Times of Malta Business asked representatives from some of Malta’s main economic sectors what they would most like to see happen in 2014. There may not be any surprises but the replies are a somewhat sad reminder of how long it takes for real progress to be made.
Angelo Xuereb – chairman, AX Holdings
2014 should kick off a resurgence in the construction industry, which is one of Malta’s main motors of its economy. Construction incorporates many associated trades and therefore has a multiplier effect on all walks of life.
I feel confident about this, since the government has realised the importance of this industry and has already taken various actions to re-oil its wheel. The government is very pro-private sector and is putting its money where its mouth is.
The government is giving preference to Public Private Partnerships (PPP) concepts to develop a number of infrastructural projects and other government properties. It is also focusing on regenerating derelict buildings in urban conservation areas or idle buildings with an emphasis on long-term investments that generate permanent employment.
Mepa is also processing long-pending applications for major projects and hopefully will reduce the excessive bureaucracy. It is giving a boost to the tourism industry and allowing an additional two floors on certain existing hotels, and the development of boutique hotels.
The regeneration of unsightly blocks of buildings into more environmentally-friendly structures is also based on the proposed floor area ratio policy, whereby 50 per cent of the site would be left as open space. On this point unfortunately some people and NGOs have not yet understood the positive effect. These structures can only be developed in five specific areas and not in ODZ. These new structures could be landmark buildings and will definitely improve the neighbourhood.
Other initiatives are land reclamation projects, the Gozo marina and cruise ship mooring facilities, the long pending Marsa Business Park that will cater for large scale offices, the new Marsa Maritime Hub, a number of restoration projects and major road network and traffic junctions.
Given the above opportunities with the right demand for them, together with the support of a more efficient Mepa and banks, I can confidently say that 2014 will kick off more intensive construction activities during 2015 and 2016.
This major industry has taken great steps forward in many aspects during the past 20 years and has learned from past mistakes. Although building contractors offer a service to developers, and developers in return develop according to the demand, we should all be looking forward to more sustainable developments that create a balance between environment and development and that will enhance the Malta product that will make future generations proud of today’s decisions.
Theresa Bartolo Parnis – CEO, Accessorize, Monsoon
For many retailers, the absolute number-one priority is the customer’s shopping experience. At Monsoon and Accessorize stores, great expense and effort is made to ensure that all the elements such as shopfitting, design, window displays and lighting combine to ensure a pleasant shopping environment. If this commitment could be extended to include feasible traffic and parking schemes, and the creation of a great atmosphere in retail destinations in the form of activities such as music and cultural or fashion events, this would make the whole experience of shopping pleasurable and seamless for the customer, and would greatly benefit the retail sector too.
Michael Caruana – chairman, Fort Chambray Ltd
The government has to place immediate and special focus on Gozo and lead a strategic body to address the economic, cultural and environmental issues it faces. The government has to act immediately and decisively to implement the infrastructural projects in line with the electoral program to boost the economy in Gozo and to create jobs for Gozitans who opt to work in Gozo.
It should:
1. Proceed with the evaluation process and conclude at the earliest possible the construction of a first-class yacht marina and cruise liner terminal in Gozo.
2. Lead an expert team to plan and integrate an environmentally friendly air strip for small aircraft to land in Gozo.
3. Issue Mepa permits for hotels, hotel extensions and other tourism-related projects, (obviously those conforming to Mepa regulations) without any further delay.
4. Assist interested parties to create venues to cater for conferences in Gozo.
5. Provide and allocate without any further delay an industrial zone designated by Mepa to build garages and workshops to host small scale industries (carpenters, panel beaters, wrought iron works etc).
Andy Gatesy – chairman and CEO, Toly Products
For Toly the key issue lies around competitiveness, that is: what can we do to be more competitive?
Over the past years the costs for manufacturing in Malta have outstripped productivity increases rendering us less competitive each year. The government has recognised this and is committed to reducing some of the important costs such as the cost of electricity. For manufacturing, we still have to wait until 2015, so any help before that will be welcome.
We also need to work with the government to persuade the European Union that Malta needs to be looked at differently from other member states. We do not have a level playing field with other EU countries. We are a small island. We have no suppliers or customers in Malta. We have to import all raw materials, convert and then re-export. Our European competitors do not need to do this, so we need to find ways to offset these disadvantages.
Around us are competitive regions such as North Africa and Eastern Europe. We need to continue to find a way to differentiate ourselves in Malta and offer value to our customers.
