Author: SME Chamber

The European Commission has recently launched a Green Paper on building a Capital Markets Union and two flanking consultation papers on securitisation and a review of the Prospectus Directive.

This Green paper was launched as an initiative to break down existing cross-border barriers in European investment which prevents businesses from accessing finance at reasonable cost, give savers more investment choices as well as enhance the efficiency of the system that channels such funds.

GRTU President Paul Abela and Deputy President Philip Fenech attended an event organised by the European Commission Representation in Malta to present the Green Paper on Capital Markets Union in more detail and provide a platform for the sectors’ stakeholders to exchange their views and contribute to the consultation exercise.

During the discussion GRTU President Paul Abela emphasised that the European Commission should look beyond banks if it really wants to facilitate access to finance for SMEs. Finance facilities must target also SME organisations, within an agreed framework, that will promote access to finance and really have SMEs at their heart. Banks will always first and foremost priorities profits, low level of risk and promote their own products. These are far from the priorities of the European Commission and SMEs.

GRTU has followed reports in the media where it was stated that 300,000 square meters of space had been granted to Enemalta, so as to be made available to Shanghai Electric Power, at the mere price of Eur 0.50c per square meter.

GRTU is very disappointed by such an announcement after it has been lobbying for Government to make an area of land available to local businesses for PV investments.

Instead of leasing it to local businesses for investment and rehabilitation it was leased to a Chinese company. An area of this size could have easily provided for 2 years’ work for the Maltese enterprises and their employees involved in this sector. It would have made up for the quiet periods this sector experiences when MRA schemes are closed and their staff are idle.

To add insult to injury the price at which the Government owned factory roofs are being offered for lease is Eur 3.35 per square meter. If what is reported in the media is correct, this is almost 7 times more expensive than the rate given to Shanghai Electric Power.

In GRTU’s opinion, this is a case of two weights and two measures, where a foreign company is being given advantageous terms in respect to many local companies.

GRTU is incensed that Maltese businesses are being treated as second class citizens in their own country. GRTU feels that Maltese companies should get first preference by right, ahead of foreign businesses and if there is an opportunity Maltese businesses should always be given first priority.

GRTU is not against foreign direct investment but at least we require that Maltese companies are treated with dignity and given the same opportunities at the same price of foreign businesses.

GRTU demands an official clarification and if the facts are as reported, then GRTU demands corrective action in this regard so that Maltese enterprises are placed on equal footing.

A Country Thematic Review by CEDEFOP (EU Centre for Vocational Training) on Malta’s Apprenticeship Schemes gave an overview of the current systems in order to pave the way forward for reforms in work-based learning tied in order to make vocational training more closely tied to industry needs. This report was presented today at a Stakeholders’ Meeting held at MCAST in Paola.

GRTU applauded the efforts undertaken to bring forward this report as it sheds light on the previous schemes formerly held through ETC, which is a necessary step in order to reform apprenticeships as we know them and integrate them into education to bridge training with the world of work. GRTU agreed on the importance to rebrand apprenticeships, but also argued that the revamping needed to ensure a renewed quality which both students and employers can trust.

GRTU highlighted the need to ensure that the workings of any such schemes need to be feasible and attractive to micro-enterprises and self-employed. Given that the Maltese economy is made up of mostly such small businesses (at a rate which is higher to its EU counterparts), if the apprenticeship schemes are to be successful, they have to be tailor-made to fit the realities and exigencies of the smaller businesses. If the number of opportunities for trainees to acquire apprenticeships is to be widened and boosted, we need to ensure that considerations of small businesses are taken into account, so that even the wide sector of smaller businesses can also participate in offering these opportunities. The situations of these businesses need to identified and the schemes shaped upon them. For instance, self-employed and micro-enterprises will not have HR departments that can be assigned follow-up and handling of apprentices – but they can offer invaluable training opportunities as well. The scheme has to then be communicated and facilitated targeting also these businesses and not only larger employers.

GRTU also advocated the need for an increasing culture of apprenticeships in building an understanding of the benefits of work-based learning. This is should also serve as a spill-over towards linking educators and trainers with the world of work. If students are going to be undergoing apprenticeships to be linked to industry, we also have to ensure that teachers are in touch with the labour market.

Apprenticeships need to be given quality and value by establishing credits and an agreement on recognisable learning outcomes which both the employer and the student agree upon in order to know what training is to be achieved throughout the experience. However this has to be done in a clear and simplified manner that is not burdensome on partaking employers in a way that discourages participation.

In terms of recommendations related to strategic planning concerns, GRTU suggested that the relationship between small businesses and training institutions needs to be solidified. A setup has to be put in place to ensure an ongoing colloquium with industry which also reflects the needs of micro-enterprises and even self-employed. This would serve as a one-stop-shop for training needs and skills matching.

GRTU also welcomed the responsibility of apprenticeships being allocated to MCAST as the major public VET provider. GRTU however added that it would be necessary that MCAST would now also steer a national outreach to employers together with the help of employers’ representatives and support other training providers, both public and private, to also embark tap into the pool of apprenticeships.

