The Business Observer - 28th August - Issue 8

FEATURE

Issue 8

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August 28, 2014

Distributed with Times of Malta

Unpopular High Net Worth Individual Rules killed off

Maltese investors are facing severe cashflow problems because of the Libyan crisis – but stakeholders are trying to look beyond the challenges of the present to be prepared for the opportunities of the future. see page 8 >

NEWS Phoenician found nothing of interest in the Ħaġar Qim well but will it invest $45m to drill a second one? see page 3 >

NEWS A survey of online letting sites shows that the average daily rate in August for a short let in Sliema is €141– with a seaview apartment able to command €172. see page 5 >

CASE STUDY Photo: Darrin Zammit Lupi

Vanessa Macdonald The High Net Worth Individual Rules for EU nationals, those from the EEA and Swiss nationals, has been killed off by a legal notice.

It has been replaced by a residency programme which has the same eligibility parameters as the Global Residence Programme for non-EU nationals, with regards to the minimum spend on purchase or rental of property, as well as a minimum tax of €15,000.

The applicant must spend a minimum of €275,000 for a property in Malta and €220,000 for one in Gozo or the south of Malta or €9,600 annual rental for Malta and €8,750 for Gozo and the south.

“e legal notices also introduce a punitive clause meant to deter the beneficiaries from trying to obtain longterm residence or permanent residence” The High Net Worth Individual Rules (HNWI) for non-EU nationals, which only attracted two applications in its two-year existence, had already been superseded by the Global Residence Programme (GRP).

The HNWI for EU nationals, those from the EEA and Swiss nationals, has now been replaced by the The

Residence Programme (TRP) which grants a 15 per cent tax status for the applicant and his family on any income they bring to Malta.

The government’s consultant on these programmes, John Huber, explained that it did not make sense to keep a programme which was more onerous than the GRP.

The legal notices also introduce a punitive clause meant to deter the beneficiaries of both the TRP and the GRP from trying to obtain long-term residence or permanent residence .

“If you opt for the 15 per cent tax status, then you have to provide your own medical health care insurance and so on.

“But once a person gets longterm residence it means that Malta becomes responsible for his welfare, including the provision of social benefits.

“If you apply for long-term residence – whether you actually get approved for it or not – you will be taxed at the normal tax rates up to 35 per cent on your worldwide income,” he explained.

Continued on page 9 >

Bluhull believes Malta could easily cope with four rig “stops” a year, generating millions of euros – but only if the owners are allowed a free choice of contractors. see pages 6 and 7 >

CASE STUDY Frank Salt Real Estate Gozo manager Marie Grech is concerned that there will not be enough upmarket properties to cope with demand. see page 13 >

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August 28, 2014

3

NEWS

Ħaġar Qim exploratory well cost over $45 million Phoenicia Energy Company was granted a six-month extension until January 2015 in order to conclude testing on the findings of the Ħaġar Qim well. The well was abandoned in July because no reservoir was found.

The extension was confirmed by Genel, which holds 75 per cent of the shares in Phoenicia, on its website. Sources familiar with the sector said that this would mean around €500,000 more would have to be paid to the government.

Phoenicia asked for the extension before the well was abandoned as the first phase of the concession was due to expire on

considerable analysis of the results – and calibration against all the seismic data gathered before drilling – before anyone decides on whether to try again,” the sources said.

Phoenicia Energy Company is the operator of the Area 4 licence and a wholly-owned subsidiary of Genel Energy plc, the majority shareholder in the consortium holding the licence for exploratory drilling in the area.

Since drilling began, the minority shareholder, Mediterranean Oil and Gas, was sold outright to Rockhopper, which has a balance sheet of $247 million cash and no debt. Through the £29 million

“ere will be considerable analysis of the results – and calibration against all the seismic data gathered before drilling – before anyone decides on whether to try again” July 18 and it was clear that more time would be needed to analyse the results.

The consortium has not yet given any indication as to whether it will take up the option to go into a second phase – in line with its concession agreement – and drill a second well. The sources estimated that the first phase would cost around $45 million in all (€35 million).

“Clearly, frontier drilling is always very risky but the decision to proceed is based on carefullygathered scientific data. However, the decision-makers have to justify their decision to drill to the board of directors. So there will be

acquisition, Rockhopper took over MOG’s interests in Malta, Italy and France, its first foothold in the Mediterranean.

