Industry needs more of a voice within government - Farsons CEO
Industry needs more of a voice within the government, Farsons Group CEO Louis Farrugia has said. In an interview with The Times Business, Mr Farrugia, a leading entrepreneur and a former president of the Chamber of Commerce, said that industry did not...
Industry needs more of a voice within the government, Farsons Group CEO Louis Farrugia has said. In an interview with The Times Business, Mr Farrugia, a leading entrepreneur and a former president of the Chamber of Commerce, said that industry did not have sufficient clout when the utility rates were being revised "because the government was under pressure due to the price of oil and that was obviously the government's focus".
He said: "Tourism has its own voice, and a strong one, and industry needs one as strong. I am not talking about a private sector pressure group but a pro-industry attitude within the government, viewpoints that industrialists can relate being put across in the Cabinet."
When Prime Minister Lawrence Gonzi was re-elected to office in February last year he did not appoint a minister or parliamentary secretary for industry, but gave the industry portfolio to Finance, Economy and Investment Minister Tonio Fenech.
Mr Farrugia said there wasn't enough sensitivity on the government's side about the impact on industry when the new utility rates were worked out. "The argument brought up that the householder is subsidising industry is not correct in the sense that all over Europe household utility rates are higher than industry. There is a very good reason for this - industry consumes large quantities - the principle of the market is that if you buy more you should pay less per unit of purchase," he said.
He added that since the price of oil has gone down everybody is now expecting an adjustment to the utility rates, including industry, although "so far this is not yet clear to industrialists".
Mr Farrugia said that taking the global economic situation into consideration "we need to go green in the sense that companies need to be encouraged to reduce electricity consumption. There has to be a proper sustained attempt and it has to be organised."
"I know Malta Enterprise has come up with some schemes but they have to be well managed. When you actually sit down and work out whether it's worth it, the sums don't add up. So a lot more work has to be done in helping a company go green. I know there are grants, and that's the way to go. Companies need to be looking at such schemes, putting them in context of what's happening in the world. We need to reduce our dependency on oil and also to do our bit in terms of climate change. So we need to get organised and I think utility rates have to be linked to a proper co-ordinated policy with clear objectives for industry," he said.
Asked about his views on how the international economic situation was affecting Malta, Mr Farrugia said it was evident that Malta was not immune from what was happening globally.
"The international forecast ranges from a depression which is to last between five to 10 years to a recession which is to recover in two to three quarters. If one follows our own GDP performance it is very clear that we are not immune to what is happening internationally.
"However, the fact that Malta's economy is quite diversified is a great help. I think the world is witnessing a change in attitudes and habits. As a result of the global economic bubble bursting - which is a really a result of too much consumption - I think we are going to have a change in attitudes which could be on a semi-permanent basis. People are going to consume less, change cars less often, buy televisions less often. Attitudes towards debt and stocks and shares will change. It will take time for people to feel confident about markets again. They would prefer secure bonds with fixed interests. These changes in attitudes are definitely going to change the Maltese consumer habits," he said.
Mr Farrugia said that although Malta will be very lucky to escape the recession "we have some in-built structures such as our diversified economy, our small size, the fact that we can be quite nimble and reactive as well as our stable banking system which are to our advantage".
It would be very sad, the Farsons CEO said, if Malta had to lose its technical skills base, such as all those engineers who work for ST. "Malta should try and keep its skills base as this gives substantial value added to our country. Manufacturing is also important in our economic mix. If we aim at an economy based on services only then if something had to happen to the services industry we would be very badly hit. We should continue to aim for a diversified economy".
Regarding how Farsons had fared since Malta joined the European Union, Mr Farrugia said that within the beverage industry "we have had to fight a very tough battle".
He explained: "We are competing with the biggest brands in the world, both in beer and soft drinks. We haven't made anybody redundant, our turnover is still steady. What we are doing is looking at our cost base and reducing it. We have embarked on a voluntary early retirement scheme - we reduced our employees by 50 people last year and this year we want to reduce another 50 - so that would be 100 in the last two years. And we will continue to do this, because that is the way to go."
Mr Farrugia said that increasing productivity, increasing revenue per employee, increasing value added per employee, investing where there is growth and investing in exporting more and niche marketing was the way forward.
"We are now not just a manufacturer, we are a service provider, an importer, we add value to products we import and we add value to our local products. We have export initiatives taking place right now in Russia, America and Japan. Exports are still a small percentage of our turnover but there's growth. The end of protection has forced us to look for new markets and diversify the business while continuing to improve in the areas that we traditionally operate in, making beer and soft drinks," he said.
