The Business Observer Newspaper 3rd December Issue

INTERVIEW

Issue 40

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December 3, 2015

Distributed with the Times of Malta

e Malta Employers’ Association is marking its 50th year. Director general Joseph Farrugia opens up about what lies in its future, pensions, SMEs and the industry in general. see pages 10 and 11 >

NEWS e female participation rate in the job market grew by 11.7 percentage points between 2008 and 2014, the highest increase within the EU. see page 3 >

NSO lays stress on independence Independence should be a defining characteristic for the National Statistics Office, according to its new director general, Reuben Fenech.

Mr Fenech, 39, joined the NSO this year after leaving a15-year career in investment management and banking to serve as a “change agent” for the organisation.

“I strongly feel that any modern democratic country, with serious ambitions for its society, needs to instil and protect the credibility of its institutions,” says Mr Fenech in an interview with The Business Observer.

In joining the NSO, Mr Fenech says he saw an opportunity to help transform one of the country’s cornerstones and make a real impact.

“The decisions we make today will shape our future, so we need to make better decisions, more informed ones, based on good quality

“e National Statistics Office must shed light on more aspects of society and the economy” data. Our vision for the NSO is to help Malta make better decisions; be it the government, the business community or households.”

Mr Fenech acknowledges that statistics can be widely interpreted.“However, this can be countered if we, as producers of statistics, go beyond our traditional role and get better at presenting the story behind the numbers.”

He says the NSO needs to shed light on more aspects of our society and economy.

“Statistics, should underpin all our discussions. They are not the only thing that should be factored in. There is also scope for ideology, principles and other aspects but statistics should provide the factual backdrop.”

He does not think statistics are being used sufficiently by society, which is why he wants the NSO to reach out to the public and produce more digestible statistics.

One of his main priorities is to carry out “major upgrading” of the processes and systems architecture by 2018.

During Malta’s EU presidency, the NSO will have the crucial task of coordinating the European Union’s law-making process with regard to statistical legislation. This will see Mr Fenech chairing the Council Working Party on Statistics throughout the duration of the presidency.

See the interview on pages 5 and 6

CASE STUDY Maintaining your current lifestyle after you retire may well prove impossible on just a government pension. is is where a private plan could make all the difference. see pages 12 and 13 >

NEWS Air Malta surveys over 10,000 customers to gauge satisfaction levels, achieving one of the highest scores accors various industries. see pages 13 >

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NEWS

Female growth in job market The female participation rate in the job market grew by 11.7 percentage points between 2008 and 2014, the highest increase within the EU. Still, despite such an improvement, at 52.1 per cent in 2014, the female participation rate remains one of the lowest in the EU. A paper by Brian Micallef, principal economist at the Central Bank of Malta’s Economic Research Department, concludes that the trend increase in participation rate is estimated to have contributed, on average, to 0.8 percentage points per annum to potential output in the period under review.

The median estimate of the various approaches suggests that slightly less than half of the 11.7 percentage point increase in the female participation rate is attributable to labour market reforms. Overall, the impact of the various reforms to increase the number of working women is calculated to have raised the economy’s potential output growth by 0.3 percentage points annually over the past six years.

Micallef writes that the Maltese labour market was very resilient after the economic crisis, with the island registering one of the high-

est growth rates in employment among the EU countries.

According to the Labour Force Survey, employment increased by 19,800 between 2008 and 2014, mostly due to females.

The growth in job creation was broadly split between full- and part-timers. Females accounted for almost all the increase in fulltime employment and to about two-thirds of the growth in parttime employment.

Slightly more than half of the new jobs for females were in public administration, education, healthcare and social work activities. This is also associated with the structural changes that occurred in the Maltese economy, with activities previously conducted informally by housekeepers now being serviced by the formal economy, such as residential care.

Another 17 per cent of full-time jobs for women were in profes-

sional, technical, administrative and support services activities.

About 40 per cent of new parttime jobs for females were in wholesale and retail trade and the tourism industry, with another 20 per cent in arts, entertainment and recreational activities.

“While it is undeniable that structural reforms played an important role in raising the female participation rate in recent years, the increase masks the effects of factors unrelated to reforms.

“After all, in addition to government policy, the labour force participation of women is determined, to a large extent, by the level of female education, the overall labour market conditions and cultural attitudes,” the paper notes.

The decline in the working-age population and changes in the structure of the labour force could also have exerted an impact on the participation rate.

“Strong growth in number of female workers”

Malta ‘must focus its resources’ Malta must focus its resources on those productive and economic sectors that promised to offer the best possible opportunities, the president of the Chamber of Commerce, Enterprise and Industry, Anton Borg, said.

“As a small and resource-hungry nation, Malta cannot afford to position itself as ‘everything’ to ‘everybody’. On the contrary, Malta, and its SMEs, must focus its resources towards those productive and economic sectors that will optimally leverage opportunities – existing, emerging and new. In this regard, we must ensure agility through smallness: Malta’s smallness should result in an enabling environment that allows for immediate policy action to: leverage opportunities, counter threats, and provide

for a pro-business climate that gives Malta an advantage over others,” he told the Commonwealth Business Forum last week.

SMEs represent 99.8 per cent of all registered business units in Malta and are responsible for 78 per cent of all private sector employment. They generate €2 billion worth of value added every year, equivalent to 73 per cent of the country’s total value added.

In the interest of strengthening the platform for SMEs to drive growth, Mr Borg noted, the Chamber’s vision was for a “focused and diversified economy, which is underpinned by a high quality, dynamic, productive and innovative private sector”. Malta must ultimately position itself as a global hub for business and investment leading

ANTON BORG

to increased prosperity. In the successful economy the Chamber envisage’s, the public and private sectors would continuously complement each other.

Mr Borg laid stress on quality.

“We are calling for a concerted effort from the part of all social partners to inculcate a culture where

the current ‘good enough’ attitude is replaced by ‘nothing but the best’ – whether this relates to the products that are manufactured in Malta, to the professional services provided to simple courtesy and good manners towards tourists who visit our shores.”

Referring to innovation, Mr Borg said this was “a strong ingredient of competitiveness and we must embrace it and encourage it”.

The Chamber wanted to see Malta position itself as a global hub for business and investment leading to increased prosperity.

The prevailing situation in markets Malta chose to venture in could equally pose a limiting barrier for economic growth. The growth registered in the recent past came mainly through the

penetration of markets in Europe and North Africa, markets that, for different reasons, had become very unstable. Mr Borg noted that, by 2050, none of the European member states are projected to be among the world’s largest economies. Malta, therefore, had to choose very diligently.

“We need not seek new partnerships elsewhere. We must rather seek to exploit a strong but latent organisation which we already have and which is the Commonwealth… We must exploit our membership of the Commonwealth as a platform of evolving economic trends where business opportunities constantly arise and which we need to make each other aware of at a frequency that is equally constant,” he said.

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Behind the numbers Reuben Fenech, 39, left London and a 15-year career in investment management and banking to become director general of Malta’s National Statistics Office. His background promises to bring a fresh perspective to how statistics can help Malta make better decisions.

They speak of lies, damned lies and statistics. Why do they say so?

I prefer the phrase “numbers don’t lie”. It is true that statistics, like good paintings, can be open to interpretation where different people extract different meanings. However, this can be countered if we, as producers of statistics, go beyond our traditional role and get better at presenting the story behind the numbers. This could go a long way to limit the range of interpretations.

There have been occasions when the NSO and the authorities, even the government, clashed on what to John Citizen should be the same figures. Why does that happen? Should it happen?

