The Business Observer Newspaper - 20th November Issue

INTERVIEW

Issue 14

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November 20, 2014

Distributed with Times of Malta

SECURITY PERSONNEL GATHER AT THE SITE OF A BOMB BLAST AT A POLICE CHECKPOINT IN AL MARJ, EAST OF BENGHAZI, LAST FRIDAY. PHOTO: REUTERS

e National Audit Office uncovers numerous shortcomings in government administration but it has no executive powers to enforce its recommendations. But Auditor General Anthony Mifsud said the reports are not ignored. see pages 10 and 11 >

INDUSTRY FOCUS e Budget took several hours to read and weighed in at over 150 pages. ere were numerous business measures – some radical, some just tweaks. We asked stakeholders for their comments. see pages 8 and 9 >

Libya crisis causing lay-off pressure – Chamber Vanessa Macdonald Companies affected by the Libya crisis will probably have to start laying off staff by the end of the year, the chairman of the Libyan Action Committee Frank Farrugia warned.

The committee, which falls under the Malta Chamber of Commerce, Enterprise and Industry, has been monitoring the impact of the crisis which broke out in Libya last July. It has been lobbying for the government to help on three fronts – the settlement of government dues; the deferment of payments to government; and visas for Libyan businessmen – with success in one, delays in another and an impasse on the third.

The government, aware of the squeeze on company cashflow, had promised to speed up payments for its own contracts, refunds and so on. Mr Farrugia said the committee had not “received any complaints” on this point so the assumption was that this was being done.

However, when it came to the deferment of payments to government – mostly for VAT – little has actually been achieved. The problem is that the government obviously wants to make sure that only those genuinely affected will get this concession and so the 200 companies identified by Malta Enterprise as having Libyan connections are being screened on a case-by-case basis to ensure that

“e 200 companies identified by Malta Enterprise as having Libyan connections are being screened on a case-by-case basis”

CASE STUDY

they were actively involved there and substantially affected.

Mr Farrugia said the committee estimates that no more than 50-60 companies fall into this category – but it is taking far too long for the screening to be carried out so that the deferments can start.

“We appreciate that not everyone should get this concession; it would bankrupt the country if that happened. Of course we must focus on the genuine and urgent cases,” he said.

“But some companies have not been contacted yet and the pressure on them is building up. Very few have managed to keep operating – and even those that did are Continued on Page 3

PTL International could probably have grown without forming part of Hili Ventures but drawing on its international experience means not having to learn the hard way, PTL International CEO Kenneth Spiteri explained. see pages 12 and 13 >

STOCK MARKET REPORT e decline in Tesco’s performance has exposed an all-too human side to investor Warren Buffett, who is considered an infallible guru by many. Edward Rizzo believes that there are lessons to be learned. see pages 17 and 18 >

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NEWS

THE ISSUE OF VISAS TO LIBYAN BUSINESSMEN IS CURRENTLY AT A STANDSTILL.

Libya business woes Continued from Page 1 affected by the closure of the Libyan banking system. Others brought their staff back to Malta and, although some were redeployed, many are either paying them to stay at home or giving them half-pay.

“That cannot continue indefinitely. By the end of the year, we will start to see lay-offs unless their cash flow situation is eased,” he warned.

The committee had also offered a way to facilitate the issue of visas to Libyan businessmen – which is currently at a standstill. At one stage, before the current conflict, 700 applications a week were being received – most of them for businessmen.

The situation is complicated by the fact that the Maltese embassy is not operating, and since fingerprints are needed with the application, the only way for the non-EU nationals to apply for a Schengen visa is to go in person to the nearest embassy in Tunis or Cairo. But even this is only permitted once they have sought approval to apply from the Central Visa Unit. And approval to apply

does not in any way guarantee that the visa will be issued.

The chamber proposed that it would act as a ‘single point of contact’ for applications from its members for their business contacts.

Aware of the implications of issuing Schengen visas, it is proposing a temporary visa only valid for 90 days and only valid for travel to Malta.

“We are also suggesting that the visas should only be issued to the business contact – and not to their spouse or dependents. We want this to be a system that facilitates what little business there remains, and find a way to curb any possible abuse,” Mr Farrugia said.

“By the end of the year, we will start to see lay-offs unless their cash flow situation is eased”

There have been media allegations of people offering to get visas for around €1,000, which certainly does not help when it comes to genuine cases.

The committee is proposing that companies would put up a bank guarantee that they would forfeit if the visa were in any way abused.

The visas would only be issued against a return flight ticket and each application would be given a unique number to make them harder to fake.

“At one point, meetings were being held in Tunis, but even that is becoming harder. And it certainly does not make sense to encourage Maltese to travel to Libya for meetings, exposing them to unnecessary danger,” he said.

“However, weeks have passed and we have not heard anything from the government at all. We appeal to them again: do not shut the door for legitimate businessmen. Let us salvage as much business as we can.”

Questions sent to the Home Affairs Ministry weeks ago by the Business Observer have not yet been answered.

HSBC Bank Malta underprovisioned by €30 million HSBC Bank Malta was found to be underprovisioned by €30 million during the recent asset quality review carried out by the European Central Bank.

Bank of Valletta had been underprovisioned by €16 million – mostly in corporate loans, but when announcing its financial results for the year, chairman John Cassar White had also pointed out that it was overprovisioned in other segments of its loan book. He had also noted that, even though there was a difference between the so-called “prudential provisioning” of the AQR and accounting provisions, the bank had moved the €16 million into non-distributable reserves.

The underprovisions cannot be offset against the overprovisions, according to the AQR rules.

It is not apparent from the publicly-available information whether HSBC Bank Malta had any similar overprovisions in other areas of its loan book.

Sources said that, while BOV were able to comment on the issue as they were announcing their financial results, HSBC would not be able to do so because this information would have to be announced at market level – especially since it could have an impact on the dividend payout.

“BOV has already commented on the difference between the AQR and accounting standards but it is very important for the public to understand the implication of this,” the sources said.

“The methodological approach of the AQR is mechanical and quite inflexible for the simple reason that the intention was to have something which could be compared across all the 130 banks reviewed.

So the baseline was set at a common level for all banks, without taking into account the idiosyncracies of different markets.

“Accounting standards take a more realistic approach. We are mostly talking here about corporate loans and a bank would look at the running of a business based on its own ‘know-your-customer’ approach and the strong relationship banking model for which Maltese banking is renowned.”

After adjusting for the impact of the AQR, HSBC Bank Malta’s 2013 CRR/CRD IV transitional basis common equity tier 1 (CET1) capital ratio was 9.02 per cent, which exceeds the ECB’s threshold of eight per cent.

BOV started the comprehensive assessment with a CET1 ratio of 11.2 per cent. This fell to 10.71 per cent as a result of the AQR assessment.

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NEWS

New property valuation procedure ‘will save time’ The removal of the government’s property valuation system has a number of benefits, ranging from certainty for buyers to the ability to start improvements immediately.

Until now, the Inland Revenue Department would send its architect to value properties being sold and the stamp duty would be based on this amount. If there were a significant difference between the amount declared as the agreed price and the IRD price, then it was assumed that the vendor was underdeclaring and a fine could be imposed.

Buyers will no longer need to get a separate valuation for the bank and for stamp duty, which will also save time and resources.

The procedure was meant to deter underdeclaration but in practice, it had far more detrimental effects. A year ago, the Malta Developers’ Association suggested that it should be scrapped – and last week, Finance Minister Edward Scicluna did just that.

