Category: Archive – 2009

Joanna Drake has been appointed as the first Maltese Director in the European Commission. She has been appointed as Director of its Directorate General for Enterprise, as Director for the Promotion of Competitiveness of SMEs. This is the highest appointment that any Maltese held so far within the European Commission, apart from Dr. Joe Borg's appointment as Commissioner. 126 applicants were considered for the post.

Her experience in the EU matters and affairs has led to various other roles, above all one of the 6 members which formed Core Group of MEUSAC (Malta-EU Steering and Action Committee) One of six experts on EU issues appointed by Government to co-ordinate the consultation exercise with stakeholders and establish Malta's position on each of the accession negotiating chapters of the ACQUIS, under the Chairmanship of the Minister for Foreign Affairs. In 2005 she took up her current appointment as Head of Representation of the European Commission in Malta.

GRTU is very pleased for Dr Drake and congratulates her. Dr Drake has always been of help to the GRTU and we have had several opportunities to work with her during her position as Head of Commission representation. Her appointment is positive and of pride to  all Maltese enterprises and their representatives, as is GRTU.

We look forward to working with Dr Drake soon, within her new role.

Interview with Charlotte Zahra of Business Today

Do you agree with the Prime Minister's suggestion of a new social pact or not?

The social pact concept is taken from the experience of countries with traditional tri-partite national bargaining experience. Malta does not have this experience and trade unions and employers have been found wonting when it comes to committing themselves over a span of years on important issues. Another exercise will be as futile as the last one. What MCESD is doing now is following an alternative route which is less cumbersome.

What alternative means of tri-partite discussions should be used instead?

What is currently going on makes a lot of sense as it gives the social partners the necessary experience and feedback.

What lessons have been learnt from the last unsuccessful social pact?

1.     That we do not have what it takes to reach a successful social pact conclusion.

2.     That some individual members of MCESD are perhaps still too politically committed to accept a contractual obligation irrespective of which Party is in Government

What effective measures should be taken this time around to prevent another failure?

We should not waste our time on too ambitious targets

Do you agree with those who say that the Government and the Opposition should be included in the social pact discussions to serve as guarantors of the agreement or not?  Why?

Politicians have nothing to do with a social pact. A social pact or a diluted form of it is an agreement amongst social partners. Political parties have Parliament and other fora where they dominate. Indeed I would say "A la larga"

Has the Government effectively made any specific proposals to the social partners following this announcement to push forward the social pact?

No

Should the MCESD be used as the place where the discussions for the social pact, especially in view of the fact that the Forum Trade Unions' grouping is not represented?

MCESD is at law the Forum for all national tri-partite negotiations. No one should invent anything else. We already have too many institutions in Malta. We should at all cost avoid inventing others simply to suite individuals who prefer to go in alone or go it their way

Do you agree with the inclusion of the FORUM trade unions in the MCESD or not? Why?

MCESD is the Forum of Government, employers and trade unions. Employers associations and trade unions are equally represented. If the trade union partners are now 4 and not 3 it is up to the trade union side to make way and offer a seat to the new family member and recognise him as family. The issue would really be something that needs to be settled within the trade union ranks

GRTU called on the Ministry for Finance, the Economy and Investment as responsible for trade relations to stand against the Commission proposal for a mandatory ‘made-in' label to be attached to certain imported consumer goods. The Ministry consulted the GRTU on the new Commission proposal and GRTU replied as follows:

The commerce sector strongly rejects the claims that the proposed label is a ‘necessity' and will ‘protect our consumers'. The proposed label is far from helping, such a label would simply create another barrier to trade at a time when Europe needs growth, not protectionism.

The ‘made-in' label has already been clearly rejected by the majority of business and consumer associations, which replied to the first Commission consultation on the proposal. GRTU argues that significant objections continue to apply:

• In global production chains, products are often processed in several different countries. Indicating one single country of origin would be misleading for consumers. Moreover, in many companies, internal processes would have to be adapted, with time and money spent on compliance and surveillance – resources that would be lost for efficient business and competitiveness, especially for SMEs.
• According to the Commission's own impact assessment, the label could cause additional costs of up to €1.50 per article for clothing and up to €2 per article for footwear. Furthermore, European companies would have to bear additional logistical costs related to the different procedures to control and manage the goods.
• The EU and its trading partners have different rules of origin. In practice, this would make the implementation and management of the label very complicated for companies which produce in developing countries and export to non-EU as well as EU countries.
• Such a measure would require companies to undergo lengthy controls at customs, running counter to the aim of boosting business and reducing red tape. The establishment of a special ‘Origin Marking Committee' to administer the label would create further unnecessary bureaucracy.

