that the vouchers should be

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flexible and transferable. In addition, the client had to be convinced that, if they accepted the voucher, the money paid would still be safe, thanks to the Insolvency Fund.

Mr Tonna explained that all FATTA’s 55 members, who catered for both incoming tourists and Maltese holidaying abroad, were affected by the travel restrictions. The bulk were small to medium companies, although 20 per cent handled about 80 per cent of the market.

Most of the association’s members, Mr Tonna continued, depend on tourism, and, therefore, a decision on whether to open the airport or not would make the difference between either seeing some sales or further lay-offs and the need for liquidity support by the Government, he continued. Mr Tonna argued that such support should take the form of grants, not loans, because the latter would still have to be settled at some point.

Some travel agents, he predicted, may not survive, while the flexible and more innovative

ones may just make it. “So, of course, the sooner Malta International Airport resumes operations, the better it is for us, provided that a risk assessment justifies such a decision,” Mr Tonna asserted.

If this summer is lost and there are no signs of hope before spring, then the season would probably be lost too, he warned. However, he remains hopeful that winter could still be an option, provided that some light can be seen at the end of the tunnel by October, rather than December.

Still, the FATTA President remarked that it all depended on how the situation developed in terms of ensuring people’s safety. The biggest issue remained consumer confidence: unless that returns, the exit process or recovery will be that much more difficult, Mr Tonna acknowledged.

Somewhat in contrast to these sentiments, Raphael Aloisio, Leader Financial Advisory at Deloitte, said he thought it is still way too early to objectively make any form of reliable predictions,

“Malta has engaged in active discussions even on a European level.”

– Tourism Minister even though the recently issued guidelines and proposed easing of restrictions have given a sense of direction.

“We must acknowledge that we are only at the very beginning of what I fear is going to be an extremely challenging and rocky journey in our attempt to try and find the new sustainable economic norm. Operators in the local hospitality and retail sectors have been rocked to their roots and their sustainable business model has been pulled from under their feet,” he said.

The decisions taken by the authorities, Mr Aloisio continued, were made to safeguard the health and safety of the broader population and it would be extremely inequitable if the stakeholders and employees of the

impacted sectors are not supported by the Government and the broader community.

He admitted he failed to see how operators can realistically be expected to rebuild a self-sufficient model overnight and said the affected sectors must continue to benefit from Government financial support and assistance throughout the recovery period.

The support, Mr Aloisio explained, should be provided as part of a formal economic recovery plan, which is backed by all stakeholders and a well-mapped out phased ‘re-entry’ plan should be formulated.

In this regard, he feared that, unless hotel operators are able to achieve certain minimum occupancy levels, they will inevitably face a real risk of losing more

money being open, rather than closed.

Unfortunately, he pointed out, this is already being witnessed in the retail sector, where a number of operators are already seriously considering a reversal of their decision to reopen their stores.

“I would dare say that most of the heavily impacted sectors are in the same situation and will require ongoing support, albeit at a decreasing scale, even past March 2021,” Mr Aloisio asserted.

Yet, not many details were forthcoming from the Tourism Minister, when approached by The Malta Business Observer with these concerns. Instead, Minister Julia Farrugia Portelli said the Ministry was “analysing the situation in various countries on a daily basis, together with our health authorities. Malta has engaged in active discussions even on a European level. In my intervention during a recent EU tourism ministers’ meeting, I insisted on a common-wide approach on safe protocols on a European level,” she asserted.

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Workplaces will be transformed even postpandemic, private sector stakeholders say Rebecca Anastasi More flexible working conditions, less travel and an increased reliance on technology will underpin a transformed post-pandemic workplace, according to some players in the private sector, who told The Malta Business Observer that important lessons have been learnt as a result of COVID-19.

“We are definitely adopting a ‘remote first’ mentality, so we will not be returning to the office on a full-time basis,” GO plc’s Chief Executive Officer, Nikhil Patil said. “We shall also be opting for remote meetings and events whenever possible since this has definitely proved to be far more efficient and effective.”

From the start of the pandemic, the telecommunications company was in a strong – and perhaps, somewhat, unique – position to adapt to the changing circumstances, from a technological and operations point of view. “When you run a company as complex as GO, a company that offers services on which so many businesses, households and individuals depend, preparing for emergency situations is part of our everyday lives,” Mr Patil said, underlining that COVID-19, nevertheless, “took our preparedness and response to a whole new level.”

