Month: November 2021

At a recent conference, the Malta Business Bureau (MBB) officially launched an online SME Hub to help strengthen the financial and digital skills of microentrepreneurs and enable them to
widen their networks and internationalise. The event was organised as part of DIFME – an Erasmus+ Knowledge Alliances Project led by MBB with the participation of the University of Malta’s Edward de
Bono Institute and other European partners.

In her opening address, MBB President Alison Mizzi said, “We have seen the digital transformation of the workplace outpacing educational institutions as well as the labour market itself, leading to skills
shortages in several sectors. For this reason, the EU must continue facilitating cooperation among Member States’ authorities and educational institutions and the private sector to address key challenges by microenterprises.”

The SME Hub serves as an open repository of solutions for entrepreneurs. Through collaborations between the DIFME project partners, practical information was collated and made accessible to
entrepreneurs operating across different industries, including information on doing business in Malta, Bulgaria, Germany, Greece, Ireland, Italy, and the Netherlands, relating to government agencies,
banking sphere and assistance programmes, among others.

Commenting on this, MBB Project Manager Marika Huber stated, “Whether you are kicking off your enterprise or scaling up, the SME Hub will provide you with the tools and resources you need to make
informed decisions regarding your financial and internationalisation well-being now and in the future.”

The hybrid conference was also addressed by Roberta Metsola, First Vice-President of the European Parliament and Josianne Cutajar, Member of the European Parliament. Dr Metsola explained the
European Parliament’s work on boosting entrepreneurship and facilitating investment and trade by pushing the development of better SME financing tools and generating greater business
opportunities. On her part, Dr Cutajar put emphasis on the challenges faced by microenterprises in island states like Malta, whilst also highlighting the critical role of funding and access to finance in
helping microentrepreneurs get equipped with the skills they need to cope with the twin transition and the structural challenges they face.

At the end of the conference, the DIFME project partners signed a Memorandum of Cooperation, thus confirming their intention to develop further activities and maximise on the outputs achieved
throughout the last three years of project implementation.

Despite the number of challenges faced by business, The Malta Chamber of Commerce, Enterprise and Industry notes that this year’s Black Friday, like in the previous years, in general left a positive impact on business particularly since the majority anticipated the challenging environment and sought to work around it. In fact, many businesses spread their offers over a week and even longer periods. Ensuring extra precaution to avoid COVID spread, logistics and transhipment issues in respect of stock and the very bad weather conditions were just some of the few challenges experienced.

The Malta Chamber notes that there has been a major shift in customer behaviour particularly the move from shopping-in-store to shopping online, hence the importance for business to keep abreast with and invest in digital innovation.

Black Friday outcomes that occur once a year are not enough for business particularly given the current circumstances when business is going through a tough recovery period. The Malta Chamber believes that there should be more incentives which help businesses to innovate and strengthen their online presence as well as further investment in well thought out infrastructure suitable for bad weather conditions.

A resilient environment will help businesses anticipate and set trends whilst ensuring good sales all year round.

A Malta Chamber delegation led by President Marisa Xuereb attended the BusinessEurope Council of Presidents (COPRES) meeting in Paris. Business Europe is the leading confederation of European businesses representing enterprises of all sizes in the European Union and other non-EU countries. The Malta Chamber is one of forty industry and employers’ organisations making up BusinessEurope.

The discussions amongst the top business representing bodies on the European continent are evolving on the economic recovery and the challenges being faced at present, including disruptions and increased costs related to supply chains.

Outlook for the European Economy

The EU economy is undergoing a strong recovery, but rapid price increases and bottlenecks in global supply chains are threatening to blunt the upturn.

The EU27 economy is expected to grow by 4.8% this year, followed by 4.3% next year. The recovery is propelled by a consumer-led rise in domestic spending. Retail sales are now 6% above the 2019 average and the household saving rate is at 21%, vs around 12% before the crisis.

In contrast, production in the EU is suffering from supply chain bottlenecks. The share of European companies that report materials/equipment as a factor limiting their production has shot up from 9% in 2019 Q3 to 39% in 2021 Q3.

EU Energy prices are now 7% above the January 2020 level. There is a clear risk that price pressures could translate into longer-term inflationary pressures if wage increase fully reflect such rises. So, wage moderation will be important.

The toolbox to tackle rising energy prices

The rise in energy prices overshadowed all discussions during the meeting of the European Council on 25 October 2021.

A toolbox with short-term measures that member states can take was proposed. These included direct payments to vulnerable households, deferred payments, tax cuts, state aid for companies that are compatible with the EU state aid rules.

Mid-term to long-term measures, were also suggested, including a number of already planned EU initiatives such as the announced revision of the gas/hydrogen market regulatory framework, future guidance on how to accelerate permitting process for renewable energies, as well as new ideas such as joint procurement and/or joint reserves of gas stocks.

The disruptions in supply chains

BusinessEurope created a Supply Chains Taskforce to assess the overall cumulative effect of actions and legal initiatives taken by different countries on supply chains.