The buyer now has the option of appointing his or her own architect to value the property, or not to appoint one at all, in which case the IRD would carry out a check to en-

sure that the declared price falls within a certain bracket.

Under the new system, the IRD architect would only be sent in exceptional cases when a very low price raised suspicion of attempted tax evasion. The head of the MDA, Sandro Chetcuti, said that in practice, the IRD architect (there are only a handful of them) was rarely able to check all the properties sold.

Even so, in many cases, the valuation was not done till months after the sale was concluded.

“This meant that the purchaser could not make any improvements to the property until after the valuation was done – as otherwise the IRD architect would assess the property on the basis of the improvements that the buyer would have paid for after the sale! Now, at least, improvements can start straight away.

“The system also did not give any clarity – even for people who had no intention of evading tax. For example, if you managed to get a real bargain, perhaps because someone was under pressure to sell quickly, you would declare the price you really paid knowing that the commercial value was higher,” he explained.

“You knew that you would have to pay the stamp duty on the higher value, even though you actually paid less. But you would have no way to know what the IRD architect would consider the commercial value and risked getting fined if you inadvertently underdeclared.

“Valuing a property takes many parameters into account” There is nothing which irritates people more than the injustice of being fined when they had no intention of evading tax. People who did evade would never complain about being caught. It is only the innocent who would get upset!”

The new system relies even more heavily on the competence of the

THE ARCHITECT WILL TAKE ALL FACTORS INTO CONSIDERATION.

architect and Mr Chetcuti said that they should know their own limitations: “Valuing a property takes many parameters into account and it would be wise for architects to decline this job unless they are competent as it could have serious implications for their client.”

The Federation of Estate Agents agrees that the new system will minimise the chance of an unpleasant surprise for the client before or after the contract.

Will the new system be flexible enough to take into account all the context of a property, from location and size, to finishing and views, however?

“There is no real system other than a buyer will have the right to

get his own architect to value as was done previously. The architect will take all factors into consideration, location, finishing, size etc.,” federation president Ian Casolani said.

The next step would be to create some sort of index or database which would serve as a guide to property values. This was recommended by the BICC in the past and while the MDA was originally in favour of the concept, Mr Chetcuti said the association said it would only work if it were just used as a benchmark.

Mr Casolani was also cautious about the index.

“That is something different and more complex which is being looked into,” he said.

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November 20, 2014

NEWS ??

When wealth comes on wings The search is on for Maltese ready to invest in entrepreneurs – but the potential ‘business angels’ are being warned that they must understand what they are letting themselves in for.

Business angels put up money to help companies in the early stages of development – a stage beyond start-ups, when the company is already set up and well on its way to a prototype, with clients lined up.

The investors usually take equity in the company but eventually sell out, hopefully getting a return on their investment. But early stage investment is high risk and you have to go into it with your eyes wide open and a clear strategy, the founder and CEO of the Go Beyond network Brigitte Baumann explained.

She had a number of tips for potential business angels, the first being that they should aim to create a portfolio of different investments, and that because they were such high risk, only around 10 per cent of their wealth should be dedicated to these companies.

Business Angels tend to shun majority shareholding, as they are not after a controlling interest, opting instead for around 20 to 30 per cent of the equity, at least at the beginning. One reason for this is that the intention for most business angels is to exit after a few years and to reinvest in something else – which also explains why technological companies are preferred: they are easier to scale up and sell.

Service companies would need 7 to10 years to build up and are not as tempting as an acquisition.

The normal statistics on business angel investing are daunting: in four out of 10 cases, they expect to lose all their money, and in four to break even or make a small return. This means that the remaining two companies have to give a fivefold return for the portfolio to remain static.

“This is why it is so important to choose wisely,” Ms Baumann said.

“Being a business angel is a bit like diving. You should not just jump into the water. You should be prepared and always have a dive-buddy that you can rely on” “We meet 100 companies and will only choose five.”

She had three tips for business angels: ask about the other financing; think through to your exit strategy; and do due diligence on Go Beyond.

Ms Baumann had tried to set up the Malta Business Angel Network some years ago and failed but she is now back with Go Beyond, which she set up in 2008. Its back office is in Malta and the team, with Jean Paul “JP” Barthet as operations

manager since summer 2013, it is based at Take Off, the incubation centre at the university.

Go Beyond pools investors to get companies the money they need, usually a few million euro – anything beyond that would usually be more suitable for professional investment funds. Anything less, and you are looking at a crowdfunding scenario.

“There is a lot in common with crowdfunding but in our case we know and meet the entrepre-

neurs and we negotiate deals,” she explained.

Each business angel would ideally build up a number of different investments over two to three years, so they can start with as little as €10,000 to €15,000 a year.

“It is a fallacy that only very wealthy people can become business angels,” she stressed.

“The optimum would be to have around 10 investments in your portfolio. But don’t commit all your spare money to them. Keep

around half your money because you may want to invest more in the ones that do well – and you may want to get involved in other investment rounds.”

Ms Baumann is passionate about business angels – check out her TED speaker on the subject in Malta a few years ago – but although the concept is growing fast, there is much more that could be done.

“In 2003, there were maybe 25,000 business angels around the world. Now there are probably closer to 100,000, with €3 billion invested through them. But there should be 5 million. And Malta could have hundreds! There are more than enough people who have enough capital to be able to do this.”

It is not for the faint-hearted.

Normally, only 20 per cent of business angels actually make money, although Ms Baumann claims that Go Beyond has a track record of 80 per cent, thanks to the intense networking and mentoring approach.

She has managed to enlist the first few Maltese business angels and received applications from four companies, and has already organised a training workshop which included the screening of the monthly virtual event where the companies make their pitch to the business angels.

Go Beyond makes its money through membership and training.

So far it has 200 business angels – a third of whom are women – who are financing around 35 companies to the tune of €8 million. Half the companies are in Switzerland, with a quarter in the EU and the rest spread between the US and Asia.

Apart from the individual angels, it also helps family offices and corporates seeking investment targets.

“Being a business angel is a bit like diving. You should not just jump into the water. You should be prepared and always have a dive-buddy that you can rely on.

That is what we offer,” she said.

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November 20, 2014

INDUSTRY FOCUS ?? – BUDGET

When wishes come true Budget 2015 introduced a lot of measures that stakeholders have been clamouring for over the past year or more. We asked some of those stakeholders to remind us why they wanted these changes and what else has struck them.

Measure: A skill card will be introduced for the construction industry, to be administered through MCAST and the ETC. Stakeholder: Charles Buhagiar, executive chairman of the BICC. To date most of the skills within the construction industry are unregulated. Hence if, for example, you need a decorator, you do not ask for his certificate but in most cases utilise the services of a person who has been recommended or one where you have seen examples of past work.

This situation is not tenable since it gives no assurance that the person required to carry out a particular task has the knowledge, expertise and experience to carry out the task successfully. BICC in collaboration with MCAST and ETC, therefore, proposed the introduction of skill cards to address this situation.

The bearer of the skill card will be certified as being competent to carry out certain tasks. The skill card will eliminate irresponsible persons within the industry who present themselves as capable of carrying out certain jobs when in fact they do not know how.

This initiative will also control the present unfair competition imposed by unregistered foreign workers to local skilled workers.

Measure: The eco-contribution will be phased out as white goods are migrated to the Waste Electrical and Electronic Equipment Directive.