This is mostly due to interpretation and the fact that a set of statistics often provides multiple indications on an area, which can also be conflicting with one another. I believe we need to rethink the NSO model. A lot of effort goes into collecting numbers and producing statistics but very little time, energy and investment goes into disseminating and presenting our product. Like any commercial entity we ought to know more about our customers – the users of statistics – and deliver what they need in a way that is timely, convenient and practical for them.

Is the NSO fully serving its purpose in its present structure?

Our purpose should be evolving in tandem with Malta’s economic and social evolution. The decisions we make today will shape our future, so we need to make better decisions, more informed ones, based on good quality data. The NSO has a unique role to play. We want an NSO which is more forward looking, more relevant, more dependable. Our vision for the NSO is to help Malta make better decisions; be it the government, the business community or households.

Why did you decide to join the NSO after you managed to gain so much experience in investment management and banking?

Probably the magnitude of change the organisation required was the biggest attraction for me.

I consider myself a change agent.

In this opportunity I spotted the potential to transform one of the country’s cornerstones and make a real impact. I do realise that the road is long and bumpy.

“Like any other commercial entity, we must know more about our customers and deliver what they need in a way that is timely, convenient and practical” We need to convince and persuade many that our new approach is not only required to strengthen the national statistical system but also that it is the right one.

My experience in investment management definitely shaped who I am today and what I bring to the table: taking decisions in a constantly changing environment, strong mental discipline to think systematically and a strong inclination to look at the big picture and not miss the woods for the trees.

You have been heading the NSO for some months now. What do you think is the core role of the director general of a country’s national statistical institute?

Every director general of this organisation so far had a different core role depending on the stage in which the organisation was in.

Some of the early ones built the foundations, others consolidated the work of their predecessors and readied the organisation to take on new important challenges like, for instance, EU accession. My role is now to lead the NSO to become a dynamic, forward-looking organisation that serves as a pillar for Malta’s economic and social development for the years to come.

An extensive investment in IT infrastructure and process engineering, together with new HR, training and development strategies, the establishment of more comprehen-

sive risk and quality management frameworks and a new approach to dissemination of data are the principal challenges that we have got in front of ourselves.

Obviously, through this transformation, we will continue to ensure quality and timely output delivered with integrity and autonomy while we claw back relevance and fend off competition from emerging sources of statistics which have proliferated over the years.

You mention competition. Do you believe that an organisation like the one you are leading needs to be concerned about competition at all?

Absolutely. We live in times where information is abundant and immediate. We may not be conscious about the fact that we are highly prone to make decisions with whatever information is available or, at least, with the one that is most interpretable. Bodies that generate information have mushroomed and surveys have become popular. NSIs Continued on page 6

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NEWS

Quest for more digestible statistics Continued from page 5 around the world have to share a space that they virtually controlled uncontested for decades. Unprepared for this tsunami and still operating under technical constraints that other bodies usually do not have, led to the relinquishing by NSIs of some of their territory, powers and relevance.

Why are official statistics so important for a country?

I think we need to shed light on more and more aspects of our society and economy or we run the risk of looking for answers where there are none. This is why official statistics are so important. They guide our decisions as policymakers, entrepreneurs and households.

Statistics, should underpin all our discussions. They are not the only thing to be factored in. There is also scope for ideology, principles and other aspects but statistics can provide a factual backdrop.

Are official statistics used sufficiently as a basis for policymaking?

I have no reason to believe they are not but I think that more can be made available to policymakers and there is definitely scope for the NSO to engage with the public, private and voluntary sectors to ensure a broader and better use of our output. I certainly think statistics are not used sufficiently by our society at large. This is why I want the NSO to reach out to the public and produce more digestible statistics. I am also positive that renewed momentum from this aspect will encourage research and development in areas that are still handicapped by lack of good quality statistics.

What role will statistics play in Malta’s EU presidency and how are you preparing for it?

As Malta’s national statistical institute, the NSO will have the important role of coordinating the European Union law-making

Malta has an obligation to produce statistics that adhere to stipulated concepts and methods. This leads to a substantial body of information that is comparable across the EU and that benefits member states in many ways, not least in policymaking and in funding EU structural projects. There is substantial overlap in this space and 80 per cent of what we do goes to Eurostat.

I would like to explore getting a more reasonable balance there as I feel we can produce more statistics for national purposes.

“I strongly believe that any modern democratic country with serious ambitions for its society needs to instill and protect the credibility of its institutions” process as regards statistical legislation. Among others, this will entail organising the Council Working Party on Statistics at which national statistical institutes congregate to agree common positions in the laws being proposed. I am expected to take the chair of that council working party throughout the six months of Malta’s presidency.

We are preparing for it by strengthening our networks with EU member states, notably our Trio partners, and by putting together a strong international relations team.

I am honoured to be working with the Dutch and Slovak delegations that with Malta form part of the Trio that will preside over the Council between January 2016 and end June 2017. We have already engaged successfully with our colleagues from the UK, who will assume the presidency right after Malta.

What is the European Statistical System (ESS) and what role does Malta have in it?

The European Statistical System brings together Eurostat, which is the statistical office of the European Union, and national statistical institutes of countries forming part of the EU. It functions as a network in

which Eurostat’s role is to lead the way in the harmonisation of statistics in close cooperation with the national statistical authorities. It also coordinates its work with candidate countries and at European level with other Commission services, agencies and the ECB and international organisations such as OECD, the UN, the International Monetary Fund and the World Bank. Malta’s membership of the ESS reaps several benefits but also obligations, such as adherence to the ESS code of practice, a comprehensive guideline to the operations of statistical offices around the EU. What are the priorities you have set for the NSO? I see our priorities grouped into four areas: people, processes, product and partners. We want to make the NSO a great place to work and aspire for a long and fulfilling career. Our processes and systems architecture needs major upgrading and, with Mita as one of our main business partners, I am confident that we will deliver our ambitious plans by 2018. We will look at our statistical output more as our ‘product offering’ that needs to be developed, manufactured and

distributed in a way that keeps the users at the heart of the process.

Last but not least we want to become much more dependable both at a national level and also on the international level. We want to engage with the public administration, which, by virtue of providing a service, collects a considerable amount of information. We will upgrade the quality of that data collection to the standards required to allow us to produce good statistics.

On the international front I see a much more active NSO that contributes to the evolution of statistics in Europe. Granted, small NSIs like ours face an uphill struggle as better-manned institutions in Europe, which have anywhere between 1,000 and 2,000 people compared with our 150, have definitely more bandwidth. However, I strongly feel that small nations sitting at the table need to step up their contribution to safeguard their interests while making sure the debate at the European level remains inclusive.

What is the difference between statistics the NSO produces to meet EU obligations and those it publishes for national purposes?

Similar to other member states,

What has been the most interesting statistical project achieved in your time so far?

‘Gozo in figures’ was a really important project that brought together all statistics related to Gozo, also providing comparisons with Malta. This is now a comprehensive reference document for anybody doing business in Gozo or having a direct relationship with the island in any way. We will be using this success as a springboard to change some aspects of how we disseminate data. We aim to produce many more themed publications where we will be able to tell the story behind the numbers. A news release – 240 on average per year – does not allow sufficient flexibility and I feel we are not reaching a wide enough audience, wasting an important part of our efforts.

What should be a defining characteristic of the NSO? The defining characteristic must surely be our independence. I was saddened by comments in recent months made during a political debate that undermined the credibility of the institution and its output. I strongly feel that any modern democratic country with serious ambitions for its society needs to instill and protect the credibility of its institutions. Economic history tells us that, over the decades, countries with strong, independent institutions progressed further and better.

