Fabian Demicoli

Are SMEs burdened with too much bureaucracy?

 If one had to carry out a survey among SME's the response to this question will be an overwhelming yes. This is not the first time that this question has been asked. GRTU has regularly asked this question to its members and has often written and spoken about the subject. Why does it take so long to reduce or even remove bureaucracy? When running an SME and especially at a time of an economic downturn the
business person does not want to be over burdened with bureaucracy.

The first priority of a business is to get work to sustain itself; to have enough funds to cover wages, costs such as electricity, water, transport and other running costs. Filling in documents is not a priority.

It is now becoming common practice to receive forms accompanied by a letter stating that if the forms are not filled in and sent in due time, fines or other penalties will apply. The reason for this being that the general environment in Malta has become anti-business, pro-regulation driven economic thinking.

The recent farce on the regulations and penalties and loss of licence threats imposed on retailers for simply wanting to service customers late show that there is a strong resurgence in government of this anti business pro regulation thinking.

The problem is that these same people in government offices who take these decisions are paid by the taxes gathered from the private sector. Yes it is true that they themselves pay taxes but of course this only covers a small percentage of the total wage they receive. Where is the balance coming from? From the private sector and from our younger generation who must work and sacrifice themselves in order to sustain the debt burden being run up by the current massive recurrent government expenditure.

Europe 2020 strategy talks about structural reforms to increase market flexibility. Malta has a problem of market size and therefore it stands to gain a great deal from greater market integration and better institutional settings. Somehow Malta must find the formula to help businesses overcome the problem of market size. Making its institutions more efficient is one of the ways of doing this. Malta is still lacking behind among most European countries in terms of its competitivity. Out of the 26 EU countries Malta occupies the 21st position. Only 5 countries out of the 26; countries such as Greece, Bulgaria and Latvia are behind Malta and that does not say much!

98% of entrepreneurs in Malta run small businesses and the vast majority do this against all odds.

I am one of the 98%. I am a woman entrepreneur with offices in Floriana. Every 2.5 hours each and every one of my staff has to leave the office to change the parking metre on his car or move the car around Floriana. Recently one of the staff got fined. The warden in question said that the car has to be taken out of Floriana and cannot return for one hour. Can you imagine what this female employee said? How can you introduce a policy that makes employees leave the office and not return for one hour right in the middle of the working day? Can't someone somewhere realise that this is a hopelessly wrong decision?

Unfortunately most local councils are anti business and therefore council decisions are taken to drive away business from the locality not to welcome it. How about introducing a system whereby our licence fees go to the local council instead of to some authority somewhere that does not give a hoot about business? Surely my council in Floriana would be very happy then to have me operate in Floriana!

Take away all the nice talk and the nice phrases and all the schemes that finally after years of GRTU agitation are now in action; only a very small ratio of all these entrepreneurs receive any form of assistance. An SME lacks resources, cannot afford to fill in forms after forms. An SME is today fighting to survive. GRTU is not asking for subsidies. We have never asked for subsidies. All we have asked for are schemes that mitigate for the problems caused by small size; for the mitigation of the excessive costs of meeting the exceptional level of bureaucratic and government induced costs.

Why do companies have to fill in the NSO forms asking for turnover, gross profit, expenses and so on when this same information is passed on to the MFSA – registry of companies every year? Is this not a waste of time?

Can you believe that the Department of Education asks for a copy of the recognition letters issued by the Malta Qualifications Council instead of getting them itself from the council? This means that the private training provider has to photocopy documents for an office issued by another office falling within the same ministry.

Private training companies for instance have the public sector to compete with but this competition is not on a level playing field. Courses are offered by ETC, OHSA, MFSA and others that are already offered by the private sector. Why does this public sector have to compete with the private sector? Of course their courses are cheaper. They do not have to factor in staff costs because the private sector is paying for this cost! If anything authorities and other public sector entities should offer training not covered by the private training industry.

In order to understand the level on bureaucracy, one has to cost it. This means that an exercise has to be carried out on the percentage of overall costs that bureaucracy is costing business. We need to understand the weight per capita on small enterprise. There are more people than ever being dragged to court on silly excuses like posting tax returns late or for falling behind in payments of tax when in 2008, 2009 and 2010 Malta was passing from the worst recession in 30 years. Unfortunately, but I say this with conviction, the anti-small business feeling in the public service rather than diminishing is growing. There is a stench of jealousy and prejudice. Of course, and I have no doubt that there are hard working and genuine public sector employees but unfortunately the actions of a few, because these few are occupying high positions and are among the policy makers spoil it for the rest. There is this us and them mentality instead of all of us working for the benefit of this country.

The Small Business Act will help no doubt but unless the overall mentality changes GRTU believes we are still uphill. Indeed our Director General has only this week described the general feeling of state bureaucrats and government politicians in general as the worst over 2 decades. Why is this? Some of the younger elements in Cabinet do not appreciate the importance of the private sector. Few politicians have a business background; most are lawyers; hence the explanation whey Malta has become a regulation driven rather than a business driven economy. The result is that Malta is not becoming more competitive. Having retained its place at the 50th Ranking in the Global Competitivity Ranking as per the World Economic Forum Report it is behind countries such as Cyprus, Italy, Portugal and Slovenia; wages cannot go up like they have in some other countries because businesses are not doing well. It is not the business person and his/ her family which suffer as a result of wrong policy making. It is the employees too and their families. It is the vast majority of the population.

I am a woman in business. For many years I have spoken in favour of encouraging women into business. A business cannot be run part time. What has the government done to encourage women to open up their own business? I am not talking here merely about women returners to the labour market. (Malta has the lowest percentage of women in the labour market in the whole of the EU!). That is another topic for another day. I am referring to those women who have the courage to open up their own business. Extending school days, real tax incentives, other family friendly measures are only a few of the many ideas that we have now been taking about for years.

As in every business, the public sector needs to do some soul searching; should look at itself, should learn to co-ordinate and work with itself before it attempts to work with others. Stream line forms; make them easier to fill in. Do not ask for double information or information which takes us nowhere.

Policy makers in Malta must take measures to improve basic competitive requirements by strengthening institutions making them more efficient. Policy making must be effective and help businesses be more competitive.

Public sector employees should learn to empathise with the business person; make life easier so that business can flourish. Only then can we stand up and be proud that our country is pro business and anti bureaucracy.

Rosanne Galea- Director Future Focus

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