The government is currently carrying out due diligence on Rockhopper, prior to giving its consent to the indirect change of control of the concession from Melita Exploration Co. Ltd – a subsidiary of MOG. A spokesman for Rockhopper said the transaction provided them with a footprint in the Great Mediterranean and North African region which it could build up with time. He said the company was conducting a formal review of all of the acquired licences which

ROCKHOPPER’S £29M ACQUISITION OF MEDITERRANEAN OIL AND GAS GAVE A FOOTHOLD IN THE MEDITERRANEAN.

will incorporate a comprehensive review of the Malta concession(s) and the results of the well in Area 4. Rockhopper will be meeting the Genel technical teams during the course of the well evaluation.

Rockhopper also holds a 40 per cent interest during the Exploration Study Phase in area 3 with Cairn Energy as operator.

Exploratory drilling in Area 4 started in May and was planned to last 45-55 days. Sources said that the duration estimate was always designed to take worst case scenarios into account and the earlier than expected results were due to

efficient operations. Tony Hayward, CEO of Genel Energy, had predicted a one-in-five chance of finding oil, adding that the odds could be twice that.

However, it was apparent immediately from the cuttings brought the surface that there were no hydrocarbons. The sources said this was clearly a huge disappointment for all involved – and will also deter other investors from coming forward should Phoenicia decide not to proceed to the second phase.

“We have to put this setback into context though. Malta was

represented at the main oil conference in Amsterdam earlier this summer, which was attended by around 7,000. And as a result, there were a handful of promising data room requests by interested investors. And there is still the two-year concession held by Cairn Energy, which is evaluating its seismic data. They have until June 2015 to decide whether to enter into a production sharing agreement.

“Despite the results of this well, there are still many other prospects for Malta,” the sources concluded.

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August 28, 2014

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NEWS & APPOINTMENTS

New AmCham Malta board

€172 a day for short-lets in Sliema Properties with a seaview in Sliema commanded an average of €172 a day for short-lets in August, according to a survey of online booking sites carried out by property management company Casa Rooms.

Properties without a seaview in Sliema are being offered at an average of €113 per day.

Properties in other areas commanded lower prices, with Qawra at the bottom of the range surveyed, at €81 per night.

However, Qawra also had the best occupancy levels – 81 per cent.

When the occupancy levels are factored in, it equates to monthly revenue of €2,820 for Sliema as a whole, and €1,720 for Buġibba.

The properties analysed were all capable of hosting four to six people, and had internet and airconditioning. The survey looked at properties in Sliema, Valletta, St Julian’s, Qawra and Buġibba.

The survey was conducted by analysing the properties listed on specialist websites holidayletting.co.uk, airbnb.com and homeaway.com. The sites list 1,200, 1,500 and 700 properties in Malta respectively, with Airbnb offering a mix of entire properties (940), private rooms (413) and shared accommodation (62).

Tourist zones are clearly the most popular. The survey found that a third of all the properties listed on holidaylettings.co.uk were in Sliema or St Julian’s, with 18 per cent in St Paul’s Bay and 15 per cent in Mellieħa.

Last October, The Sunday Times of Malta carried a story about Airbnb and noted that it had 813 properties listed. However, dozens had been taken down from the website after it was pointed out that not all these properties were licensed to host visitors – and that many did not declare their rental income.

The Malta Tourism Authority can issue fines of €2,329 and the Courts of Justice fines from €1,165

Tanya Sciberras Camilleri is the new president of AmCham Malta.

The members of the board are Pierre Attard vice-president, John Mizzi honorary secretary, James Satariano honorary treasurer while Alfred Cuschieri, Tonio Depasquale and Luciano Mule Stagno were elected as members. Simon Lee Barberi retains the post of executive secretary.

Dr Sciberras Camilleri said one of the priorities would be to maintain AmCham Malta’s information campaign on the proposed EU-US Transatlantic Trade and Investment Partnership (TTIP).

The board will also maintain its excellent and ongoing relationship with the US Embassy so as to retain and strengthen AmCham’s position as a point of contact between American and Maltese businesses.

