Category: Archive – 2015

Download the full survey document here

GRTU’s 2015 Business Performance Survey shows an overall positive result which to a great extent reflects Malta’s economic achievements. This is especially when considering an increase of over 10% of respondents reporting improvements over last year, when compared to the feeling expressed by enterprises in the 2014 Business Performance Survey.
In 2015, the positive feedback submitted by businesses supersedes the negative feeling both when businesses assess their overall performance and their sales during the festive season.

GRTU however believes that the figure of 25% of total respondents reporting a negative going of business is not an insignificant one and merits a thorough analysis to assess what the underlying issues causing this disparity are. GRTU is also not satisfied with the 27% of enterprises that felt that they remained in the same situation of last year because the economic performance of the country should have translated into improvements across the board.

Enterprises outlined a number of factors that they felt contributed directly to their overall performance in 2015. Interestingly, even though the results of the survey are generally positive, respondents mention a higher number of negative factors and some elements are even cited by businesses as having had a negative contribution while others attribute the same elements to their positive performance.

An extended period of good weather was frequently mentioned as having had the strongest positive impact on the going of their enterprise because people were encouraged to go out and shop. The weather was however also seen in a negative light by businesses that do better when the weather requires the thicker clothing they sell. Another main positive factor was the successful strategy adopted by the enterprises themselves, including advertisement and promotion strategies, good customer care and the selection of products sold. Consumer spending power was also said to have contributed towards positive business performance.
The negative comments were both numerous and familiar, with competition being the most unfavorable factor reported. Enterprises complained about too many businesses competing for the same consumers with the same products, driving down profitability; however their complaints also include the ever-increasing challenge posed by online shopping as well as unfair competition. The issue of unfair competition is affecting businesses in all sectors. This ranges from imports that are evading taxes, the sporadic issuance of licensing and the unsustainable enforcement efforts of the authorities.

Traffic, roadworks and parking were also very common sources of complaints with a vast number of respondents arguing about lack of sufficient parking facilities in many localities, accessibility issues in Valletta, the need to increase loading and unloading bays and the need to utilize wardens to help rather than castigate.
Insights into the festive season show that the best time for business sales was Christmas Week (21st – 27th December). The introduction of Black Friday sales (27th November) were reported as a successful initiative despite takeup by businesses may have been low in its first year. As one may expect, January has been so far a slow month for business.
The survey further resonates issues and concerns which GRTU has been honing about. There is a clear need for a stronger environment towards boosting competitiveness such as initiatives to help businesses go online. One point which continues to surface as a stumbling block for outward online shopping is excessive postage costs to sell abroad. Running costs also need to be diminished to encourage competitiveness. GRTU’s call for reduction in utility tariffs would definitely be of great support to this end, allowing businesses to instead be in a better position to invest and innovate.

Access to finance remains largely an unaddressed business concern with the survey referring to bank interest charges. Administrative burdens and bureaucracy also hinder business growth.

Setting an outlook on expectations for 2016, a good 34% of businesses reported intentions to expand over the next year whilst only 5% reporting downsizing expectations for the upcoming year.

The private sector’s role to raise standards in Paceville is pivotal

“We need to send a serious enforcement message on Paceville, but to succeed all stakeholders involved including the private sector must act in unity”, This was stated by Minister for Home Affairs and National Security Carmelo Abela during a meeting held with the Chamber for Small and Medium Enterprises in Malta on the issue of the amelioration of Paceville entertainment zone and surrounding areas.

The majority of entertainment operators in Malta and Gozo were present for the meeting including a high number of owners of establishments in Paceville. 

“Government is committed to see immediate improvements when it comes to the issue of safety and security in Paceville”, Hon Abela told those present. He noted Government is currently reviewing regulations that permit a stronger regulatory framework marking clearer responsibilities, for enforcement in the area of health and safety. The increase of fines as a deterrent which is currently under review was also discussed. 

GRTU Tourism President Philip Fenech said that GRTU was working closely with private operators to raise standards in the sector. “Together with the authorities we are taking a constructive approach and making advancements” said Mr Fenech. He noted that through these meetings, GRTU was enhancing the effectiveness of a platform which sees policy makers and the people that work on the ground, working together to understand each other’s realities and devise a way forward.