Stakeholder: Abigail Mamo, CEO of the GRTU GRTU has been lobbying incessantly for the removal of this tax and, therefore, it greatly welcomed the commitment given in Budget 2015. GRTU considers this to be a first important step to obtain a level playing field for all products currently falling under this tax. GRTU will be monitoring

see announced in the Budget. Valletta shops owned by government have a lease that currently is very limited and gives them low entitlement. The previous scheme attracted little interest and therefore GRTU, through its proposal, sought to address such shortcomings.

The ċens gives the titleholder collateral upon which he can take loans from commercial banks in order to improve the premises, grow his business and employ more staff, to mention but a few aspects. GRTU is already involved in discussions and will endeavour to make the scheme attractive and successful.

rather than take it back to his own yard.

This measure is meant to address this situation, ensuring that contractors plan their work in such a manner as to minimise the time required to retain their equipment on public land and thus minimising the inconvenience caused to the public.

IT IS CLEARLY BENEFICIAL FOR CRUISE LINERS TO STAY OVERNIGHT.

developments very closely and has already started speaking to the relevant ministries to ensure work on the issue starts immediately and that the GRTU is involved every step of the way.

Measure: Cruise ships will be able to open onboard casinos if they stay in Malta overnight.

Stakeholder: Stephen Xuereb, CEO of Valletta Cruise Port We first proposed this four years ago. It is clearly beneficial for cruise liners to stay overnight. Apart from getting the revenue from the casino itself, they can also sell night excursions, which is another source of income.

Because Valletta is so close to the port, they do not sell as many excursions as they do in other destinations, so having something new to offer will encourage them to add Malta to their itineraries. Also, overnight stays would encourage passengers to consider eating out in Valletta itself or at the Valletta Waterfront, as it would make a great change from eating onboard.

It is also very good to waive the tax on the casino licence if the cruise ships also stay in Gozo as this will

double the economic impact of their stay in Malta.

The only thing is that the measure has come too late to help bookings in 2015 but it could start to have an impact by 2016.

Measure: A new scheme will come up with the option of better leases for shops in Valletta which occupy government-owned premises.

Stakeholder: Abigail Mamo, CEO of the GRTU This is another measure proposed

by GRTU which we were pleased to

Measure: Tower cranes parked on roads will pay between €10 and €15 every day.

Stakeholder: Charles Buhagiar, executive chairman, BICC This measure is meant to streamline payments which to date are collected by local councils from contractors who park their equipment for a long time in public areas, effectively hindering both pedestrian as well as vehicular traffic.

The rates applicable to date are very low as a consequence of which it is sometimes better for the contractor to leave his equipment parked on a public space

Measure: The regulation of real estate agents will be one of the proposals in a White Paper on the property sector.

Stakeholder: Chris Grech, chairman, Dhalia Group The extension of exemptions for first-time buyers, as well as the tax exemption on division of property between co-owners, is a clear indication of the government’s commitment to the revival of the property industry.

Announcement of the regulation of the property sector is also a breath of fresh air. However, I do not understand why a White Paper is being proposed for the regulation of the real estate industry. Formal discussions between the regulatory bodies and the Federation of Estate Agents should suffice to conclude rules, regulations and the right policies. A White Paper will only lengthen this process, and is totally unnecessary.

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INDUSTRY FOCUS - BUDGET

Measure: A number of schemes are being introduced to wean people off benefits and encourage them to find a job.

Stakeholder: Clyde Caruana, chairman, Employment and Training Corporation

THE BUDGET HAD QUITE A FEW POSITIVE THINGS FOR GOZO.

“e services that will be made available to businesses in the field of internationalisation will experience a quantum leap because, for the first time, they will draw on the joint forces of the Chamber and Malta Enterprise while being driven by people in business.”

Replacement of the capital gains tax with a final withholding tax, in practice reducing it from 12 per cent to between five and 10 per cent will also be of benefit to a number of property traders. However, there is a flaw which will need to be rectified in the final legal notice.

A substantial amount of traders who invested over seven or eight years ago, who are today selling at a loss, especially after years of paying bank interest, will still have to pay tax and are not covered by any exemption. I believe this is an issue that has been overlooked or not yet clarified.

Measure: Employment measures for Gozo.

Stakeholder: Michael Grech, president, Gozo Business Chamber The budget had quite a few positive things for Gozo. The new law courts and the medical school will definitely be two important projects for Gozo in the coming year.

We are also confident that the outcome of the studies for both the permanent link and the fixed wing air strip will be positive and that government will have these important projects started without any further delay.

Apart from these projects, we are also satisfied to see that out of the various schemes that the Chamber together with the Gozo Tourism Association, have put forward to Minister Evarist Bartolo, three have already been taken on board within this budget. These are: 1. An employer in Gozo who engages new employees, or who switches part time employment to full time employment, will benefit from a partial refund of social security contributions. This will amount to €1,000 for each additional full time employee.

2. Employees in the Gozitan tourism industry will be offered training sessions between the period of November and March, while the employer will receive a payment of €30 per day.

3. A grant amounting to €100 per month per student will be given to employers who engage students of ITS. The above are just three suggestions which have already been taken on board. We are sure that more of the suggestions that we have put forward are also being considered once the ministry has evaluated them and found the way to implement them.

Measure: Trade Malta will be set up in partnership with the Malta Chamber.

Stakeholder: David Curmi, president, Malta Chamber of Commerce, Enterprise and Industry The Malta Chamber welcomes the setting up of Trade Malta, an initiative that it is centrally involved in. The Malta Chamber believes that Trade Malta, as detailed in the Economic Vision for Malta 2014-2020 recommendation 32, will be of invaluable assistance to business enterprises, in increasing their export potential successfully.

The services that will be made available to businesses in the field of internationalisation will experience a quantum leap because, for the first time, they will draw on the joint forces of the Chamber and Malta Enterprise while being driven by people in business.

Hence, the Malta Chamber reiterates that this initiative, which is already materialising, is words in action of how the government can tap into the expertise of the private sector, in meaningful partnerships for the good of the involved sectors. The setting up of this joint venture signals a show of confidence in the role of the private sector and the Malta Chamber by government.

The Malta Chamber will endeavour, as it always has, to make such initiatives work for the economic growth and good of the country.

Over the past months, the Employment and Training Corporation underwent a period of internal restructuring to become more efficient in its operation and services. The corporation plays an important role in the implementation of the National Employment Policy and now finds itself at the centre of several initiatives as presented in the budget for 2015.

As from next year the corporation will have a new electronic platform. These new digital tools will create a virtual labour market to help facilitate the interaction between employers and job seekers.

In turn, this will also completely modernise the ETC registration system. Job matching will no longer be based solely on what the individual wants but ETC will also take into consideration the skills and abilities of the applicants.

A NUMBER OF SCHEMES ARE BEING INTRODUCED TO WEAN PEOPLE OFF BENEFITS AND ENCOURAGE THEM TO FIND A JOB.

Another important Budget 2015 initiative is the in-work benefit, which will continue to strengthen the concept of making work pay. This benefit will be given to those families in which both parents work, have low income (between €10,000 and €20,400) and have children up to 23 years old .

The working mother within this family unit would need to declare at least €3,000 revenue per year and these families will be entitled to a maximum of €1,000 per year per child. Single parents in employment with an income of between €6,600 and €15,000 will be entitled to a maximum of €1,200 per year per child.

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INTERVIEW ??