The temporary and short-term challenges listed by members, included the current shortages in raw materials, the subsequent increased prices of materials and the peaks in transportation costs and obstacles to mobility of personnel.

To mitigate these impacts, companies themselves are taking measures. For instance, by adopting diversification strategies, increasing strategic safety stocks and improving lead times. However, certain areas require public action. Among the priorities that require public policy action, we have for instance the elimination of all export restrictions, promoting regulatory cooperation and the adoption of international standards, as well as carefully designing initiatives in the area of sustainability.

Regarding the short-term challenges, the taskforce suggests underlining that these are mostly related to disruptions caused by the COVID-19 pandemic. Several measures can be useful to alleviate pressure. For instance:

• simplifying customs procedures,
• ensuring better coordination on health and safety measures as well as travel restrictions,
• monitoring and addressing the uptake of trade-restrictive measures by governments.

Regarding the medium and long-term challenges, the taskforce suggests underlining that even if they can be related and exacerbated by the COVID-19 pandemic, they often have deeper root causes. Building resilience is important and requires good coordination between different policies. For instance:

• addressing trade restrictions will help ensure access to critical inputs that are necessary for European industrial sectors,
• at the same time, boosting investments and production capacity in Europe might be necessary but we also need to cooperate with allies and like-minded partners.

The crisis is also leading governments to increase national content requirements and promote “buy national” policies in many cases attached to the financial stimulus plans. Access to third countries’ procurement market is a long-standing problem for European companies. The taskforce therefore suggests underlining that this crisis is making the case for having the International Procurement Instrument in place even more compelling.

The Malta Chamber reaffirms its commitment to bring to the fore the issues and challenges faced by local businesses within these highly influential European fora.

Inflation has become extremely topical after many years of price stability within the Euro zone.

“The bottlenecks created by the deep recession caused by the pandemic and the relatively quick recovery that followed, coupled with the pursuit of the twin transition of digitalisation and green economy has resulted in an acute concern on inflationary pressures by businesses and discussions on how policy makers should address them to ensure that we do not enter into an inflationary spiral that could jeopardise recovery efforts” said Ms Marisa Xuereb, President of the Malta Chamber during her welcome address at an event co-organised by the Malta Chamber of Commerce, Enterprise and Industry and the Central Bank of Malta titled Inflation: Trends, Threats and Transitions.

The seminar was aimed at economists and business leaders in the country in order to raise a national discussion on the subject of inflation and whether the current global inflationary trends will be transitory in nature or will persist in the longer term and what both scenarios could mean in terms of their impact on the Maltese economy.

In his keynote speech on inflation the Governor of the Central Bank of Malta, Professor Edward Scicluna explained that contrary to popular perception the ECB has been praying and hoping that one day inflation would pick up from a decade of very low inflation and get itself anchored at around two percent. Anything above or below that rate is equally undesirable. The two percent would give enough leeway for monetary policy to be applied without the headache of negative rates, asset purchase programmes and the like.

During the event, economist and Saxo Bank Director, Mr Christopher Dembik spoke of the global scenario in terms of inflationary trends and some of the key factors which are leading to this increase. These include, amongst others, the bottlenecks in terms of global supply chains which are seen as cyclical in nature, the green transition and shift towards ESGs, and lack of investment in energy. He spoke of the possibility that part of the inflation will become permanent or structural, particularly due to the green transition business operators and economies need to undertake during the next years. This in turn will limit the possibility of exploiting productivity gains by the fact that some of the green technology is still in its infancy.

Concluding the session, Central Bank of Malta Mr Jude Darmanin delivered a presentation on a recent study focusing on the inflation impact on low-income households. Mr Darmanin noted in his conclusions that household spending patterns vary significantly across the income spectrum with official Retail Price Index (RPI) weights not adequately reflecting the spending patterns of low-income households. The results also indicated that the relative income of low-income households is harder hit when prices for basic necessities, such as food, increase. Mr Darmanin concluded by suggesting the need for an additional price index, separate from the RPI, based on the basket of goods purchased by low-income households, which could serve as a guide in measuring by how much social benefits should be increased over and above the COLA to maintain the purchasing power of low income households.

The Malta Employers’ Association, The Malta Chamber of Commerce, Enterprise and Industry, the Malta Chamber of SMEs, the Malta Hotels and Restaurants Association and the Gozo Business Chamber are calling on government to put an immediate halt on the drain of human resources from the private sector, to be employed in the public sector including state appointed bodies.

More and more members of these organisations are voicing their concern about employees who resign haphazardly to take up what is perceived to be a more secure job with less work pressure in government entities.

Some companies are having to reduce their operations as a result of a shortage of manpower. Many have to resort to replacing Maltese employees lost to the public sector with other nationalities.

This is changing the distribution of the labour force, as government is employing a greater percentage of the Maltese labour force, with companies compensating for labour shortfalls by engaging more foreign labour.

The business organisations stated that they are convinced that, in many cases, there is no real need for these persons in the public sector. It must be borne in mind that public sector employment is financed by the output and taxes generated by entrepreneurs and their employees, and depleting the private sector of human resources will spell trouble even for tax revenue generation.