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INDUSTRY FOCUS

e Renaissance of Valletta While ‘baroque’ is one of the words most commonly used to describe Valletta, the revival that the city is undergoing has led to talk of the city’s renaissance era.

“Ever since Malta joined the EU, one of the main priorities of successive governments has been the restoration of Valletta to its former glory. However, the country set to hold the EU presidency in 2017 and the city named European Capital of Culture in 2018 really set the wheels in motion – to say nothing of other honours conferred on it, including hosting the Valletta Summit on Migration and the Commonwealth Heads of Government Meeting. In fact, more money has been spent on Valletta in the past eight years than in the 20 years before that,” says Valletta mayor Alexiei Dingli.

“The focus on Valletta isn’t surprising – not only is the city an architectural gem, visited by millions every year – it is also a living symbol of what we were, what we are, and what we would like to be.”

‘What we were, what we are and what we would like to be’ neatly sums up the culmination of Renzo Piano’s master plan for the renovation of City Gate, which came to full term this year with the opening of the much-talked about parliament building’s doors.

The mayor has noticed a seismic shift in the way the newest Valletta landmark is regarded by the Maltese. “The negative comments about it have all but vanished – the Maltese are proud of this project and they recognise the importance of having such an entrance to the city. It has been hailed by various people from all walks of life and featured in the most prestigious architectural and design magazines in the world. The latest feature will be in Monocle where they sent a crew

“e focus on Valletta isn’t surprising – not only is the city an architectural gem, visited by millions every year – it is also a living symbol of what we were, what we are and what we would like to be.” just for it, a few weeks ago. Ten years ago, people came to see our Caravaggio. Today, they’re eager to see the Renzo Piano project as well. It fits perfectly with our idea of a city which respects its past while also looking forward towards its future as a modern European capital city.”

“The rejuvenation of Valletta is thanks to the hard work of many different entities, such as the Valletta Regeneration Project and the Valletta 2018 Foundation,” says MTA CEO Paul Bugeja. “Some of the projects these foundations were in-

volved in include the Renzo Piano Parliament and City Gate project as well as the works carried out in Strait Street, which go hand-inhand with the planned regeneration of the covered market and the old civil abattoir. The MTA endeavours to promote various events in Valletta all year round, so we are very pleased to be able to support events as the Malta Fashion Week, the Malta Arts Festival, the Malta Jazz Festival and Notte Bianca, many of which are taking place in Valletta’s refurbished spaces.

“The city’s increased popularity has led to the number of boutique hotels increasing exponentially, which, in turn, has led to more tourists choosing Valletta as their ideal destination for a short city break.”

Valletta’s restoration is also having a ripple effect on the areas and facilities which surround it. “The regeneration of Valletta is certainly augmenting the cruise passenger experience, as well as serving as the gateway to the Valletta Waterfront through the Barrakka Lift,”

says Valletta Cruise Port chairman Stephen Xuereb.

“The port of Valletta is the gateway to Malta’s rich historical and cultural experience. It offers a warm welcome – the old buildings have been restored with sensitivity to their former grandeur and they now house a number of lively restaurants and bars, shops, office space and other amenities.

“To cruise into Malta’s Grand Harbour is to arrive in one of the world’s most breathtaking and historic ports. Research which we reg-

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INDUSTRY FOCUS

ularly conduct shows that passengers are pleasantly surprised by their stay in Valletta, would like to return for a longer stay and will recommend a visit to Malta to their family and friends.”

For many years, before it was eclipsed by Sliema’s more modern and high-end establishments, Valletta was one of the hottest destinations for Maltese shoppers. Has the regeneration of the city managed to breathe new life into the local retail community?

“The current retail environment is picking up but we definitely need more branded retail outlets to generate business,” says Gordon Schembri, the managing director of 113-year-old Ascot House, one of the oldest Valletta shops still in operation.

“My clients look for quality goods, an excellent after-sales service and, above all, exclusivity – over the past years they have become more demanding and more fashion conscious.” Claire Abela, general manager of Franks, agrees.

“Most of our customers in Valletta are people who come into the city for work. While we have seen increased footfall in other localities, the bulk of retail business has moved away from Valletta. We believe there is more work to be done to make Valletta a shopping mecca. Big retail brands and outlets cannot be found in Valletta – a more concentrated effort is needed to attract business owners and retail brands to set up shop in Valletta as this will surely entice more people to shop in the city. As it stands, the high price of rent cannot justify the comparatively slim footfall of the location.”

Both Schembri and Abela point out that the lack of parking within the city remains a major problem for shoppers and could be a discouraging factor. While it may have lost the retail crown to more accessible and contemporary locations, the explosion of hip new pubs, wine bars and eateries in the capital city has made it a hugely appealing destination for lunching with friends or a lively night out.

Michael and Daniel Cauchi, a father-and-son team who run

“While we have seen increased footfall in other localities, the bulk of retail business has moved away from Valletta.

We believe there is more work to be done to make the capital city a shopping mecca.”

Michael’s restaurant in the building known as L’Hostel De Verdelin – the premises of the former Civil Service Sports Club – cater to a variety of patrons.

“The gastronomic world has changed completely from when my father had his first restaurant, so we try to incorporate traditional with modern cuisine by improving the presentation but without losing quality. We see different types of diners in Valletta, varying from lunch to dinner. For lunch, we usually get people coming in from different offices for a quick bite or a comfortable place to host visiting guests. We also get several requests from destination management companies for hosting tourist groups that opt for set menus. When it comes to dinner, our clients are generally looking for a fuller meal and a dining experience – especially tourists. This has been quite consistent for the past three years,” says Daniel, the younger half of the team.

“From our point of view, dining in Valletta is more appreciated by foreigners than Maltese clients. However, in recent times, the events held in the capital and the renovation of Strait Street have started to make it more of a destination for the locals as well.

Dean Falzon runs StrEat in Strait Street, a whisky bar and bistro where patrons enjoy a selection of more than 180 whiskies from all over the world. “In the past few years, Valletta has seen a complete turnaround when it comes to nightlife. There are many more places to go for entertainment; be it theatre or movie, fine dining, or meeting friends for drinks. We cater to the customer who is looking for a relaxed and pleasant dining experience. Our bistro is both cosy and inviting, with original architecture and a beautiful ambience to dine in.”

Like Daniel Cauchi, Falzon believes that the cultural and social regeneration of Valletta will not only

bestow upon the city a more permanent appeal beyond the novelty factor which draws in tourists but also fuel the food and beverage industry.

“Valletta has beautiful squares and open areas scattered around the city, most notably Pjazza San Ġorġ in front of the Grandmaster’s Palace. These areas are ideal for performance events, art exhibitions and festivals. These kinds of events would bring new life and increased interest to our beautiful capital city.”

One such organisation contributing to the city’s cultural pulse is the Malta Philharmonic Orchestra, whose recent ventures include the launch of the Cosmos Wind Ensemble’s CD entitled Premieres, in collaboration with V18. Cosmos – which consists of five Malta-based musicians in a dynamic chamber music ensemble – recently performed in Australia as part of the CHOGM Culture Outreach Programme and will be performing in Frankfurt next, as part of the ECB European Culture Days.

At the launch of the CD, Sigmund Mifsud, the executive chairman of Malta Philharmonic Orchestra, said that Maltese businesses and the cultural sector thrived off each other’s success.

The MPO will also be participating in the prestigious and highlyanticipated Valletta International Baroque Festival, which runs from January 16 to 30 and places the city’s baroque identity at centre stage through a celebration of music from the period when it was built, produced and managed by the Manoel Theatre.