Since this label would be limited to some imported consumer goods only – such as textiles, clothing, shoes, leather and furniture – questions must be raised as to its true objectives. Is the Commission really seeking to protect consumers, or to encourage protectionism? We truly hope that our leaders can spare Europe this burden.

Interview with Raphael Vassallo of Malta Today

How do your react to the fact that the Opposition leader has taken on board a few of your own suggestions: especially the eco-tax revision, and the revision of the 12% withholding tax on property?

Our ideas are the result of extensive consultation since the publication of the Pre-Budget Document. The Eco-Tax reform and the whole package of reforms we recommended in relation to the 12% final withholding tax form part of a strategy that we recommended government to follow. This is a strategy towards the re-direction of the construction industry and private investments towards the building of more affordable housing, ready-for-use office facilities in the localities to provide new work opportunities especially for women in the localities, the building and financing of harbour projects and the spread of tourism to the localities through government and private funding of improvements to create home tourist lodgings and promote urban renewal projects among others.

Ours is a clever use of the 12% withholding tax to promote investments that the community needs and indirectly supporting the construction industry and smartly harnessing developers plans. Joseph Muscat is promoting single fiscal tools without scope or link to economic, social or environmental planning.

How do you rate Joseph Muscat's proposals on other issues, for instance the maximum tariff on water and electricity bills, or the cutting back on government spending on big capital projects?

There are big capital projects proposed by government, such as the  new Parliament in Freedom Square, an Open-Air theatre in Valletta and the abandonment of all existing busses used in public transport just to have a new scheme nobody is really asking for, that are not only not convincing but are a bad use of public finance at this particular phase of our economic development when the real threat is how to renovate our enterprise fast enough to meet the tougher competitive times our economy will face in the post-recession era when price-cutting will dominate.

Government's proposals were conceived when no economic recession was on the horizon. What we need now are projects that lead to sustainable productive work not pompous and prestigious projects. Joseph Muscat is right in criticising, but again he has not promoting alternatives. We have promoted new factory buildings, new warehouses for logistics work that can be attracted to Malta, fiscal reforms to cause enterprise to renovate and reinvest, the speed-up of the building of new harbour quays for cruise liners, new tourism facilities and new urban renewals. Ours is a list of productive investments to really get the economy going. Joseph Muscat's is just a cut and paste exercise.

On electricity tariffs we sustained all along that what Government is doing wrong is of not assessing what the economy, i.e. enterprise and households, can sustain and then estimating at what price they ought to buy and to buy substantially each time the world price for gas oil and fuel oil is within our reach, so that the economy can have electricity and diesel prices that will not distort our economy performance every six months. Instead Government has produced systems and market intervention schemes that are not convincing. Joseph Muscat's ceiling price fixing makes no economic sense. He should come forward with sustainable and well worked out proposals. He promised to give politics a new approach and not merely a new face. The new approach must be based on exact calculations and professional strategic thinking. He is not doing this.

Do you think all 10 proposals, taken together, are affordable/ feasible considering the international economic climate?

GRTU produced a budget strategy, we analysed the economic impact of the world recession on Maltese enterprise and the internal economy and within the framework of the actual financial situation facing the country. We proposed a stimulus package which is achievable and within the limits of our financial constraints. Joseph Muscat picked and chose from our proposals failing to understand that after a year of constant criticism of Gonzi's Government performance we in business expected from him the alternative Salvation Plan. He now gives us a hotchpotch of economic and financial thinking.

Feel free to add other comments that you think are important…

For me Joseph Muscat's act is an anti-climax. I expected him to surround himself with a team of smart economists who over the summer months would have produced the alternative stimulus package that would really cause Government to rethink some fundamentals of its economic strategy. This is what we tried to do and I am happy of Governments and the public's positive reactions to what we proposed. I don't think Joseph Muscat can have the same reaction from business.

