Chamber music to our ears
Tancred Tabone took over as president of the Malta Chamber of Commerce and Enterprise at the beginning of the year. Vanessa Macdonald spoke to him and his team about the issues this year.
This year, the chamber will face a watershed in its 160-year history: the planned merger with the Federation of Industry.
"Years back the Federation of Industry primarily looked after manufacturers who were at the time making goods for the local market and were therefore all for protectionism to favour their members. On the other hand, the Chamber of Commerce was predominantly made up of importers and businessmen who wanted to import and distribute. So there were completely opposing agendas. One group wanted as much protection as possible and the other wanted a free market," he said.
Globalisation, Malta's accession to the European Union in 2004, the elimination of trade protectionism as well as the introduction of the euro brought convergence between the two organisations, who found they were regularly adopting similar stances on issues of direct economic and commercial interest.
They started to collaborate, setting up and running the Malta Business Foundation in 1996 and more recently investing jointly in the La Valette Business Centre in Brussels.
Discussions on a possible merger began between representatives of the two bodies around three years ago.
"These quickly revealed the benefits to be achieved by having a single voice in national forums such as the Malta Council for Social and Economic Development (MCESD), influencing economic fiscal policy and deciding on the difficult trade-offs among competing commercial or social priorities, and from more streamlined, unified representation on the numerous employer and business policy-making bodies of the EU," he said.
"I would not be revealing any major secrets if I stated that the merger discussions between the chamber and FOI were sensitive, involving sectoral interests that needed to be addressed, fundamental interests that had to be entrenched, tradition that needed to be guarded. The reluctance to change had to be addressed and so to move forward healthy compromise had to be sought.
"The synergies that can be derived from the consolidation of resources would produce a larger and stronger organisation enabling the merged organisation to better serve member's demands while giving the commercial sector a louder voice than ever before.
"The councils of both organisations have given their full support. Later on this year, we will put the decision to the membership of both organisations to approve or otherwise in EGMs held on purpose some time around July."
The two organisations are currently carrying out financial and legal due diligence processes as well as working through administrative and logistical details. This is being done with the assistance of an independent project manager.
An information campaign is planned which will outline the rationale behind the merger and what members of both the chamber and the FOI should expect from a unified organisation.
"We will try to pre-empt any questions," he said.
The chamber's membership has shown a modest upward trend since 2006. Mr Tabone has made it his mission to expand it further and the chamber has engaged a marketing company to give professional advice.
"We need to change the perception some people might have of the chamber being an old gentlemen's club. That is why we are embarking upon a drive for younger members to join, giving them more value and making it more relevant to their needs. We want to create more awareness about what we do, such as our new internationalisation services - which are helping members look at this as a real opportunity and not just a last resort in a 'backs-to-the-wall' situation.
"Besides, we still run our business education programme. In fact we have just launched a new programme with ABE, a UK-based certification programme for business courses with special prices for members and their employees. In this regard we continuously tread a fine line as the area of courses is very competitive and it brings us in direct competition with our own members, a situation we always try to avoid. But this hampers further expansion in this area. We also organise and host international qualification examinations," he said.
Members call the helpline on a daily basis asking for advice, assistance and technical information on issues, for instance, relating to better regulation, taxation and waste. It also regularly carries out surveys which have an important role to play in identifying and monitoring trends.
So much for internal challenges. What about external ones? Money makes the world go round but Mr Tabone was cautious about the impact of tax cuts.
"We are convinced that the reduction of the tax burden is very important. At the same time we are conscious that this must be done wisely because any announced measure must be sustainable in the short and medium-term or we would lose the fiscal consolidation achieved thus far," he said.
He admitted that measures aimed at increasing disposable income should be handled with care.
"One must be very cautious when it comes to ways to increase disposable incomes. Doing so via the Cost of Living Allowance (COLA) has negative implications on national competitiveness as well as the fiscal deficit in so far as public sector employees are concerned.
"Reaching the objective via taxation has a more direct implication on the budget deficit but affects national competitiveness in a positive manner.
"On the subject of COLA, I think that we need to discuss the relevant mechanism in the interest of efficiency and productivity. The chamber believes government ought to re-evaluate this compensation mechanism, which is granted across the board, in the interest of national competitiveness and the long-term sustainability of workers' employment.
We are proposing that government sets a reference margin for percentage wage increases. This reference margin should take into account salary increases in trading/competing countries, productivity indices and consumer prices.