“The annual Valletta International Baroque Festival has now taken its place among the major baroque festivals on the global cultural map, attracting a new type of visitor to our city and reviving activity during the leanest of months,” says Michael Mangion, the Manoel Theatre’s PR and marketing manager. “ Manoel Theatre’s response to the growth of Valletta as an entertainment location, as opposed to it just being a daytime working city, is to continue to provide and develop its eclectic programme of performances covering most genres of music, dance and drama.”

Last year, Remax Malta’s chief operating officer Jeffrey Buttigieg commented that the continuing embellishment of Valletta would allow it to develop into an ideal real estate investment opportunity, with a huge boom to take place over the next 18 months and beyond. Twelve months later, with Valletta properties selling like hot cakes, time has proved him right.

“I would say that there is a larger increase in demand for Valletta than there has been for a while. Valletta is seeing a natural surge in popularity which can be attributable to the increase in commercial activity in the capital over the last three to five years,” he says. “There is still a limited supply of property, thus keeping the properties in high demand, which will only increase as new properties are renovated. It’s a solid investment with no hint or risk of a bubble. We suspect that 2018 will be the year for Valletta, when it will officially hold the title of EU Capital of Culture.”

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INTERVIEW

Business generators e Malta Employers’ Association is marking its 50th year. Director general JOSEPH FARRUGIA speaks about what lies in its future, pensions, SMEs and the industry in general In its reaction to the Budget, the MEA said that one of the challenges facing Malta was to deal with the pressures of rapid growth, such as labour shortages, environmental constraints and a stress on infrastructure. How should this be done?

Economic growth is a desirable objective in itself, provided that it is sustainable and that the economy’s resources are managed in a manner to maintain the momentum. Otherwise it will be sowing the seeds of its own failure.

Due to our limited resources, we experience constraints all around us, for example traffic congestion partially caused by more people going out to work; the limitations of our carrying capacity to expand the tourism industry; overcrowded beaches in summer; the ongoing debate to strike a balance between construction activities and environmental priorities; lack of human resources in many sectors, which is

leading to immigration. The best approach to deal with such circumstances is, first of all, to manage economic growth through prioritisation and selective pruning.

A strategic use of our resources will channel them into higher value added areas and the economy in general should be managed in a manner as to adopt a more targeted approach to generating wealth. This could well mean that some activities may have to be downsized because they would not be as beneficial to the economy as others.

The MEA feels that incentives for SMEs should be more defined and accessible and that the public sector needs to be more efficient and streamlined to assist the private sector in continuing to generate economic expansion. What does it have in mind?

There is a global impetus to give SMEs more importance as genera-

tors of business, employment and innovative ideas. We have been campaigning for easier access to finance for SMEs and, more importantly, for the implementation of the SME test, which would imply that before any legislation comes into force it will have to be assessed on the extent of its impact on SMEs. Another idea that we are proposing is that of establishing a business clinic to advise and assist SMEs in various aspects of running their business.

We have always campaigned for a more streamlined and efficient public sector. The fact that public sector

employment is once again on the increase is of concern to us, especially during a time of scarce labour. It is worrying that thousands of persons employed in the private sector aspire for a job in the public sector because such jobs are perceived to be less strenuous and challenging.

During a period when the private sector is generating productive jobs, this is creating artificial wage inflation and increasing the need for foreign labour in Malta. I stress that, while acknowledging that more human resources are required in the public sector in some areas, the

“e public sector should not be a source of unfair competition with the private sector in the labour market”

public sector should not be a source of unfair competition with the private sector in the labour market.

The head of the ETC said that the average Maltese working week is four hours shorter today than it used to be 15 years ago. What does this mean to employers?

The main cause of this phenomenon is an increase in atypical employment. As more women join the labour market there is an increased demand for more flexible working practices, including part-time work and reduced working hours. To an extent, this is a necessary transformation of our labour market.

There is also an increased number of people who opt to remain in employment working on reduced hours even though they have reached retirement age.

In general, one can also observe a changed attitude towards overtime, with more employees giving

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more value to leisure and family time compared to extra income from overtime. For employers, this highlights the need to have a more flexible work organisation that is able to match both employees’ and organisational imperatives.

consequences of social exclusion.

This means that we cannot expect the second generation of migrants who settle in Malta to necessarily work in menial, unskilled jobs because they have been deprived of the opportunity for social mobility.

The country’s two largest unions – the GWU and the UĦM – appear to be closer to each other. Is this good or bad news to employers?

Definitely good news. MEA has, on numerous occasions, expressed its concern over the threat to industrial relations stability created by union conflict. I sincerely hope that the current leadership of the main unions work to remove any differences between them and to work to common objectives in the interest of their members and companies’ sustainability. This is one of the reasons why the MEA has been pressing for legislative reforms to establish clear procedures to determine union recognition. It is hoped that the discussions at the Employment Relations Board bear fruit in this regard.

I must also add that the association has an excellent relationship with the unions, based on mutual trust and respect.

Some say government employment is on the rise and that a good part of it is due to the fact that the party in government wants to repay those that helped it return to power or to ‘buy’ some people’s silence.

What is the MEA’s verdict?

I think it is safe to say that not all jobs created in the public sector over the past few years have been productive jobs.

Is there place for irregular immigrants in the Maltese labour market?

The internationalisation of our labour market is an inevitable process. More Maltese will be working abroad and concurrently more foreigners will be working in Malta.

If one takes the irregular migrants as a specific segment of foreign workers, we find that many of them are working in occupations which are not popular with Maltese citizens (among the reasons for this is a preference for jobs in the public sector). This, of course, presents many challenges to our society.

The MEA fully supports the implementation of labour laws to ensure that these persons work in a dignified environment and have the same entitlements as other employees.

Secondly, I must add that, in the medium and long term, Malta should avoid the marginalisation of groups due to their ethnicity. The recent experience of other countries teaches us lessons about the horrible

Pension reform remains a big debate. Some decisions have been taken. Were they the decisions that needed to be taken? How would the MEA handle the situation?

Pension reform is an ongoing process, dictated by the exigencies of changing demographics and fiscal sustainability. The MEA has always been at the forefront of pension reform talks. We note with satisfaction the government has steered away from the introduction of mandatory second pillar pensions.

More attractive incentives are required for a better take-up of third pillar financial products and we are insisting that there should be no distinction between pensionable age and retirement age. The recent report is a continuation of previous reform proposals and the main positive feature is that successive administrations have preferred gradual changes to avoid radical shocks in future.

Would you say the private sector is driving the economy?

The private sector was always the driver of the economy. One could add in spite of the government.

Are the country’s education institutions, notably the University and Mcast, churning out the skills and professions this country needs now and in the future?

The degree of success of matching the skills generated by our educational institutions and the needs

of the Industrial Tribunal is not respecting the Constitution.

“e MEA proposed an employability index to guide students select courses with better career prospects, bearing in mind that skill demand prediction can never be an exact science” of employers will depend on the rate of economic transformation, the anticipation of such change and the level of dialogue between the stakeholders. Skills mismatches arise because the supply of skills may not keep up with demand or due to structural deficiencies that channel human resources into areas of study which are not in high demand to the exclusion of others.

This is why the MEA had proposed the setting up of an employability index as a means of guiding students to select courses with better career prospects, bearing in mind that skill demand prediction can never be an exact science.

Another facet to this question is the quality of the qualifications, which presents another reason for better collaboration between industry and education in course design and deeper involvement by industry experts in lecturing, for example.

There have been a number of attempts to update/upgrade labour

laws. Where do we stand? Where do we need to go?