The private operators raised a number of concerns that they encounter. Amongst the challenges mentioned were the anomalies in the licensing regime and the difficulties with fake and stolen Identity Cards. Others remarked the unlevel playing field created by one off events and by some establishments that are utilised for entertainment purposes but fall within a different licensing category. The need to strengthen the training of a number of security personnel was also pinpointed. 

GRTU stated that this meeting followed the one held recently with the Malta Tourism Authority related to licensing and compliance. In this meeting, they were represented by Tourism President Philip Fenech and CEO Abigail Psaila Mamo. Accompanying the Minister for Home Affairs and National Security Carmelo Abela was Mr Joe Bonello, Policy Advisor 

1. Micro Investment of a maximum tax credit of €50,000 over a three-year period, naturally subject to Malta Enterprise’s terms and conditions;
2. Legal and Accountancy advisory services up to €2,500 over a five-year period;
3. Assistance for Arbitration sittings;
4. Education and training for owners and their employees of up to €1,000 annually per family business;
5. The positive consideration of lease renewals occupying government premises;
6. Loan guarantees of up to €500,000 per business for the purpose of acquiring the business or parts thereof;
7. When a registered family business is occupying industrial government premises or land on lease or emphyteusis (cens) and subject to the business satisfying all the conditions of the tenancy agreement that has lapsed, the Regulator shall recommend to the Malta Enterprise and/or Malta Industrial Parks to renew the tenancy. 

1. Duty on Documents on immovable property being transferred between family members of a family busiess shall be chargeable on the first €500,000 of the value of the property transferred at the advantageous rate of 3.5% or part thereof;
2. In the case of Duty on Documents payable on the transfer of shares of a family owned company between family members, or interests in a partnership, trust or foundation, no duty will be chargeable on account of the first €150,000 of the value of the shares or interests in a partnership, trust or foundation transferred.

GRTU CEO Abigail Psaila Mamo has today participated in a citizens debate entitled ‘Living with Migration’ which concentrated on the issue of migration in Malta including how they are perceived by citizens, how they themselves feel they are treated and the case for their integration.

It was mentioned that migration is an issue not just in Malta but in many other EU countries, where the numbers are even bigger than in Malta. When 

we speak of migration we commonly associate it with asylum seekers and illegal migrants coming from Africa. Migrants however come from other EU countries as well as other 3rd countries and there is a good number of migrants that are skilled. 

Ms Psaila Mamo said that Malta has a very low level of unemployment and migrants fill in the vacancies the Maltese are not interested in working in or not skilled enough. There are a number of sectors where migrant workers are essential, simply because there is shortage in the Maltese labour market. She said that there is an issue with the lengthy procedure for a third country national to be able to work in Malta and also with regards to the recognition of qualifications.  Another thing she mentioned is that GRTU is supporting the Government in its efforts to regulate work of illegal immigrants through the newly announced Budget measure that will establish an Immigration Work Office where businesses will be able to buy the hours of work they need and the current situation of going to Marsa to pick an illegal immigrant for work will stop. This is something GRTU has been insisting on for many years because businesses have no other option but to employ them illegally and this would put a stop to any abuse and social contributions would be paid in the process. GRTU will be involved in the consultation process before this system is established to ensure that the system is not bureaucratic and that the cost of employment is reasonable and viable for enterprises.

Another way GRTU is supporting the integration of migrants is through social entrepreneurship. GRTU has applied for an Interreg project whereby it would work with disadvantaged groups such as women, pensioners, youths not in education and employment as well as migrants to help them tap into entrepreneurship as an option to employment. If funded the project would start being implemented later next year.

GRTU welcomes the Energy Union Package. The Energy Union is even more important for Malta because we feel that due to the small size of Malta and lack of economies of scale we have a lot more to gain. Malta’s absolute dependency on importing oil to produce electricity and problematic and unavoidable market inefficiencies, including lack of competition, being the only member state that imports refined oil because we do not have a refinery and the added costs to secure supply, makes electricity in Malta amongst the most expensive in Europe.

We are also in favour of reforms and changes that are needed to increase energy efficiency and change to alternative energy sources. We emphasis however that the impact on SMEs must be assessed and they must be supported and SME organization should be fully involved. 