GM for InterContinental Malta

“A property situated outside a key location may need to be priced towards the lower end of that price range in order to compete with prime locations” up to €23,293. The numbers are clearly creeping back up again.

Thomas Cremona of Casa Rooms said that before deciding on a price, landlords should analyse the range for that locality.

“A property situated outside a key location may need to be priced towards the lower end of that price range in order to compete with prime locations,” he said. He also warned that, once listed, it was important to monitor queries.

“Internet bookings engines often use response time of a first enquiry as an attribute affecting the listing ranking,” he advised.

“It is imperative that a property manager is able to optimise the use of booking engines in order to adequately satisfy the rising demand for residential unit accommodation and generate a regular stream of income from the rental unit.”

Martin van Kan has been appointed as area general manager at InterContinental Malta. Mr van Kan, a South African national, has been operating in the tourism industry for over 30 years and has worked within InterContinental Hotels Group since 1985.

Mr van Kan’s primary objective is to, together with his team, position the InterContinental Malta as the principal hotel and resort on the islands and to solidify its position within the conference market.

HR manager at Vodafone Malta Vodafone Malta has appointed Claire Mifsud as the new HR manager leading the human resource function, including the property and health and safety functions.

Ms Mifsud started her career in the communications industry as a customer care clerk in May 1996 and moved on to become a customer care senior executive in 2004. In 2006 she moved into HR and has steadily worked her way up.

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August 28, 2014

CASE STUDY

Malta losing out on rig stops because of monopolies

“ere are numerous rigs working in the Mediterranean and North Africa. Malta could easily cope with four a year” – Jonathan Borg

Malta could attract considerably more rigs for lucrative overhauls if the owners were given more leeway to outsource contracts, Jonathan Borg, the managing director of Bluhull Group, said.

Rigs need overhauls every five years or so, with contracts amounting to €30-60 million each and lasting an average of five months.

“The owners are not keen to work at yards where they are not given a free choice of engineering and service contractors. I cannot think of any other places were a quay is dedicated to just one operator. Successful rig-stop facilities have got to have the infrastructure, but they also have to have a business-friendly atmosphere, without day-to-day interference in the day-to-day project and assets,” he said.

“The gates need to be open all the time and all contractors should be allowed to work within the yard.”

Mr Borg believes that the solution would be for the government to allocate a quay – perhaps in the south – to rig-stops, but not to give it to the private sector “which would turn it into a closed shop”.

“There are numerous rigs working in the Mediterranean and North Africa. Malta could easily cope with four a year,” he said.

Mr Borg was one of the first people to bring rigs here for maintenance – 15 years ago. He has been involved with the oil and gas

industry for 22 years – 10 of them offshore – and their company now offers a huge range of services, covering engineering and supply chain management, to paintings and coatings and recruitment.

Times have changed. He remembers a time when a box of videos would be delivered to the oil rig every month or so, and dozens of people sat in the theatre arguing about which one to watch. Things have changed now, with wi-fi available and devices which allow them to entertain themselves and to keep in touch with their loved ones. Most rigs have gymnasiums and some even have a sauna. And the food is excellent...

Still, it is not an easy life being away from home for weeks at a time, even if you can Skype every evening. And yet, he would be the first to encourage others to consider a career working in the oil and gas sector.

He and his wife Sharon are doing all they can to raise awareness of the varied careers available, which range from maintenance and hospitality, to engineers and administration.

Over the past three years, it has placed 220 Maltese on rigs around the world.

“Malta has been supplying the oil and gas sector for some time but, until 2003, it was seen as a provider of lower level manpower. But, as a result of the downsizing of a large company here, a number of engineers were looking for new jobs.

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August 28, 2014

This coincided with a boom in Northern Europe and the traditional recruitment sites in the UK and the Netherlands could not cope with demand,” Ms Cassar Borg said.

“And companies were also impressed by the students graduating from the university and MCAST. Maltese staff are now occupying top offshore posts.”

Over 200 rigs were built between 2006 and 2010, so demand for personnel is going to remain high.

“This is why we need to ensure that we have more students in the pipeline as well as experienced people who can work their way up to managerial positions,” she said, noting that Global College at Smart City Malta was now offering degree courses for petroleum engineers and well drilling engineers.