Budget, economic and financial proposals are not made for street demonstrations but to convince decision makers and investors. I think Joseph Muscat lost a tremendous opportunity to show his real worth as an alternative Prime Minister. I hope he rises to the occasion on November 9th. It will be a day of reckoning for Tonio Fenech, but also for Joseph Muscat.

In the light of the current economic crisis which puts a massive strain on companies' finance, the last option for an increasing number of companies is to file for bankruptcy caused by late payments. Especially Small and Medium Sized Enterprises, whose often low liquidity makes them vulnerable to late payments, tend to fall victim to this development. Through this recast, the European Commission seeks to combat this trend by strengthening the existing Directive on late payments (2000/35/EG)

The recast Directive is proposed within the framework of the Small Business Act (SBA) which aims to improve conditions in which Small and Medium Enterprises operate. It aims to do so by trying to clear up ambiguities from the old Directive and making it easier for creditors to claim reimbursement- and administrative costs as well as interest. A main new element of the proposal is the fact that the Commission directly addresses public authorities, which are, according to research, responsible for 2/3 of the late payments.

The commerce sector acknowledges the efforts undertaken by the European Commission with regard to improving the framework conditions for SMEs in the European Union. The text however still does contain several provisions that raise concern to the commerce sector, and since the Directive was proposed within the framework of the Small Business Act, it will be more than sensible that the voice of the SME-retailers and the sector as a whole, is heard.

GRTU Malta Chamber of SMEs welcomes the Commissions determination to fight late payments and especially embraces the Commissions statement that governments and public authorities will commit to paying their suppliers on time, knowing that public authorities are responsible for 2/3 of late payments. Where late payments by businesses can, in rare cases, be caused by reasons outside their influence, late payments by public authorities can barely ever be legitimized. Public authorities deal with tax payer money and in fact paying late to businesses means that government is taking money from its citizens twice. In a period where the efficiency of public spending is highly scrutinized, together with the economic damage late payments by governments do to SMEs, there is no excuse for public authorities to pay late. This is why GRTU assumes that public authorities adhering to the rule of law will, by definition, pay the extra charges in case of late payment to which their debtors are legally entitled.

GRTU is sceptical regarding the shape of the proposed system that deals with the issue of recovery costs. In the proposed system, the recovery costs that can be claimed by the creditor, progressively rise in relation to the debt. In the proposed system, retrievable recovery costs of late payments of up to €1000,- are set at a fixed sum of €40,-. This implies that a company who is late with the payment of a sum of 4 euro's, can theoretically be obliged to pay the tenfold in recovery costs to its creditor, which seems disproportionate.

Finally GRTU is of the opinion that certain provisions in the Directive on contractual clauses constitute a threat to the freedom of contract within the context of business to business transactions. To the commerce sector the freedom of contract of B2B relations is essential, as trading credit (accompanied by the possibility to reach contractual agreements on payment terms exceeding 30 days) forms one of the sectors basic means of access to finance. Any minimum harmonization of payment terms, that does not take into account the nature of the product, its shelve life and the sector in which it is traded, is rejected by GRTU. The same goes for any minimum harmonization that does not make a distinction between SME suppliers with a weak market position and large suppliers, both local and international, with a strong market position. In this situation there is no justification for limiting the contractual freedom.

In line with this GRTU does not see the advantage of changing the status quo by enabling organisations other than those representing exclusively SMEs, to retrospectively challenge contractual clauses on which both parties have already agreed. The reason for this is that it poses a threat to SME-retailers, since it would also enable associations dominated by large producers to challenge contractual clauses. In the old directive this right is exclusively reserved for organisations representing SMEs.

The Late Payments Directive is very important for Maltese traders. However, GRTU is watchful to ensure that the changes will be of maximum benefit to SMEs and are not used to favour of the bigger supplier, at the detriment of smaller retailers and store owners. Government is also being warned that the main issue remains the late payment from the Public Authorities to the private suppliers and that all action should be geared to restore this major issue. This question is of maximum importance within the current economic situation where many SMEs face liquidity problems.