The employer organisations warned that an ageing work force across the European Union will present a challenge in Malta in the coming years, as countries will compete for the younger cohort. This is all the more reason why government should not make the situation worse, simply for political expediency.

Human resources in Malta are scarce and limited, and therefore cannot be squandered in this manner. To make matters worse, many companies are also complaining about the difficulties they still encounter in employing third country nationals, including cases of repatriation of workers who have been working here regularly for years.

The economy can only progress by upskilling the local labour force and channelling it into productive use, both in the private and public sector.

As Chairperson, what are your aims for TradeMalta and how do you see it developing?

TradeMalta provides an excellent opportunity for Maltese businesses to explore international business opportunities. We have to forge new and ambitious partnerships and open up innovative markets for Maltese goods and services. But while Malta punches above our weight in exports, we also punch significantly below our potential.

We aim to continue to open markets and unlock opportunities for businesses especially in East & West African countries which have considerable unexploited potential in trade. Libya is also a very important market for Maltese businesses albeit depending on the stability of the country. We will continue to assist companies in other countries but we need to prioritise.

We also plan to strengthen the in country support. Government also has a vital role in helping businesses to export, by using its unique assets such as its international network and government-to government relationships.

In May you were appointed as chairperson of TradeMalta; how has the experience been so far?

My experience to date has been a positive one in spite of the situation being challenging. However, during challenging times we still perceive trade as a window of opportunity for diversification and growth of Maltese companies.

It is truly a pleasure to work with Anton Buttigieg, our CEO, and the rest of the team who are talented and inspiring. The Board is made up of a formidable array of passionate community leaders with a veritable storehouse of business acumen.

As vice president of The Malta Chamber, what is your role within this entity?

I mainly focus on the internationalisation aspect and continue to further strengthen the already existent excellent collaboration between government, TradeMalta and The Malta Chamber of Commerce, Enterprise and Industry.

I also enjoy enticing new members to The Malta Chamber. There is so much work behind the scenes which helps businesses of different sizes. Also, it is extremely valuable for building connections and learning about other industries.

Being so involved in TradeMalta and The Malta Chamber, two business-focused entities, when or how would you say your interest in business developed?

Internationalisation has always occupied a special place in my heart – I love it, so when the opportunity presented itself to be part of this incredible team, I was grateful for the opportunity.

As many of you may know, Trade Malta was formed as a public-private partnership between the Government of Malta, currently under the remit of the Ministry for the Economy and Industry and the Malta Chamber of Commerce, Enterprise and Industry

You’ve been part of TradeMalta for over three years now – what have been the biggest challenges so far? Has the pandemic had any part in this?

It may seem counterintuitive to talk about expanding overseas when local businesses are grappling with the pandemic, but for the many firms venturing abroad it seems there is no better time.

The pandemic has led to certain constraints, especially on cross-border travel, but it has also given rise to new ways of doing business. And support for internationalisation, whether from the government or industry partners, is as present as ever.

That being said, we know internationalisation may still seem daunting and this is why we are here to help navigate a business environment which is dynamic and ever-changing. Access to finance, lack of working capital and cover for the financial risks of exporting and payments is always a major challenge.

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The Malta Chamber of Commerce, Enterprise and Industry has taken note of Legal Notice 419 published on 5th November 2021 entitled ‘Exemption from Tax on Property Transfers (Set-off of Tax Arrears) Rules’. According to this legal notice, those who have tax arrears that were due by January 2021 will be allowed to pay any tax due on the transfer of property purchased before March 2021 against their arrears and thereby be exempt from tax on property transfers to the extent that they are in arrears.

Like every other scheme intended to bring taxpayers in order, this scheme benefits only the defaulters, and does not consider those who have their tax payments in order. This in itself is unfair on those employers and businesses who pay their taxes when and as due. This legal notice seeks only to proliferate an unlevel playing field in favour of those who are in default and who are in the habit of using their due tax monies as their overdraft facility.

With its attachment to property transfers, this legal notice indicates that Government believes that tax monies have been used to purchase property, and that defaulters do not have the cash to settle tax arrears promptly and can only do so if they liquidate some of their property. If we do not want to see any more of this cavalier behaviour in the future, we should make sure that people are not able to purchase additional property before they settle their tax arrears. Only then will the exemption from tax on property transfers, which will only be allowed until 31 December 2022 according to said legal notice, be effective in curbing old habits.

The Chamber feels compelled to draw attention to the fact that those who default on tax payments to finance speculative activities may also end up delaying settlement of trade credit indefinitely to the detriment of businesses that supply them. Such practices are extremely damaging and need to be discouraged. It would be good to see schemes designed to help businesses recover their dues from defaulting unrelated parties who are heavily invested in property.

Finally, the Chamber reiterates its call to blacklist businesses that do not honour their tax payment obligations and hold them back from participating in public procurement. There is no level playing field between businesses that honour their obligations and those who do not. Competitive calls must factor this in to encourage more compliance and curb unfair practices.