Academic qualifications are not the only skill required. Working offshore is demanding because of the distance from home, as well as the need to be able to work with so many different nationalities and cultures, in a relatively confined area, for weeks at a time.

“Many people pull out after our induction sessions but this filtering process is very important as the next phase – training – costs thousands,” she added, noting that the recruitment process including personality tests as well as mentoring.

It is a dynamic business with requests requiring immediate action – and short-term definite contracts to provide flexibility.

“We always say that there is no such thing as Christmas Day on a rig. They work round the clock, every day of the year,” Mr Borg said.

7

MALTA COULD ATTRACT CONSIDERABLY MORE OIL RIGS FOR LUCRATIVE OVERHAULS.

Recruitment is just one of the services offered by Bluhull – which was set up in 2011.

At the time, Mr Borg had divested his shareholding in a number of companies and intended to do something different. He wanted to set up a company chartering sailing yachts – hence the name Bluhull – but his clients in the oil and gas sector kept badgering him for help and he eventually relented and set up Bluhull Marine.

The company grew very quickly, and within two years, he opened other companies as subsidiaries and formed the Bluhull Group, catering for provisions, then projects and recruitment, and finally shipping and logistics. Along the way, it picked up some important

agencies for marine and drilling equipment, as Mr Borg is a great believer in the ‘one contact, one contract’ approach.

It moved to Balzan last Christmas and with 14 staff it is already outgrowing its premises.

Of course, the crisis in Libya has taken its toll – around 75 per cent of its business is in Libya and North Africa. But the couple are far from discouraged.

“To survive in this business, you need to have energy and connections. But you also have to have the right attitude. If there is a problem, then you have to be able to find a solution,” Ms Cassar Borg said.

“We believe that we can be the leaders in the Mediterranean and North Africa within five years.

Even if no oil is found in Malta, it could still be the best hub in Europe for supply services.

“We are up against Cyprus, Sicily and Las Palmas but we could easily compete. If providers operate a closed shop, then the cost pressure is inevitably upward.

This is what the government needs to understand,” her husband warned.

“Having said that, I see a change in the way this government looks at this industry. There has recently been less bureaucracy, and more government officials are addressing the needs of the oil industry. There is also more awareness of the need to balance environmental concerns with industrial needs.”

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August 28, 2014

INTERVIEW

Prolonged Libyan crisis could cause redundancies Hundreds of Maltese workers brought back from Libya by their employers are being kept on the books – but that might not be possible if the crisis goes on much longer.

“If you have trained and experienced employees – especially in specialised jobs – you would not want to lose them. But companies might not have any choice if the situation persists. And it is not only those 450 who work in Libya but also others who provide ancillary services and products,” Malta Chamber of Commerce, Enterprise and Industry vice-president Frank Farrugia said.

One of the most immediate problems is cash flow. In fact, the government recently announced measures to help the 200 companies affected by the latest fighting. It will speed up any payments due to firms, such as VAT refunds, and will also extend the deadlines for the payment of tax and social security contributions.

There was a huge surge in activity after the 2011 revolution with tenders being issued to rebuild the infrastructure – although the Malta Chamber estimates that only half the Maltese companies went back at the same levels.

Many companies had little choice as they have huge investments tied up. International Hotel Investments, which runs Corinthia Bab Africa, said in its interim results that the current conflict had seriously affected hotel occupancy. The hotel is currently operating with just a core nucleus of personnel.

Medserv, which operates a base at Misurata, also recalled its staff, leaving just the Maltese country manager and his assistant. Its warehouses are full of clients’ equipment and, although the port is open, it was not always easy to approach, managing director Anthony Diacono said.

Oil production had just started to

recover, reaching up to 550 kbpd compared with just 200 kbpd for most of last year. It was 1,483 kbpd just a few years ago. Operations to service this offshore activity are now being run from Malta, with Medesrv’s new yard already packed with material and its offices being used by oil companies who moved their staff here.

Mr Diacono called for high level intervention. “We will be able to get international fora to listen much more than Libya would on its own,” he said, stressing the opportunities that would become available once the situation is resolved – as long as short-term greed did not take over.