10. Tips for keeping healthy

1. Stay home if you are sick

2. Wash your hands frequently

3. Avoid touching your nose, mouth and eyes.

4. Cover your coughs and sneeze.

5. Wash your hands or use an alcohol-based hand sanitizer after coughing, sneezing, or blowing your nose.

6. Keep frequently touched common surfaces clean. For example, telephones, computer equipment, etc.

7. Try not to use other workers' phones, desks, offices, or other work tools and equipment.

8. Keep doors and windows open.

9. Avoid using fans.

10. Avoid overcrowding in shops.

The fifth Managers Exchange and Training Programme (METP) intake will start in May 2010. The application phase started on September 21, 2009 and will end on January 7, 2010. METP had been launched in July 2006 as a four-year intergovernmental programme comprising four intakes. Within this scheme, about 400 managers from China and the European Union have been provided with training and internship opportunities.

China has evolved into one of the world's most dynamic and constantly growing markets. But small and medium-sized companies (SMEs) in particular often lack the resources to establish business relations with China. The European Commission therefore supports SMEs, Non-Governmental Organisations (NGOs) and self-employed entrepreneurs by offering METP – a ten-month executive training in China.

The fully-funded programme offers EU-based companies the possibility to train their employees to become qualified experts for the Chinese market. Ideally, these experts will utilise their newly acquired skills and contacts needed to conduct business with China. During METP, the selected European managers receive seven months of business Chinese language training, intercultural training, tailor-made seminars and site visits to Chinese companies, cities and administration bodies. Additionally, the participants embark on a three-month internship in a Chinese company. Long-term objective of METP is to enhance the EU's relationship with China in a sustainable fashion through exchange and economic cooperation. Besides the organisation of the whole stay, the EU will cover all tuition fees and provide participants with a monthly living allowance (1.000 euros). All graduates receive an official diploma signed by the EU Ambassador to China.

For further information about application modalities, download instructions for the application dossier and for general information about METP visit www.metp.net.cn or contact the METP hotline at +49 69 15402 638.

This programme financed by the European Union offers EU-based companies and SMEs the opportunity to train their employees to become qualified experts on the Chinese market. Since July 2006 about 400 managers from China and the European Union have benefited from the training and internship opportunities. This year METP has been extended by a fifth intake the application phase for which started on September 21, 2009 and will end on January 7, 2010. 

GRTU welcomes the signature of the comprehensive free trade agreement between the EU and South Korea. This is a great day for the European commerce sector. The European Commission has positively responded to our requests. In the current economic environment, the EU-Korea deal is exactly the right sign against protectionism. Open markets will help return to growth and prosperity.

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The agreement, delivered by the European Commission in only two years of trade negotiations, significantly improves the conditions for European retailers and wholesalers on the Korean market. The abolition of size restrictions will allow retailers to freely choose the format of their stores in Korea. Unlike today, they will also be able to offer an almost complete range of goods to Korean consumers. This will not only enhance their competitiveness on the highly challenging Asian market, but also act as a catalyst for European exports.  Korea counts among the biggest trading partners of the European Union. The trade deal brings European retailers and wholesalers access to 50 million consumers and is the most ambitious trade agreement the EU has ever negotiated

GRTU in its Budget proposals presented to Government has earmarked incentives for construction and property development as essential to give an immediate boost to the economy. It is essential Government gives priority to this economic sector as many other economic sectors and the economy in general depend on its revival.

Government must push infrastructural projects that modernise the country. The port projects, schemes to support first-time buyers, new roads projects, an extended factory buildings project, greater funding for Malta Enterprise, investment in alternative energies and in education, greater investment support to create more places of work and an extension of tourism in the locality.

GRTU supports all initiatives to increase the spread of tourism to all localities because it will not only make it possible for Malta to increase its carrying tourist capacity without the necessary damaging impact on the infrastructure and the further erosion of unbuilt areas but will provide better utilisation of unused resources found in localities.

Economic recovery must be supported by policies which aim to bring back confidence to all economic actors and to stabilise economic demand, without further endangering fiscal stability in the long run. The strengthening of the SME sector is key in the economic recovery. This budget must be a conscious budget however it must restore confidence for a new start.

GRTU proposes 21 fiscal initiatives to be included in budget 2010 for economic revival linked to better utilisation of our resources:

1. Stimulate private demand by setting the right incentives. Government must provide the necessary fiscal incentive to encourage developers not simply to issue an energy audit certificate on property placed on the market but to build and sell property that qualifies and saves energy. GRTU is recommending that the 12% withholding tax on properties that qualify to high energy saving criteria as set by Malta Resources Authority will benefit from a reduced 5% final withholding tax.

