John Dalli’s article ‘This is how it all started’ (September 22) calls for some clarification. I have no idea what Joe Zahra had stated in his previous article that prompted Dalli to state his views. However, I consider questionable some statements made by him and wish to place on record some facts based on my own short-lived involvement in the initial stages of Malta’s first steps towards establishing itself as an international financial and business centre.

On returning to Malta late in 1987 after nine years in senior executive posts with Barclays Bank in London and Milan, I was asked by Prime Minister Eddie Fenech Adami to assist three former banking colleagues (seconded by the Central Bank of Malta and Mid-Med Bank) who were lending support to a senior official from Chase Manhattan Bank at the office of Joe Fenech, Parliamentary Secretary for Offshore Activities and Maritime Affairs.

Their brief was to draft legislation (Malta Business Activities Act; Offshore Trusts Act; Merchant Shipping Act; Insurance Business Act) which included the setting up of the Malta International Business Authority with powers to oversee all such offshore activities.

Chase Manhattan were engaged as lead advisers well before I came on the local scene. Dalli said they had billed the government some €10 million. This I cannot confirm as that figure is news to me. All I can say is that for the 16 months that I lent a hand, my work was done on a voluntary basis and not against remuneration of any sort.

One should not underestimate what was done in 1988 and in subsequent years until the distinction between offshore and onshore activities was removed in 1994

I have no intention to belittle in any way the excellent work done by Dalli and his team in 1994 when the legislation enacted in 1988 was replaced by a raft of legislation that removed the distinction between onshore and offshore activities. This was a move that was anticipated in the white paper that accompanied the draft offshore legislation. Indeed, this was made clear in the white paper, and I quote:

“This distinction shall be eliminated as soon as the right social and economic conditions prevail. Malta’s aim and objective is to evolve from a Mediterranean centre for offshore activities to a free open financial and trading centre like Luxembourg and Switzerland offering diverse and efficient services.”

This aim was indeed achieved in 1994 (Dalli did not quote the fees charged by KPMG UK for their services) well within the 10-year scenario envisaged in 1988 when it was decided that Malta should take only modest steps towards establishing itself as an international financial centre of repute in full knowledge this would create a reaction from those countries with whom we had treaties for double taxation avoidance.

Having clarified the background, I wish to comment on some statements made by Dalli in his article. It is not correct to say that offshore companies did not fall under any laws in Malta as regards taxation etc. In fact, offshore trading companies were taxed at a flat rate of five per cent.

Dalli said he is unaware if any companies in fact made use of the offshore legislation.  I do not have at hand the exact number of offshore trading and non-trading companies that were registered under the offshore regime but I understand that until 1994 the total number was certainly in the upper hundreds.

Apart from the revenue derived by government by way of income tax, company registration fees, etc., professional services providers (e.g. nominee companies, lawyers, accountants and banks) saw a welcome boost in their fee income thus enhancing Malta’s invisible exports.

One should not underestimate what was done in 1988 and in subsequent years until the distinction between offshore and onshore activities was removed in 1994 and MIBA was substituted by the Malta Financial Services Authority.

I imagine that the initial fees charged in 1994 to government by foreign advisers plus those charged to the MFSA over the past 20 years were far higher than whatever amount  Chase Manhattan bank had charged.

Anthony Curmi is a former banker.