Minister for Finance Prof Edward Scicluna addressed a joint meeting of the MCESD and the MEUSAC Core Group focusing on the National Reform Programme for 2015. The discussion was based on the New European Semester under which the European Commission provides a detailed analysis on the budgetary plans of Member States and gives Country Specific Recommendations (CSRs) which are intended to give direction to how respective Member States should deal with particular challenges in order to perform better in line of EU financial and fiscal targets.

The Commission report described Malta’s economy and labour market as performing well in 2014 with a favourable outlook for 2015-2016. It however highlighted that despite lower budget deficit, public finances sustainability remains a challenge. The participation of women and older persons in the labour market has improved yet remains considerably low. The authorities have focused on reforming the energy sector to diversify the energy mix. Malta’s competitiveness continues to be hampered by structural challenges in the business environment and the innovation framework, notwithstanding improvements. The report states that investment has been muted even though economic performance has been muted.

Minister Scicluna disputed the statements on investment and the means by which is taking such considerations. He also emphasized on the deliverables which the government is setting in terms of budget initiatives which are also targeted at addressing the country specific recommendations. These included, amongst others: finalisation of the Fiscal Responsibility Act; continuing to improve tax compliance and fighting tax evasion; pension reform discussions; public health reforms; measures to enhance labour market and skills; diversification of the energy mix; increasing of energy produced from renewable sources.

At the meeting, GRTU articulated major concerns for SMEs which need to be addressed in period ahead which tie to the comments presented in the Commission report. GRTU stressed the importance of focusing on the fact that Malta’s economy is built around a higher rate of micro-enterprises than the rest of its European counterparts.

A) This implies that administrative burdens need to be addressed tangibly and not only through legislative procedures but also by training all levels of the public service to understand that a delay in procedures may not cost much for a government department but cause serious repercussion to a micro-enterprise or self-employed. GRTU suggested immediate training initiatives, perhaps through EU programmes, which can be undertaken hand-in-hand with employers, to address the sensitivity to the results of administrative burdens on business.

B) GRTU welcomed Minister Scicluna’s statement of commitment towards moving towards electronic payments. This, GRTU explained, needs to be tied with offering new opportunities to existing business models that need to be supported in order to upgrade to turn challenges such as online shopping into opportunities.

C) GRTU voiced its concern on the Report’s comments on lending stagnation particularly in the case of smaller businesses. Banks need to be incentivised to provide the resources for businesses to operate. GRTU also welcomed and urged for further upcoming initiatives to find alternative means of accessing finance such as through providing structured private financing to small businesses to be able to take the necessary steps to the next level.

D) In terms of Research and Innovation indices, GRTU commented that despite giving due importance to academic high level research, it is essential to start considering business-tied innovation which small businesses and self-employed may not have the possible structures to invest in. GRTU suggested initiatives to be coupled between enterprise and public and private vocational education institutions that can provide tailor-made research opportunity support to business ideas and needs for micro-enterprises and self-employed.

E) GRTU stressed the importance of taking necessary measures to address tax evasion. GRTU added that whilst it is imperative to ensure that for fair competition practices are kept, it is perhaps more urgent to ensure that systems are put in place in practice to address taxation which is not being captured at all, such as undeclared goods. GRTU asked for updates about the developments of the setting up of a instruments such as the proposed Guardia di Finanzi alternative as announced in Budget 2015.

The Government is launching a new website that will promote the current products available on the market in relation of green buildings. Malta is already making a lot of advances in relation to greener buildings however it is clear that there is a larger need for more improvement for this concept to grow. This week architect Ivan Bartalo project officer at BICC (Building Industry Consultative Council) visited GRTU to deliver a presentation to a number of operators that provide smart technologies. Through this presentation Mr Bartalo explained the aim of the website and also highlighted the key products and services to be featured in the website. 

These product include:

• Solar thermal heating systems
• Photovoltaic panel systems
• New build and retrofit insulation
• Double glazing doors and windows
• Cladding systems
• Hard flooring systems

This initiative targets consumers to promote products and services that are energy efficient and smart technologies that lead to lower energy consumption and/or the generation of renewable energy.  The website will provide information:

• on the concept of green buildings
• product catalogue of local building technologies
• job descriptions of certified technicians, designers, consultancy and other specialist services
• technical product information
• non-technical advice for homeowners

The government believes that this initiative will not only benefit consumers that will be able to invest in energy efficient technology but also local suppliers that will be able to reach a wider audience.

• Smart, Green Fisheries
• Smart, Green Aquaculture
• Sustainable and Inclusive Territorial Development
• An Integrated Maritime Policy

The Family Business Act to help family-owned businesses survive was discussed during a business breakfast earlier on this week.

During his opening address, Minister for the Economy, Investment and Small Business, Hon Christian Cardona said that the Family Business Act is one of the initiatives that are being implemented by the Government to safeguard jobs, invest in enterprises and to boost Malta’s competitive economy. Its aim is to address obstacles and problems that those operating a family business face especially in instances of business transfers.  

