The Malta Business Observer, 28th October 2020

NEWS Issue 115

|

October 29, 2020

Distributed with Times of Malta

Budget praised but securing economic stability remains a challenge Ray Bugeja Operators, working across a spate of sectors, have praised the measures announced in Budget 2021, saying they will serve well through difficult times, but they’ve insisted that challenges to economic stability remain.

As all continue to face unprecedented times, with growing pressures on the country’s social fabric and economic performance, reaching some form of economic stability is critical, Farsons Group CEO, Norman Aquilina said. “This is a challenge we have yet to overcome, more so in today’s highly volatile circumstances.”

The Government, he acknowledged, has a very difficult balancing act to perform because, in the longer term, it is compelled to retain a financially healthy and sustainable position. Therefore, uncertainty within the country’s economic outlook is most likely to continue for the foreseeable future, he predicted.

He welcomed the extension of the wage supplement to March 2021 as it will help companies like Farsons to partially offset the incremental non-productive costs incurred following the drop in the Group’s turnover.

“The wage supplement’s fivemonth extension is, indeed, an important fiscal measure for the forthcoming depressed period, which will reinforce decisions to retain trained and valuable employees despite the lower consumption levels,” the CEO asserted.

On the other hand, Mr Aquilina cautioned, financial planning cannot be limitedly calculated on a five-month basis and, as the economic challenges

resulting from the pandemic are expected to have a longer term effect, in the absence of further supporting measures, businesses may eventually be compelled to re-evaluate.

He pointed out that, to date, consumer behaviour is still settling into a new normal as more people learn to live with the reality of COVID-19. “Consumer sentiment continues to reflect the uncertainty of the COVID-19 cri-

sis, with confidence remaining muted and spending intent still below pre-crisis levels… So, when one looks at the measures introduced in the Budget, specifically those aimed at improving consumers’ income levels, whether collectively these measures are enough to boost consumers’ confidence and spending remains questionable,” Mr Aquilina concluded.

The subject of consumption was raised by PG Group CEO and Executive Director Charles Borg. “The crisis did not affect the sales of food items. We will be affected should consumption be negatively hit,” he asserted, adding he strongly thinks the Government must help those sectors that suffered the most.

He pointed out that, in the case of Pavi and Pama supermarkets, the bulk of sales consisted of food items, which continued as usual, though certain changes in habits were noticed. Since people seem to be doing more cooking at home, possibly because they do not eat out as often as they used to, staple products are selling more, while impulse buying declined, he remarked.

“Evidently, shoppers are going for what they think is essential,” he continued on page 3

e Minister for Finance and Financial Services, Professor Edward Scicluna, says knowledge already gained about the effectiveness of the COVID Wage Supplement scheme will be used to decide on the upcoming fund allocation, with a tailored approach targeting specific industry needs. see pages 5, 7 >

BUSINESS OPINION JP Fabri, a co-founding partner at Seed Consultancy, seeks to give an overall analysis of the Budget and highlight pending challenges the economy faces. see page 13 >

CASE STUDY Carm Cachia, the Chief Administrator, eSkills Malta Foundation, talks about how the COVID-19 pandemic has pushed firms to effect digital transformation. see pages 14, 15 >

e Malta Business OBSERVER

|

October 29, 2020

3

NEWS

Long-term strategy for hospitality still required, despite Budget measures, stakeholders say continued from page 1 continued, pointing out that turnover indicates there was a slight increase in food sales during the pandemic outbreak. In contrast, a drop in sales in the clothing retail sector was evident, judging by the performance of the Zara franchise, the CEO said. The drop was substantial soon after the pandemic reached Malta but, then, sales stabilised although a lower turnover was still posted. In contrast, he went on, Zara Home posted an increase in sales in percentage terms.

Moreover, in his capacity as Chairman of the Westin Dragonara Resort, which has just completed a €40-million refurbishment project, Mr Borg had first-hand experience of a sector that suffered the brunt of the pandemic.

“There has been a drive to encourage Maltese people to have their breaks in hotels in Malta but that market is very weak,” he noted.

“What is really very helpful to the industry is the wage supplement as, otherwise, half of the workers could have lost their job. It is good for the Government to use money where it is really needed, where it really matters,” Mr Borg asserted.

However, continued investment is fundamental, he insisted. “The first aim should be to save present jobs but no stone should be left unturned to attract that sort of investment that would yield the economic growth necessary to cover the debt being incurred to deal

with the pandemic,” Mr Borg concluded.

AX Hotels Malta Group Hospitality Director, Claire Zammit Xuereb, argued that, given the present crisis, the tourism industry needs both short-term support and a long-term vision. “The much needed [announced] support for the tourism industry is positive. However, more can be done on the long-term aspect. We need a vision on how to deal with hospitality in terms of positioning and strategy. We must also take the opportunity now that the business is slow to regenerate and upgrade certain touristic areas like Buġibba, Qawra and Paceville,” she pointed out.

In her view, the industry needs to know now what is happening with Air Malta and what routes the national airline will be working in order to save 2021 tourism. Ms Zammit Xuereb insisted that the Government must look at key air carriers, like Ryanair, and see how to engage them in constructive dialogue to ensure that a product can be guaranteed for next year.

The industry, the Hospitality Director noted, may have been able to pull through 2020 with all the support that was given but it will certainly not be able to carry through in 2021 without much more support, unless the sort of action she suggested does not happen. “All the country would stand to benefit with a long-term vision and a strategy for the hospitality industry,” she argued.

On a related note, James Perry, the CEO of FELTOM, the Federation of English Language Teaching Organisations in Malta, explained that students who normally travel here in the first two quarters of the year spend longer stays and, therefore, it would be possible to attract them even though they have to spend some in quarantine.