The firm mobilised 75 per cent of its workforce to work remotely, including the call centre agents. Retail shops remained open, though these were equipped with Perspex screens; health and safety training was given to customer-facing employees; and procedures were revised and digitised wherever possible, to ensure that outlet visits remained minimal.

However, the shift was not without its challenges, the CEO explained. Indeed, Mr Patil said the sourcing and setting up of equipment for a large workforce was complex since the firm had to ensure everyone had remote access to the systems set up at the office. As a result, the work of the company’s response team – which devised a strategy for the transition – proved instrumental.

“Having such a well-formulated plan, organising daily team check-ins and discussing the best way forward, as a team, certainly helped overcome any challenges that we faced. We also invested in the upskilling of leaders to help them lead more effectively re-

motely. Our HR department did a sterling job of churning out one initiative after the other to support employees in this new reality,” he asserted.

And, the results were encouraging. “Many reported increases in productivity,” he noted, as a result of “the time saved from not having to commute to and from the office” and “the freedom to work in the hours when you are at your most productive”.

Despite this, the decrease of interpersonal relations weighed heavily on some. “People missed the corridor catch ups, the early morning coffees and lunches with their colleagues,” he said. To tackle the issue, the firm introduced mid-day fitness online classes for all staff; yoga sessions twice a week; weekly motivational SMSs sent to all staff; free online counselling sessions; and a kids online learning platform for parents forced to juggle.

Moreover, “in order for everyone to still feel connected and informed on company news, we have weekly, remote live hangouts with the Executive Committee. During these hangouts, we invite two employees to give a short, five-minute presentation on a particular topic, and then

we open the session to Q&A to all staff. These have been really well received. We have even launched new products internally through this medium before going out commercially,” he outlined, saying that it was “remarkable what one can roll out from the comfort of one’s home.”

Global payment services provider, CCBill, which has offices in the United States, Serbia, the Netherlands, Singapore, and Malta, also reported a smooth transition to online working for the local outfit, which boasts an 82-strong team. The firm’s Human Resources Director, Cindy Anastasi, highlighted that the company – since it operates in the IT sphere – actually saw an increased level of business “We do a lot of hosting, so we’ve seen growth as a result of the pandemic,” she said.

Their technological capabilities were key to adapting to the current circumstances, she said.

“Within a week, everyone working in Malta was operating remotely. Our help desk team got everyone set up and, anyone who didn’t have VPN access, was ready to go,” she explained.

However, Ms Anastasi stressed the “people challenge” implicit in

“We are definitely adopting a ‘remote first’ mentality, so we will not be returning to the office on a full-time basis.” – Nikhil Patil, GO CEO a full online operation, saying that, while “communication has actually increased, with more dialogue happening online,” the way people interacted had to change. Onboarding new employees was also a delicate process, she said, while managers had to be trained to adapt to the new scenario.

“It’s a different style of working, so we needed to make sure people could handle it. There’s a lot of anxiety and stress at the moment, so from an HR point of view, it’s became harder,” she explained. To remedy any issues, Ms Anastasi and the HR team, based in Serbia, organised fortnightly meetings, to put staff’s minds at ease, share information and retain a close connection to each team.

“As an HR team, we also needed to look after the personal aspects. Some employees weren’t

sleeping well. There were some of our foreign staff who were on their own. Some are fed up of the current situation and are keen to return to the office. But we’re also having to prepare people for the changes they will see once they return, because it won’t be the same,” she said.

The company doesn’t yet have concrete plans as to when the move back to the office will be, but, commenting in a personal capacity, Ms Anastasi said that, in the future, she would have people come in mainly for meetings and interviews, working from home 65 per cent of the time “as long as the productivity is there”.

Moreover, “I would also stipulate a certain amount of face time, organise social events and team meetings,” she asserted, while also stressing the need to train managers to monitor pro-

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ductivity. “More training can be given to managers, and there can be more investment in activities with high-impact benefits. I don’t think a full transition to remote working is positive, but balance remains key,” she concluded.