Ensuring better value for money e National Audit Office is celebrating its 200th anniversary and it is planning to culminate celebrations with a visit by President Marie-Louise Coleiro Preca. ANTHONY MIFSUD spoke to VANESSA MACDONALD about the office’s work and challenges.

Over the past decades, the role of the National Audit Office has changed. What is the impact in practice?

Through the Auditor General and National Audit Office Act of 1997, the department of audit was transformed to the National Audit Office. It no longer forms part of the civil service and no longer reports to the finance minister – but to Parliament.

We increased our autonomy and have been free to recruit our own staff without going to the Public Service Commission or the PAHR office at the Office of the Prime Minsiter.

Having said that, in the past 50 years since Malta become independent, when Malta’s budget was £30 million and now when it is €3.4 billion, we kept the same number of staff – around 55, including support staff.

You were appointed in 2008 and your term of office was renewed for a further five years under this administration. What are the implications?

It puts a greater pressure on our office as one administration appointed us and the next confirmed us. This show of trust in the office has to be reciprocated by all our staff doing their utmost.

Sometimes we are criticised that we always mention the shortcomings of government departments.

Obviously, that is our work. There are a lot of positive factors throughout the public service, but it is not our job to report them.

There are quite a number of senior officers in government departments who really work hard and for very long hours. We must put everything into perspective.

All in all, since independence 50 years ago, this country has been well served by its public administration, in spite of all the shortcomings we mention.

This is a delicate period for the office. For almost 25 years, we had the same administration. Now it is a different administration and next month we will issue the National Audit Report for 2013, and that covers a three-month period of one administration and the rest for the present one.

Will people scrutinise them, looking for a bias in favour or against a particular administration?

Things do not change for us. We maintain our objectivity and always have to report factually. We are sometimes also given some delicate assignments, which are technically quite complex... ...Like the fuel procurement one?

Yes. We tend to approach university academic staff to help us with

technical details. Usually people are forthcoming when we ask for assistance. Until now, we have not had any problems with people shying away from our assignments.

There is a lot of political weight to your reports. They are a real mirror of how competent an administration is at governing...

I would not say they reflect how competent a government is; I would say rather how competent departments and the public administration is.

After all, we do not report on policy, we report on administrative measures and shortcomings. We leave policy to politicians and do not interfere.

Those who read your reports are often shocked by the outcomes. It seems incredible that so

many things are not checked, or are ignored.

Public administration changed drastically with membership of the EU 10 years ago. Top people – permanent secretaries and directors general – are so loaded with day-today work and EU work that they sometimes do not have time to supervise their subordinates. But it is important that we do not allow these shortcomings to become permanent issues.

You mentioned subordinates.

But how many problems are down to human error or negligence?

And how many are due to lack of structures or frameworks?

We do find departments who might have shortages of staff or ones that do not have the appropriate competencies. On the other hand, we also know that junior

people sometimes need more training and direction. And those who develop policies should explain them clearly to people further down the line. We usually find that there is a lack of communication.

Sometimes there is considerable staff movement and departments suffer from a lack of institutional memory. They rely on the memory of one particular individual who has been there for a number of years.

However, there are cases of carelessness. An area which bothers us is the high level of arrears of revenue.

This obviously leads to sums of money which are non-collectible.

That is an area that the ministry of finance follows closely. If departments realise that they are wasting their time and energy trying to get these arrears, they have to seek

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INTERVIEW

approval from the finance ministry to write those amounts off.

VAT and Inland Revenue are now doing a lot to identify inflated estimates, uncollectible amounts, perhaps because a company is closed and the owners dead, etc.

The decision on whether to write them off or not would have to come from you, according to Finance Minister Edward Scicluna.

I have to clarify this. According to financial regulations, that decision would have to be taken by the Ministry of Finance. Remember this office can only recommend. We do not have any executive powers at all.

At the end of 2012, we had €1.6 billion due.

What do you recommend the Finance Ministry should do?

The ministry is taking positive action. It has decided to have a Commissioner for Revenue who would oversee Inland Revenue, VAT and customs – the three major revenue-earning departments of government. They would then have to decide what can be written off and what has to remain.

When you look back, have you seen any improvements?

Yes. Many departments take up our recommendations, but there are others that are reluctant – perhaps the word is hesitant – on what approach to take.

When our auditors go to a department, they go after the event has taken place and have the time to look at things carefully.

Sometimes, when you are in a department, you have to take a decision there and then as it is cumbersome to go by the regulations if you are trying to get the work done on time.

I can understand because I was a permanent secretary myself.

Having said that, thanks to EU membership, public procurement legislation has improved and e-procurement has been introduced, but in other areas I think we need to update legislation enacted in the 1960s.

What is the solution? Are other audit offices around the world given executive powers?

The British model is that of a National Audit Office but the continental model is a Court of Audit, where the department concerned is ‘charged’ before the president of the court, who acts like a judge to decide whether there was a shortcoming and can impose fines.

Wouldn’t you like to do that?

Perhaps for those departments that ignore your request for feedback or ignore your recommendations? Or where you do a follow-up audit and do not find any improvement?

In our case, the action usually has to be taken by the Public Accounts Committee, which can sanction a department.

Also, you must remember that in Courts of Audit, most audit staff hold legal professions, which is not the case for audit offices, such as ours.

Let us take roadworks. There are a number of projects which were over-budget and over-time.

Has anything improved?

There are areas where there was improvement but this depends a lot on specific factors.

You mentioned roadworks.

Sometimes the contractors are really busy with other projects and cannot cope or reach their targets.

Please do not expect me to cry for them. They should not have taken on the contract in the first place, if that were the case...

You are right in your argument.

But sometimes it is difficult; these contractors have problems with their workforce, with turnover of employees, for example.

It is no use finding out that a project is over-budget and overtime when it is finished – whether a road or the Parliament building.

Isn’t it better to flag the problems when there is still time to do something about it?

Traditionally, national audit offices used to be reluctant to preaudit but nowadays we are moving towards a scenario where we

ROADWORK PROJECTS MAY NOT REACH DEADLINES DUE TO VARIOUS FACTORS, INCLUDING EMPLOYEE TURNOVER.

“Many departments take up our recommendations, but there are others that are reluctant – perhaps the word is hesitant – on what approach to take” audit as the work is being done.

However, you have to be careful not to disrupt the work itself if the audit has to be done while the work is under way.

How many times is action instigated by a ministry or department, asking for your help?

Ministries and departments usually go to the Internal Audit and Investigations Directorate, which forms part of OPM. The difference is that they do not publish their reports but present them to the permanent secretary concerned who then has to decide with the minister how to improve any shortcomings identified. We do sometimes receive requests to carry out a particular audit but these usually come from the PAC. I can also carry out investigations on my own initiative.

We are very careful as we need to lead by example. Our budget is around €2.5 million, increasing slightly over time.

Most audit offices internationally calculate that they save their governments roughly 10 times as much as they spend. So our work can save government around €25 million.

Can I be simplistic? If we gave you €5 million, would you save the government €50 million?

You cannot say that doubling the budget would bring about the same return, as international studies also indicate. We compare ourselves mainly to the UK NAO, which has 800 staff and also carry out intensive work on performance and valuefor-money and obviously have one of the best operating PACs, which meets twice a week.

We have close contacts with them and with the European Court of Audit through meetings twice a year.

Where would you like the office to be by the time your five years are up?

I hope that the departments realise that the NAO is their helper.