The Federation feels that the wage supplement and the tax deferrals will help in the overall cashflow problems schools are facing. “While we feel they are a step in the right direction, we plan to discuss with the Government to provide more incentives directed towards attracting students to come and study in Malta. We shall also be discussing any extra support for the school owners to ensure schools will survive after COVID is over,” Mr Perry said.

In addition, the Government should continue marketing the island as the ideal English language teaching destination that it is and try and stimulate more demand, he continued. “In fact, at the moment, FELTOM is seeking ways of helping its member schools attract students and we are currently drafting a marketing plan to attract students from various locations. This plan will be presented to the Ministry for Tourism in the hope that it will be endorsed,” Mr Perry observed.

Denise Micallef Xuereb, Construction and Development Director at AX Group, noted that although the property, development and construction sectors

are clearly distinct, they are very much dependent on each other.

The Government, she continued, clearly recognises the importance of keeping these industries strong at a time when other sectors are dipping due to the COVID-19 pandemic. A set of “very good incentives” launched by the Government served to stimulate these sectors, she noted, mentioning in particular the reduction of tax for both the buyer and the seller, the extension of the first-time buyers’ scheme and the increase in the sale value for tax purposes.

“This is very positive because the entire country stands to gain from this, especially since property will retain its value apart from the multiplier effect,” Ms Micallef Xuereb said.

Although a number of companies will survive thanks to the measures introduced by the Government across the board, others will still find it very difficult to remain afloat, she remarked, adding the Government should ensure the construction sector remains strong and sustainable. The Government could help by embarking on a number of regeneration projects. As a result, contractors would be engaged and, furthermore, such projects could attract investors apart from improving Malta’s product, she added.

Moreover, in her opinion, there needs to be a reduction in tax on overtime work. She thinks that such a measure will greatly reduce the abuse in the

construction employment market and encourage employers to assign more overtime work to their employees to get the job done faster.

For Alliance CEO Michael Bonello, the Budget 2021 measures are adequate, in light of the current difficulties. “We hope we can continue to avoid another lockdown because estate agents were not supported with any wage supplement to see us through those difficult months and this was omitted in Budget 2021,” he pointed out.

He considers the raised threshold of €200,000 for first-time buyers as being one of the most significant improvements because it directly increases the purchasing power of this important cohort. Similarly, the reduced 15 per cent tax rate now covering the full amount on assignment of promise of sales can be expected to incentivise sellers that may have been reluctant up to this point, he explained. On the whole, he continued, Budget 2021 includes several measures that can go a long way to help the economy recover.

“No new taxes were introduced, children’s allowance and pensions have been increased and the wage supplement, given to pandemic-affected businesses, is to continue at least until March 2021. Although these will not solve all the problems brought about by the pandemic, they can certainly go a long way in alleviating some of the difficulties that particular sectors are suffering from,” Mr Bonello said.

e Malta Business OBSERVER

|

October 29, 2020

5

INTERVIEW

COVID support for private sector can now be better tailored to industry needs – Minister Scicluna Rebecca Anastasi The Minister for Finance and Financial Services, Professor Edward Scicluna, has said the “unprecedented” support Government has pledged the private sector, through the extension of the COVID Wage Supplement Scheme and vouchers announced in Budget 2021, can now be better tailored to the needs of specific industries, as a result of lessons learnt over the past few months.

“A large chunk of the Budget is going towards the private sector. It is unprecedented for a Government to spend €50 million on vouchers to be spent in our local market and, on top of that, we are estimating a spend of €40 million a month with the COVID Wage Supplement Scheme – that’s €200 million just until March 2021, and we’re still uncertain as to what comes next,” he explained, keeping open the possibility of a further extension of support should the situation not have stabilised.

Budget 2021 was the Minister's eighth, and last Budget, with Prof.

Scicluna expected to resign in the next few weeks.

The criteria on how these funds would be spent will be determined based on previous experience, the Minister continued, saying that Malta Enterprise is better prepared, armed with data from the previous round of wage supplement allocation. Indeed, he predicted that the entity will be able to tailor the scheme to specific in-

“at money is the package, and it has to be used wisely, I admit.

But the discussion [of how, precisely] is yet to come.”

dustry needs, formulating “a more sophisticated system, with four or five different rates, depending on the state of each particular sector.”

Yet, he insisted, the precise mechanics of the new extension have yet to be worked out. “The Budget is still unfurling, and Malta Enterprise is under pressure to decide how to allocate that €200 million,” he asserted, adding that the Government gave the entity the responsibility of monitoring “the pulse of the private sector.” In this regard, it will be determining which sector “is suffering more than others”, the Minister ex-

plained, and will move away from assumptions based solely on NACE codes. “That money is the package, and it has to be used wisely, I admit. But the discussion [of how, precisely] is yet to come.”

He added that the previous years of economic upswing has allowed the Government fiscal flexibility, with regards to helping companies based on the island, saying that “the idea of lowering debt was to have fiscal space in case of a crisis.” And, now is the time to reap what was sown, he added. “We kept to that rule, and it’s paying back because

the crisis has happened. The need is here and now, and we have to dig into our pockets.”

And, while the Minister did not close the door on future extensions, post-March 2021, he stated the Government is seeking to retain control on the amount of debt being borrowed, by keeping overall debt under 60 per cent, even if the situation prolongs. Indeed, as specified in the Budget announcement last week, Malta’s deficit is expected to reach 5.9 per cent of GDP, while its overall debt will increase to 58.6 per cent of GDP. “This time we had to decide

how much we would borrow, and we decided we would borrow 5.9 per cent,” he said. Within such a context “we’ll stand a better chance”, he claimed, of returning swiftly to economic buoyancy.

But, keeping an eye on public coffers means there is a limit to how much the Government is willing to spend, even in a time of crisis. “Government cannot cushion to the extent that everybody in industry or, families themselves, won’t feel anything. There are no such resources. How can we replace the millions spent by tourists in Malta? We are in this situation together and we have to share the pain. The taxpayer is ready to share the pain in which we are borrowing against the future, but this is as much as we can help. This is how much the taxpayers can help, with certain prudence,” he argued.

