Author: Developers Think

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.

Today, The Malta Chamber held a conference as part of SME Week 2021 in collaboration with the Malta Business Registry under the auspices of the Ministry of the Economy and Industry titled Meeting Compliance Requirements.

The Chamber President Marisa Xuereb said, “Compliance and good governance are a priority, and should not be regarded as a legal imposition but as a behavioural obligation arising out of ethical responsibility.” President Xuereb continued by identifying five (5) guiding points that businesses should adhere to when it comes to compliance requirements:

1. Understand what is required, when and why
2. Identify supporting corporate service providers with caution
3. Keep abreast with regulatory changes
4. Provide regular feedback to Chamber consultations
5. Be appreciative that the country is on a steep learning curve on good governance.

In his welcome address, Hon. Silvio Schembri, Minister of the Economy and Industry stated, “The Malta Business Registry is an important and ongoing guide for stakeholders.” He described the event as an opportunity for discussion for both The Chamber and MBR to better understand the changes and what is required of them. He stressed on the importance of ensuring that the information given is correct and timely, and understanding the obligations of all parties involved to further enhance collaboration.

The CEO and Registrar, Dr Geraldine Spiteri Lucas, said that the MBR’s mission is to provide businesses with peace of mind throughout all their undertakings. “Our portal is your tool and your feedback matters. In fact, we have introduced a simple tool where one could notify us in case of incorrect information, on which action will be taken,” she said, adding that amendments were presented and published following complaints put forwarded to MBR by directors.

Dr Marthese Portelli, CEO at The Chamber remarked, “The Malta Chamber is all for better regulation and full compliance without excessive bureaucracy and without disproportionate administrative burdens and costs.” During her intervention Dr Portelli also brought forward a number of recommendations, which included:

1. Ensuring that all desk officers are giving the same interpretation to guidelines, regulations and requirements
2. Upgrading IT infrastructure and MBR’s platform to be less taxing for the user and to shift manual processes online, thereby increasing efficiency and transparency
3. Seamless integration between Government agencies for the provision of standard documents and information, within the limits allowed by GDPR
4. Introducing a system of blacklisting corporate service providers that repeatedly show negligence or incompetence
5. Providing adequate lead time prior to the entry into force of new regulations.

Dr Portelli also insisted on a better level of communication amongst MBR, CSPs and company directors to mutually, whilst acknowledging the efforts being undertaken by MBR, improve efficacy.

Today the Tourism Operators Business Section at The Malta Chamber of Commerce, Enterprise and Industry with the support of Seed, presented Rediscover, its vision for Malta’s tourism industry. President Ms Marisa Xuereb said, “The Malta Chamber recognises the vital importance of Tourism as a pillar of the Maltese Economy, and we believe that this document is the blueprint to strengthening and future-proofing this sector for decades to come.”

In his remarks, the Chair of the Tourism Business Section, Mr Alan Arrigo said, “We’ve placed sustainable growth in the epicentre of our Vision. One that is built on improving customer journey, encouraging authentic quality customer experiences and building on our capabilities to make Malta a destination of choice.”

The document is rooted in a detailed analysis of the hurdles faced by Malta and its tourism operators in this sector. This analysis is contextualised within broader international industry trends and is enriched by consultation with more than 29 industry stakeholders, leading to a series of recommendations and key performance indicators geared at revitalising the Maltese tourism sector in a post COVID-19 future.

In doing so, the document proposes its recommendations based on eight (8) key themes:

1. Branding & Marketing
2. Digital & Innovation
3. Accommodation
4. Sectoral Infrastructure
5. Culture & Identity
6. Governance & Institutions
7. Human Capital
8. Connectivity

Amongst its flagship recommendations, The Chamber is re-proposing lower VAT on all tourist services to 7%, unless the product or service being offered is already VAT exempt. Incremental income from VAT reduction should be diverted towards improvement in salaries.

This Vision proposes a new focus on unique and varied events which are true to the local identity, a proposal which forms part of a broader approach to strengthen the Maltese tourism brand as well as the specific marketing of destinations such as Gozo and Valletta in their own right.

Furthermore, The Chamber proposes carrying out a sectoral review to measure tourism operators’ digital readiness to identify all opportunities for digital transformation and include opportunities for funding.

The restructuring of current licensing regimes are to reflect new accommodation concepts and quality standards that match target clientele. The Chamber believes that hotel star classifications need to be revisited.

Moreover, The Chamber believes connectivity is key to ensuring that Malta remains accessible and therefore, advocates for enhanced route development, including pushing for our national airline to hold key city airports while low-cost airlines retain their foothold in regional airports.

CEO of The Malta Chamber Dr Marthese Portelli said, “With this Vision, The Malta Chamber believes Malta will solidify its place as a quality, year-round destination of the highest standard at the forefront of international industry trends.”

 

The Malta Chamber members, together with other local businesses, had an exclusive opportunity to discuss concerns and ideas with EU Commissioner for Innovation, Research, Culture, Education and Youth, Mariya Gabriel.

In her introductory remarks, Gabriel emphasised the potential that businesses have within the European Union, especially within the field of innovation and research. During the event, issues were raised including innovation, research, skills, funding and business opportunities.

Gabriel remarked that the role of innovation has changed recently, shifting from from technology to linking it’s solutions to operational sectors.

She also noted that the Commission is embarking on a process to combine EU funding programs to make them more accessible, a task which is challenging to execute.

Apart from this, she also noted that challenges are still being faced, primarily in increasing female entrepreneurship.

Following a Q&A session in which Chamber members were given the opportunity to raise their issues, the EU Commissioner pointed out most sensitive enablers which are crucial for innovation and research are Education and Finance.

Hence, the Commission intends to pursue joint Accademia – Business Road Maps amongst other initiatives. Gabriel showed concern in areas related to education as most youths are still not well equipped, especially in areas related to AI and STEM.

The initiative was led by Stefano Mallia, President of the Employers’ Group of the EESC, supported by four Employer organisations in Malta.