But such adaptation is not just the purview of technology companies. Legal firm Fenech & Fenech Advocates has also hit on ways to, not only operate well during the crisis, but also to innovate long-term. “It has encouraged us to work at organising more and more virtual events which have united us as a group and as an organisation,” Managing Partner, Dr Ann Fenech said. As a result, “a number of us have also had the opportunity of connecting with colleagues at work with whom we rarely actually connect.”

The restrictions imposed by the pandemic forced the firm to eliminate physical meetings and travel, with “the normal conference call substituted by Teams or Zoom calls”, as well as the introduction of webinars, to replace the traditional conferences and seminars which would have

taken place in their stead.

The biggest challenge was reworking client relationships, which would usually be dependent on personal contact, and trying to find a solution even when the courts closed. Indeed, it was only once the Court Registry reopened that the firm was able to devise a system where they could see clients – though they did this by “adhering to a strict appointment system to avoid anyone in our waiting rooms and by implementing all the safety recommendations including the required distancing, wearing of face masks, and hand sanitizers,” she said.

Looking ahead, the firm will return to the workplace, but “fully committed to continue to make use of the numerous technological aids” at its disposal, she said. This will include the setting up of virtual meetings for overseas clients, which would lead to a decrease in the number of overseas work trips required.

“Speaking personally, travelling overseas takes up a great deal of my time. Substituting, where possible, these business trips with virtual meetings will cer-

tainly be a step in the right direction,” Dr Fenech asserted.

Moreover, the Managing Partner said she believed that all the staff “will return to work totally convinced that working from home is something which we will approach with a much broader mind. I believe that this pandemic has forced us to slow down our pace and to appreciate what really counts in life. That is a lesson in itself and worth remembering when we get back to the new normal,” she underlined.

The future will also look different for some companies in the catering sector. Mediterranean Culinary Academy Chief Executive Officer, Kurt Mifsud, said that, moving forward, “we will do things a bit differently.” Many meetings will move into the virtual space and the outfit will retain some of the products created in response to the challenges the pandemic has meted out.

“When we noticed that the COVID-19 situation was serious, we first shut down all the activities which went against the principles of social distancing. This

“More training can be given to managers, and there can be more investment in activities with highimpact benefits. I don’t think a full transition to remote working is positive, but balance remains key.” – Cindy Anastasi, HR professional was done days before it was mandatory as we could see the writing on the wall and saw it coming. We then started brainstorming a strategy to keep moving forward despite these troubling times, and so, we came up with the concept of The Recipe Box,” he said, explaining that it consists of three recipes using locally-sourced ingredients, delivered to one’s door.

“We realised that providing people with a product that would be great value for money, easy to use, as well as support local farmers and producers, and be sustainable (with re-

gards to packaging and sourcing of ingredients) was going to be key,” he explained.

In the future, any other changes are highly dependent on the industry, the CEO said, though he asserted his conviction that – across the board – the whole situation has made people re-evaluate how they do things and what is necessary and what isn’t. “This not something, someone forgets quickly, and the habits people have formed during these past few months will not fade away as soon as restrictions are lifted,” he concluded.

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

EDITORIAL

What’s next?

Now that the dust has somewhat settled, and we’re coming into our third month of living with the COVID-19 pandemic, attention is turning towards what happens in the next few months and how the crisis has changed our longer-term business futures, if, indeed, it has.

In the immediate, businesses have started to open up, although not without difficulty.

The conditions within which many in the entertainment and tourism sectors are being asked to operate have left many confused, with some restaurants, in particular, opting to remain shut rather than rack up significant overheads, which they cannot pay due to the loss of custom.

In this edition of The Malta Business Observer, the Director-General of the Malta Employers’ Association, Joseph Farrugia, underscores the harsh reality: the longer it takes for companies and enterprises to get to some sort of new normality, the greater the economic impact. And, as Perit David Xuereb, President of the Malta Chamber of Commerce, Enterprise and Industry, points out, this will have a concomitant effect on unemployment numbers, which he says are, at any rate, forecast to grow over the next few weeks.

This is – partly – what could be motivating Malta Hotels and Restaurants Association President, Tony Zahra, to push for the air-

Executive Editor Rebecca Anastasi

port to open as soon as possible. In our article focusing on the tourism sector on pages 5, 6 and 7, Mr Zahra says that if tourism does not restart, even to a limited extent, by July or August, then the state will have to keep propping up the sector well into next year, for “unless airport operations resume, there is no reason to reopen hotels.”