These attempts are ongoing. The MEA had presented a comprehensive set of proposals for changes in labour legislation which have been discussed at MCESD and the Employment Relations Board. The next stage is that, through the social dialogue process, these proposals and others that may be submitted by the trade unions will be evaluated and eventually legislated.

I am certain that consensus could be reached on a number of issues and a convergence of opinion on others. The current debate on union recognition at the Employment Relations Board has been productive and mature.

I am certain that other aspects of employment legislation, such as the structure and function of the Industrial Tribunal, will be equally interesting and productive. This will become an important issue, especially given that a recent court decision concluded that the operation

The MEA is celebrating its 50th anniversary since it was founded.

What lies in the future?

The MEA has become the foremost employer organisation in Malta, having a constantly expanding membership base – covering all economic sectors and in terms of size of organisations – that today generates more than 35 per cent of jobs in our economy.

We will certainly continue with our primary mission, which is to represent our members and to advise them on employment and social policy matters.

As the organisation that is specialised in social dialogue, we will remain continuously involved in promoting and maintaining harmonious industrial relations in Malta, which is one of the cornerstones of our country’s competitiveness. As our membership has changed in line with the economy’s economic transformation over the past 50 years, the MEA will also adapt its services to meet the contemporary and future requirements of our members.

We have just successfully completed a rebranding exercise of the association, we have upgraded our premises to reflect a more professional service and we are effectively communicating employers’ perspectives to the public on various economic matters through our television programme.

This year, we have been awarded the National Enterprise Support Award, been shortlisted among the three top projects across the European Union for the European Enterprise Promotion Awards in the category of Promoting the Entrepreneurial Spirit, and also obtained a special mention in the overall categories Improving the Business Environment in recognition of our project known as Providing professional management support to SMEs and educating the public on employment issues.

I am positive that these achievements will further enhance the MEA’s status and propel it to an even brighter future.

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e Business OBSERVER |

December 3, 2015

CASE STUDY

Paving a personal pensions pathway PHOTO: DARRIN ZAMMIT LUPI

Maintaining your current lifestyle after you retire may well prove impossible on just a government pension. So, as MSV Life’s Stuart Fairbairn tells JO CARUANA, this is where a private plan could make all the difference to your future The pension conversation is a hot topic at the moment. Some people believe that the government’s pension pot (which all workers pay into) should be enough to sustain us as we get older, while others believe that there is no way to sustain our ageing population without each person taking responsibility for their own income after retirement.

For many of the people in the latter category, MSV Life has already become a central part of their savings plan since the launch of their private pension products earlier this year – a first for Malta.

“MSV Life has always been a leader when it comes to local innovation and we pushed hard for this product range to be brought to market because we believe it is imperative that people should be able to take control of their own future pension,” says Stuart Fairbairn, MSV Life’s chief officer for business development. “It is unlikely that a future state pension will provide enough for a comfortable living, so a viable alternative was needed – fast.”

Somewhat controversially, Mr Fairbairn believes Malta’s govern-

ment pensions are currently too generous. “In the UK, the maximum state pension paid out is €8,561 per annum or €164 per week, while, in Malta, it is €11,895 per annum or €229 per week – an incredible 38 per cent higher. Research shows that that simply isn’t sustainable,” he says.

This is because people are generally living longer, so pensions need to be paid for longer, while fewer people are being born and, thus, less are going into the workforce to support those pensioners.

“Government pensions are not funded – there is no separate money pot behind them – so what goes in today, comes out today,” Mr Fairbairn continues. “And this will not change in the future. As a result, with less people working and less money going into the pot, and more people retiring and hoping to take money out, we have ended up with a truly unsustainable system.”

It was this lack of sustainability that prompted MSV Life to develop two personal pensions products for Malta. “People need to have sufficient other sources of wealth to compensate for the fact

“Government pensions will only just cover the basics in the future – people will need to supplement that with their own savings.”

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CASE STUDY

that government pensions will only just cover the basics of the amounts people need as they get older. It is often understood that you won’t be richer once you retire but it is also hoped you won’t be poorer – so having a plan is vital, and the younger you can get started on it, the better,” Mr Fairbairn says.

So, MSV Life became the first – and, so far, the only – company to create private pension products for the local market. “We worked with the government on the legislation to enable this to happen. The steps forward have been very positive and there are already incentives in place: those who sign up to a pension plan before the end of 2015 will be given a tax credit of 15% on contributions up to €2,000, and €1,000 in 2016 (although we hope the government will increase this to €2,000 again).

“I do imagine that these incentives will rise in the years to come – as they have in the UK and other countries – but they are a very good start and are already encouraging many people to sign up.

After all, there are no other plans that will give you an immediate pay back from the government in this way,” he says.

The idea behind MSV Life’s plans is that they offer you flexibility and choice. There are two distinct products available, depending on exactly what each individual would like to achieve.

The MSV ‘With Profits’ Fund is a low-to-medium risk investment that provides potential growth while protecting you from shortterm market volatility. Any money you invest will grow in line with MSV’s declared bonuses. It is a slow-but-steady route for people who want to know their savings are guaranteed and growing at a steady rate.

The MSV ‘Unit Linked’ Funds, meanwhile, is higher risk because you can choose to invest from a range of 40 external investment funds, giving it the potential for higher growth depending on how each fund fares. “This product gives you potential for medium- to

Air Malta new customer satisfaction survey

“Government pensions will only just cover the basics in the future – people will need to supplement that with their own savings.”

PHOTO: CHRIS SANT FOUNRIER

long-term capital growth, while also allowing you to create a portfolio to match your investment objectives,” explains Mr Fairbairn.

The plans have also been designed to encourage as many people as possible to start saving for their future, from as little as €40 per month.

“We also understand that, especially when it comes to young people, they may feel nervous about committing to something for such a long time as a set rate per month. So, there is plenty of flexibility linked to the plans, easily allowing them to change the amount that they want to pay in per month or even to take a break altogether for a while.”

One of the few non-flexible elements, though, is the fact that the money cannot be withdrawn before you turn 50.

“This is money that is purely set aside for your retirement and that’s a good thing,” Mr Fairbairn continues. “Regardless of how much you invest, the savings accrued will be there waiting for you; you can start withdrawing them at 50 or wait until a maximum of 75.

And once you choose to do so, you can take a tax-free lump sum of up to 30 per cent while the rest will be paid out per month to supplement your government pension.”

Other concerns have also been taken into consideration. For instance, there are guarantees in place if you die before you reach retirement age – at which point the plan pays out 101% of the value to your estate. “After retirement you can then decide what happens to your savings if you pass away; they could be used to supplement your spouse’s pension or paid into your estate,” he explains.

“Now, our main aim is to encourage people – including young people in their 20s and 30s – to really start thinking about their future pensions. Of course, it can seem daunting to think about it, and pension age may feel so far away right now, but it is vital to take responsibility for how you will live in your retirement. It’s important to create a safe and comfortable future for yourself and that starts by saving today,” Mr Fairbairn concludes.

Air Malta has surveyed over 10,000 customers to gauge their satisfaction levels in a new, simple, yet effective method, to understand realtime customer satisfaction levels. In these surveys the national airline is achieving one of the highest scores across various industries.

Air Malta is one of the first organisations in Malta to have introduced the Net Promoter Score (NPS). In contrast to traditional survey measures, NPS makes it possible to rectify issues fast rather than get to know about them months later. By then customers might have switched to a competitor.

This score also helps to understand where priorities for development and investment should be and how to achieve loyalty and positive recommendations. Customers are viewed as key ambassadors for the organisation.