"I must stress that the macro-economic effect of the annual COLA must not be underestimated. Nor should it be used for any other non-economic motive/s. Government must remain faithful to the agreed mechanism as this enables us as a private sector to operate along planned cost and revenue forecasts. Departing from the set mechanism can also impinge on our profitability because the latter must finance any direct increases imposed on our payrolls and indirectly the increases granted in the public sector through taxation and other charges.
"In many cases, especially when companies are export-orientated and bound by forward contracts, any unforeseen costs must be absorbed by profitability. This is rather dangerous in cases where there is very little room for manoeuvrability, thus threatening job sustainability. Possible immediate gains may be neutralised by complications that this type of measure may bring about in the medium to long term."
To what extent tax cuts are translated into disposable income depends, of course, on prices and inflation. With oil over $110, rocketing cereal prices, talk of a US recession and financial markets in meltdown, there is clearly much to fear. Mr Tabone warned that the Maltese economy could not be shielded from global factors and that dependence on imports meant that Malta was open to the "woes and tribulations" of the market.
He also warned that the Price Stability Agreement signed by some importers prior to euro adoption were irrelevant in this context.
"First of all, these were voluntary agreements with the government which these individual companies chose for their own marketing, operational and financial merits. Secondly, their aim was not to curb inflation directly. Their aim was to facilitate the introduction of a new currency. Such agreements were therefore temporary in duration and any calls for them to be extended make little sense.
"Prices on an international level continued to soar - they did not wait for us to introduce the euro. Ultimately, prices will have to catch up with us and reflect the changing economic realities at a global level which Malta cannot influence by any stretch of the imagination. And while I do not want to sound fatalistic, there is nothing the authorities on their own can do about this because any temporary measure will have a temporary effect. And even if government does something, it will come out of our own taxes - so it will be like robbing Peter to pay Paul. The authorities can, on the other hand alleviate pressures on business by reducing administrative burdens to neutralise higher input costs."
One such issue was port costs. He said that members, in the main, report that their bills reflect very little savings - if any.
"We recently learned that stevedores may increase their tariffs by 6 per cent, which will not help matters. I believe there may be more work to be done and bolder decisions to be made in terms of port reform. Let us not forget how dependent our economy is on our ports.
"Even more serious than port reform at the moment is the issue relating to the lack of reliable sea connections for importers and exporters in our country. All stakeholders involved must come together to find a lasting solution to this situation which tends to raise its head from time to time," he said.
What role does he see for the MCESD?
"The Chamber is always ready to sit round the MCESD table to objectively discuss the best way forward. But we must see the same disposition from the unions and the government for a solution to be found, because we must keep in mind that it is the private sector which is fuelling the economy and any measure which adds pressure solely on the private sector will make things worse, not better."
After lying dormant in the run up to the election, the MCESD was recently re-convened, now assigned directly to the portfolio of Parliamentary Secretary Chris Said.
"Surely, the furtherance of the local economy is not the monopoly of government or any social partner. We need to understand that we are in this together and in the national interest, the healthier the consultation process, the better," he said.
The chamber is also taking an active role in the collection of packaging waste. Importers or manufacturers who place packaging or packaged goods on the market in Malta are considered responsible for a percentage of its recovery. The legislation covers all packaging (primary, secondary and tertiary) whether at industrial, commercial, office, shop, service, household or any other level, regardless of the material used.
The chamber, together with three other employer bodies, decided to create a scheme through which members could satisfy their legal obligation.
"In doing so, we are endeavouring to ensure that this option will be cheaper than any other alternative available in terms of either taxation, self-compliance or joining competing schemes. We even considered opting out of the idea at one stage when we were not entirely convinced that we would attain this goal. I can add that this collective scheme will not be profit-motivated and will pass any surpluses made to its registered members by means of lower fees.
"It is imperative to state that we will not be collecting waste on a national level. We shall only be responsible for the packaging placed on the market by subscribers to our scheme. Hopefully, we will be up and running very soon. A roadmap has been agreed upon and we will be announcing details in the coming weeks."
Another area where the chamber is being proactive is SmartCity. It is in regular and direct talks with Tecom, through a SmartCity Working Group.
"The project is an ambitious one but on the other hand it is doable and it will have major impact on the way we do business, particularly at international level. It will permit local business to tap important foreign clients without the need to physically leave local shores. We are speaking to SmartCity to explore ways for the Chamber to maximise opportunities for its members.
"The Chamber has also spoken of the 10-day fast-track application process which SmartCity has been afforded. We are insisting that this should also be made available to all locally-based entrepreneurs soon after this is afforded to SmartCity tenants."
