Pulling the same rope in the workplace
Newly-appointed director general of the Malta Employers Association,
Joe Farrugia, talks to MIRIAM DUNN about
his new post and how he thinks Malta can flourish in the international
What is the reaction of the Malta Employers Association to the
I think if there is one word I would use to describe this budget it
The budget acknowledges that certain economic problems are still there,
but that at the same time there are some positive signs.
I think the Finance minister has taken both of these factors into account.
For example we have a drop in government debt in relation to our GDP
and more efficient collection of taxes, but the international situation
doesnt look good, obviously heightened by the 11 September aftermath
and that naturally affects our economy.
I think the government has weighed up all these factors and opted for
a cautionary approach, which is understandable.
Perhaps there was disappointment in some quarters because expectations
for this budget were higher, probably because of some budget hype or
because the last budgets were rather austere. But there were plenty
of positive measures announced, such as the reduction of income tax
rates for married couples making a single declaration.
The lowering in fringe benefit taxation, on some vehicles and the incentives
for SMEs are also welcome. The government showed it recognises that
where restructuring and EU accession are concerned, this is the segment
requiring the most help.
We also noted the fund to be allocated to agriculture and the mention
made of social security reform. The news that there will be a distinction
between what is being paid for pensions and other services is important
since we need to identify just how great the welfare gap is. This problem
must be viewed as a bomb with a fuse and now is the time to look ahead
and see what measures we need to take to avert a potentially explosive
Are you concerned about the impact that the 11 September attacks on
consequent war will have on Malta?
There is no doubt that the events of 11 September have produced threats
to the economy, both direct and indirect. The airline has been affected
and one can also expect repercussions within the rest of the tourism
industry. How can one turn a threat into an opportunity is the question
we must ask ourselves. Malta has always been considered a safe destination
and perhaps if we can step up the efforts to emphasise this distinguishing
feature when comparing our country to other riskier destinations, perhaps
the negative impact could be minimised.
The Finance minister has said that the party is over for tax evaders.
How do you react to this statement?
The MEA is against any form of tax evasion. Traditionally the culture
of tax evasion emerged in Malta because there was a time when taxes
were generally considered to be unfair. And in fact, in the early nineties
when the government introduced certain income tax reductions, tax collections
I think there has to be collaboration and understanding between all
the parties concerned, although I dont think its fair to
paint a picture of all businessmen trying to wriggle out of paying tax.
Yes, some culture changes are needed, and these take time, but they
must also start from the government side.
Tax collection should not be portrayed as just an accounting exercise
but as part of a process for everyones benefit. I think
the more the public perceives that the money is going to the right places,
the less incentive there will be to evade tax. Fostering this change
in attitude is important. The government must highlight the advantages
of paying taxes to the people.
What specific issues is the MEA concentrating on at present?
The MEA has been acting as an employers union since 1965, having
been founded in 1958 by Anthony Miceli Farrugia. Over the years the
membership has increased and one of my priorities is to encourage employers
in Malta to become aware of the benefits of joining the MEA and expand
our membership accordingly.
My new role involves the challenge of respecting the tradition of this
association, while also ensuring we move with the times. Obviously that
combination is a challenge. In this respect, I see myself as an agent
But I must stress that I believe we have evolved, alongside the changes
we have witnessed in industrial relations.
These changes are set to be formalised in the long-awaited revision
of the Conditions of Employment Regulations Act.
This will be a momentous occasion for Maltese industry, which is widely
viewed as currently being at a crossroads. What with these amendments
and EU accession, it is a critical time for employers to be informed
and involved, both of which the MEA can provide.
Do you think the expanded role of the Malta Council for Social and Economic
Development is proving to be successful?
Although I was not directly involved in the pre-budget MCSED talks,
the feedback I heard was positive.
The general line of thought was that any initiative providing a platform
for the social partners to make their proposals is positive in itself.
Unfortunately, in the past, the unions and employers only tended to
meet when there was some kind of conflict. Its far more positive
that we all meet for discussions and have the chance to make our own
recommendations. And the MCSED is providing just the right meeting place
in this respect.
However, it should be stressed that relations between employers and
unions have, over the years, developed, with both sides having reached
a stage of maturity.
As industrial relations have moved forward, I think its fair to
say that the two sides no longer think of themselves as opponents. Inevitably
there will sometimes be flare-ups, but today the emphasis is very much
on partnership and we all aim, where possible, to find standpoints that
are of mutual benefit.
It is no secret that there are cashflow problems in Malta. What do you
think can be done to help this situation?
Maltas liquidity problems boil down to various factors. One possibility
is a drop in demand which slows down the circulation of money. When
this happens, everyone tries to postpone making their payments, with
the result that everyone gets caught up in the chain, whether they are
a consumer, a retailer or a manufacturer or service provider.
But the issue is also related to the banks and the way they lend money.
I think that today, banks are becoming more cautious about extending
overdraft facilities. There have been some bitter experiences and hard
lessons to be learned, such as the Price Club incident. Many of the
suppliers caught up in this disaster are our members, so we have heard
a number of stories of how hard hit these people were.
What lessons can we learn from the Price Club disaster?
I think there always has to be a limit to the extent to which you can
grant credit. You can grant it to do business, but if you are simply
giving more credit because youre chasing your money and you are
afraid you wont get paid, disaster will follow.
Things will continue building up, as happened with the Price Club, and
the whole venture will simply collapse.
One positive thing that came out of this crisis was the suppliers
decision to form a creditors association. Hopefully this will provide
them with a good network to try to ensure there isnt a repetition
of what happened.
Do you think that a satisfactory business ethic exists in Malta?
I wouldnt describe the business community in Malta as unethical,
although there are definitely things that can be improved.
I think many of us would like to see the number of people employed in
the public sector brought down, government expenditure reduced and subsidies
on what many of us regard as lame ducks tailored, to name a few problem
But something worth remembering is that somehow, from an island that
is overpopulated, with no natural resources, we manage to have a comparatively
decent standard of living, which indicates that business is ticking
Yes we have problems, and yes there is some abuse, but I believe that
when it comes to the crunch, the vast majority of people play their
We are currently inundated with buzzwords such as globalisation and
restructuring. Do you believe that Malta is gearing up well enough to
compete in the modern market place?
Although globalisation is definitely a buzzword today, my belief is
that Malta has long existed in a globalised society in the sense that
being a small economy, we have always been strongly influenced by external
factors and therefore had to adapt to economic conditions beyond our
In this respect, I wouldnt describe globalisation as an entirely
new concept for us. What we probably have to come to terms with is the
idea that government intervention to protect various sectors of our
economy has to come to an end. And the announcement in last weeks
budget of the further dismantling of levies shows that this is the road
ahead. But I believe there is a general acceptance that if we want to
evolve as an economy, protection no longer provides any solutions.
This is where another buzzword comes in restructuring.
As we gear up to compete in the new economy, there will inevitably be
a decline in some sectors in which Malta is not in a position to take
on other countries.
But we are free to seek out those areas in which we can gain an advantage
for ourselves. For example, we can find niche areas of activity which
have a great input of technology and capital and we can use our skills
as a source of generating value added.
It is up to us to us to hunt down these opportunities and maximise them.