“ere is a lot more at stake here than just oil and gas: it also impacts migration and idealism” “There is a lot more at stake here than just oil and gas: it also impacts migration and idealism. We need to wake up to the realities.”

The Libyan-Maltese Chamber of Commerce identified three problems: stock trapped there; debt collection; and money trapped in Libyan bank accounts.

“These are causing massive cash flow problems – so the government’s initiatives will definitely help,” president Tony Micallef explained.

“Our advice is to wait and see – but to use the time as wisely as possible, for restructuring, training and so on.”

A DAMAGED AIRCRAFT IS PICTURED AFTER SHELLING AT TRIPOLI AIRPORT LAST SUNDAY. Photo: Aimen Elsahli/Reuters

The Malta Chamber had set up a Libya Crisis Committee in 2011, which has now been reconvened under Mr Farrugia. He said that many companies have letters of credit or bid bonds opened in favour of the Libyan government or companies – and are unsure what to do.

“If you close or cancel them, you will lose all that you have done till now. But how long can you afford to leave them open?” he said.

Mr Farrugia believes it will take much longer for things to get back to normal after the fighting stops – with the airport alone requiring months of work to re-open.

The committee believes is it very important to have a strategy for the future.

“How can we consolidate our economic presence there? Can we put together a delegation to talk to the government as soon as one is

appointed? We cannot let others beat us to it,” he said.

“We have to be prepared to seize opportunities – which will be huge.

So much of the infrastructure has been destroyed.”

The Crisis Committee called for local investors to consider the advantage of a regular sea transport link between Malta and Libya for cargo and passengers – as there was during the sanctions.

“Malta gained a lot from this link – and could do so again. Ports like Misurata are quite safe and are vital for the provision of services to offshore rigs,” he said.

The impact on the Maltese economy is much larger than people assume as trade figures do not capture transhipment or parallel trading, or services like education and health.

Air Malta lost its lucrative Tripoli route once the airport there closed.

It recently started flying to Djerba in Tunisia twice a week and may add frequencies as and when required.

There is also a possibility that it will fly to Tunis in the near future.

The crisis also had an impact on Libyan investment in Malta, as the home situation has distracted their focus. However, it is not all bad.

Oil companies are operating from here – and what started off as a transitional arrangement could easily turn into something longer term. And numerous Libyan and expatriate families moved here, renting accommodation and filling places in schools.

One thing is clear: the forecast is still bleak. An international law firm this week reported that “the prevailing view ... is that Libya is destined for a period of sustained conflict, as the two main groups remain evenly matched in a fruitless stalemate”.

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August 28, 2014

9

NEWS

< Continued from page 1 A number of other changes were made. For example, the need for an applicant to be “fluent” in one of the official languages of Malta has been changed to the more pragmatic requirement to be able to “adequately communicate”.

The Malta Retirement Programme has also been amended to include the south with the lower threshold applied to Gozo for the acquisition or rental of property.

Another important change was the recognition of partners in stable relationships as, prior to this, each of the persons would have had – at least in theory – to buy or rent a property to get the tax status for both partners.

The new programmes solve other issues too. The HNWI was introduced to replace a residency scheme which had been abruptly suspended, and opened up the possibility of exploitation by unscrupulous landlords.

“Let me give you an example.

Under the old scheme, the residents had to pay a minimum rental of €4,150. But, if they changed their address, they were obliged to adopt the minimum thresholds of the HNWI, which meant they had to pay a minimum rental of €20,000 – quite a huge leap.

“e landlords basically had them over a barrel” “The landlords basically had them over a barrel as they would threaten to raise the rent knowing that the resident really did not have much choice. We know of some cases where this happened, which of course created a lot of fear. Many people just gave up and left Malta.

“Now if they do change their address, they move to the TRP or GRP thresholds of €9,600 or €8,750, which are still higher but not unacceptably so.”

The GRP was introduced just over a year ago and has had limited success. Only 36 applications have been received, of which nine were approved with 15 others close to approval. But Mr Huber does not see that as low – given the circumstances.

“That is still 36 in just over a year. Compare it with just two applications during two years of the HNWI non-EU scheme. So really the levels are staggering. It will never be as attractive as the old residency scheme which had ridiculously low thresholds: the minimum tax was just €4,192.

“There are other factors too.