But it’s a fine balancing act, he said. “It’s the private sector which continued on page 7

e Malta Business OBSERVER

|

October 29, 2020

7

INTERVIEW

Minister Scicluna says Moneyval recommendations “all addressed” continued from page 5 generates income for the Government so it is in our interest to give it some space, but we cannot give everything or we’ll have our backs to the wall, and we'll be in very difficult situation,” he continues, expressing confidence that the crisis will come to an end, with damage having been mitigated.

“This is Government’s aim – to keep companies going so they can hit the ground running when this is over. We want people to remain on the payroll, so we don’t have the upheaval of high unemployment, low motivation and companies dissolving only to start up again. That would be a big shock and we’re trying to avoid that. So, we’re optimistic, in that we’re giving all the support we can, and we’re saying ‘make it till March, dig in there and we’ll take it one step at a time’,” he shared.

On the subject of Moneyval, and whether the initiatives set out in Budget 2021, should suffice to assuage the concerns of the Financial Action Task Force’s (FATF) decision-makers, the Minister insisted that a lot of work has been done to meet the demands. “There were recommendations, and we’re happy to say that all the recommendations have been addressed. We sent Moneyval a thick report since a lot of work was carried out, including the signing of MoUs, training, and the implementation of regulations and guidelines,” he asserted.

However, Prof. Scicluna re-iterated his stance – expressed in other recent interviews – that the private sector must bear some responsibility for ensuring that the rules are adhered to. “We needed to amend some legislation, and players in the private sector will now have certain

“We sent Moneyval a thick report since a lot of work was carried out, including the signing of MoUs, training, and the implementation of regulations and guidelines.”

obligations to report where certain moneys are coming from. The law is making them more responsible, so Moneyval has impacted upon

both the public and private sectors,” he said, insisting that Malta “cannot undo the past, but we’re looking to the future.”

e Malta Business OBSERVER

|

October 29, 2020

9

NEWS

Multi-million euro boost for industrial spaces expected to generate employment Ray Bugeja Industrial properties demanded by investors are in short supply but that is set to change thanks to a multimillion-euro boost announced in the Budget 2021, which, stakeholders say, will generate

wealth and employment opportunities.

Malta Industrial Parks Ltd will be investing more than €450 million over a span of seven years in an infrastructural investment programme.

This, CEO Karl Azzopardi explained, will lead to significant upgrading of the industrial

space available for new, productive investment.

This infrastructural investment programme, he pointed out, will be the “one of the biggest of its kind to ever take place in Malta and seeks to address the current shortage of readily-available, plug-and-play industrial properties, which is often a stum-

bling block that limits new investment. Over and above that, MIP is also taking into consideration the envisaged needs for the years to come, thereby futureproofing the country’s industrial properties,” he said.

While the specific details of the programme have yet to be announced, Mr Azzopardi men-

tioned some of the major projects. These include the expansion of the Malta Life Sciences Park, with the aim of providing additional space for the life sciences and other knowledge-intensive industries; the former Luqa dump, on the outskirts of continued on page 10

e Malta Business OBSERVER | October 29, 2020

10

NEWS

Malta Industrial Parks investment “one of the biggest of its kind”, CEO says continued from page 9 the Marsa industrial estate, which will be regenerated; and the taxiway designated as LIMA, within the airport perimeter, which will be upgraded to support further growth of the aviation cluster. Moreover, the Corradino Business Incubation Centre will be overhauled to facilitate the start-up phase for new businesses, and several other projects will also be undertaken to provide industrial space in multi-storey facilities.

The CEO noted that the projects in the pipeline will be further complemented by other services that will be introduced within certain industrial estates to further enhance their users’ experience. These will include the development of administration buildings, childcare centres, health and fitness facilities, as well as parking areas, among others.

“Throughout the programme, there is one common, underlying principle: sustainability, not only from an economic perspective but also from an environmental one through the incorporation of as many green initiatives as possible,” Mr Azzopardi remarked.

Within this context, MIP has been and will continue working very hard to deliver its targets in a sustainable manner that strikes a balance between optimising the space available while, at the same time, respecting and improving the living and working environment for all those that make use of the facilities, he said.

Even the crafts village at Ta’ Qali will benefit, as explained

by Elton Micallef, speaking on behalf of the Malta Crafts Foundation, who said that, now that the works on the common infrastructure of the artisan village at Ta’ Qali have been completed, MIP will next year be investing about €5 million on the next phase of the project.

This will include more spaces for artisans in the village, a creativity centre hosting the foundation’s offices, an incubation building and a centre for dying crafts, together with data services, interactive screens and directional signage.

A marketing campaign to attract more visitors to the village will also be rolled out and MIP has also launched a scheme to build the remaining buildings of tenants who, for one reason or

another, had difficulties in commencing construction work. “In this way, MIP will be contributing to the revival of the artisan sector in Malta,” Mr Micallef said.

At Ta’ Qali, artisans practise traditional Maltese crafts in huts that used to form part of a wartime airfield used by the Royal Air Force. Various initiatives were announced along the years to upgrade the facilities and organise the place better, also because it is a tourist attraction. In addition, a project launched in mid-2016 aimed to give a total makeover to the village and provide a better space for tenants and visitors alike.

The Malta Crafts Foundation, which is expected to start operating fully as of January 2021, was set up by MIP together with the Ministry for the Economy, Investment and Small Business. Mr Micallef explained that an updated Malta Crafts Act assigned the promotion and organisation of events related to the crafts sector to the foundation. Such re-

sponsibilities previously fell under the Crafts Council, which has now been dissolved.

The Commerce Department, falling under the political umbrella of the Economy Ministry, will be responsible for setting policy and maintaining the register of crafts, crafts persons and crafts entrepreneurs. Other responsibilities have now been assigned to the foundation.