However, Mr Zahra also acknowledges that “what happened previously might not work anymore.” So, should we going back to 2019’s numbers, which are often touted as a reference point, almost as a standard of what ‘normality’ should look like? According to economist, Dr Stephanie Vella – and reflecting much of what Gordon Cordina has also said in the past – a focus on wellbeing and sustainable tourism is key, and strategies in the sector need to shift gear towards quality tourism, rather than quantity.

These ideas are, of course, not new, for this is what has been touted for the past few years as a solution to the heavy pressures placed on our infrastructure, our way of life and our cultural heritage.

But if our long-term strategy is to focus on well-being and sustainability – across the board – there will be casualties. There will be no going back to things ‘as they were’.

There will be a new normal – but one where there is less. Will the dozens of hotels and thousands of restaurants survive? And, if

not, which of them will still be serving clients in a transformed economy?

A clue might lie in Perit Xuereb’s call for companies to adapt fast, to retrain their staff and to “re-engineer their business objectives and operations” in order to overcome the challenges change will bring upon employers, employees, and the bottom line. Some firms have been quick on the ball in this regard, as our feature on the future of workplaces on pages 8 and 9 shows. However, this drive towards adaptability needs to be continuously encouraged by social partners and Government.

Change cannot be the exception, if businesses want to survive long-term.

There will, hopefully, be a ‘new normal’, both in Malta, and worldwide – not only in terms of social distancing measures, masks and an increased awareness of how to wash our hands, but also in terms of the products we’re offering, the processes we have adopted and the way we see our futures. For, while Malta seems to have had a bit of an easier ride over the last few months than other severely impacted countries, we must not forget that at the time of going to print more than 350,000 deaths have been registered globally as a result of the virus. If this isn’t a call for introspection, for a better way of doing things, and for a brighter future, then very little will be.

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BUSINESS OPINION

Re-inventing ourselves for a more sustainable economy post-pandemic

Dr Stephanie Vella There are, in my opinion, two important lessons which must be drawn from the unpredicted and unprecedented shock created by the COVID-19 pandemic.

The first is that resilience must continue to feature and shape policy making. Resilience has always underpinned Malta’s economy. Due to our small size, and our island status, we have always been exposed to shocks beyond our

control. As a result, we’ve built an economy which has transformed over the years – from manufacturing, to tourism to financial services among others – in a bid to adapt to changing circumstances. But, today, with the onset of COVID-19, we realise that, no matter how much we plan, unexpected shocks are bound to occur. The pandemic is not the first global shock nor will it be the last, with international observers predicting that the incidence of shocks is likely to increase.

We must, therefore, continue to build on our resilience and make effective use of this time to reinvent ourselves in a sustainable manner. We must look into developing sectors that can make use of the digital transformation as there is no doubt that this transformation will shape the development of economies in the foreseeable future. This includes the development of sectors such

as fintech services, IT and advanced manufacturing. It also entails questioning how these changes can benefit sectors on which we have been traditionally dependent, such as tourism.

Tourism can be enhanced through virtual and augmented experiences, possibly attracting higher spending niches and paving the way for the effective management of tourism capacity. In all of these choices we cannot lose sight of the fact that the pursuit of resilience must also feature sustainability.

The second lesson is that it is possible to adopt more sustainable production and consumption choices. Indeed, there are important lessons to be learnt from this crisis that should not fall by the wayside. For instance, it is becoming increasingly evident that frequent business travel can be minimised as meetings can be held online. Likewise, remote work-

ing can be effective and can lead to productive outcomes.

There are wider benefits which are reaped through the adoption of these approaches including less travel and less emissions, as well as savings in time leading to more satisfactory use of our restricted time.

Our consumption choices can also be more sustainable.

In a relatively short period of time, a number of firms have invested in their digital platforms to secure their survival. This has led to a surge in online shopping including delivery services. We have come to appreciate the value of local production such as the case for agricultural products and food security. The benefits of these consumption choices are also wide in nature including positive environmental implications due to less people travelling and goods transported over shorter distances.