Family businesses constitute 75% of Maltese enterprises and thus they employ a substantive number of people. Most of these family enterprises pass on to the second generation. However, during this transition, only 30% of these family businesses succeed and only 10% make it to the third generation. For these reasons a committee was then set up  to create a legal framework on which family business owners and members could plan and affect their transfer of business.

In order to have an efficient and effective legal framework, widespread consultation has been carried out. Amongst other things, the Family Business Act will include a clear definition of what constitutes a family business. This will control abuses and is a very important initiative considering that family businesses registered under this Act will be eligible for tax incentives.

Dr Nadine Sant, Legal Advisor to the Economy Ministry,  highlighted  that the structures of family businesses, the vast majority of whom are micro-enterprises, are often poorly defined.

Dr Sant explained that the proposed Family Business Act would aim to encourage family-owned businesses to register themselves, who occupies what position, the actual ownership structure, who has voting rights and decision-making rights. These will have to be clearly established.

The draft act defines family businesses as those owned by at least two members of the same family, although a small minority stake by non-family members is permissible.

A structure where one family member owns 99% and the other owns the remaining 1% will not be deemed acceptable for the purposes of the act, in part to ensure that other family members would have a say and an interest in the company’s wellbeing but also to encourage the transition from one generation to the next during one’s lifetime.

Malta Enterprise Head of Incentives Administration Karl Herrera said that registered family businesses would qualify for certain assistance and benefits.

Many of the proposed incentives involve the modification and extension of existing schemes, including increasing the guarantees that can be provided through the Micro-Guarantee Scheme, extending special benefits provided to start-ups under the MicroInvest scheme to family businesses, and providing advisory services that are specific to the needs of family-owned businesses, including legal and accountancy services related to succession and the services of an arbitrator to address any possible disputes relating to the transfer of assets.

GRTU would like to take the opportunity to thank Hon Cardona for involving the  GRTU as one of the main stakeholders which has worked on the legal framework of the Act in conjunction  with other stakeholders which have worked on the Family Business Act.  

The next step is for Parliament to debate and ratify the Family Business Act and next to encourage family businesses to trust the legislation and register.

GRTU has replied to a public consultation by MEPA on the Guidelines for Outdoor Catering Areas on Public Open Space.

While welcoming the consultation, GRTU has however suggested that this should be regarded as an initial step and once concrete proposals are in place MEPA should carry out a more in depth consultation explaining in detail the policy changes that are envisaged and any proposed change in procedures.

GRTU does however in principle agree with the objectives outlined by MEPA. We believe that a clear set of objectives is essential to implementing a system that is fair to all the stakeholders involved, including the commercial establishments. GRTU feels that this element of fairness is currently lacking because today, due to a number of reasons, different commercial establishments benefit from different permits when it comes to tables and chairs placed on public open spaces. This variation does not only apply in cases where establishments are found in different localities but also between establishments that are situated next door to each other. GRTU therefore believes that whatever guidelines are established they must be clear and available to any commercial establishing holding the relevant license.

One of the main problems emanating from the system today is that a large number of entities are involved in the decision of permitting and these entities serve the commercial establishments with different interpretations and points of view, which in actual fact makes the acquisition of a permit very time consuming and difficult. The current bureaucratic system should be replaced with a one-stop-shop system that still incorporates the views of all the stakeholders however is able to act according to a clear set of guidelines that limits the level of interpretation, gives commercial establishments equal opportunities, as much as possible, and the permit is issued within a reasonable timeframe.

GRTU feels that when deciding on permitting, the one-stop-shop system should bring together all the stakeholders involved and this includes not only representatives of the various entities but also a business representative, such as a representative from the GRTU. The business perspective is normally lacking within decision-making structures and it is important that the new system caters for such a perspective. In addition the commercial establishment should also be given a right to appeal a decision and be granted an opportunity to be heard by an appeals board.

1. Competitiveness first: There are a lot of factors affecting the competitiveness of enterprises, these include access to finance, unfair competition as well as the regulatory environment. Enterprise competitiveness is still not given top priority. Environmental regulations heavily impact the competitiveness of European SMEs. This does not mean that the environment is not important but regulations need to be implemented in a manner that is sensitive to business and keeping in mind the competitiveness of enterprises when compared to enterprises outside the EU, which are direct competitors. 
2. Access to Finance: The issue of excessive interest rates and bank charges that heavily effect a country’s competitiveness is an issue in many European Countries and GRTU contends that the problem is very pronounced in Malta. GRTU emphasized that more finance facilities must be made available to SMEs and these must be affordable and easy to access. These funds must be made available to all local banks so as to encourage full participation. The Commission should however also facilitate the distribution of such funds to intermediaries apart from banks and encourage bodies that really have SMEs at heart to build the necessary infrastructure. 
3. The Small Business Act: The Small Business Act was a good paper exercise however it was implemented to different extents in the Member States because there was no legislative obligation on the Member States. The Small Business Act has not reached its desired results and a more aggressive stance is required.
4. Standardisation: Standards tend to be complicated to acquire as well as costly. Larger enterprises therefore fair better than smaller enterprises to acquire standards and making standards accessible to smaller business still requires a lot of effort at national level by the GRTU and at EU level by UEAPME.