Some see us as their overseers or outside intruders while others realise that they have shortcomings and they accept our recommendations and immediately start to implement them. Where we receive a department’s backing, things usually improve in a relatively short time.

In that way, when their turn comes before the PAC, they can give

real evidence that they have started improving certain things and that they have controlled wastage.

The problem with procurement is that there are so many different types of contract and so many projects. Some of them are one-off – like a hospital – so there would not be the expertise locally.

It is a major headache for most administrations.

It does not help when a preferred bidder for the casino contract is announced and is then reviewed. Things that change half way through a race tend to raise a lot of question marks over procurement...

Departments should avoid those kinds of situations but that is sometimes easier said than done.

Circumstances might crop up. A large project tender would take some time to be issued, adjudicated and awarded. However, departments must have a clearer vision.

There are periods – as we had last year – when a new administration is keen to start implementing its electoral programme. If things are hurried up, then there could be some shortcomings.

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CASE??

STUDY

An Apple a day. . . keeps investors happy Here is something that you probably did not know about SAD, the Polish company recently acquired

by PTL International: sad, in Polish, means orchard. The name of the company is a play on its role as an Apple reseller.

But there is more that might have been missed about SAD, including the fact that, apart from being a retailer, the company started out as a solutions-provider for the audio visual industry.

This is perhaps why PTL sees it as having such a strategic role to play in its growth, which started with the acquisition by Hili Ventures of Philip Toledo Ltd in 2012.

“Hili Ventures had had an interest in IT for quite some time and always had its eye on something that was sizeable in the technology area. First it formed part of a joint venture with other family businesses in Smart Technologies in 2008. I joined soon after it bought Philip Toledo and we created a strategy to grow the company quite substantially through acquisition and organic growth,” CEO Kenneth Spiteri said.

Mr Spiteri’s background is banking, financial services and telecommunications but he is passionate about IT. “I am definitely not a technical person. But I love what IT can do for people and business. I am not interested in the technicalities of how it is done but what it does, whether processing, efficiency or environment. My experience in

LAUNCH OF APPLE IPHONE 6 AT ISPOT.

telecoms was a great help as this is also true of this sector,” he laughed.

Before getting on with any acquisitions, some key decisions were taken. One was to spread operations across not only geographies but also business margins, and another was to target a mix of technologies.

“We think that strategically this will help us to weather cycles, whether they are technologydriven or economic,” he explained.

PTL International wanted to limit itself to three areas: retail, business enterprise solutions and e-commerce.

The first area led to their €40 million acquisition of SAD, which sells Apple through its branded iSpot chain.

“Expanding at an international level is not easy. You learn through experience and lose a lot of money before you learn.

But Hili Ventures has already been through that learning curve and all that experience comes in handy”

PTL already did business enterprise solutions. As a value-added reseller, it took existing technology like Cisco, Apple and Microsoft then develops them to provide solutions for industry, a sector or a client.

SAD’s non-retail side also boosted this and could lead to contracts all over the world.

“These guys have a very unique skill set in this field. We have the ability to set up a production house or a TV station, with all the hardware, software, editing and so on.”

SAD created a solution for the Polish parliament which is paperless, one of the first parliaments to do so. It developed the application

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CASE STUDY

so everything from legislation to committees could be done through iPads.

It also developed an application for Orange Telecoms to basically stream video and TV on the mobile.

“The moment you launch something like this, it touches 10 million customers. This is very mission critical: that is the level we are playing at. Anything below that line is not of interest.

“Hili Ventures is active in the Baltics, Hungary, Romania, Greece and Dubai. So we can offer these solutions in different places... we would just need to tweak them to fit another market but the knowledge is already there. We have already taken solutions developed here and are testing them in Poland.”

Apco was the natural acquisition for the third pillar of the strategy: e-commerce. The company was well established and 80 per cent of their clients were international.

“We also found that from a platform architecture perspective, it could easily be enhanced through innovation as it is highly automated. There is a good technological story there. There are hundreds or thousands of payment gateways but many have reached their ‘end-of-life’,” he said about the €8.8 million acquisition.

The acquisitions brought PTL’s original 100 person headcount up to 400, including 230 in Poland, and the number is still growing.

PTL Holdings plc is issuing €36 million in unsecured bonds due to mature in 2024 carrying a coupon of 5.1 per cent per annum. The proceeds of the bond issue will be used to repay bank loans and other short-term borrowings taken out to finance these recent acquisitions.

Mr Spiteri acknowledged that things did not usually happen in that order.

“It was basically a matter of timing. The opportunities came along and we had the capability to access to finance through the banks, which we did. But we are now issuing the bond. Normally, a bond would be issued for forthcoming projects or to refinance an existing loan because of existing operations. This is the refinancing of the acquisition money,” he said.

The future growth projected in the financial model is dependent on these recent acquisitions and this needs to be kept in mind when comparing with past corporate results. Mr Spiteri explained that the trends were thoroughly analysed.

“We also modelled what would have happened had these entities been in our portfolio a year before,” he added.

Looking ahead, Mr Spiteri is pragmatic about the fact that there will always be challenges to growth.

“If you look at what happened over the past years over different cycles, it is all about disruptive technologies which make current technology obsolete – and it happens very fast. You can see this with Nokia and with a lot of other techie companies.

“The SAD retail chain being linked with the Apple brand means we clearly have a technology risk. If Apple does not

“e moment you launch something like this, it touches 10 million customers. is is very mission critical: that is the level we are playing at.

Anything below that line is not of interest”

PTL INTERNATIONAL CEO KENNETH SPITERI

continue to be innovative and come up with new products, then obviously, this will have an impact as our fortune or misfortune will be linked to theirs.

“But this is only part of the story. First of all, SAD through iSpot is the largest Apple retailer in Poland and is also considered to be a top performer on a European scale. Poland has a low penetration rate from an Apple perspective so there is room for growth.

“We also own the leases to the 21 shops located in the best malls – we only have one high street shop, which we opened in July. So the retail option can be changed if there are problems with Apple,” he said.

Apco is also still in its infancy on a global scale. In Europe in 2013, €360 billion were transacted online and Poland is still playing catch-up. Out of 40 million people, there are only 22 million connections and only 2.2 million people purchase online. So the potential growth for a payment gateway is huge.”

Would it have been possible if not part of Hili Ventures? Mr Spiteri paused very briefly.

“Anything is possible. But it is all about the mentality. Clearly being part of Hili Ventures was the key to having the ability, the know-how and the stamina to pursue such paths.

“Expanding at an international level is not easy. You learn through experience and lose a lot of money before you learn. But Hili Ventures has already been through that learning curve and all that experience comes in handy,” he said.

Are there any other acquisitions on the horizon?

“At the moment we want to consolidate so that we make sure that we take advantage of what we have. Although there is nothing on the horizon now, further growth will come through synergies and so we will eventually have to look at further acquisitions in the same three areas.”

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

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

EDITORIAL

Greater than the sum of its parts Budget 2015 ran to 139 pages. The Finance Minister took nearly four hours to read it out. There were hundreds of measures, some immediate, some planned.

And yet commentators are still trying to categorise the Budget as being good or bad, black or white, pro or anti-business.

Surely that is too simplistic?

That is not to say that there has not been an overall shift in focus: recent Budgets had their main measures aimed at the middle class and increasing their disposable income, and at facilitating job creation.

These ranged from reducing the income tax bands and utility rates to establishing a flat tax rate for rental income.