For example, we had a very good market for South Africans but the higher thresholds coupled with the worse exchange rate for the rand meant we lost a lot of this market.

“And the introduction this year of the Individual Investor Programme – the so-called

citizenship scheme – also eclipsed the GRP as an alternative for those who want Schengen visa,” he said.

He also pointed to the Portugal factor as this member state is granting passports after five years’ residence, with lower property parameters, and offering tax holidays for 10 years at 0 per cent.

“We had already lost a lot of momentum because of suspension of the previous residence scheme. Now, with the Portugal factor, our Swedish market was virtually destroyed. Thankfully we do see a few good ones trickling back but it will never go back to previous levels,” he said.

residence schemes minimum taxation

minimum taxation for dependents

minimum acquisition malta

minimum acquisition gozo

rental malta / south

rental gozo / south

hnWr/eu

€20,000

€2,500

€400,000

n/a

€20,000

n/a

hnWr/non-eu

€25,000

€5,000

€400,000

n/a

€20,000

n/a

global residence programme

€15,000

nil

€275,000

€220,000

€9,600

€8,750

residence programme

€15,000

nil

€275,000

€220,000

€9,600

€8,750

retirement programme

€7,500

€500

€275,000

€220,000

€9,600

€8,750

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e Business Observer is a new business newspaper distributed with Times of Malta every fortnight.

EDITORIAL

Residency rules: the start of a new era?

In June last year, Times of Malta reported that the government was planning to impose a deterrent to those who might want to apply for long-term residency.

Long-term residents are eligible for social services: they basically become the responsibility of the country with regards to healthcare and benefits, including stipends.

The deterrent was to take the form of a clause which would mean that those who apply for long-term residence would have to pay normal rates of tax on their worldwide income – rather than the 15 per cent tax rate on income derived from or brought to Malta, from which they would benefit under other residency programmes.

For some reason, that clause was only introduced a few weeks ago – without any official announcement to draw any attention to it.

Five legal notices have now been issued, which, apart from including this punitive clause, have streamlined the three residency programmes and killed off the High Net Worth Individual Rules (see story on pages 1 and 9).

The legal notices have been backdated to July 2013 – and the indications are that the drafts have been ready for some time. Is it churlish to ask why there was a delay, rather than to welcome the fact that they have finally been implemented? After all, they mark the end of a chapter that is best closed and forgotten.

It started when the Permanent Residence Scheme (PRS) was suspended in 2011, leaving dozens of applicants in the lurch. In 2010 alone, the real estate business section within the Malta Chamber of Commerce, Enterprise and Industry had calculated that 151 nonEU citizens purchased property in Malta at a value of over €35

million. In the face of widespread howls of protest, it was hurriedly replaced by the High Net Worth Individuals scheme nine months later – by when considerable damage had been done to Malta’s reputation.

While the PRS was too lax and open to abuse, the HNWI scheme went to the other extreme, mandating unpopular bond requirements and much higher property thresholds. It did little to repair the damage and even less to attract newcomers: apparently only two applicants in two years.

The Labour government tackled this soon after the election and came up with the Global Residence Scheme (now being referred to as a ‘programme’), which struck a much better balance between the lax PRS and the stringent HNWI. But the PN had immediately pointed out that it lacked safeguards to deter applicants from going for long-term residency and getting all the benefits of the welfare state while only contributing 15 per cent tax. The parliamentary secretary spearheading the GRP at the time, Edward Zammit Lewis, had pointed out that becoming a long-term resident was not that easy – but he also acknowledged the need to make it even less attractive.

Hence the proposed clause about taxation on their worldwide income and not just on the income they bring to Malta. And also at a flat rate of 35 per cent. And, as it turns out from the legislation, not if their application is successful but even if they dare to apply.

The clause may be a year late – perhaps why it was done without any fanfare – but at least it is now there, part of a complete overhaul of the residency programmes which finally makes them a lot more logical, accessible and attractive. Not a moment too soon.

Editorial Vanessa Macdonald, Head of Content (Business), Times of Malta.

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A M E M B E R O F T H E A L L I E D G R O U P O F C O M PA N I E S

BUSINESS OPINION

Malta’s economic vision Malcolm Bray Malta’s economic transformation during the last decade was shaped

by EU membership and the adoption of the euro. These two episodes mark the end of the postwar period and the start of a new journey. Having reached these milestones we need a new economic vision. In which direction does Malta want to head and what are its aspirations?