2. Stimulate public and private demand by investing in infrastructure also via Public-Private Partnerships.  Government must provide the necessary fiscal incentives so that developers will invest in the renewal of our old urban centres and in the creation of new comprehensive development projects that will cause first home buyers to return to the village and town cores or to reside in new energy saving modern comprehensive estates. It is a question of encouraging developers' funds and energies where the community needs most.

3. Reduced rates of withholding tax on property developed by private investors for parking complexes that service the community.

4. A grant of up to 50% of expenses to households for improvements that will enable the lodging of tourists where the size of the property makes this possible. This incentive will encourage the extension of tourist residence in the Localities thus providing the necessary impetus for the expansion of city core activities

5. Special allocation of funds coupled with adequate fiscal incentives to promote urban renewal and refurbishment in the traditional village and town core. Developers who participate in urban renewal schemes through the purchase of properties for development and refurbishment submitting to urban conservation plans and to energy saving will enjoy a reduced rate of taxation on sale of properties or a nominal 3% withholding tax on rents receivable if properties are placed on the rental market.

6. Tax relief of 70% investment allowance on expenditure affected by commercial property owners in the traditional urban centres used on the renovation and restoration of facades.

7. Reduction of 12% final withholding tax to property development investing in ready for use energy saving office space or facilities suitable for back office work in the Localities, including call centres but not only. Too much back office work is concentrated in special city centres. Much of this, including public back office work, can move to the localities.

8. Up to 50% tax credit for the renovation and extension of facilities in the city core such as bars, restaurants and cafeterias and other listed services in the community to encourage the growth leisure focal centre in the community. Local Councils will be provided with additional capital funds to provide the necessary facilities in the city centres for the outdoor extension of these enterprises.  

9. Special financial Awards to be given to Local Councils who prove successful in the introduction of projects that support enterprises and economic growth in their locality.  A Local Authority Business Growth Incentive (LABGI) package should be designed in consultation with GRTU and the Local Councils Association so that Local Councils will benefit on their initiatives in favour of economic sustainability of the locality.

10. Up to 50% tax credit on all initial expenses suffered by businesses that opt to transfer back office work to the Localities. This supportive scheme will also include special electricity and water rates for firms whose back office work functions from energy saving facilities established in the Localities.

11. A one year concession for first time buyers not to pay any stamp duty on property under € 120,000.

12. A lower withholding tax from the 12% option to 7% for developments that will support first time buyers, relieve developers and will also stabilise the property market for a period of 2 years.

13. A 12% final withholding tax instead of 35% on transfers to third parties still on convenium (CESSJONI).  This will encourage speculators to find more investors.

14. An extension of the 12% from 35% five year option period to an eight year option period.

15. Eliminate the 1% on property values paid on convenium as this is leading to discouragement. Introduce instead a range of administrative fees according to the values of properties which should not be higher than €1,000 or a percentage charge of 0.05% on property value.

16. Property owners are not regarding leasing of property as a feasible option due to the 35% tax which has to be paid annually from the return of their investment. GRTU also observes that the Government is earning very little from the rental market. GRTU therefore recommends that for a period of 10 years a 5% final withholding tax on residential property and 15% on commercial.

17. The current restriction on foreigners owning property in Malta should be released so as to be allowed to invest in more than one property, even if outside the designated areas. We remain confident that with the current over supply the country will not run out of property to sell.

18. A reform in property evaluation regarding CIR is badly needed.  The whole system should be changed immediately.

19. An incentive package that causes developers to invest in buildings for utilisation by entrepreneurs. Developers or property owners who build approved factories or garages for garage industries, approved premises for use as residential homes for the elderly and approved hotels and tourism projects, will benefit from a reduced final withholding tax of 6% if such property is soled or a withholding tax of 6% on annual rents if such property is rented. This special concession is given to developers who build such projects over a period of 5 years and building of premises for projects in the harbour areas.

20. In introducing the Energy Performance in Buildings Regulations as of 1^st January 2009, the Government would ascertain that all properties with an area of over 1000sqm should form part of an assistance program to be set up by Government to align to these Directives.

21. All new buildings in excess of 1000sqm built for a commercial purpose are to include 50% of their energy needs in renewable energies. This would require a long term projection funding, either via tax credits or performance bonuses against set bench marks.