Customers are surveyed online on one single question.

They are asked to rate on a standard 0-10 scale the likelihood of recommending the company to a friend or col-

“e objective is to convert into promoters those customers who were less than happy”

league. Rating customers are classified in three categories: detractors, passives or promoters. The calculated NPS is an index deducting detractors from promoters (two highest scores) and can therefore range from +100 (all promoters) to -100 (all detractors).

Air Malta started measuring NPS this spring and now achieves an average score of +44, considered to be in the top range across any industry including airlines.

More than 10,000 customers have given their feedback and during the last week of October the airline achieved a score of +54, which is an exceptionally good NPS. The airline intends to continue measuring this score to benchmark its performance.

This score is also shared with employees and is part of the efforts to make customer focus an integral part of the company culture.

NPS is easy to understand and has become very popular within organisations. If a company has more detractors than promoters the score will be negative and vice-versa. NPS provides companies with a simple and straightforward metric that can be used as motivation for employees to improve and to provide the best customer experience possible.

Its ultimate objective is to convert customers who were less than happy or unimpressed into promoters who will put the word out and allow for increased revenues and profits.

This initiative is the foundation of a series of projects that Air Malta launches in order to enhance the customer experience and to show that the airline ‘Cares More’.

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December 3, 2015

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

Editorial Vanessa Macdonald, Assistant editor, Times of Malta.

EDITORIAL

Publishers Allied Newspapers Ltd. Content House Group Ltd.

Time to build fiscal buffers As the economy keeps doing well, with one report after another projecting even greater consolidation and progress, the Central Bank governor, Josef Bonnici, struck the right note when he called for fiscal buffers to act as a cushion against any future need.

Quite correctly, he felt now was the right time to think ahead and make provision for bad times. His call echoes what the World Bank said in its global economic prospects report in January this year when it argued that, faced with weaker export prospects, an impending rise in global interest rates and fragile financial market sentiment, developing countries needed to rebuild fiscal buffers to support economic activity in case of a growth slowdown.

To many developing countries, including Malta, lower oil prices have provided a timely opportunity for doing so. With so much progress being registered in bringing down the government’s financial deficit and with growth prospects remaining encouraging, Malta has an even greater opportunity than some other countries in rebuilding its fiscal buffers.

The overall economic improvement appears to be having a multiplier effect across the board in the shape of greater confidence. If it is kept up, this can in turn help generate greater economic activity all round.

Of course, the country would have to see to problems as they come up along the way and the government would need to correct its direction in specific areas of the island’s democratic process. Its serious shortcomings in accountability and transparency have cast dark shadows over its form of governance.

But beyond this, the country’s economic direction is paying good dividends. The Central Bank chief said the economy was vibrant and showed remarkable resilience in the face of the unstable economic

environment elsewhere. It has now been doing this for quite some time and, besides, the government is managing to correct the deficit and reducing the national debt.

Prof. Bonnici welcomed the government’s drive to exploit the growth potential of the health and education sectors and transform these into “exportable services”. There may indeed be great scope in developing the education sector as a viable new segment of the economy, although there is no need to sacrifice any precious virgin land for any educational project in the process.

Far too many sins have been committed against the environment already and there is still time for the government to correct the one it is making at Żonqor Point.

As to the health sector, it may be a bit more difficult to build up this new area of economic development because the country would need to have the skilled manpower resources to feed it.

In the process of promoting new economic activity, care has to be taken not to overestimate expectations as the groundwork for the development of such activity is not created overnight. Now is the time to reassess the state of the island’s infrastructure to see how it can be strengthened to meet present and future needs.

The traffic problem ranks as one of the biggest ills the country is facing today. Its sheer size appears so daunting that many appear to have resigned to the fact that the government has no answer to it. Yet, unless it is solved or, at least, eased, the country will continue to waste a great deal of time and energy.

So this ought to take priority in the list of infrastructural matters that the government would need to address in the process of making it easier for the economy to keep growing and encourage the creation and development of new economic sectors.

Allied

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BUSINESS OPINION

Compensation to NBM shareholders

Anthony Curmi The article titled ‘National Bank shareholders to insist government must pay compensation’ (November 19) correctly said I was asked by the NBM shareholders to prepare a valuation on their behalf. However, it is odd that it refers to an “internal memo” saying that I “could not understand why the government was still trying to wriggle out of paying compensation”. I would have thought it more proper for any quotations to have been taken from an affidavit (that included eight appendices) which I swore in court in January 2015.

Moreover, prominence was given in the article to a report submitted in court last June on behalf of the government by three experts (Piero Ugolini, Richard Nun and Larry Chilton) in which every effort was made to discredit what I maintained in my first affidavit.

It is to be noted that, in response to the three experts’ report, I filed another sworn affidavit in court on October 27 but no reference was made in the

article to even one of the salient points I raised therein. These included, inter alia, my contention that certain statements made in the report were not in line with what Dr Ugolini had stated in court in April 2007.

I was cross-examined in court by the Attorney General on November 3 and another session is scheduled for December 16.

At this stage, however, I wish to comment on certain statements made in the article because these need clarification. Moreover, there is a need for me to give some brief background information which I trust will enable readers to have a clearer understanding of the situation.

The shareholders are not “claiming €325 million in compensation”, as alleged in the article. That is the amount I proposed to the court, in my January 2015 affidavit, as being, in my view, fair compensation based on a number of factors.

The proposed compensation amount took into account factors that were ignored by the council of administration and its auditors in assessing the net asset value

(NAV) of the NBM as at December 31, 1973.

My calculations were based on what I considered to be the NBM’s realistic NAV as at December 31, 1973 (that is, not a negative one of -Lm253,000, as alleged at the time).

Due regard was taken of the government’s equity injection in Bank of Valletta when it started operating on dissolution of the council of administration in March 1974 as against what I considered to have been a realistic NAV of the NBM (the value attributable to NBM’s shareholders as at December 31, 1973).

Bringing into the equation the value derived by the government from its shareholding in BOV over the years (and not considering such undisclosed amounts as the profit it made on the sale of shares to the Banco di Sicilia in 1974) and accounting for the inflation factor over the years, I came to the conclusion that €325 million would constitute fair and reasonable compensation to the NBM shareholders.

I point out that this amount was based on a BOV quoted share

price of €2.10 ruling last January and excluded all dividends received by the government during 2015 and the bonus share issue due to be made in January 2016 from profits for the year ending September 30, 2015. Moreover, the immovable property valuation quoted in your article was not yet available.

Thus, for all the above reasons, there is good reason to argue that the above-mentioned proposed compensation amount has risen since my calculations made at the beginning of 2015. This point was made in my affidavit submitted in court in October.

I trust that this gives a clearer picture to readers of the basis of the compensation figure proposed by me in my first affidavit, not, I repeat, in an “internal memo”.

Finally, it is as well for me to quote (this is my free translation from the Maltese text) what the Constitutional Court of Civil Appeal decreed in its judgment on October 14, 2014: “As indicated above by this court, there exists in the court’s records sufficient proof on which

“e court decision puts paid to the defendants’, and their experts’, contention that the NBM was a failed (insolvent) bank”

the court of first instance could reasonably conclude that the NBM had a value.

“Therefore, notwithstanding the negative impression that may have been given by Deloitte’s report after the bank had been taken over, there is proof given by witnesses possessing a good knowledge not only of the banking sector but also persons directly involved in the management of the bank that could reasonably have led the court of first instance to the conclusion that, notwithstanding the problem of temporary liquidity that the bank was facing at the time, there was value that passed from the hands of the shareholders and for which they were not compensated and that such value was used to the advantage of both the council of administration as well as, eventually, by the Bank of Valletta.”