The foundation’s objectives will not only be to promote the crafts sector with tourists and various sectors of the public as well as to organise events that have been in the sector’s calendar of events for years, but also serve as the much needed driver for the introduction of innovation in the sector, Mr Micallef added.

“The crafts sector has been neglected for years and, unfortunately, a lot of damage was done by this passive attitude. The sector needs greater promotion and there needs to be appreciation of Maltese artisanal works. It also

“e shortage of readily-available, plug-and-play industrial properties is often a stumbling block that limits new investment.” – Karl Azzopardi, MIP CEO

needs stimulation in innovation and the development of artisan skills among students and young people. This has become critical and, if this does not happen, certain artisan skills will be lost forever,” he asserted.

He thinks artisans themselves also need training in adapting the products they have on offer to remain relevant in the 21st century. Mr Micallef noted this is no easy task and stressed that artisans need to look at both the

type of product or service they are offering, as well as the way in which they are promoting it and the tools they are using.

He acknowledged there is a lot of work to be done, adding that the Malta Crafts Foundation has a strong vision, and its objectives are based on three pillars: promotion, innovation and education.

The aim, Mr Micallef emphasised, is to revive the artisan sector in Malta.

e Malta Business OBSERVER | October 29, 2020

12

BUSINESS UPDATES

Malta Budget 2021: the most salient features that will affect your business

Kristine Attard Monday 19th October, 2020, saw the announcement of the Budget for the year 2021. The package does not aim to bring about major changes to the Maltese Tax System, leaving the system mostly unchanged.

However, the Budget will be extending most of the incentives already in place.

Some of the changes announced will be coming into effect immediately, while others shall be introduced from the beginning of January 2021 or later through the year. Nevertheless, many of the proposals have yet to be finalised before they’re ready to be initiated and come into effect.

How will the Budget affect you?

Below is a breakdown of some of the proposed fiscal incentives announced.

The COVID-19 pandemic has left an indelible mark on all aspects of our lives, with the economy sector being no different.

Measures such as the COVID

wage supplement, tax deferrals, moratoria, Government-guaranteed bank loans, interest subsidy schemes and many more incentives of this sort, have all helped reduce the heavy burden that employers were expected to carry. The Government has announced that due to their beneficial contribution, the following schemes are to be extended again till the end of March 2021: 1. COVID Wage Supplement 2. Tax deferrals, moratoria, Government-guaranteed bank loans and interest subsidy will remain in place and will be evaluated again at the end of March 2021.

From an income tax perspective: 1. To benefit from the income tax exemption relating to the Third Pillar Pension Scheme and Voluntary Occupational Pension Scheme, the investment increased to €3,000 per annum (An increase of €1,000 per annum). The maximum tax saving varies from €1,500 (single individuals) to €2,250 (married individuals where only one of the spouses is in employment); 2. With effect from 2021, any royalty income derived by authors and co-authors from the sale of their books shall be subject to tax at a final reduced tax rate of 15 per cent; 3. Registered voluntary organisations with the Malta Council for Voluntary Services (MCVS) will not be required to pay any

taxes on their profits if their annual turnover does not exceed €50,000; and 4. One of the Budget measures for 2020 referred to the taxation of income derived from assignments of rights acquired under a promise of sale agreement (ċessjoni ta’ konvenju). This applied as from 1st January 2020 and the tax withheld amounted to 15 per cent on the first €100,000 and the rest at 7 per cent provisional tax. As from 1st January 2021 up to 31st December 2021, any profits or gains arising on the assignment or cessation of any rights acquired under a promise of transfer of immovable property or any rights thereon will be subject to a tax at the rate of 15 per cent; 5. An extension of the reduction of property transfer tax on the sale of property from 8 per cent to 5 per cent. This is applicable to promises of sale being signed until March 2021 with the final deed of transfer being signed until 31st December 2021.

From a stamp duty perspective: 1. The reduced rate, down to 1.5 per cent from 5 per cent, on the transfer of family business from parent to child, which was introduced 3 years ago, will be extended again once again; 2. The stamp duty exemption for first-time buyers on the acquisition of their residential property has also been extended.

There shall be an increase in exemption from the previous rate

of €175,000 to €200,000; 3. Acquisition of properties in Gozo or in Urban Conservation Areas (UCAs) shall continue to enjoy a reduced rate of stamp duty from the standard 5 per cent to 2 per cent in case of Gozo and 2.5 per cent in case of UCAs (the acquisition of property in UCAs); 4. A reduced stamp duty rate of 3.5 per cent will be applicable for non-first time buyers on the first €200,000 relative to the purchase of a residence. This rate will also be applicable on the first €200,000 of the value of the immovable property (previously €175,000) on inherited immovable property being the residential property of the heirs; 5. No stamp duty shall be charged on the first €250,000 (previously €200,000) on donations of immovable property from parents to their children where the immovable property being donated is used for the children’s residential purposes.

The additional value of the immovable property is to continue being charged at 3.5 per cent; 6. Extension of the reduction of stamp duty on the acquisition of property to 1.5 per cent on the first €400,000. This is applicable to promises of sale being signed until March 2021

with the final deed of transfer being signed until 31st December 2021.

From a VAT perspective: 1. The VAT exemption threshold is increasing from €20,000 to €30,000, thus reducing the administrative burden for small businesses and the selfemployed. Small businesses falling under this system would not need to charge VAT, but would still need to submit an annual VAT declaration. This shall apply as from 1st January 2021.

Subsequently, schemes such as the Micro Invest, the Business Development and Continuity Scheme, the Research & Development 2020 Scheme, the R&D Feasibility Study Scheme as well as the Business Start scheme, are to be improved and extended further.

In conclusion, Malta’s Budget for 2021 will most definitely contribute to ensure a certain degree of stability and attractiveness to the business sector. In addition, investors will be rid of any concern about an increase in taxes for the upcoming year.