Sustaining these choices, successfully addressing challenges and tapping into opportunities, is however not guaranteed and collective effort is required to ensure that we do not resort to autopilot when the impact of the pandemic eases. A concerted effort is required from social and civil stakeholders as well as government to adapt to this new reality, maintain the momentum and ensure sustainability in a post-COVID period.

Dr Stephanie Vella is co-founder and Executive Director of ECubed Consultants. She is a graduate of the University of Malta, and completed her postgraduate degree in 2018. As an economic consultant, she has worked on a number of projects and consultancy assignments with institutions including the EU Commission, Commonwealth Secretariat, Government ministries, authorities and private sector entities.

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NEWS

Unemployment set to rise in coming weeks, social partners reiterate Ray Bugeja Employers and Malta’s constituted bodies expect more jobs to be lost over the next few weeks, as a result of the pandemic, with the Malta Chamber of Commerce, Enterprise and Industry, and Malta Employers’ Association (MEA) saying the repercussions could be felt for years to come.

The economic impact of the COVID-19 outbreak is becoming more pronounced the longer businesses remain closed, whether by choice or necessity, and this will extend for months, and, in some sectors, years to come, Joseph Farrugia, DirectorGeneral of the MEA said.

He pointed out that although the hospitality sector appears to be at the epicentre of the prevailing upheaval, the fallout on the

“One cannot expect Government support to fully neutralise the economic impact of this crisis, as jobs will be lost no matter how much funding is pumped to keep business afloat, but the casualties can be minimised with more prolonged interventions.” – Joseph Farrugia, MEA Director-General rest of the economy will be far and wide.

“I believe this is partially due to an over-reliance of economic growth on population expansion over the last years. As the pandemic will reduce tourism figures, and the number of foreign employees shrinks, domestic demand for property, catering, and goods and services in general will also contract. This, together

with a fall in income, and the uncertainty faced by many employees in the private sector, will exacerbate the economic downturn,” Mr Farrugia predicted.

Speaking generally, the dilemma, the MEA DirectorGeneral pointed out, is whether the risk of opening up too soon to safeguard business interests will work against such same interests in the medium

term if the pandemic is not fully controlled.

He noted that, so far, there has been no dramatic increase in unemployment, both because the majority of enterprises have, in spite of the adverse circumstances, retained their human resources, and also due to the fact that foreign workers are acting as a buffer for the reduced economic activity, with thousands of third-

country nationals being repatriated. “However,” Mr Farrugia warned, “the indications are that things are set to take a turn for the worse in the coming weeks.”

Indeed, according to Foreign Minister Evarist Bartolo, preCOVID-19, something like 7,000 of the 11,000 or so new jobs generated every year were filled by foreigners. About 100,000 foreign workers and their families lived in Malta over the past years, he said. The Government assisted 4,200 of them to return home in March.

A total of 3,131 non-EU nationals have applied to be repatriated, with the number standing at 2,269 for EU nationals.

Struggles are being faced in diverse industries, and this has and will continue to affect employment numbers, Mr Farrugia said. “This is why it is imperative that the Government needs to

e Malta Business OBSERVER

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May 28, 2020

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NEWS

shore up ailing enterprises irrespective of sector, as the coming four months will be critical for the survival of many companies.

One cannot expect Government support to fully neutralise the economic impact of this crisis, as jobs will be lost no matter how much funding is pumped to keep business afloat, but the casualties can be minimised with more prolonged interventions. Such casualties will be across the board and are bound to affect employees at all skills levels in practically all economic sectors,” he asserted.

On the positive side, and looking ahead, Mr Farrugia said this is also a time to reflect, to engage in strategic thinking on reshaping the economy in order to make it less vulnerable to similar shocks in the future.

Echoing some of these thoughts, David Xuereb, President of the Malta Chamber of Commerce, Enterprise and Industry, agreed on the gravity of the situation. He noted that unemployment figures are forecast to grow, adding that this is confirmed by surveys carried out by the Malta Chamber during the COVID-19 crisis.

Elaborating, he said that unless further tangible action is taken to safeguard business, and, hence, jobs, when extrapolated on a national level, unare employment figures estimated to rise to between 22,000 and 27,000 over the next three to six months.