As stated in the article of November 19, I hold that the abovementioned court decision puts paid to the defendants’, and their experts’, contention that the NBM was a failed (insolvent) bank. This quite apart from the arguments put forward by me in both the sworn affidavits submitted in court.

As the final decision regarding the amount of compensation rests with the court and is still sub judice, I have no intention of indulging in any further correspondence in the media pending the court judgment.

Anthony Curmi is a former bank executive and a financial consultant.

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APPOINTMENTS

Microsoft’s new manager Panayiotis Ioannou has been appointed new country manager for Microsoft Malta. Mr Ioannou, succeeds Adrianna Zammit who was appointed on the senior executive leadership team within Microsoft CEE Multicountry region; a hub managing 24 countries in central Eastern Europe.

Mr Ioannou joined Microsoft in 2006 as a partner sales lead for Cyprus and Malta and in 2008, moved to the post of small and midmarket solutions and pPartners (SMS&P) lead for Cyprus driving the overall channel engagement for Microsoft’s partner community.

Before joining Microsoft, Mr Ioannou, who holds a Masters degree in mechanical engineering from The Catholic University of America in Washington, was based in Maryland where he held a series of project engineering

PANAYIOTIS IOANNOU

and project management roles.

Commenting about his new role, Mr Ioannou said “I have been following Microsoft’s work in Malta since Microsoft Malta established itself in 2003. I see

Malta as a natural step forward in my career and an opportunity to lead an amazing team in great technological times.”

“Technology and innovation have gained a lot of importance in Malta in recent years notably, and together with the team, we are going to make sure that Microsoft keeps offering its remarkable portfolio of services and solutions to support the evolution on the island and to further enhance our connection with our customers and partners,” added Mr Ioannou.

One of Malta’s most important challenges for the coming years is going to be a redefinition of its competitiveness and this is going to need a thorough exercise to identify in which sectors Malta should invest in the coming years to ensure more economic growth.

GM for Malta Sotheby’s International Realty Malta-based real estate agency Malta Sotheby’s International Realty (SIR) has appointed Miguel Bonello as general manager. Mr Bonello is responsible for overseeing the operation of Malta SIR and shall be responsible for driving the agency forward, developing avenues for new business, widening the client network and supporting Sotheby’s affiliates worldwide.

This year’s achievements have culminated in the expansion of Malta SIR’s current outlet presence on Tower Road in Sliema with the opening of adjacent offices – a physical demonstration of increased success. A recruitment drive is also in progress.

Mr Bonello joined the Malta Sotheby’s International Realty team in 2014 as real estate associate. He possesses over 20 years of experience in luxury product business development and sales. He has also worked in the insurance field for numerous years, gaining sales and customer service expertise.

MALTA SIR GENERAL MANAGER MIGUEL BONELLO (LEFT) TOGETHER WITH MALTA SIR DIRECTOR AND JOINT OWNER MICHAEL J. ZAMMIT

Oulala scores with Leicester City Global daily fantasy football platform Oulala.com has become the official fantasy football partner of Premier League football club, Leicester City.

This is the first partnership established by Oulala with a Premier League football club.

The deal will involve a bespoke Leicester City version of the Oulala fantasy football game, which has already been created, being made available to fans.

The new game will give Leicester City fans the opportunity to challenge fellow supporters in head-to-head fantasy battles, with the aim of winning money with

their successful teams. This unique partnership will also provide Oulala with extensive exposure within Leicester City’s stadium, as well as upon LCFC.com, the club’s digital channels and within match day programmes.

Launched by Malta-based entrepreneurs Valery Bollier and Benjamin Carlotti in 2013, Oulala unveiled the monetised version of its platform in the UK last month.

BOV appoints new CEO Mario Mallia has been appointed Bank of Valletta’s chief executive officer with effect from January 1.

He succeeds Charles Borg who will retire from the bank on December 31. Mr Mallia, 54, joined Bank of Valletta in September 1979.

He has been a member of the bank’s management board since 2005, during which time he has occupied the posts of chief finance officer, chief risk officer and chief operations officer.

He is chairman of the Asset & Liability Management Committee (ALCO) of the bank, and a director on the boards of MSV Life plc and of Valletta Fund Services Ltd. He received his education at De La Salle

College, Cottonera, and holds a Master of Arts degree from the University of Malta. He is a certified public accountant by profession, and is a fellow of the Malta Institute of Accountants.

He is married to Rosette, and has two children, Daniela and Bernard.

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e Business OBSERVER |

December 3, 2015

STOCK MARKET REVIEW

Importance of interim directors statements

Edward Rizzo The large majority of companies that have their equity listed on the Malta Stock Exchange have a December financial year-end. In fact, only four companies have a different year-end, namely, Simonds Farsons Cisk plc which is in January, Bank of Valletta plc and MaltaPost plc both in September and Loqus Holdings plc in June.

In view of the fact that we are only a few weeks away from the December financial year-end, many companies were obliged to publish their interim directors statement in accordance with Chapter 5 of the Listing Rules by the third week of November at the latest.

Listing Rules 5.86 to 5.88 stipulate that companies must issue such statements twice a year. The first statement must be issued not later than six weeks prior to the half-year end and another announcement must be published not later than six weeks before the end of their financial year. The rationale behind this requirement is to provide the market with an update of the company’s financial position and other important developments since the last publication of their semi-annual financial statements.

When the requirement for these interim directors statements first came into force in 2007, the initial announcements made by all listed on the Malta Stock Exchange were very brief and provided little value to shareholders and other market participants.

Most companies simply resorted to a confirmation as required in the Listing Rules that “no material events and/or transactions have

“It is surely not coincidental that during the third week of November, trading activity jumped to a 12-week high with just over €1.7 million worth of shares changing hands” taken place that would have an impact on the financial performance of the company”.

However, it has become very evident over more recent years that the majority of companies have understood the importance of regular and detailed communications to the market.

In fact, in the announcements published recently, many companies provided a detailed description of market developments and how this is impacting their financial performance.

By way of example, in the banking sector both HSBC Bank Malta plc and Lombard Bank Malta plc claimed that the increases in costs (mainly regulatory) are negatively

impacting their financial performance. HSBC reported that during the second half of the financial year it registered a modest decline in profit before tax compared to the same period in 2014. During the first half of 2015, HSBC had already reported an 8.3 per cent decline in pre-tax profits to €36.3 million.

Lombard Bank Malta plc claimed that it continued to experience pressure on its after-tax profits during the first three quarters of 2015 due to higher costs as well as increased impairment allowances.

On the other hand, various other companies reported an improved financial performance and outlook. In particular, Medserv

plc revised upwards its projections for the second half of the year on the back of better-thanexpected financial results for the third quarter of 2015. Malta International Airport plc confirmed that, following the 7.4 per cent increase in passenger traffic during the first 10 months of the year, it will be surpassing its July forecast of 4.5 million passenger movements (representing an increase of 4.6per cent over 2014).

Another company that reported a positive outlook was RS2 Software plc as it explained that demand for its services remained significant (and in line with that of 2014 as well as the first six months of 2015) not only in Europe, Latin America and

Asia Pacific, but now also from other regions such as the Middle East and Africa. RS2 confirmed that it maintains a very strong pipeline of potential business.

Meanwhile, one company in particular, Grand Harbour Marina plc, adopts a different approach and provides quarterly key financial items. In its interim directors statement in May, GHM provides its Q1 figures for the income statement namely revenue, cost of sales, operating costs, EBITDA, finance costs and depreciation and pre-tax profits.