"We've had quite a difficult market situation but our turnover is steady, in fact growing, not necessarily from the manufacturing side but growing as a group. So I am satisfied that our strategies have been correct. Obviously what we need to do is to continue to review our cost base."
He said: "Tourism has its own voice, and a strong one, and industry needs one as strong. I am not talking about a private sector pressure group but a pro-industry attitude within the government, viewpoints that industrialists can relate being put across in the Cabinet."
When Prime Minister Lawrence Gonzi was re-elected to office in February last year he did not appoint a minister or parliamentary secretary for industry, but gave the industry portfolio to Finance, Economy and Investment Minister Tonio Fenech.
Mr Farrugia said there wasn't enough sensitivity on the government's side about the impact on industry when the new utility rates were worked out. "The argument brought up that the householder is subsidising industry is not correct in the sense that all over Europe household utility rates are higher than industry. There is a very good reason for this - industry consumes large quantities - the principle of the market is that if you buy more you should pay less per unit of purchase," he said.
He added that since the price of oil has gone down everybody is now expecting an adjustment to the utility rates, including industry, although "so far this is not yet clear to industrialists".
Mr Farrugia said that taking the global economic situation into consideration "we need to go green in the sense that companies need to be encouraged to reduce electricity consumption. There has to be a proper sustained attempt and it has to be organised."
"I know Malta Enterprise has come up with some schemes but they have to be well managed. When you actually sit down and work out whether it's worth it, the sums don't add up. So a lot more work has to be done in helping a company go green. I know there are grants, and that's the way to go. Companies need to be looking at such schemes, putting them in context of what's happening in the world. We need to reduce our dependency on oil and also to do our bit in terms of climate change. So we need to get organised and I think utility rates have to be linked to a proper co-ordinated policy with clear objectives for industry," he said.
Asked about his views on how the international economic situation was affecting Malta, Mr Farrugia said it was evident that Malta was not immune from what was happening globally.
"The international forecast ranges from a depression which is to last between five to 10 years to a recession which is to recover in two to three quarters. If one follows our own GDP performance it is very clear that we are not immune to what is happening internationally.
"However, the fact that Malta's economy is quite diversified is a great help. I think the world is witnessing a change in attitudes and habits. As a result of the global economic bubble bursting - which is a really a result of too much consumption - I think we are going to have a change in attitudes which could be on a semi-permanent basis. People are going to consume less, change cars less often, buy televisions less often. Attitudes towards debt and stocks and shares will change. It will take time for people to feel confident about markets again. They would prefer secure bonds with fixed interests. These changes in attitudes are definitely going to change the Maltese consumer habits," he said.
Mr Farrugia said that although Malta will be very lucky to escape the recession "we have some in-built structures such as our diversified economy, our small size, the fact that we can be quite nimble and reactive as well as our stable banking system which are to our advantage".
It would be very sad, the Farsons CEO said, if Malta had to lose its technical skills base, such as all those engineers who work for ST. "Malta should try and keep its skills base as this gives substantial value added to our country. Manufacturing is also important in our economic mix. If we aim at an economy based on services only then if something had to happen to the services industry we would be very badly hit. We should continue to aim for a diversified economy".
Regarding how Farsons had fared since Malta joined the European Union, Mr Farrugia said that within the beverage industry "we have had to fight a very tough battle".
He explained: "We are competing with the biggest brands in the world, both in beer and soft drinks. We haven't made anybody redundant, our turnover is still steady. What we are doing is looking at our cost base and reducing it. We have embarked on a voluntary early retirement scheme - we reduced our employees by 50 people last year and this year we want to reduce another 50 - so that would be 100 in the last two years. And we will continue to do this, because that is the way to go."
Mr Farrugia said that increasing productivity, increasing revenue per employee, increasing value added per employee, investing where there is growth and investing in exporting more and niche marketing was the way forward.
"We are now not just a manufacturer, we are a service provider, an importer, we add value to products we import and we add value to our local products. We have export initiatives taking place right now in Russia, America and Japan. Exports are still a small percentage of our turnover but there's growth. The end of protection has forced us to look for new markets and diversify the business while continuing to improve in the areas that we traditionally operate in, making beer and soft drinks," he said.
"We've had quite a difficult market situation but our turnover is steady, in fact growing, not necessarily from the manufacturing side but growing as a group. So I am satisfied that our strategies have been correct. Obviously what we need to do is to continue to review our cost base."