Kristine Attard is Director for Tax and Immigration at KSi Malta. For more information and advice kindly contact Ms Attard by email on kattard@ksimalta.com

e Malta Business OBSERVER

|

October 29, 2020

13

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

EDITORIAL

Discipline is a must to mitigate economic damage Over the past few months, we’ve continuously heard the word ‘unprecedented’ used in relation to the COVID-19 pandemic.

From international bodies, to local authorities, leadership has been patchy, with few figures seeming to have a true handle on the situation. Indeed, 2020 will go down in history as the year during which the bestlaid plans were scuppered and all certainties were at the mercy of a global virus attacking the very heart of our societies, with decision-makers reacting to developments as they occurred. As a result, companies across the island are still reeling from the slow-down, with one question forming in their minds: will my business actually survive this pandemic?

Budget 2021, announced by the Minister for Finance and Financial Services, Professor Edward Scicluna – now confirmed to have been his last budget, with the Minister retiring in the next few weeks – aimed to

provide some solace in these scary and uncertain times. And, to an extent, it did: it confirmed the COVID Wage Supplement Scheme until, at least, March 2021 – this will cost the taxpayer €200 million in total, according to the Minister – while vouchers will be reissued in January to encourage consumption. Moreover, buying and selling property incentives were extended and the tax incentives for firsttime buyers were raised to €200,000 on property value.

These initiatives – and more – were praised by stakeholders working across sectors, as can be seen in this edition’s cover story – but are they enough to stop mass unemployment and businesses going under? The reality is we just don’t know.

And, actually, nobody does. For, this is the fundamental lesson learnt during this pandemic: we’re all flailing in the dark, some, of course, more than others. These are all

experiments designed to support industry and society until the situation eases. We’re playing for time, as it were.

But, for circumstances to change, and for business confidence to be regained – in the absence of a vaccine, which, at any rate, won’t be a silver bullet – some simple rules have to be followed, at the very basic minimum. Masks have to be worn, social distance must be maintained, and our trademark laissez-faire attitude when it comes to rules cannot be allowed to hold sway. This requires discipline on all our ends – even from the Prime Minister’s, who has not exactly been the paragon of virtue in this regard.

Unfortunately, the virus is here to stay for the immediate future, and it is incumbent on everyone to mitigate further damage by following some basic rules, lest the economy suffers even more than it has to.

Executive Editor Rebecca Anastasi

Publishers Allied Newspapers Ltd. Content House Group Ltd.

Advertising Enquiries Tel: 2132 0713 Email: info@contenthouse.com.mt Advertising Sales Matthew Spiteri Director of Sales and Business Development Lindsey Napier Director of Sales and Operations Sue Ann Pisani Advertising Coordinator

BUSINESS OPINION

Budgeting between different roles

JP Fabri Every Budget has its story and context and this year’s budget is no exception. The Budget presented last week by Government was delivered against a unique background - the economic uncertainty as a result of COVID-19. So, apart from balancing between the different goals, the Budget had to serve the purpose of supporting the economy navigate this difficult and challenging phase. Although not an exhaustive analysis, this article will seek to give an overall analysis of the Budget and highlight pending challenges the economy faces.

One of the key roles for any government is to stabilize the economy. This becomes even more critical at this point of time, and it was, indeed, the main thrust of the Budget. To this effect, the Budget extended the support measures announced earlier this year to

March 2021. These include the wage support scheme, the Government-guaranteed debt, a second round of vouchers, interest-subsidies and more. In addition, it extended measures aimed at stimulating the property market too. In order to shore up domestic demand, the Government is also supporting investment by the private sector through a scheme aimed at innovation. It is also continuing with its infrastructure building programme in order to support economic activity. Although these measures will surely support economic activity, the uncertainty and volatility of the situation is hard to predict and the actual benefit of such schemes is yet to be determined. Tourism is not expected to pick-up any time soon, the global economy is expected to continue wrestling with the pandemic and the ensuing recession as well as consumer and business confidence will also be taking a significant hit. Incentivising private investment is going to be critical and additional schemes aimed at conditional investments or upgrades in key sectors would have been welcome.

Government also plays an allocative role by deciding how financial resources are used for different purposes, and when

these resources should be dispensed. The Budget is heavily focused on short-term measures.

However, a number of them have a future-focus. Infrastructure development is one such future-focused investment including the plan to invest in Malta’s industrial zones and estates. There are also schemes to support start-ups through venture capital. The support and schemes aimed at a green transition are also sowing the seeds for a greener economy.

Further investment in education and health were also announced.

However, key challenges remain.

Malta faces key educational challenges including high early school leaving rates; low educational attainment rates; low numbers of students graduating in science, technology, engineering and math; and, more generally, low numbers of graduating students. The skillsets required in the future are also going to be different to what they are today. Our focus up until now has been on health care, rather than on health, and this is something that we need to start tackling, together with the digital transformation required in the health sector. Although the Budget provided a host of both short and long-term focused measures, the challenge now is to tackle structural chal-

lenges that are limiting our economic future.

Distribution plays a key role in Malta’s socio-economic governing model. Here the Budget has targeted key vulnerable cohorts including pensioners. Malta has seen an increase in vulnerable people especially those in at-therisk-of-poverty group. Statistics have shown that this cohort has increased even before COVID and, therefore, more work and support is needed. Local NGOs are doing sterling work in this sector and Government needs to find public private partnership models that can support inclusive development including the concept of social organisations and social entrepreneurship that was found to have long-lasting results and improvements in other countries.

There is no doubt that regulation plays a key role in any government.

