As the European Union's Services Directive enters into force on Monday, business leaders are appealing to the government to ensure a level playing field and to prevent a "free for all situation".
Both Chamber of Commerce and Industry president Helga Ellul and GRTU director-general Vince Farrugia called on the government not to allow the alleged "abuse" that took place in the free movement of goods sector to be replicated in the services sector. The objective of the Services Directive is to release the untapped growth potential of services markets in Europe by removing legal and administrative barriers to trade in the services sector.
Mrs Ellul told The Times Business: "The Services Directive will make it easier for Maltese operators to provide a service anywhere within the remainder of EU territory while making it easier for any EU service provider to do business in Malta. The country must therefore ensure it has the administrative capacity to implement this directive and ensure a level playing field."
She added: "Implementation is in fact the major concern across all EU member states. Malta must ensure that the necessary implementation and enforcement mechanisms are well in place. In much the same way that the free movement of goods does not equate to a free-for-all situation, neither does the free movement of services or the Services Directive - for that matter. Therefore, the country must ensure that the extent of abuse in free movement of goods is not replicated in the context of services."
Mrs Ellul said that local service providers must gear themselves up to consolidate their local position while at the same become more proactive in pursuing opportunities for business abroad.
"There was never a more appropriate time to encourage local businesses to internationalise. In view of this, the Chamber is actively seeking to collaborate closely with Malta Enterprise to actively promote and facilitate this task," she said.
Vince Farrugia said that while the GRTU is entirely in favour of the Services Directive which enters into force next week "in the past five years some businesses suffered as a result of unfair competition in the free movement of goods."
Mr Farrugia mentioned an "invasion" of goods entering Malta by boat and cited local bottlers who were placed at a disadvantage as they pay VAT and eco tax on their products.
He pleaded with the authorities not to allow a repetition of this situation in the services sector.
"We need better market supervision. We need a better regime so that the Services Directive can be operated properly," he said.
Mr Farrugia said the GRTU always looked at the positive side of the Services Directive and believes that Maltese service providers should have opportunities in other markets.
"We look at this directive as an opportunity for Maltese businesses to grow in a bigger market rather than foreign businesses coming here and taking business away from Maltese companies. Both will happen but hopefully the first scenario will be overshadow the second," he said.
Mr Farrugia said that certain businesses such as petrol stations and pharmacies are outside the realm of the Services Directive.
"The government has certain options when it comes to these business concerns which are protected and these options are being studied. I hope we will be consulted over any changes as we were not consulted enough over the legal notices in connection with this Services Directive.
"Not a single formal meeting has taken place on this directive. In the past when Edwin Vassallo was parliamentary secretary for the self-employed we used to meet regularly. Today I hardly know the people who are working on this directive," he said.
Finance Minister Tonio Fenech told The Times Business that consultations were indeed held with a whole range of business organisations including the Chamber of Commerce and Industry and the GRTU as well as representatives of professionals.
Mr Fenech said that Malta had the administrative capacity to ensure a level playing field as the Services Directive enters into force. "We have a mechanism in place to ensure fair play and we did carry out consultations as our laws were screened and changed to transpose this directive," he said.
Mr Fenech pointed out that whenever there was any suspicion of illicit trading in goods, the government took action "and the private sector is aware of this."
"We will do this same if there are any suspicions of unfair activity in the services sector, although one cannot compare this sector with the free movement of goods sector."
Mr Fenech said that Malta was very much a service oriented economy and, therefore, had a lot to gain from the Services Directive.
The directive requires EU member states to simplify procedures and formalities that service providers need to comply with. In particular, it requires member states to remove unjustified and disproportionate burdens and to substantially facilitate the establishment of a business, in which a natural or legal person wants to set up a permanent establishment in a member state, and the cross-border provision of services, in which a business wants to supply services across borders in another member state, without setting up an establishment there.
As a result of this directive member states are obliged to set up "points of single contact", through which service providers can obtain all relevant information and deal with all administrative formalities without the need to contact several authorities. The "points of single contact" have to be accessible at a distance and by electronic means.
The Services Directive also strengthens the rights of recipients of services, which can be both consumers and businesses. For instance, it prohibits discriminatory conditions based on the nationality or residence of the service recipient, such as discriminatory tariffs. It also lays down a set of measures to promote a high quality of services and to enhance information and transparency relating to service providers and their services.
Finally, the Services Directive obliges the member states to cooperate with each other in order to ensure efficient supervision of providers and their services.
The Services Directive has been hailed by its supporters as a key development of the EU's single market. Goods are already freely traded in the EU, but services have lagged behind, despite generating two-thirds of the EU's economic activity and employing nearly 70 per cent of its workforce.
It is hoped that this directive measure will create jobs, boost economic growth and increase quality and choice for consumers.
The consultants Copenhagen Economics have predicted a 0.3 per cent rise in GDP and a 0.7 per cent increase in employment in the EU while the European Commission's estimates point to a 1.8 per cent increase in GDP and 2.5 million new jobs.