A vision creates a picture. Malta is currently visualised as a hub for services, such as financial services, remote gaming and back office operations.

But how will Malta look in 30 years’ time? Are we picturing a London-style financial district, a Paris-style tourist attraction, a Brussels-style centre for high level meetings for the Euro-med

countries, or a Mediterraneanstyle relaxed lifestyle?

Another important element of a vision is that it represents a change from the status quo. As countries become increasingly aggressive in their bid to attract investment – and further harmonisation across the EU cannot be ruled out – it may become increasingly difficult for Malta to attract business purely on the basis of a favourable tax regime and other cost savings. There needs to be a genuine focus on how to equip the country with a competitive edge over other countries.

This will require concerted research across all sectors to identify the fundamentals which can make Malta stand out from its peers. Comparative advantage is something which can be built, but this requires a long build-up process.

A vision is also about values.

Going forward, which values does the country want to ascribe to? In economic terms, where does Malta want to position itself along the solidarity versus individualism spectrum? Free health care, free

“Malta’s economic vision should supercede its traditional vulnerabilities” education and state pensions are prime examples of economic solidarity, but will the increasing pressure on public finances change people’s views on the

desirability or otherwise of these policies? What type of income distribution will be considered as acceptable in our country?

A vision provides a map. The milestones which characterised Malta’s post-war economic vision are clearly identifiable. We now need to identify future milestones along with a high level description of how they can be reached. These will help us evaluate whether the country is on track to achieve its vision. Just as the EU has set itself public targets, our policy makers need to make a public commitment to their long term targets.

Accountability demands this.

A vision challenges people.

Malta’s economic vision should not replicate current realities but should be bold enough to aim at higher standards. Like a small entrepreneur who dreams of build-

ing an economic empire, Malta’s economic vision should supersede its traditional vulnerabilities and build on its resilience. Malta will always remain a small state in a geographical sense, but this does not mean that in economic terms Malta cannot grow up.

Who should spearhead Malta’s economic vision? Crafting Malta’s vision should not be left exclusively in the hands of politicians. Constituted bodies and NGOs must become more active in expressing their views. They should present a fuller analysis of their suggestions and move away from a pure lobbying function. The MCESD can also be upgraded to serve as a genuine forum where economic ideas are discussed and challenged.

History will reward those leaders who develop and contribute to Malta’s new economic vision.

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13

CASE STUDY

Need for upmarket properties in Gozo There is a dire need for upmarket properties in Gozo, with demand picking up again after a few slow years, according to the manager of Frank Salt Real Estate’s Gozo branch, Marie Grech.

There are very few villas in Gozo with a tumolo of gardens, and of those very few are – or ever will be – on the market, she said.

“One solution would be to have more villas at Ta’ Ċenċ – if 20 or 30 more were added to the existing 11 they would be snapped up. I think it would be very easy to design them so that they are contained within gardens and not intrusive.”

Ms Grech, who set up the Gozo branch 25 years ago, said that both sales and letting were picking up again on the sister island, especially at the upper end, after five fairly lean years since the 2008 global meltdown – particularly for foreigners.

“In the 1960s and 1970s there were a lot of wealthy foreigners living here, virtually without anyone knowing about it. They have made a huge impact on the economy of Gozo and this is hopefully where we should be going again,” she said.

The upturn is due to a number of factors, including the general economic environment and stronger sterling, which is boosting the British market – still the strongest one in Gozo.

“However, we are seeing other nationalities too apart from Europeans, like South Africans,” she said.

One market that has defied efforts is the Russian one, which seems more suited to Malta with its vibrant nightlife than Gozo.

“However, the perception that Gozo is a quiet retirement place is quite wrong. We are getting people of all ages moving here, and not just to retire but also to set up businesses,” she said.

“It is true that Gozo does not offer nightlife during the week, but on the weekends there is plenty to do,

FROM LEFT: GINO CAUCHI, RUTH GRECH, GRACE CAUCHI, ALAN TABONE, KATYA SCICLUNA, ANDREW PORTELLI AND MARIE GRECH (CENTRE).

with good restaurants, pubs and nightclubs.