This Budget, and to an extent its predecessor, had a definite slant towards the lower income segments of the population. But it also has a plethora of other measures which are aimed at business. Some of them have been highlighted in the Business Observer’s Industry Focus (see pages 8 and 9).

These are indicative of this Budget’s approach to business, which has admittedly been overshadowed by youths who do not want to work and single mothers trapped in a poverty cycle.

There were no grand measures, rather dozens of small ones, none of which require enormous amounts of money or drastic changes to legislation. However, their impact will be positive, often removing stumbling blocks which add unnecessary frustrations. They may not on their own make a difference to investment measures affecting decisions but when taken as a whole, they are all about listening to what stakeholders want.

Perhaps the best example of this was the decision to allow casinos on board cruise ships to open in port. Doing so will be a real carrot for cruise companies who weigh up the cost of moving from port to port

against staying here overnight. The spin-offs for Malta could be huge: even if it does not attract new calls, this measure could mean existing calls become overnight stays. And adding an incentive to stay in Gozo, through waiving the licence, is another measure which will cost the government little in reality but act as an incentive for companies to schedule a second night on the islands.

The government also bit the bullet and will dismantle eco-contribution, a made-in-Malta tax, which did little to get the polluter to pay.

All it did was put local retailers at a disadvantage against online vendors and at the mercy of imports from the continent which bypassed the authorities.

We need a lot more of this. We need to look at measures that are in place, ask why they were put there and whether they were working as planned. And if not, then we need to stop dragging our feet and change them or abolish them. We cannot afford to get sentimental about laws and regulations and procedures. We cannot get too enamoured of the income from measures without also taking into account the burden they put on businesses, the drag on our competitiveness, the opportunity costs.

Newton’s third law says that for every action there is an equal and opposite reaction. There is also Merton’s law of unintended consequences. Reducing the VAT for e-books will hurt booksellers.

Creating incentives for single mothers could encourage teenagers not to get married. Shortening waiting times for operations will strangle private hospitals.

The proof of any budget will only be felt over time. Some of the measures will work as planned; others will merely transfer problems further down the line. The important thing is to approach each one with caution – and the humility to admit it when they don’t work out.

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BUSINESS OPINION

Shifting to indirect taxation

Philip von Brockdorff Tax systems are generally evaluated on the basis of a number of criteria, especially in regard to equity or the fairness of a particular tax system as well as the socalled allocative efficiency of the tax itself, that is, how the tax affects individual well-being either through the direct effect of paying the tax or the indirect effect (described as distortionary) caused by the tax on commodities or services.

In economic theory it has been observed that the allocative efficiency of direct (progressive) taxes is superior to that of indirect (regressive) taxes.

Put differently, raising taxes through a direct tax like income tax would imply a lesser burden on individuals than the same amount raised through an indirect tax like excise duty or ad valorem tax.

The reason for this is that indirect taxation increases the burden on individuals since it distorts their choices as a result of price changes. An indirect tax,

therefore, has a greater negative effect on markets than a direct taxation. From an economic (and social) welfare perspective, paying direct taxes is considered fair especially when (assuming minimal tax avoidance and evasion) income tax takes a larger percentage from the income of high-income earners than it does from low-income individuals. In any event, high income earners would still be better off (in terms of the choices they make) in a tax regime which is primarily based on income taxation.

In recent years, however, we have seen a gradual and partial shift from income to more indirect taxation, and the 2015 Budget is no different with the imposition of additional indirect taxes. The further switching from a direct to a more indirect tax regime will affect both individuals and markets but has become inevitable given the political commitment to reduce the tax rates for highincome earners.

What, you may ask, are the advantages of indirect taxation?

First, there is no theoretical certainty that allocative efficiency applies in the case of direct taxation – but I’ll put this theoretical argument aside.

Second, the administrative costs of a direct tax are higher than those of an indirect tax, since a direct tax regime may have many exemptions. In fact, from an administration cost point of view, indirect taxes are considered superior.

“In economic theory it has been observed that the allocative efficiency of direct (progressive) taxes is superior to that of indirect (regressive) taxes” Equally, from the viewpoint of efficiency (in terms of revenue), indirect taxes are better. Indirect taxes are hidden in prices and evasion is not so easy (unlike income tax, the success of which really depends on the extent of tax avoidance and evasion). With a lower cost of collection than income taxation, the gradual shift towards indirect taxation has

been easy to predict but, whereas direct taxes are regarded as superior to indirect taxes as an instrument of fiscal policy to reduce inequalities, this shift inevitably raises questions about the risk of widening the gap in inequalities (income and wealth) in Maltese society. An increase in excise duty on fuel, for instance, is paid for by both

high and low-income earners who drive their car to work and is therefore regressive. To avoid this, indirect taxes need to be levied only on luxury items but this is a very unrealistic scenario.

As things stand, indirect taxes have an edge over direct taxes especially for high-income earners (who are now benefitting from lower tax rates).

Moreover, the shift towards indirect taxation can facilitate economic growth since high-income earners will have more disposable income. Saving will also be encouraged and with saving, investment.

However, the risks of widening inequalities in Maltese society (accelerated by the gradual shift to indirect taxation) cannot be downplayed – or, worse, ignored.

Compensatory measures will need to be adopted from time to time to mitigate the regressive nature of indirect taxation.

Though one can conclude that a system of indirect taxation is better than direct taxation whenever large revenue is the target for government, to do so at the expense of equity considerations would be a recipe for deep social inequalities. It would be necessary, therefore, to strike the right balance between direct and indirect taxation as well as to evaluate from time to time the effects, especially on low-income earners, of indirect taxation.

Philip von Brockdorff is the head of the Department of Economics, University of Malta.

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STOCK MARKET ?? REVIEW

Even Warren Buffett can make mistakes Edward Rizzo Over the years I have written various articles about Warren Buffett. He is the chairman, CEO and the largest shareholder of Berkshire Hathaway and is given a lot of media attention since he is widely considered to be among the most successful investors of all times ranking consistently among the world’s wealthiest people.

Warren Buffett is normally given media prominence when he carries out some major acquisition or when one of his famous phrases is used by a journalist to explain the state of the stockmarket.

However, last month, he grabbed the business headlines for the wrong reasons as a number of companies in which he has sizeable stakes issued disappointing announcements. Within the span of a few weeks, first Tesco and then International Business Machines Corp. (IBM) and Coca-Cola Company all saw their share prices hit by weaker-than-expected earnings and other concerning revelations.

The share price of Tesco plc, the largest supermarket chain in the UK, dropped by more than 40 per cent this year in response to a series of unexpected announcements, namely, two separate profit warnings, change in management and, the most concerning of all, an overstatement in earnings forecasts by £250 million in mid-September.

The company then issued its interim results in mid-October and, two weeks later, it was revealed that Berkshire Hathaway reduced its stake in Tesco to less than three per cent of the company from their previous holding of 3.97 per cent.

BERKSHIRE HATHAWAY CEO WARREN BUFFETT AT THE TRADE SHOW DURING THE COMPANY’S ANNUAL MEETING IN OMAHA, NEBRASKA, ON MAY 3, 2014.

PHOTO: RICK WILKING/REUTERS

IBM and Coca-Cola rank among the three largest investments of Berkshire Hathaway. Warren Buffett’s company saw its value in IBM drop by nearly $1 billion in October after the company posted disappointing earnings. That same week, Coca-Cola also announced third-quarter revenue that fell short of expectations and warned of currency headwinds.