Unemployment, he explained, is expected to affect sectors such as retail, wholesale, importation and hospitality. Given the country’s dependence on tourism, the Malta Chamber expects the impact on the economy to be substantial and to last for a longer period due to the fact that, in the near future, there will not be the usual numbers of tourist arrivals Malta is accustomed to, Perit Xuereb continued.

The Malta Chamber has already gone on record saying that the country needs to start reopening operations in a responsible, safe, and phased-in manner, as was the case over the last few weeks. The gradual reopening of non-essential retail, followed by restaurants, snack bars and hotels is expected to help generate economic activity but only to a certain extent, its President said.

However, Perit Xuereb underlined the need for companies to adapt fast, and retrain their staff, as the need arose. “Companies will need to re-engineer their business objectives and operations, and upskill or reskill their workforce where and when appropriate, as the economy is not expected to get back to the February 2020 lev-

els for a considerable time. The operators who will be able to retain their best skilled workforce will be in a position to restart quicker and stronger than their competitors and it is essential that the skilled workforce, on whom businesses invest considerable resources in training, are retained for as long as possible,” Perit Xuereb asserted.

Noting that it is very difficult to predict the future in a world moving through uncharted territory, he said the Malta Chamber expects the Government and the business community to be quick on their feet to address this disruptive challenge and plan ahead for the opportunities that lie ahead. “The Malta Chamber is working hard to support businesses and our nation during this challenging part of our history,” he stressed.

Concurring, HR consultant Rachel Falzon – the founder of ReWired HR Consultants – said although there will be casualties, in terms of employment, she is confident damage can be contained if all stakeholders are open-minded and flexible.

“The Government will have to continue assisting those enterprises that truly need help even beyond June, while employers must understand that what

“e operators who will be able to retain their best skilled workforce will be in a position to restart quicker and stronger than their competitors and it is essential that the skilled workforce, on whom businesses invest considerable resources in training, are retained for as long as possible.” – Perit David Xuereb, Malta Chamber President worked in the past does not necessarily work now and employees have to contribute through their ideas and accept to be flexible,” she said, advocating for a “a think-tank approach” with ideas feeding onto each other.

Describing the current situation, Ms Falzon said that, whereas, until a few weeks ago, Malta had an employee’s market, with workers having a number of choices open, the number of layoffs experienced since the pandemic spread have turned the tables and, now, there are many people looking for a job.

However, many employers have looked after their loyal workers, notwithstanding the difficulties encountered, and,

therefore, the number of redundancies has not been “staggering” so far. Yet, she continued, it is still early days to say what can happen in the months to come.

“What is certain is that changes need to be made in the employment and HR sector, and this was already being felt before the COVID-19 struck,” Ms Falzon explained. The answer, in her opinion, is to be adaptable and flexible, and that applied to both the employer and the employee.

“If, say, a worker would like to continue working from home, the employer needs to understand that such a move could be beneficial to the business in various ways, including produc-

tivity-wise, and employers should not resist such change, simply because the way it has always been had worked out well in the past.”

For what matters, the HR consultant continued, is that workers get the job done. The prevailing situation is a “brilliant opportunity” to assess the situation and see what areas need to be improved, she stressed.

She also insisted on the need for synergy and creativity to address the difficulties of the times we are living in and even beyond. “All need to think differently,” Ms Falzon asserted, warning that things could turn out to be very serious if all stakeholders do not come up with new ideas.

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e Malta Business OBSERVER

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May 28, 2020

BUSINESS UPDATES

COVID-19 and transaction monitoring: managing AML compliance As a result of the ongoing global struggle with the COVID-19 pandemic, financial institutions are experiencing novel compliance challenges linked to this outbreak.

The new strain of coronavirus has sent global financial markets into widespread turmoil and this, unfortunately, presents criminals with new opportunities to generate and launder funds gained from illicit activities. As a result, financial authorities around the globe have taken to adjusting their AML/CFT approach to cater for the new patterns of criminal behaviour being recorded.

Changes in behaviour The current pandemic has seen numerous countries set up stringent control measures such as restricting movement and, therefore, keeping people in their homes.

The impact such measures have

Adjusting compliance with ComplyRadar

had on the global economy has brought about drastic changes in banking behaviours and in criminal behaviours too. Panicking at the current situation, people are withdrawing hard currency and are making more use of mobile apps thinking that it is safer. An increase in the use of virtual currencies has also been noticed.