“There are also many cultural events, ranging from exhibitions to concerts, thanks to the many artists and people from the entertainment business living here. There is a very active expatriate community.”

The lean years forced owners to take a more realistic approach towards prices, she added.

“Some properties were overpriced five years ago and they are now back at more realistic levels,” she said.

The return on investment over the past five years is not indicative, she warned, but over the longer term view, there has been a capital appreciation of eight per cent per year – with rental income over and above that.

“We are getting people of all ages moving here, and not just to retire but also to set up businesses”

Rentals tend to be lower than in Malta – you can get a farmhouse with a pool for around €1,500 – and there is still considerable seasonality, in spite of the natural beauty of Gozo outside the summer months. She noted, however, that a number of entities are trying to attract off-season tourism through packages built around art and sculpture lessons, yoga and

agrotourism. Ms Grech believes that the slowdown has also influenced new construction. “Developers were very badly hit. They will now be much more careful about what they produce,” she said.

Taste has also changed drastically over the past decades and the trend has switched from rustic to ultramodern chic, from quaint farmhouses with traditional colours

and patterned tiles to minimalistic decor with monochromatic schemes.

Apart from providing more upmarket properties with the right decor, what more could be done to boost sales and rentals? Ms Grech said a permanent link would have a positive impact on foreigners.

“Crossing with the ferry is definitely part of the experience but there are times when the 2.5 hours from the airport are seen as ‘extra’, especially for those who arrive late at night. It is a long time – almost as long as the flight itself. It is a big drawback...

“We believe that there would be a lot more people who would live in Gozo and work in Malta – including many more Maltese – if the commuting time were shorter.”

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e Business OBSERVER

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August 28, 2014

BUSINESS UPDATE

Malta: a regional oil and gas hub With offshore drilling activity in the Mediterranean set to witness significant growth, Malta’s strategic location places it at the forefront as a regional service hub for the oil and gas industry.

Many firms have already settled on the island to benefit from its maritime assets, infrastructure, facilities and qualified workforce.

Since 2001, the Ablecare Oilfield Service Group has been a leading supplier of specialist products and services to the marine, oil and gas industry, with a special focus on drilling contractors and their specific requirements.

With their head offices in Malta, the group has worked in Egypt, Tunisia, Cyprus, Israel, Italy, Morocco, Libya, the Canary

Islands and Spain, to name but a few. Its expert teams handle the most demanding projects, supporting companies of all sizes in exploration and production, with a continuous commitment to quality, safety and service.

Once further investment is undertaken locally, Malta could experience a significant economic boost; more so in view of the forecasts of growth for the industry in North Africa, which will make the island a key player.

Attracting new customers through promotions Retailers working to maximise the potential of their unique competitive space will be one step ahead with a tailored retail management system to underscore their business’ differentiator. iVend Retail features an intelligent collection of modules designed to support retailers win customer loyalty. Its comprehensive pricing and promotions module can manage straightforward discount and incentive operations.

The module’s functionality enables retailers to define promotions in multiple formats –‘termbased discounts’, ‘quantitative discounts’, ‘mix and match’, or

‘buy some, get some’. The retail suite’s promotions module gives operators the flexibility to manage in-store or chain-wide promotions through on-demand customer trend analysis.

Retailers can easily upscale incentives to customers by integrating other modules from the retail suite, including loyalty, to increase repeat footfall in stores.

Your trustworthy construction partner Since 1992, V&C Contractors Ltd, run by brothers Vincent and Charles Borg, has established itself as one of the leading contracting companies on the island.

Over the years the company has registered steady growth, regularly investing in human resources and machinery to keep up with the latest technological advancements.

V&C Contractors Ltd established a reputation for good workmanship, high-quality finishing and respect to deadlines.

The company has successfully concluded a number of high-

quality projects in construction, road building and trenching, demolition and excavation works, landscaping works of some of Malta’s major projects, specialised restoration services, plant hire and various development projects varying in size and scope.

V&C Contractors Ltd has now expanded into real estate though V&C Developments Ltd, and has now decided to invest in the tourism sector.

V&C Contractors Ltd is always seeking to invest in new businesses and ventures.