Coca-Cola had the largest negative impact on the value of Berkshire’s portfolio as the share price of the world’s largest soft-drink maker fell six per cent after an unexpected drop in third-quarter sales. CocaCola is struggling with slower international growth and mounting concerns over obesity and artificial sweeteners in the US. The drop in Coke’s share price reduced the value of Berkshire’s 9.1 per cent stake in Coke by over $1.04 billion.

Warren Buffett often advocates a strategy of a ‘buy and hold forever’.

In fact, one of his famous phrases is “only buy something that you’d be perfectly happy to hold if the market shut down for 10 years”. While this may have been successful for many of the companies he invested in over the years, the same cannot be said for the investment in Tesco.

Berkshire started buying shares in Tesco in 2006 and built up a stake of almost five per cent in the company.

In 2007, Warren Buffett again opined on acquiring businesses that operate in markets that are relatively safe from new competitors.

His explained this by comparing such companies to “strong castles with big moats” and in one of his famous annual letters to Berkshire shareholders, he wrote “a truly great business must have an enduring moat that protects excellent returns on invested capital”. However, this cannot be the case for Tesco as it has lost its ‘moat’ due to the intense competition from Aldi and Lidl. Last month, Warren Buffett departed from his conventional belief and reduced Berkshire’s stake in Tesco, incurring a sizeable loss in the

“One of Warren Buffett’s famous phrases is ‘only buy something that you’d be perfectly happy to hold if the market shut down for 10 years’”

process after calling this investment “a huge mistake”.

Although a long-term perspective is necessary when investing in equity markets and investors should, at times, ignore the fluctuations in the stock market (Warren Buffet claims that no one can accurately predict the direction of markets), the recent example of Tesco clearly shows that investors cannot be passive and need to follow company developments closely due to changing business dynamics.

Another point to remember from last month’s events at Berkshire Hathaway is that investors sometimes need to take losses and move on. Although Warren Buffet states “be fearful when others are greedy and be greedy only when others are fearful”, his sale of Tesco shares after these fell by more than 40 per cent this year alone, is Continued on page 18

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Taking an active investment approach Continued from page 17 clearly contradictory to this statement and shows that even this legendary investor in certain circumstances may need to crystallise a loss and consider other propositions. In fact, some commentators have criticised Warren Buffett’s decision to sell Tesco last month and branded this as a “second mistake” since most of the bad news seems to be priced into the equity as it trades at a cheap multiple of only 5.4 times earnings. However, the decision to sell the shares is indicative that Berkshire believes that Tesco’s business dynamics have changed since it started investing in the company in 2006.

Likewise, other companies, both locally and internationally, also pass through such changes and investors need to revisit their investment portfolio exposures regularly to verify whether all companies have continued to perform positively or whether their industry landscape has changed. As an example, the regulatory changes within the European banking industry have started to negatively impact the financial

SHOPPING TROLLEYS AT A TESCO EXPRESS IN SOUTHWEST LONDON. PHOTO: LUKE ACGREGOR/REUTERS

“ere are risks and opportunities in all equity investments” performance of some local and European banks and the dividends they distribute to shareholders.

I continue to believe in the valueinvesting approach, that is, buying for the long-term and ignoring short-term volatility which generally arises from emotional behavior.

We have undoubtedly had many

attractive opportunities over the years, both locally and internationally, to take advantage of general investor panic and acquire shares at well below their fair value. Many investors also generally base their investment decisions on past financial performance while the future is what is more important.

This could create market imperfections which other value investors can take advantage of. In the final analysis, however, investors must understand that there are risks and opportunities in all equity investments and sometimes it may take time for the share price of a company to reflect reality. This is where an active investment approach pays off as investment advisors can assist investors to take advantage of such market imperfections.

Investors therefore need to hold periodic meetings with their independent financial advisor who should be in a position to provide them with a detailed update on developments within a specific company and also guide them on their optimal asset allocation given their profile and objectives.

However, in order to enable financial advisers to explain company developments to their clients, publicly traded companies need to do their utmost to issue detailed and regular announcements and organise company briefings at least on an annual basis.

Edward Rizzo is a director at Rizzo, Farrugia & Co (Stockbrokers) Ltd.

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. © 2014 Rizzo, Farrugia & Co. (Stockbrokers) Ltd. All rights reserved

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COMMENTARY

e impact of public private partnerships in Malta Gilbert Guillaumier Over the last few decades, public private partnerships (PPP) have increasingly become pivotal instruments in the creation, development and execution of large scale infrastructure projects across the globe. Their importance has been further highlighted by the recent United Nations plan to develop an international PPP centre of excellence to foster greater collaborations with governments and higher standards of execution.

The key benefits of PPPs are now widely known. The combination of public and private sector players creates a formidable platform which opens projects up to a wider array of talent and broader access to capital.

In addition, PPPs present several opportunities which have the potential to create economies of scale through reduced project costs and overruns, accelerated delivery through shorter time delays, and an overall better resource allocation. The government can channel or transfer a desired level of risk to private operators while focusing on its administrative duties without giving up all control as generally happens in a privatisation scenario. Furthermore, projects enabled through PPPs have a

tendency of creating synergies by integrating a wider breadth of innovative ideas and ancillary services in a project’s scope.

Finally there is also an element of knowledge transfer between the stakeholders which makes for increasingly efficient and effective PPP mechanisms over time.

Malta is undergoing a process of reform across several sectors of its infrastructure patrimony. The government is increasingly intervening to seek ways to finance the development of infrastructure in order to create jobs, establish new industries and move to an innovation-based economy.

Other pressures in urban transport, public health, regeneration, renewable energy and waste treatment, among others, are consistently leading policy makers to explore the social and economic opportunities arising from the better use of the existing infrastructure. An aging infrastructure means that the effective exploitation of these assets, together with funding and procurement issues have become hugely important issues to consider for the longterm benefit of the country.

In a world of competing interests and constrained resources, Malta should aim to be bold but at the same time act smartly on how to

THE COMBINATION OF PUBLIC AND PRIVATE SECTOR PLAYERS CREATES A FORMIDABLE PLATFORM WHICH OPENS PROJECTS UP TO A WIDER ARRAY OF TALENT AND BROADER ACCESS TO CAPITAL.

“PPPs present several opportunities which have the potential to create economies of scale through reduced project costs and overruns, accelerated delivery through shorter time delays, and an overall better resource allocation” move forward. A potential solution is to bottom up our development needs by building smaller projects one step at a time. In addition, PPP projects we initiate should fit and complement our country’s overall economic strategy, which in turn needs to be consistent over the long-term to ensure we are always moving in the right direction.

At a global level, developing regions have recognised and

embraced the importance of combining public and private sector initiatives to increase growth, efficiency, sustainability and competitive advantage. In turn, we do expect this trend to gain further traction locally across a range of economic sectors. The private sector is uniquely placed in leveraging expertise and effective management in executing projects together with the government to

stimulate targeted economic sectors, and improve the quality of life of the targetted community.

Recent announcements made by the government, including the latest Budget speech, have put forward a number of ideas that could involve the private sector to varying degrees. That said, the trigger for creation of PPP projects cannot be a unilateral decision made by the government alone. The news so far, however, is good. Malta has already ventured into a number of successful PPP projects on the basis of the mutual trust that exists between the private sector and the government. These projects have shown how properly structured and thought-out PPPs can serve the interests of the country at large, as well as those of the principal stakeholders. All of this augurs well for the future.