Meanwhile in the November interim directors statement, GHM publishes its financials for the third quarter of the year.

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STOCK MARKET REVIEW

The investing community as well as financial market participants need regular and detailed announcements from the various companies to remain abreast of industry-wide developments. This also drives trading activity thus enhancing liquidity on the secondary market. It is surely not coincidental that during the third week of November, trading activity jumped to a 12-week high with just over €1.7 million worth of shares changing hands. This surged to €3.9 million last week (the highest weekly volume in several years) also in part due to the commencement of trading in the equity of Malta Properties Company plc.

The heightened activity over the past two weeks and the differing movements across various equities confirms once again that the market has become more responsive to company announcements.

As an example, the share prices of the retail banks declined over recent weeks due to the weaker outlook across the sector. On the other hand, the equities of other companies reporting improved performances advanced, some of which quite remarkably, also on very high trading activity.

The increased efficiency across the market is indeed a positive development indicating a more knowledgeable investing community.

The obligation of the semi-annual publication of the interim directors statements helped enhance the newsflow between one financial reporting period to the next.

A company with a December year-end must publish its halfyear results by August and its annual financial statements by the end of April at the latest. Previously, a period of eight to nine months without any reporting obligation was far too long. The interim directors statements have helped bridge this gap which was an important development for shareholders and financial analysts.

Unfortunately, the European Commission amended the Transparency Directive and removed the obligation for companies to issue interim statements. EU member states were required to implement this change by November 2015 and as such, the Listing Rules of the Malta Financial Services Authority are likely

Rizzo, Farrugia & Co. (Stockbrokers) Ltd (RFC) is a member of the Malta Stock Exchange and licensed by the Malta Financial Services Authority. This report has been prepared in accordance with legal requirements. It has not been disclosed to the company/s herein mentioned before its publication. It is based on public information only and is published solely for informational purposes and is not to be construed as a solicitation or an offer to buy or sell any securities or related financial instruments. The author and other relevant persons may not trade in the securities to which this report relates (other than executing unsolicited client orders) until such time as the recipients of this report have had a reasonable opportunity to act thereon. RFC, its directors, the author of this report, other employees or RFC on behalf of its clients have holdings in the securities herein mentioned and may at any time make purchases and/or sales in them as principal or agent, and may also have other business relationships with the company/s. Stock markets are volatile and subject to fluctuations which cannot be reasonably foreseen. Past performance is not necessarily indicative of future results.

Neither RFC nor any of its directors or employees accept any liability for any loss or damage arising out of the use of all or any part thereof and no representation or warranty is provided in respect of the reliability of the information contained in this report. © 2015 Rizzo, Farrugia & Co. (Stockbrokers) Ltd. All rights reserved.

to be amended shortly to remove this obligation.

In the UK, the Financial Conduct Authority amended their Listing Rules to reflect this directive a year ago. It is interesting to note that in the feedback statement to the consultation document, some companies indicated that they will continue to publish such interim statements or quarterly financials on a voluntary basis.

In my view, it would be best practice for all local companies to also adopt this stance if they wish to maintain a high level of awareness among the investing community and improve the liquidity in the secondary market.

Additionally, those companies that have their equity listed on the Malta Stock Exchange should not only replicate the information in the interim directors statements

but also publish financial metrics and other key performance indicators in such announcements.

This would provide more valuable information to the investing community and market participants including financial analysts who require this information to monitor a company’s performance on a regular basis.

Moreover, the financial analysis summary that has become a

“Companies that have their equity listed on the Malta Stock Exchange should not only replicate the information in the interim directors statements but also publish financial metrics and other key performance indicators in such announcements”

requirement for certain bond issuers has proved to be a valuable document since it provides the market with an update on the financial projections of a company from one year to the next. This enables investors to monitor whether the company is managing to achieve its financial objectives or whether it is underperforming.

As I have been advocating in the past, equity issuers should also realise the importance of publishing financial forecasts and replicating the documents being published by some bond issuers. A more informed market will help drive trading activity in a company’s shares. This should be an objective for all companies that have their equity listed on the Malta Stock Exchange and would be a major step forward in the development of our stockmarket.

e Business OBSERVER

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December 3, 2015

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BUSINESS UPDATE

Malta’s Institute of Directors to hold EU Corporate Governance as Key to Malta’s Competitiveness Workshop on December 11 The Malta Institute of Directors (IoD) will be holding a workshop for stakeholders on December 11 at the MFSA. The workshop will be conducted by Roger Barker, chair of the ecoDa/AIG working group, director of corporate governance, IoD UK. Louis de Gabriele will give the local dimension, while ecoDa policy committee member Edwin Ward will act as the workshop’s moderator.

James J. Satariano, chairman of the IoD said: “This workshop highlights the specific risks faced by directors in individual European jurisdictions and provides a rich variety of cross-border and national case

studies. Malta is an integral part of Europe, our financial services jurisdiction is a respected onshore EU jurisdiction, and our role as an OECD White-List country is significantly dependent on the quality of our corporate governance standards.”

To register for the workshop which is accredited with two hours structured CPE contact Secretarial Services by e-mail on ssl@go.net.mt or by telephone on 2133 6507.

IoD members and MIM members benefit from a reduced fee of €45 while non-members may attend at €55.

DR. ROGER BARKER

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e Business OBSERVER |

December 3, 2015

BUSINESS UPDATE

ird wave of globalisation to reshape trade: HSBC report The world is on the cusp of a third wave of globalisation which will see global merchandise trade quadruple by 2050 and trade in services accelerate, thanks to increased economic integration and new technology, according to Trade Winds, a new report from Oxford Economics on behalf of HSBC. The report highlights several opportunities available to Europe in this third wave of globalisation, including expansion of the European Union, reduced barriers to trade through the implementation of the Digital Single Market in the EU and agreement of further mega-regional trade agreements. Opportunities for businesses highlighted by the report include: ■ The rise of the collaborating specialist: Our analysis points to a future for specialists who

collaborate with other best-in-class organisations to compete.

■ Small players compete globally: Big won’t always be best, or even necessary to interact internationally.

■ Operating models based on leasing rather than purchasing: New models for revenue income will fundamentally shift how companies operate, invest for the future and grow.

■ Data is king: Using data to track the world today, particularly evolving consumer demands, and use it to forecast for the future will build new intelligent systems and ways of operating.

The full report is available via https://globalconnections.hsbc.com/united-kingdom/en/articles/tradewinds-shaping-future-international-business

MIA launches CPEonline – Your Time!

KENNETH FARRUGIA, FINANCEMALTA CHAIRMAN

The Malta Institute of Accountants (MIA) has recently launched ‘CPEonline - Your Time!’, an initiative that offers accounts a host of quality online training and development services, accessible on a 24/7 basis for accountants who are sitting for their annual minimum 25 hours of Continuous Professional Education (CPE).

“We are offering a wide array of quality resources, which cover all manner of accounts, finance and business themes” said MIA president Franco Azzopardi. “These can be accessed by our members, from the comfort of their home, at their own convenience.”

As the official voice for accountants, the MIA, with close to 2,700 members, provides guidance, technical support and continued education to hundreds of accounting, audit and finance professionals. It is also instrumental in carrying the voice of the accountant to high-level platforms in the country and beyond . MIA is also forging a stronger relationship with FinanceMalta - Mr Azzopardi and FM chairman Mr Kenneth Farrugia are eyeing closer cooperation between the two organisations in the coming months.

FRANCO AZZOPARDI, MIA PRESIDENT