Sergio Vella – vice-president manufacturing operations/Western Europe, Actavis
The local pharma manufacturing industry relies heavily on a stable provision of energy at competitive rates. The fact that local electricity tariffs for industrial consumers are significantly higher than the EU28 average penalises the competitiveness of our products in an aggressively priced global market.
In this respect, I would like to see a strong and timely reduction in utility rates for local industry during 2014 to support our drive towards increased competitiveness of locally manufactured pharmaceutical products.
Chris Grech – chairman and CEO, Dhalia Group
In the last six months we have seen a number of initiatives introduced by the present administration, to help fuel the revival of the property market. First-time buyers are having their stamp duty waived, income tax for rental income investors has been reduced to 15 per cent, a retirement scheme as well as a residency scheme has been launched, and most recently, a citizenship programme is being finalised subject to the purchase of property. The impact on the property market has been positive, and although I do not think that this will lead to an immediate increase in values, demand for existing stock of property has improved.
However, the banking sector still continue to regard any connection to property investment as high risk, and until the property sector (including major projects in the pipeline) obtains the full support, backing and confidence of the banking sector, progress will continue at a very slow pace.
Juanito Camilleri – Rector, University of Malta
The most important development needed in tertiary education and in particular research and innovation is the launch of a structured “postdoctoral junior research fellowship programme” to complement STEPS and MGSS, the postgraduate and doctoral scholarships programmes launched by the government a few years back.
Such a programme will allow the University of Malta to attract or retain emerging talent to create research clusters of excellence in areas of national importance, or to stimulate growth in specific sectors of the economy. In tandem, the setting up of a “national proof of concept fund” as well as a “start-up fund” aimed at promoting and financing knowledge-based entrepreneurship are crucial ingredients to promote a culture of indigenous innovation and value creation.
The University must continue to stimulate the creation of suitably sophisticated jobs for tomorrow’s graduates while educating suitably trained graduates for today’s jobs.
Martin Webster – head of equity research, Curmi and Partners
The central problem facing Western economies is anaemic growth. Higher growth rates would naturally allow scope for a number of positive developments, such as making sovereign debt more sustainable and lowering unemployment. To stimulate growth, we need to stimulate risk-taking. However, it sometimes appears that certain responses to the financial crisis are diametrically opposed to what is needed generally – although those responses are rational in their own narrow context. For example, banks are being forced to raise their capital buffers to mitigate against future losses. Individuals seek the relative safety of bonds, which offer the prospect of regular income and a defined settlement date for the capital.
One of the primary functions of the government is to promote conditions which induce and support private investment into the economy. That inducement should be commensurate with the risk being taken, in order to be effective. In simple terms, enterprises are funded by a mixture of debt and equity. Equity investors are prepared to take on more risk, and it is they who can jump-start the economy. If an alien had just landed on earth for the first time, it would expect to see a regime which actively promotes equity as an asset class. Furthermore, equity should be treated more favourably relative to debt. This by now wide-eyed alien would be surprised to discover that the opposite actualy holds – interest on debt is tax deductible as an expense, but the interest on equity is not. It might prematurely conclude that there are no intelligent life forms on earth, and miss the opportunity of discovering luminaries such as Mozart, Montaigne and Barroso by returning home immediately.
If it were a well-meaning type of alien, with a bit of spare time on its hands, it might contact ‘the authorities’ and kindly suggest that enterprises are allowed to charge a notional cost of equity against profits. The cost would be at a premium to the risk-free rate, which in Malta we assume is the interest on the Malta Government Stocks. It should also be at a premium to the cost of the enterprise’s own debt.
This rebalancing of the cost of different forms of funding would stimulate investment, allocate capital more efficiently, and reduce financial risk both at the individual and systemic level.
This would be particularly positive for an economy highly reliant on the formation of SMEs, which often have to resort to friends and family for funding.
Astrid Vella – Flimkien għal Ambjent Aħjar
My wish list for 2014 is simple: proper planning, which is the key to a healthy environment and economy.
Malta is the only country in Western Europe that is actively pursuing outdated, unsustainable policies that damage health and the economy. Rushing through Local Plans and regulations before the new land use Masterplan is issued will inevitably create more conflicting situations and grey areas. Sound planning requires impartial studies to assess the construction of high-rise buildings and land reclamation at a time when the country is suffering from overdevelopment which brings with it serious health problems.
Responsible planning is also a priority because the construction and real-estate sectors account for almost half of non-performing bank loans, which pose a growing risk to our banking sector.
I look forward to the day that Malta is brought into the modern age by replacing political expediency with true vision and courageous policies that put health, economic and social issues before all else.