This year, the chamber will face a watershed in its 160-year history: the planned merger with the Federation of Industry.
"Years back the Federation of Industry primarily looked after manufacturers who were at the time making goods for the local market and were therefore all for protectionism to favour their members. On the other hand, the Chamber of Commerce was predominantly made up of importers and businessmen who wanted to import and distribute. So there were completely opposing agendas. One group wanted as much protection as possible and the other wanted a free market," he said.
Globalisation, Malta's accession to the European Union in 2004, the elimination of trade protectionism as well as the introduction of the euro brought convergence between the two organisations, who found they were regularly adopting similar stances on issues of direct economic and commercial interest.
They started to collaborate, setting up and running the Malta Business Foundation in 1996 and more recently investing jointly in the La Valette Business Centre in Brussels.
Discussions on a possible merger began between representatives of the two bodies around three years ago.
"These quickly revealed the benefits to be achieved by having a single voice in national forums such as the Malta Council for Social and Economic Development (MCESD), influencing economic fiscal policy and deciding on the difficult trade-offs among competing commercial or social priorities, and from more streamlined, unified representation on the numerous employer and business policy-making bodies of the EU," he said.
"I would not be revealing any major secrets if I stated that the merger discussions between the chamber and FOI were sensitive, involving sectoral interests that needed to be addressed, fundamental interests that had to be entrenched, tradition that needed to be guarded. The reluctance to change had to be addressed and so to move forward healthy compromise had to be sought.
"The synergies that can be derived from the consolidation of resources would produce a larger and stronger organisation enabling the merged organisation to better serve member's demands while giving the commercial sector a louder voice than ever before.
"The councils of both organisations have given their full support. Later on this year, we will put the decision to the membership of both organisations to approve or otherwise in EGMs held on purpose some time around July."
The two organisations are currently carrying out financial and legal due diligence processes as well as working through administrative and logistical details. This is being done with the assistance of an independent project manager.
An information campaign is planned which will outline the rationale behind the merger and what members of both the chamber and the FOI should expect from a unified organisation.
"We will try to pre-empt any questions," he said.
The chamber's membership has shown a modest upward trend since 2006. Mr Tabone has made it his mission to expand it further and the chamber has engaged a marketing company to give professional advice.
"We need to change the perception some people might have of the chamber being an old gentlemen's club. That is why we are embarking upon a drive for younger members to join, giving them more value and making it more relevant to their needs. We want to create more awareness about what we do, such as our new internationalisation services - which are helping members look at this as a real opportunity and not just a last resort in a 'backs-to-the-wall' situation.
"Besides, we still run our business education programme. In fact we have just launched a new programme with ABE, a UK-based certification programme for business courses with special prices for members and their employees. In this regard we continuously tread a fine line as the area of courses is very competitive and it brings us in direct competition with our own members, a situation we always try to avoid. But this hampers further expansion in this area. We also organise and host international qualification examinations," he said.
Members call the helpline on a daily basis asking for advice, assistance and technical information on issues, for instance, relating to better regulation, taxation and waste. It also regularly carries out surveys which have an important role to play in identifying and monitoring trends.
So much for internal challenges. What about external ones? Money makes the world go round but Mr Tabone was cautious about the impact of tax cuts.
"We are convinced that the reduction of the tax burden is very important. At the same time we are conscious that this must be done wisely because any announced measure must be sustainable in the short and medium-term or we would lose the fiscal consolidation achieved thus far," he said.
He admitted that measures aimed at increasing disposable income should be handled with care.
"One must be very cautious when it comes to ways to increase disposable incomes. Doing so via the Cost of Living Allowance (COLA) has negative implications on national competitiveness as well as the fiscal deficit in so far as public sector employees are concerned.
"Reaching the objective via taxation has a more direct implication on the budget deficit but affects national competitiveness in a positive manner.
"On the subject of COLA, I think that we need to discuss the relevant mechanism in the interest of efficiency and productivity. The chamber believes government ought to re-evaluate this compensation mechanism, which is granted across the board, in the interest of national competitiveness and the long-term sustainability of workers' employment.
We are proposing that government sets a reference margin for percentage wage increases. This reference margin should take into account salary increases in trading/competing countries, productivity indices and consumer prices.