Malta has, over the years, developed a knack for regulatory innovation, giving rise to new economic sectors including gaming, aviation and maritime registers, financial services and pharmaceutical manufacturing. The Budget reiterated Government’s resolve to address key issues that were highlighted by international reports including Moneyval and the Venice Commission. However, for Malta to remain competitive and attractive,

new sectors or sub-sectors need to be continuously identified and developed into well-functioning sectors. Regulation plays a key role and here it is important that, going forward, expected documents such as the National Digital Strategy will set-out niche economic areas that can be developed. The Green Bond Framework, which is expected to be launched, is also welcome and one hopes that Malta can develop into a regional hub for sustainable finance - one of the fastest growing financial sectors.

There is also growing realisation that a long-term vision or masterplan is needed. Although Government has given an indication that this is being worked upon, with a focus on a number of key pillars, a broad consultation is required for this vision to be forged. The country and its businesses need to have a clear idea of what Malta is aspiring to be and in which direction it is aspiring to go. This needs to include measurable targets which Government is accountable for and which can set the road for Malta to embrace a new economic model and paradigm which puts sustainability at its core.

JP Fabri is a co-founding partner at Seed Consultancy.

e Malta Business OBSERVER | October 29, 2020

14

CASE STUDY

Lessons learnt in the past months Carmel Cachia This article is a summary of a Capgemini invent report entitled “Reinventing Work”.

“The pandemic has profoundly changed the way we live”. How many times have we heard this? ‘So many times’ would be your answer, I am sure! But that does not mean that it is not true. So many companies are under lockdown and, even if not, all organisations have experienced significant disruptions to their operations. On the positive side, some companies have started to reap the benefits from the urgent implementation of digitisation. And while the original aim may have been to protect the health of their workers and their clients, digitisation was necessary for businesses to survive in the corporate world. Therefore, I would prefer to say that “the pandemic has profoundly digitised many companies”.

“Working remotely is not just viable, it is also more efficient.”

100 per cent work from office is dead Today, going forward, all leaders agree that working 100 per cent from the office is not the right organisational model to implement. Working remotely is not just viable, it is also more efficient. The model has cut down the unproductive time of driving, traffic and parking. For Malta, this can be in the region of one to two hours. In other countries, more than half of the workers are considering living further away from the office because they do not have to travel for work, pushing property costs down even more. Working remotely has also improved employees’ work/life balance and improves diversity by allowing

for a better gender balance, since women can now work in situations where it was not as possible before. Moreover, it has now been proven that remote workers are around 25 per cent more productive.

Technology made the difference Technology made a big difference. Without Cloud Technology, remote working could not be possible. Moving to the public cloud is “coined” as the best decision by many CIOs. The capability of Microsoft Office 365 and Google Suit, amongst others, made remote working easier, and the majority of employees are now familiar with these

working tools. On the other hand, those companies who lacked infrastructure, or were afraid to take the plunge into the online world, have experienced serious negative consequences.

Technology helped by providing collaborative platforms for free and this will continue being the practice. In particular, Zoom and Microsoft Teams have increased their market share considerably to the tune of 40 per cent.

Sustainability, accessibility and carbon footprint The fact that almost all office workers can work from home has made this model more accessible to all and sundry. Additionally, according to the feedback received from the Foundation for IT Accessibility (FITA), leading digital tools and platforms are implementing an impressive number of functions to enable and improve accessibility, including

accommodating colour blindness and dyslexia. With respect to the reduction of transportation, each teleworker is reducing the carbon footprint (and, thus, pollution), by means of a 50 - 69 per cent reduction in nitrogen oxides emissions.

Therefore, we have to admit that this pandemic has taught us a few good lessons on how to provide our employees with “greener” opportunities.

Green in nature With lockdown measures implemented at country, European and global level, the skies, the countryside and nature parks have never been so quiet. It is a fact that these locations are now being repopulated with animals.

People all over the world have noticed that they hear birds that they have never heard before. It could be due to a change in migration, or simply because they were not being heard due to noise pollution!

e Malta Business OBSERVER

|

October 29, 2020

15

CASE STUDY

Downsizing to survive The majority of organisations, whether commercial or not, will need to recover from this drastic disruption. It is also a common understanding that some will not survive and will have to close down. All companies must be prudent in their spending and optimising resources. Spending wisely and with more agility will be the mantra for all organisations. If this has not hit some organisations as yet, it will happen in the very near future. Human resources departments will have a challenge on how to shave off some of the employees. Those employees whose performance was average, or of lower quality, will be the most at risk. But resorting to massive lay-offs does not create the right industrial and social climate. Organisations would be better off innovating and transforming through digitisation instead of laying off workers. And, yes, there will be a period during which digital transformation might have an impact on the bottom line, but this is until the curve starts going up again. As has been said lately “organisations need to reduce their living standards to survive”.

Transformation of digital skills Digitisation will bring about digital transformation, but adequate attention needs to be paid to human resources and to training. What is definite is that digital transformation will bring about the transformation of skills, and more so, digital skills. There will be a hefty shift towards the transformation of processes, which will become more electronic and digital. In the past, a considerable number of digital transformations have failed. This is due to a level of unpreparedness experienced by employers and employees.

Training and development were either poor or not given to all staff levels. Indeed, digital skills development is crucial for the digital transformation of companies.

Future sustainability Many leaders have been pleasantly surprised at how quickly remote workers learnt how to work with online tools without experiencing massive or long- term problems. There was also more activity, more attendance, and enrichment in the interactions between colleagues and clients.

Many surveys have indicated that working 100 per cent from the office is not desired by employees.

However, looking ahead, there

are other factors which must be taken into consideration.

Going forward, we must not let ourselves be taken over by lockdown fatigue. Employers must find the best way to motivate and instil a new normal, which is reasonable in all aspects. New personal routines must improve in our daily tasks. Working from 8am to 8pm will not work. Additionally, while digital native employees thrived, others who are older or have a more real-life attitude struggled. It has been estimated that 40 per cent of employees miss physical interaction, and isolation, digital exclusion and loss of social ties have been reported. And, therefore, it is up to us to collectively find ways to improve this new normal and make it more social and acceptable. We must recreate team bonding and trust. Remote working has taught us that online meetings can be said to be faceto-face because we see each other well on video. However, the real face-to-face contact will surely have psychological effects.