GRTU supports the use of Juncker’s Plan for investments in the energy efficiency in buildings with financial and technical support of which SMEs will profit. Similar incentives should also be foreseen for SMEs outside the building sectors aiming to become more energy efficient and more sustainable. We fear that the shift to electro mobility will be expensive and thus impact negatively on the economic operators. Short-distance transport is an essential reality, especially in a country like Malta. GRTU believes that measures targeting the transport sector should be structured in order to allow SMEs to stay on the market by reconvening their activities. Increasing taxes and charges should be avoided. GRTU is wary of the consequences the proposed decarbonisation of the transport system might have on the EU’s competitiveness.

The Energy Union means in particular:

• Solidarity clause: reducing the dependence on single suppliers and fully relying on their neighbours, especially when confronted with energy supply disruptions. With more transparency when EU countries make deals to buy energy or gas from countries outside the EU;
• Energy flows, as if it were a Fifth freedom: that of free flow of energy across borders – strictly enforcing the current rules in areas such as energy unbundling and the independence of regulators – taking legal action if needed. Redesigning the electricity market, to be more interconnected, more renewable, and more responsive. Seriously overhauling state interventions in the internal market, and phasing out environmentally harmful subsidies.
• Energy efficiency first: fundamentally rethinking energy efficiency and treating it as an energy source in its own right so that it can compete on equal terms with generation capacity;
• Transition to a low-carbon society that is built to last: ensuring that locally produced energy – including from renewables – can be absorbed easily and efficiently into the grid; promoting EU technological leadership, through developing the next generation of renewables technology and becoming a leader in electromobility, while European companies expand exports and compete globally.

Climate Change Minister Leo Brincat addressed the MEUSAC Core Group ahead of the UN World Conference on Climate Change (COP21) in Paris. Minister Brincat tied Climate Change Action with the importance of sustainable growth. He explained how Malta had adopted the Climate Change Act which establishes structures and mechanisms to instil climate change awareness and accountability related to such inaction. This would be 

done through the setting up of structures such as the Climate Change Board and the Climate Change Fund.

Maltese MEP Miriam Dalli, who also addressed the meeting, outlined the importance of planning in the medium- and long-term rather than quick fix solutions. This is a global challenge that needs to be taken seriously collectively. Dr Dalli expounded on the importance of targetting renewable sources of energy in order to shift towards reaching global targets as well as improving the perfomance of the EU as a bloc which promotes itself as a front-runner. Dr Dalli also disucssed the Emissions Trading System and the situation of realities around us that result in climate migration. Another important factor outlined was that of the vehicle and transport sector where she expressed her dismay on recent developments at EU level. She explained that this would mean that the EU could possibly back-track on commitments related to emissionstied to diesel-run vehicles across the EU simply because car manufacturers had not taken measures for development and improvement over the years. Dr Dalli concluded her address that it was important that COP21 seeks to reach a legal agreement that is binding as otherwise the results of the summit would remain on paper. This agreement would need to be reviewed periodically. She also outlined that commitments had to be set according to country and economy size rather than having a one-size-fits-all set of targets.

GRTU outlined competitivenessas its main theme for its flagship Budget 2016 proposals this year. Matthew Agius, representing GRTU at the Core Group meeting, outlined how climate change had to be to sustainable growth and promoted as a possible means to boost competitiveness, rather than simply furthering the concept as deterring factor bound by penalties. The enactment of a Climate Change Law was welcomed but should not remain on paper or simply as a stand-alone piece of legislation. The way forward is an integrated approach throughout which would instil a widespread attitude across the board even through legislative measures. This positive rather than negative approach was essential as otherwise blocs, countries, businesses and citizens would not seek to apply climate change action despite the greater good aspect. It has to be seen as a tool in itself to push forward competitiveness.

In this sense, Agius gave practical examples from this year’s budget itself – proposals which even GRTU had put forward and had been taken up by Government. In the case of transport, examples such as measures for employers to incentivise combined transport for employers could also provide employers with benefits of ensuring better well-being for their own workers and that workers have no reason not to show up on time. This would result in higher productivity whilst mitigating to traffic problem in general.

