10 OCTOBER 2001

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IPSE - assisting businesses in the face of the global challenge

Ray Abdilla speaks to Joe Vella Bonnici, Chief Executive Officer at the Institute for the Promotion of Small Enterprises on showing small businesses the ropes of competing in the global arena

It is a well-known fact that, in order to survive and expand, the local business sector needs to change its mentality. Given the present administration’s bid to join the European Union, it was found that Malta had to bring itself in line with the applicants and members of the European Union. In fact, that is why a study was conducted back in 1995, which followed closely by the Ramboll report. The government also set up an advisory board, which suggested that IPSE should separate itself from the Malta Development Corporation and become autonomous.

IPSE CEO, Joe Vella Bonnici, is adamant that the changes taking place across the European business scene also had to be implemented in Malta.

European Union membership inevitably means that some local enterprises would be hard hit, once they begin competing without the protective levies that have sheltered such businesses for so long.

However, the sector likely to be worst affected is that of the furniture producing industry, as the sector relies mainly on levies – a situation that could not go on forever.

However, Mr Vella Bonnici adds that along with the furniture industry, the agro-industry is also likely to change as a result of EU membership.

Meanwhile, Mr Vella Bonnici contends that one positive aspect of the possibly forthcoming changes is that more power will be shifted to the consumer, while modifications will also be felt in the country’s Health and Safety regulations.

Mr Vella Bonnici explained that, although there is a structure in place in terms of safety in Malta, there is nevertheless a good deal of change expected to be for the good of the workers.

Mr Vella Bonnici also spoke about the competition between Malta’s small businesses the fact that the products they produce are also being imported from overseas. According to Mr Vella Bonnici, a good example in this sphere is detergents.

In Malta there are people who produce detergents and make their entire living from such products. However, when imported detergents become available without the levy, the profits of local manufacturers made in Malta will undoubtedly suffer.

Mr Vella Bonnici explained that for many small local businessman of this sort, the best thing for them is to work together as a team, if they want to survive and to continue competing. Without such co-operation, it would be difficult for them to beat out foreign competitors who have been in the international market for decades.

IPSE’s CEO adds that today’s way forward is implement strategic thinking. Today’s businessman has to think of what the consumer really wants, as business today is a different ball game.

IPSE is helping small businessmen to find their footing, not only financially but also marketing-wise, as Mr Vella Bonnici explains that this is an era in which the only the fittest will survive.

IPSE is there to help entrepreneurs to upgrade their operations and also for their workers to be given the right training to suit today’s needs. Co-operatives are also a good way to survive in today’s world.

IPSE is an important part of the Maltese business environment as, whether Malta’s decides to join the EU or not, re-structuring has to take place.

Mr Vella Bonnici explains that the Institute is offering a great deal of assistance to small-manufacturing firms, while also helping those starting off a business. It gives advice on how to run a business and give a clear picture of the domestic market once levies will be removed in 15 months.

Mr Vella Bonnici iterates that both political parties agree that the levies should be dismantled and it is only the time frame of removals on which they differ.

Mr Vella Bonnici explains, "In an ever-changing and increasingly competitive business environment, every enterprise needs to proactively adapt and exploit the change process so as to enhance its competitiveness and profitability."

He also said that IPSE was set up to facilitate the restructuring of manufacturing enterprises as well as to promote and support SME formation and growth. All enterprises need to build on its strengths, and the go one further, that is to reach out to other enterprises and together build something stronger. Working with other enterprises, one gains from the benefits of collective efficiency leading to enhanced competitiveness.

"Some might ask, how can I work with my competitor? Why not? It is against big world-renowned companies that the local business has to compete, so why not unite and be better," said IPSE’s Chief Executive Officer.

Assisting small businessmen
IPSE can assist small businessmen in several ways. For example, if the enterprise is engaged in the manufacturing and related sectors and employs up to five full-time workers, or is a start-up that will employ up to 15 full-time workers in its first three years of operation; or will grow to have a workforce of up to 15-full time employees throughout the next three years.

In this case, IPSE can help through its Small is Beautiful Programme of Assistance. The primary objective if this Programme is to assist the formation development and restructuring of micro enterprises within the manufacturing

Business Plan Assistance
The dynamic and increasingly competitive environment necessitates that enterprises, of whatever size, think strategically about their business.

Business Plans are a tool to help improve the business by focussing efforts and resources on those areas where they will benefit most. IPSE will reimburse up to 50 per cent (Lm150 maximum IPSE contribution) of the cost of preparing a Business Plan.

Operations and Human Resource Development Assistance
The restructuring growth or setting up of enterprises requires that they obtain expert advice to improve their operations and train their people, including management. Such needs will be indicated in the Business Plan.

IPSE will reimburse up to 50 per cent (Lm1,600 max. IPSE contribution over a three year period) of the cost of securing such services.

Credit Guarantee Scheme
The successful implementation of a Business Plan requires that the necessary financial resources are available. IPSE offers guarantees to help obtain such finance. It will guarantee up to 50 per cent of the required amounts. Certain limits and restrictions may apply.

Other fiscal incentives include; duty free importation of equipment and components to be used for production of exported goods; Investment and accelerated depreciation allowances; Reduced rates of company tax on ploughed back profits; Export Promotion Allowance; Exemption from Income Tax on increased export sales and Tax Holiday for 10 years for start-up operations that export more than 95 per cent of their turnover.

Other Assistance includes leases of factory space, special incentives for enterprises establishing or already operating in Gozo. Assistance will also be given to partially cover transport costs of raw material and equipment between Malta and Gozo and to cover part of the costs of accommodating in Gozo any Maltese citizen, not ordinarily resident in Gozo, and who occupy senior managerial or technical posts.

About IPSE
The Institute for the Promotion of Small Enterprise Ltd (IPSE Ltd) was set up as a joint venture between the Malta Chamber of Commerce, the Malta Federation of Industry and the Government of Malta.

IPSE was established to initially encourage and assist enterprises to restructure in the context of the removal of levies. These efforts are primarily focussed on the manufacturing and ancillary services sectors. The aim is to facilitate the enterprises’ efforts to boost their competitiveness by upgrading their operations. This should allow them to meet the challenges and tap the opportunities of operating in a liberalised market. IPSE is there to help enterprises that are negatively affected by the removal of levies or by the application of EU directives.

IPSE also seeks to encourage the formation and growth of small and medium sized enterprises (SMEs) and micro-enterprises by helping to strengthen management capabilities, innovation and access to capital, and by encouraging and assisting clients to form strategic alliances and clusters locally and internationally. IPSE is setting up a Business Incubation Centre to further facilitate small enterprise start-ups and development. This role will take on more and more importance as the levies are removed and the restructuring process progresses.

To help its clients, IPSE has prepared a framework of Programmes of Assistance and Initiatives within which it can offer innovative, customised solutions. All assistance is given in a holistic manner within the context of a business plan. IPSE’s support is directed at facilitating the preparation of the business plan (and the export marketing plan where applicable) as well as its implementation.

This includes the upgrade of operations and management systems, human resources development of both management and employees as well as assistance for the execution of the export marketing plan.

It is also undertaking a series of sectoral analysis reports to offer its clients clear, reliable information about the markets they will be operating in, of which the Sectoral Impact Analysis of the Maltese Furniture Industry is the first.

IPSE Ltd’s offices are located at the Small Enterprise Centre, Marsa.

The Business Times, Network House, Vjal ir-Rihan San Gwann SGN 07
Tel: (356) 382741-3, 382745-6 | Fax: (356) 385075 | e-mail: editorial@networkpublications.com.mt