People will not be able to detect certain feelings and attitudes.

Knowing all this, we should already start working on minimising the negative human effects of remote working.

Moreover, shortly, we will see a massive waste of space and

“Revising your operating model is crucial. Recent events have shown that transforming business processes and going fully digital would go a long way in securing the future success of companies.”

money because most offices will be deserted. It is estimated that the target occupancy of offices will not exceed 25 per cent. If this estimation is accurate, countries will experience problems in terms of real estate. Additionally, work offices need to be “spick and span”, and hygiene must be the main objective. The multiplier-effect of people testing positive must not be underestimated if we need to be efficient in workspace efficiency.

New working paradigm Revising your operating model is crucial. Recent events have shown that transforming business processes and going fully digital would go a long way in securing the future success of companies.

Due to emerging technologies, this was already crucial, and now due to COVID, this is even more so.

An efficient delivery centre, digitised contract signing, as well as digital assessment in recruiment are all examples of best practices.

Redefining the relationship with your people is a good response to the challenges for the period to come. Employment and conditions of work must become more personalised and supported by social partners.

This also calls for new ways of leadership, encouraging autonomy and recognition.

Having resilience will help us to recover quicker for the future unknown. This means that we must optimise better our resources and develop careers more flexibly. Remote working is the next challenge to assess and address.

Regular innovation in collective rituals to maintain team dynamics will make us more resilient, and the need to support remote performance will now be needed more than ever.

The acceleration of the digital sphere will make the workplace more agile, mature and, in the end, resilient. Employees will need digital tools and training to work from anywhere and anytime. This calls for specific investment to make people’s lives more sustainable.

In the end, the best that one can do is to strike the right balance between business and employee needs. Reshaping the way an organisation works is in itself a transformation, which in the end will lead to digitisation and digital skills upskilling. One cannot but emphasise how important the human aspect is in all this, and organisations must have a collaborative approach with their employees to be able to make this transition more successful.

Carmel Cachia is the Chief Administrator of eSkills Malta Foundation.

e Malta Business OBSERVER | October 29, 2020

16

BUSINESS UPDATES

Sparkasse Bank Malta – 20 years in support of the local fund sector Established in Malta in 2000, as a subsidiary to an Austrian Savings Bank, Sparkasse Malta has since grown and established itself locally as a custodian and depository bank of repute.

The bank has grown its business by focusing its services in a specialised sector of the financial services industry in Malta and aligning its resources and network, specifically in support of this niche.

“As a provider of services to the fund and investment services sector, the bank enjoyed similar growth as did the ‘Malta Brand’ while the industry was collectively focused in developing Malta into a financial jurisdiction of repute. With commitment and the right dose of investment we enjoyed the same growth as did the country,’’ said Paul Mifsud, the bank’s Managing Director.

Today the bank provides custody and depositary services to approximately €3.4 billion in assets with a strong outlook of building this beyond the €4 billion mark in 2021. This amount represents a substantial part of the local fund business which positions the bank as a core participant in this market.

The success in this space was mainly attributed to the focused approach the bank established early on as part of its business model and its commitment to investment in resources, infrastructure and in-house expertise.

Despite current market pessimism, the bank seeks to continue its investments and develop its services both locally and within other parts of the EU. ‘’Our 100-strong workforce of professionals and solid bases in Sliema and Dublin, offer us the necessary motivation and courage for further expansion, including acquisition opportunities that may arise and may help complement our business lines,” said Mr Mifsud.

Malta has proven to be a good base for our development and we would like to continue our journey here,’’ he continued. ‘’Twenty years ago was the start to a bigger project and the next 20 will be now be invested in realising our aspirations in becoming an EU-wide participant in the custody and depositary space.’’

Remarking on the current issues facing the banking sector this year, especially in relation to the COVID-19 pandemic, and the

impending Moneyval evaluation, the bank remains cautious in its outlook despite the positive results achieved in the first semester of the year.

e Malta Business OBSERVER

|

October 29, 2020

17

BUSINESS UPDATES

EU Open for Business 2020 – BrainTrip In the health sector, business development is not just about innovation, but also about saving lives.

R&D starts small, so what does it take to bring medical devices to the public? The Maltese medical devices company, BrainTrip, has developed a diagnostic tool capable of detecting early-onset dementia at a fraction of the cost and time inherent in standard diagnoses. In need of guidance to scale up their business, BrainTrip turned to the Enterprise Europe Network, the largest global network supporting small and medium-sized enterprises (SMEs) co-financed by the European Union.

Jurij Dreo and David Sakić bonded over their research work on dementia. In 2019, they took this shared interest and cofounded the Maltese medical devices company, BrainTrip. The company developed an affordable and easy-to-use solution for early-stage dementia screening – known as an ‘EEG’ (electroencephalogram). Used on a small

scale, this diagnostic tool was more effective and rapid than standard dementia diagnosis.

Yet, the company needed to overcome funding and regulatory hurdles to have the desired impact on the medical sector.

BrainTrip approached the Malta Council for Science & Technology, a partner of the Enterprise Europe Network (EEN) located in Kalkara (Malta). The Network, with its 3,000 experts from more than 600 member organisations, based in 60 countries worldwide, is a valuable source of support for SMEs in accessing EU funding and partnerships.

Navigating the market With the support of the EEN, BrainTrip gained access to EU regulatory and marketing experts. Specifically, the Malta contact point for the Network organised a meeting with a med-

ical device certification expert at BrainTrip’s premises. Over a twoday period, the expert answered all of the founders questions about the certification process for medical devices on the EU market. Another integral component of the Network’s support was matching BrainTrip with business coaches and mentors who could provide expert insight at the national and EU level. “Without the Network, expert advice would have cost an arm and a leg.