"I must stress that the macro-economic effect of the annual COLA must not be underestimated. Nor should it be used for any other non-economic motive/s. Government must remain faithful to the agreed mechanism as this enables us as a private sector to operate along planned cost and revenue forecasts. Departing from the set mechanism can also impinge on our profitability because the latter must finance any direct increases imposed on our payrolls and indirectly the increases granted in the public sector through taxation and other charges.
"In many cases, especially when companies are export-orientated and bound by forward contracts, any unforeseen costs must be absorbed by profitability. This is rather dangerous in cases where there is very little room for manoeuvrability, thus threatening job sustainability. Possible immediate gains may be neutralised by complications that this type of measure may bring about in the medium to long term."
To what extent tax cuts are translated into disposable income depends, of course, on prices and inflation. With oil over $110, rocketing cereal prices, talk of a US recession and financial markets in meltdown, there is clearly much to fear. Mr Tabone warned that the Maltese economy could not be shielded from global factors and that dependence on imports meant that Malta was open to the "woes and tribulations" of the market.
He also warned that the Price Stability Agreement signed by some importers prior to euro adoption were irrelevant in this context.
"First of all, these were voluntary agreements with the government which these individual companies chose for their own marketing, operational and financial merits. Secondly, their aim was not to curb inflation directly. Their aim was to facilitate the introduction of a new currency. Such agreements were therefore temporary in duration and any calls for them to be extended make little sense.
"Prices on an international level continued to soar - they did not wait for us to introduce the euro. Ultimately, prices will have to catch up with us and reflect the changing economic realities at a global level which Malta cannot influence by any stretch of the imagination. And while I do not want to sound fatalistic, there is nothing the authorities on their own can do about this because any temporary measure will have a temporary effect. And even if government does something, it will come out of our own taxes - so it will be like robbing Peter to pay Paul. The authorities can, on the other hand alleviate pressures on business by reducing administrative burdens to neutralise higher input costs."
One such issue was port costs. He said that members, in the main, report that their bills reflect very little savings - if any.
"We recently learned that stevedores may increase their tariffs by 6 per cent, which will not help matters. I believe there may be more work to be done and bolder decisions to be made in terms of port reform. Let us not forget how dependent our economy is on our ports.
"Even more serious than port reform at the moment is the issue relating to the lack of reliable sea connections for importers and exporters in our country. All stakeholders involved must come together to find a lasting solution to this situation which tends to raise its head from time to time," he said.
What role does he see for the MCESD?
"The Chamber is always ready to sit round the MCESD table to objectively discuss the best way forward. But we must see the same disposition from the unions and the government for a solution to be found, because we must keep in mind that it is the private sector which is fuelling the economy and any measure which adds pressure solely on the private sector will make things worse, not better."
After lying dormant in the run up to the election, the MCESD was recently re-convened, now assigned directly to the portfolio of Parliamentary Secretary Chris Said.
"Surely, the furtherance of the local economy is not the monopoly of government or any social partner. We need to understand that we are in this together and in the national interest, the healthier the consultation process, the better," he said.
The chamber is also taking an active role in the collection of packaging waste. Importers or manufacturers who place packaging or packaged goods on the market in Malta are considered responsible for a percentage of its recovery. The legislation covers all packaging (primary, secondary and tertiary) whether at industrial, commercial, office, shop, service, household or any other level, regardless of the material used.
The chamber, together with three other employer bodies, decided to create a scheme through which members could satisfy their legal obligation.
"In doing so, we are endeavouring to ensure that this option will be cheaper than any other alternative available in terms of either taxation, self-compliance or joining competing schemes. We even considered opting out of the idea at one stage when we were not entirely convinced that we would attain this goal. I can add that this collective scheme will not be profit-motivated and will pass any surpluses made to its registered members by means of lower fees.
"It is imperative to state that we will not be collecting waste on a national level. We shall only be responsible for the packaging placed on the market by subscribers to our scheme. Hopefully, we will be up and running very soon. A roadmap has been agreed upon and we will be announcing details in the coming weeks."
Another area where the chamber is being proactive is SmartCity. It is in regular and direct talks with Tecom, through a SmartCity Working Group.
"The project is an ambitious one but on the other hand it is doable and it will have major impact on the way we do business, particularly at international level. It will permit local business to tap important foreign clients without the need to physically leave local shores. We are speaking to SmartCity to explore ways for the Chamber to maximise opportunities for its members.
"The Chamber has also spoken of the 10-day fast-track application process which SmartCity has been afforded. We are insisting that this should also be made available to all locally-based entrepreneurs soon after this is afforded to SmartCity tenants."
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