Media monitoring The increased risk of money laundering activities brought about by the pandemic has unsurprisingly resulted in an increased presence of AML/CFT stories in the media.

In times of crisis like today, financial institutions and banks would do well to adjust their media screening to capture news story types that could indicate and point out potential money laundering crimes. Story types worthy to keep an eye out for include:

Regulation - regulatory punishments may shed some light on the actions taken by authorities against other firms accused of activities like price-fixing and collusion; Financial difficulty - debt, bankruptcy, closures, redundancies, and departures of top-level staff;

Violence or human rights abuse - violence or sex offences in connection with state-level offences such as human rights abuse; and Criminality - accounting malpractice, financial crimes, dishonest billing, and predatory lending.

Since the ongoing pandemic poses great uncertainty as to when it will finally be eradicated, banks and financial institutions alike must adjust to the new reality of compliance monitoring. This is to accommodate the changing legitimate behaviour of consumers while identifying illegal activity from criminals. The upgrade of monitoring efforts not only includes the sufficient screening of transactions but should also incorporate changes to rule-sets to ensure that the software used is able to capture new typologies.

For more information on how ComplyRadar enables you to fulfil your AML obligations and help avoid reputational risk or potential fines, visit www.comply-radar.com or email info@computimesoftware.com

GO helping businesses meet their remote IT needs during the COVID-19 crisis Over the past couple of months, almost every business has had to quickly adapt to remote working.

Business owners across the world have faced the monumental challenge of ensuring homebound employees have the tools they need to work at their best, covering everything from a suitable work environment to a secure internet connection.

But as remote working becomes less of a temporary measure, and more of a new normal, many businesses are finding their long-term technical requirements changing.

That’s why we’ve been working hard to ensure our customers can access our services without any disruption - as well as working with those that need additional support during these difficult times.

Our team of highly experienced technical experts are onhand to help businesses meet their IT requirements and offer bespoke support for any challenges they may face.

If you need support keeping your team connected, get in touch at info@gobusiness.com.mt and we’ll do everything we can to help.

Financial aid with a business management approach In a recent interview with Enemed’s Executive Chairman, Kevin Chircop, quite a lot was said on Enemed’s sponsoring initiatives – initiatives that we learned not only focus on financial aid, but show evidence of a genuine interest in helping the local motorsport industry reach its full potential through business consultations. Enemed’s major sponsorship focus is motorsports, and, from powerboating to drifting, it is this concept backed with professionalism that attracts Chircop’s attention.

Maltese athletes have great talent and are making huge waves across the world. However, motorsports in Malta lacks the attention it deserves and, as a result, falls short in funding. Whilst there is passion for this sport, it sometimes lacks profes-

sionality. This is the reason why Enemed invests heavily in this and provides the building blocks to help these competitions move forward.

Learn more by visiting enemed.com.mt

HSBC Malta launches the Malta Development Bank COVID-19 Guarantee Scheme HSBC Bank Malta p.l.c. is further enhancing its support for the business community during these challenging times by confirming its participation in the Malta Development Bank (MDB) COVID-19 Guarantee Scheme (CGS). This development complements a series of initiatives already taken by the bank at the outset of the COVID-19 pandemic, including capital repayment holidays, fee free temporary short-term working capital and trade finance support.

This government-backed scheme provides banks with credit risk mitigation and capital relief in respect of loans granted to eligible and viable businesses which may be experiencing cash flow and liquidity pressures resulting from the adverse business conditions following the virus outbreak. HSBC Malta’s normal credit guidelines will continue to apply.

Joyce Grech, Head of Commercial Banking at HSBC Malta, said: “The launch of the Malta Development Bank COVID-19 Guarantee Scheme will further enable us to support business customers who are looking for financial support during this uncertain time. The COVID-19 Guarantee Scheme facilitates the provision of additional financing for businesses facing a sudden acute liquidity shortage.

HSBC Malta has already introduced a significant number of other measures to support the business community and I would encourage all our commercial customers who feel they need assistance to contact their Relationship Manager in order to discuss the best options available for their specific requirements.”

More information on the Malta Development Bank COVID-19 Guarantee Scheme is available on www.business.hsbc.com.mt/ en-gb/important-announcement