GRTU had also welcomed initiatives intended to support further the shift towards renewable energy. Businesses had understood the competitive advantage of investing in PV panels and therefore take-up of such government support had been positive. New initiatives such as the suggested proposals to set up PV solar forms would also bring positive results in terms of competitiveness as well as climate change action.

With regard to the subject of waste, GRTU outlined how the WEEE directive had been a positive way forward following the Government’s commitment to abolish Eco-Contribution Tax. Nevertheless, this year we have seen increased or new excise duties replacing the removal of Eco-Contribution Tax. This was reinforcing the idea of climate change measures as a way of penalising and deterring competitiveness and not the other way round. It would have been better to see resources allocated to ensuring that the WEEE directive is being observed in the same way that there is enforcement for other directives. If there is no enforcement complying businesses would be discouraged as they would be less competitive when compared to their non-compliant counterparts and therefore climate change action would be seen negatively rather than positively.

Educationwas also a key factor for the success of climate change action. Matthew Agius suggested that training initiatives would be set in place to empower both existing businesses and micro-enterprise as to how they can adopt climate change measures in practice given their constraints and how this would benefit them. It was also important to empower startups and upcoming entrepreneurs to value such measures from go. This would ensure that new businesses are conscious at their design stage and would not need to change their methods of doing business afterwards. Incentives to award business innovationwould also encourage progress in this sector as one would encourage developing of new tools and ideas through the private sector.

GRTU also reiterated the importance of maintaining standardsas otherwise non-compliance would be encouraged at the cost of competitiveness and sustainability. Without instigating any witch-hunts, one cannot simply accept a laissez-faire approach of accepting non-compliance and non-adherences to standards as no one would take climate change concerns seriously. Examples could be drawn from the European level, both from what Dr Dalli had highlighted as well as recent news related to breaches of emissions data. These definitely send the wrong message to what is being sought to being achieved.

GRTU has been advocating the importance of traineeships and hands-on experience to enhance labour market skills throughout education. It has been at the forefront of supporting apprenticeships and internships by encouraging its members to host such students and trainees whilst pushing forward the concept of quality training. Education needs to be supported by soft skills and practical experience to ensure a stronger labour force ready to meet the needs of business and industry.

In this spirit, GRTU has been invited to hold a press conference whereby Bachelor of Communication Studies students would be able to pose as real-life journalists and be able not only to gain first-hand experience but also have their assessment tied to practical training. The press conference formed part of the Meet the Pressmodule under the tutorship of University Lecturer and seasoned journalist Lourdes Pullicino.

GRTU President Paul Abela held the press conference at the University of Malta and covered GRTU’s flagship budget proposals and GRTU’s reaction to the Budget. Paul Abela outlined the consultative process through which the GRTU council sets its priorities and puts forward its agenda to the MCESD and to Government. He accentuated how the GRTU priorities called on the Government to address the challenges that are holding down our enterprises in terms of competitiveness. If Government really believes that enterprises are the backbone of our economy and drivers of economic growth and job creation it must address the 5 issues highlighted to enable enterprises to be competitive. These included a further reduction of energy for SMEs by 30%; improving access to finance; supporting business to conquer digital challenges; alleviating traffic pressures and parking constraints; setting up of a start-up hub.

Abela then gave an overview of GRTU’s reaction in saying that this year’s Budget offers a healthy mix of incentives targeting the private sector many of which are being implemented with the collaboration of the GRTU. He noted dissatisfaction in terms of GRTU’s request for energy cost reduction and the negative effect of excise duty introduction instead of eco-contribution tax. He mentioned a number of proposals which had been taken up such as those related to traffic and transport, access to finance and digital concerns.

The students then had the opportunity to put forward questions to Mr Abela with some students inquiring on whether GRTU was satisfied with the number of proposals being taken up and how GRTU would be pushing forward for those which had not been included in the Budget, whilst others went into the details of the proposals such as the viability of the 30% energy tariff reduction request. These students will now be following up their work through assignments and more hands-on practice. They described it as a golden opportunity to flavor their studies with real-life experience.