And we wanted to keep our arms and legs,” says Dr Dreo.

Up to scale Thanks to the Network’s guidance, BrainTrip is gearing up to enter the market with a proof of concept for a non-invasive dementia screening device, at a fraction of the time (15 minutes) and cost (€100-150) of a standard diagnosis. Prior to March 2020, BrainTrip was preparing to run clinical trials in various European health centres or hospitals.

BRAINTRIP FOUNDERS DAVID SAKIć AND JURIJ DREO © BRAINTRIP LIMITED, 2020 With the sustained support of the Network, BrainTrip looks forward to expanding staff and business prospects with EU funding as well as through the Rockstart Health accelerator and other partnerships with pharmaceutical and

healthcare companies throughout Europe.

Find out how your local Enterprise Europe Network can support your business through enterprise-europemalta.com

e Malta Business OBSERVER | October 29, 2020

18

BUSINESS UPDATES

HSBCnet is simpler, faster and smarter Keeping up with changes in technology, regulation, and the economic environment can be demanding. That’s why HSBCnet brings powerful, intuitive online tools that help commercial customers manage even their most complex banking needs.

HSBCnet puts users in control of their cash flow. With real-time access to information on their accounts from anywhere in the world, at any time – HSBCnet tracks customers’ day-to-day activity and delivers updates. Customers can review real-time and intra-day account transactions, as well as balance and statement details for all their global accounts in their HSBCnet portfolio, including both HSBC and selected third party accounts.

In addition, consolidating accounts and making informed forecasts is made more accessible by the full range of standard

HSBCnet reports. Users can also create customised reports to get the specific data they need, exactly when they want it even by scheduling the delivery of regular updates, straight into their inbox.

The HSBCnet Mobile app is available on iPhone and Android smartphones by downloading through the App Store and Google Play Store. With the help of the downloaded app, clients can see their banking account information, authorise pending payments and track payments and receive My Alerts notifications.

To log on the HSBCnet platform, please visit hsbcnet.com.

For more information on HSBCnet, please call HSBC Bank Malta’s Contact Centre on 2380 8000, visit business.hsbc.com.mt/ hsbcnet or connect with the HSBC representatives via Live Chat by logging on HSBCnet.

Medserv awarded logistics marine base services contract by Eni North Africa Medserv has recently announced it has been awarded a contract by Eni North Africa (EniNa) to provide logistics marine base and associated services in Malta for its oil and gas activities taking place offshore Libya.

The term of the contract is three years with the option for EniNa to extend for a further year, while the contract comes into effect on 1st of January 2021.

These services are to be carried out at the Medserv’s base situated in the Malta Freeport.

Back in 2016, Medserv had been reawarded a similar contract for a duration of one year, with the option to extend for a further year.

Founded in 1974 and with head offices in Malta, Medserv has become a trusted partner and provider of inte-

Prohealth launches its online store – shop.prohealth.com.mt With 25 years of experience in the pharmaceutical and dermo-cosmetic field, Prohealth is excited to officially launch its new online store, shop.prohealth.com.mt. As the distributor of La RochePosay and Vichy Laboratories on the Maltese islands, Prohealth, in collaboration with local pharmacies, is now also making these brands’ products available to purchase online.

Going digital has become ever more important in today’s world, and the current global scenario necessitates an online presence. As stated by Peter Apap, CEO of Prohealth Ltd, “it has become crystal-clear to us that also having an online sales portal is today no longer a matter of ‘if’ but a matter of ‘now’.”

Prohealth is confident that this innovative digital project will complement its exclusive pharmacy sales channel, further strengthening the leading position of these brands in Malta. It will also develop the company’s growth by increasing market access, with consumers who buy their skincare outside the pharmacy, or online, now also being catered for.

LEADERS IN DERMO-COSMETICS Both La Roche-Posay and Vichy Laboratories are world renowned brands, with La Roche-Posay being

grated oilfield support and services to IOCs and NOCs operating in and around the Mediterranean. Medserv plc is listed on the Malta Stock Exchange, where the announcement was published.

The company operates dedicated bases in Malta, Cyprus, Egypt, UAE, Oman and Iraq, and has a representative office in Libya.

Enemed: providing better-quality fuel for the environment

the number one dermo-cosmetic brand worldwide, recommended by 90,000 dermatologists. La RochePosay is a pioneer in the development of innovative skincare solutions, offering products for sensitive skin. Vichy Laboratories offers a variety of ranges to make your skin stronger, which include anti-ageing skincare, hair care, camouflage make up and sunscreens to name but a few.

A STRAIGHTFORWARD, AND ENJOYABLE SHOPPING EXPERIENCE The online store, shop.prohealth.com.mt, was developed with all consumers in mind. The aim is to have La Roche-Posay and Vichy products more accessible, whilst providing an easy-to-navigate, yet informative and enjoyable virtual shopping experience, with skin and hair care products for all the family. With prompt, next working day delivery for all orders in Malta & Gozo, plus free delivery for orders over €45, Prohealth guarantees a fast, efficient and cost-effective service.

The approach towards ensuring customers get what they need – while at the same time mitigating environmental damage – is multifaceted.

Firstly, there needs to be a reduction in emissions, which can occur through the purchasing of better-quality fuel. As Mr. Kevin Chircop, Executive Chairman of Enemed, explains, “today we have the data, and we know that certain additives improve the quality of the product and result in fewer emissions. Four years ago, Enemed took the decision to ensure that we have those superior quality additives in our product. For example, the diesel we sell today produces 20 per cent less carbon than what we used to sell three years ago.” Additionally, whilst this better quality product comes at a higher price, this added cost increase is not passed on to the client and consumer.

Learn more about Enemed Fuels at enemed.com.mt