Gilbert Guillaumier is a project finance leader at EY Malta Ltd.

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BUSINESS UPDATES

Banif Bank on board Underwear by Cristiano Ronaldo again for e President’s Solidarity Fun Run For the sixth year running Banif Bank (Malta) plc has confirmed its commitment as the main sponsor of The President’s Solidarity Fun Run. Organised by the Malta Community Chest Fund with the help of Kunsill Malti għall-Isport, in aid of L-Istrina, this year’s event will be held on Sunday November 23 and will leave at 10 am from four points – San Anton Palace, Santa Venera, Paola Square and the University.

“Once again we are expecting a great turnout,” said Dr Michael Frendo, chairman, Banif Bank (Malta) Plc. “Those who have participated in the past know that

BANIF BANK (MALTA) PLC CHAIRMAN MICHAEL FRENDO ANNOUNCING THE CONTINUED SPONSORSHIP OF THE PRESIDENT’S SOLIDARITY FUN RUN.

the Run is an experience of fun, friendship and enthusiasm. It is this spirit of humanism, at the core of Banif’s principles, that drives us to be part of this event and to mobilise our staff to help with the logistics. The bank is making its resources available and is accepting applications in its branch network, for what in effect is the biggest fund-raising event for L-Istrina. We urge the public to yet again be part of this. Each individual contribution will snowball into one of the largest donations in the year, going to the deserving causes of MCCF.” Learn more about the event at www.funrun.org.mt.

The CR7 Underwear collection has been developed in close cooperation between Cristiano Ronaldo and New York-based designer Richard Chai.

Everything from the making of the various styles, the colours and the fabric has been taken into consideration by the football player and designer.

All designs are produced in high quality by Danish JBS Textile Group, a family-owned company that has existed since 1939 and is Scandinavia’s leading underwear and socks manufacturer.

The CR7 Underwear Malta collection comes in three different lines: Fashion, Basic and Kids.

The CR7 Fashion Underwear and Socks collection is inspired

by trends, and is based on high quality. The designs are made to meet the high expectations and come in a wide range of colours and patterns to work with every look.

The CR7 Basic Underwear and Socks collection is created to ensure a perfect fit, and is based on basic colours for the man who likes a simple, modern look.

The CR7 Boys Underwear and Socks collection from Ronaldo is created with his most dedicated fans in mind. It celebrates youthful energy and the sport everyone loves with plenty of colour, great quality and a perfect fit.

Contact Dorkins/Fashions Ltd at Holland Court, Flat 1, Bisazza Street, Sliema, on 2132 3387.

FreightZone (Malta) Logistics Ltd with office in Ningbo FreightZone (Malta) Logistics Ltd, which commenced operations in 1990, has today established itself as a leading freight-forwarder in Malta with a comprehensive range of services targeted at Maltese importers and exporters. For the last three years FreightZone (Malta) Logistics Ltd has established its own office in Ningbo, China, where it undertakes a range of services, including support to the movement of cargos between China and Malta.

The managing director of FreightZone (Malta) Logistics Ltd, John Zerafa, has been a pioneer in the development of logistic services between China and Malta, and today manages the Ningbo office which provides full back up support to Maltese interests by way of OEM contract manufacturing, quality control, procurement of transport services as well as facilitation of cross trading.

The Ningbo office of FreightZone (Malta) Logistics Ltd also offers

warehousing facilities and consolidation services for airfreight, LCL and full loads, not only for Malta bound cargo but also for any required destination.

FreightZone (Malta) Logistics Ltd is a member of World Cargo Alliance Network, China Global Logistics Network and Allworld Shipping.

For more information contact Freight Zone at 14, Lighters Wharf, Marsa on 2149 7987 or send a fax to 2149 7985.

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e Business OBSERVER

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November 20, 2014

BUSINESS ??UPDATES

Cleland & Souchet open a new C&S WINE CAFÉ at MIA

Middlesea’s SME Insurance Policy Middlesea’s Insurance Policy for Small and Medium Enterprises is a tailor-made and flexible insurance business solution to protect your business risks.

Whether you are a sole trader or an established company, Middlesea will work with you to create the ideal cover for you.

The SME Insurance Policy is the ideal insurance solution for restaurants, bars, offices, retail outlets and other service providers which provide a service from their premises.

The Middlesea SME Policy includes a number of benefits to ensure your business is properly covered if something goes wrong.

The policy gives you the full flexibility to increase cover limits or

add on cover to suit your business’ unique needs.

Middlesea’s SME Insurance Policy provides cover for property, stock and other trade contents, public and products liability, employers’ liability, loss of income, money and personal accident cover, fidelity guarantee,equipment breakdown, as well as an annual travel cover for the insured or any other employees.

The SME policy also includes, as standard cover, the Business Emergency Assistance to cater for all your emergency needs 24 hours a day seven days a week through Middlesea’s call centre.

For more information call 2124 6262. Middlesea Insurance plc (C5553) is authorised by the MFSA.

Exigy appointed Mobile NAV partner in Malta Exigy has partnered with MultiSoft to act as its official distributor and implementer of MobileNAV in Malta. MultiSoft is an international company boasting 14 years’ experience and unrivalled expertise with Microsoft Dynamics NAV. MultiSoft are the providers of MobileNAV – the customisable mobile app for NAV, optimised for smartphones and tablets.

As the importance of having information access anytime, from anywhere increases, MobileNAV plays a significant role for businesses that want to make their operational processes accessible in real-time from remote locations.

MobileNAV provides a mobile online and offline solution for the day-to-day ERP operations like sales, service and project manage-

ment, warehousing and manufacturing processes.

“We see that mobility is an integral part of today’s business, and through MobileNAV we seek to further assist businesses in embracing the natural shift of connecting employees on the move with their ERP,” says Francois Grech, executive director at Exigy.

“Our partnership with Exigy provides bigger prospects to expand the presence of MobileNAV in other European countries,” says Sándor Brecsok, partner manager at MultiSoft.“We look forward to engage Maltese and other European businesses to experience the power of NAV on-the-move.”

Exigy is found at 66, Dun Karm Street, Birkirkara. Call 2011 2024 or visit www.exigy.com.

Cleland & Souchet, the leading lifestyle retailer and wine merchants, have opened their second C&S WINE CAFÉ outlet in the departure lounge of the Malta International Airport to rave reviews.

They have designed their area with the same distinctive orange umbrellas and stylish bar counter as those in their original outlet in Portomaso, and they offer an incredible selection of their quality wines and tasty light meals.

“We have tried to remain as close to our original C&S WINE CAFÉ concept as possible and we are delighted with the positive response from both local and foreign travellers at the airport,” said Richard Cleland with a beaming smile.

“Over the coming weeks, we shall be introducing a new range of healthy meals and non-alcoholic drinks in both outlets and we are

THE OFFICIAL OPENING OF C&S WINE CAFÉ AT MIA – RICHARD CLELAND ACCOMPANIED BY THE COO AND CEO OF MALTA INTERNATIONAL AIRPORT, ALAN BORG AND MARKUS KLAUSHOFER, RESPECTIVELY.

looking forward to the feedback of our clients.”

With over 20 quality wines and champagnes available by the glass and delicious fresh sushi and sashimi on the menu, the C&S WINE CAFÉ has certainly introduced an exciting new dimension to

the catering available at the airport.

Richard plans to open a third outlet next year in yet another prime location on the island which will make it easier for patrons to experience the flavours and service that are the trademark of the Cleland & Souchet brand.