As per GRTU Statute clauses 34 and 35 the GRTU Executive Council is inviting and accept nominations, during the month of November, presented by Association members of persons willing to form and to serve as the Electoral Commission.

• The tasks of the electoral commission should include:
• Fix the date to receive nominations for the Executive Council;
• To verify that the nominated members have the right to contest the elections;
• Send the names, in alphabetical order, to all the Association members;
• Supervise the elections on the established days;
• Communicate the election results.

Nominations should reach the GRTU by post or email by 30^th November 2015.

GRTU strongly welcomes the conclusions of the investigation carried out by the Malta Financial Services Authority and the Malta Competition and Consumer Affairs Authority into local bank lending practices to businesses.

This is a fight GRTU has led on its own for many years. It is only just recently that GRTU’s concerns were echoed by the European Commission and the

 Governor of the Central Bank of Malta and now the undeniably damning confirmation by the MFSA and the MCCAA through their report.

GRTU has always maintained that commercial banks, as the only vehicles offering access to finance in Malta, had an obligation to enable local businesses to grow and compete. On the contrary however the banks have for years been acting inconsiderately securing excessive profits in total disregard of the pressure they were putting on local businesses particularly SMEs. This is besides the prevailing trend for local banks to lend on “safe” products like home loans and personal credit in lieu of financing for local businesses.

Not only have they been acting greedily and taking policy makers for a ride with their talk of how fragile the banks are and how they are doing their utmost, but they have had the nerve time and time again to point their finger at businesses themselves as being the reason access to finance is so expensive in Malta, because of the level of risk they expose the banks when lending to them.

In businesses there is always risk but the bank is the only player in the equation that is invariably more than adequately covered for the worst case scenario. God forbid something goes wrong in your business and you found yourself at the mercy of the banks.  Maltese banks are so risk averse that they do not even pursue balance sheet lending but demand excessive levels of liquid and illiquid security far in excess of their lending.

Indeed, as GRTU has been saying all along, bank-lending policies are detrimental to Maltese businesses and their loan interest rates are amongst the highest in the EU. The reports not only confirm that the interest cuts by the European Central Bank, aimed at encouraging lending to businesses to grow and generate jobs, have only been partially passed on to businesses, but, adding insult to injury, the banks also took their time to lower their rates and did so after being placed under pressure.

The MFSA report also delves into the issue of bank charges. Bank charges are grossly excessive and one of the major sources of income of banks, estimated at around 40% of total revenue. The Regulator rightly points out that there is no plausible reason to justify the level and even the existence of certain charges, mentioning in particular the charges imposed on retail outlets for using debit and credit cards on their EPOS machines. GRTU has been relentlessly arguing against this percentage charge that is so truly not based on actual transaction cost that it can be negotiated.

GRTU will not stop in its struggle to instigate access to finance to become affordable. The current reality is that the authorities have finally woken up after a long sleep and banks are still making excessive profits at the expense of the economy. Such an important report concluded in July has already wasted three months lying on the shelf waiting for Budget day. When will the authorities wake up to the urgency of the situation?

Each and every day that passes, businesses are paying for costs that they could instead reinvest in their business and engage more employees.

They are paying for costs that their counterparts in other EU countries are not. It is pertinent to note that Maltese businesses have been paying loans at an interest rate of 5-6% on average. How can they compete with businesses in countries in which interest rates on commercial finance can be as low as 2%?

For years, banks have been making exorbitant profits. GRTU does not expect local banks not to be profitable, however it condemns restrictive practices towards commercial lending and any potentially abusive practices should be subjected to the competence of local authorities like any other business would.

The reports have concluded that profitability indicators for the core domestic banks in Malta were persistently higher than the EU average.

The time has now come to create a level playing field with our European counterparts.

The Authorities have always showed their reluctance and fear to confront banks and the conclusion of the MCCAA and MFSA reports are an important first step. The Regulators are however not there to simply investigate and make recommendations, they are there to implement their findings and take the necessary measures. Our Regulators need to show their muscle not only in relation to small businesses and SMEs but also in relation to the big fish.

GRTU will continue monitoring the situation closely and will not sojourn in its efforts and representation of the interests of SMEs both locally and at EU level as it will deem fit until immediate revisions and the appropriate remedial action is taken.