e Business OBSERVER
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April 27, 2017
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e Business Observer is Malta’s leading business newspaper distributed with Times of Malta every month. Editorial Coordinator Marie-Claire Grima
EDITORIAL
Malta is set to be the real loser Nobody in his or her right senses would dispute the fact that the Panama Papers and their aftermath have now escalated into a fullblown national political crisis. And the harsh reality is that in all probability Malta will be the real loser as a result of this mess that has been created by a few individuals. While either Joseph Muscat or Simon Busuttil will certainly win the battle in the next general election, the Panama Papers crisis has exposed Malta to risk losing the war. Make no mistake. This is a different political crisis to what Malta had experienced between 1996 and 1998 when Alfred Sant was Prime Minister and Labour were last in government. It is also intrinsically different from the crisis that had hijacked Lawrence Gonzi’s last legislature in office between 2008 and 2013. Whereas both Alfred Sant’s and Lawrence Gonzi’s crises were predominantly domestic and exposed to local domestic risks, the current crisis has an international perspective and is exposing the nation to serious economic risks both domestic and international. Irrespective of who owns Egrant, the mysterious third company registered in Panama, the harsh reality is that significant damage has already been done to Malta, and undoubtedly to our economy. On a national perspective, the use of offshore companies in shady jurisdictions by top government officials whilst in office – including a senior government minister and the Prime Minister’s Chief of Staff – is in itself not only unacceptable but disgraceful. The fact that both of them are still in office has strengthened the notion that from a corporate governance perspective, the situation in Malta has deteriorated and reached an all-time low. Secondly, the revelations have already harmed Malta’s reputation as a serious legitimate global financial services hub. Worse still are the recent reports and revela-
tions on the operations of a fully-licensed bank in Malta, the regulator’s role and involvement in investigating claims of serious shortcomings by the bank and the bank’s reported client portfolio. These revelations on their own are indeed very harmful to our financial services industry and lead to legitimate questions on our regulatory framework as well as on the legitimacy in any modern democracy of the modus operandi being adopted by key government members and/or senior officials within the government or within public authorities. Irrespective of whatever outcome the current political crisis will lead to, industry players in the financial services are privately being open about the fact that the Panama Papers and their aftermath are harming our financial services industry. There has already been a change in perception of how Malta is regarded by reputable foreign banks and serious players in the global financial industry. To date, one could argue that Malta’s reputation is being temporarily tarnished until the issue is domestically resolved. One could also argue that any harm already caused has not reached the surface and the public has to an extent been sheltered from this reality. However unless drastic action is taken to restore credibility and trust and to restrengthen the notion that Malta is a legitimate modern EU country that is serious and trustworthy – the likelihood is that the harm that has been and is still being caused will eventually lead to structural problems. These eventually reach the surface and have a material ripple-effect impact on an otherwise very positive economic outlook. It is indeed very sad that the prevailing positive macro economic indicators, achieved as a result of an equally hard-working business community and nation, are being undone by a handful of individuals who should have known better.
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BUSINESS OPINION
Towards competitiveness-driven economic growth
Frank V. Farrugia Taking the helm of the Malta Chamber of Commerce, Enterprise and Industry has so far been an intense experience. While assuring a grade of continuity from the sterling work carried out by my predecessors, I am energetic to keep on facing the challenges of our business community in an ever-changing economic scenario. My first priority as President is to consolidate and strengthen the position of the Malta Chamber as the country’s foremost representative of business. The Malta Chamber has achieved this position over decades of hard work, and I intend to do my utmost to cement it. I plan to do so by maintaining focus on our core business of making policy recommendations in favour of a competitive and
favourable environment for business to generate economic growth. I intend to ensure regular external communications to members and other business and economic stakeholders to position the Chamber as the principal voice of the business community in Malta. It is no secret that our country is doing well from an economic point of view and the recentlyannounced results are praiseworthy. However, as we have been saying all along, we mustn’t stop for a second and grow complacent. The country is facing challenges all the same and we must pay greater attention to detail in order to foresee the challenges of tomorrow. News of a surplus in public finances is most welcome; however, we must see how this
commendable result has been achieved. The resulting decline in capital expenditure, we fear, could hamper our competitiveness and chances of future growth. Much of the country’s infrastructure continues to fall short of the standards expected of a developed and rapidly growing country with great aspirations to establish regional centres of excellence in a number of spheres. Issues also remain in certain areas that may tip the delicate balance the country achieved if they remain untackled. The national airline Air Malta is currently at a crucial point. As a Chamber we have always insisted that the importance of the national airline is not only linked to the tourism sector but also the remainder of the economy, including industry and services.
Manufacturing for example, depends on the efficient and competitive air freight links for the inward just-in-time transportation of raw materials and outbound exports. Our proposal to Government for a long-term solution for the airline includes the reduction of operational costs, the rectification of the company’s current financial situation and opening the company’s shareholding to private investors. Another issue we must ramain vigilant about is the economic and political developments Brexit is bound to bring about. Even after the formal triggering of Article 50 by PM Theresa May, and especially after the announcement of a snap election for 8th June, Brexit remains a major unknown quantity. This is
“Much of the country’s infrastructure continues to fall short of the standards expected of a developed and rapidly growing country with great aspirations to establish regional centres of excellence in a number of spheres.”
new ground all stakeholders must tread on carefully. In fact very little can be said about this subject, but there will surely be changes to the scenario of the European Union as a major political and economic bloc. The results will also be felt in the way we conduct business in Malta and with our international partners. In light of all of the above, Malta is at a very important juncture. The country has arguably entered election mode, and both Government and the opposition have focused their attention to domestic politics. My appeal is for our politicians to maintain focus on the issues that will affect our competitiveness, investment and economic growth. Our political parties must resist the temptation of populist tactics, and should not engage in a race to out-bid each other in making electoral promises that are unsustainable from a financial and national competitiveness point of view. Under my leadership, the Chamber shall remain vigilant and promote the interests of our members and the values of competitiveness-driven economic growth. Frank V. Farrugia is President of the Malta Chamber of Commerce, Enterprise and Industry.