A necessary process of change
Malta Chamber of Commerce President John E. Sullivan last week delivered
a keynote address to the Chambers annual general meeting. Following
are extracts from his wide-ranging speech
Malta is undergoing a rapid process of change especially from the legislative
point of view and this has kept all officials at the Chamber and, indeed
many of our members, extremely occupied. Some may argue that our laws
are being altered because this is required by the European Union. In
reality, however, these changes are necessary if Malta must compete
in the global economy, and this whether Malta opts for EU membership
or not. In my opinion, however, without the stimulus of EU membership,
our country might have been less likely to implement these important
and necessary changes. Maltas EU membership application is thus
a further incentive for a national review of our body of laws with a
view to alter and update them to modern requirements where this is found
to be necessary and/or beneficial.
The same may be said for the restructuring of local manufacturing industries,
including the removal of levies over a pre-determined period. This is
necessary if Maltas entrepreneurs are to become efficient and
to be able to compete in todays global economy.
As expected, over the past twelve months, a significant proportion of
our resources was devoted to the issue of EU membership. Last May, your
Council unanimously reconfirmed and reiterated the Chambers full
support to Malta's EU membership bid. Here, we unequivocally stated
that the Chamber believes that Malta's place is within the European
o The country and its people are European for all intents and purposes;
o The EU is based on free market economic principles and an economic
environment where business can thrive for the benefit of the investor,
the entrepreneur, employees, and the consumer;
o The EU is Malta's major trading partner;
o Malta stands to benefit from standards, development programmes and
other resources available to EU members.
I reiterate our clear stand and declare the Chambers continued
and unequivocal support to Malta's membership in the EU. We will also
remain fully committed to ensure that Government secures the right conditions
for a successful accession. In this regard, we are pleased to note that
all the chapters of the acquis communautaire that have been provisionally
closed so far, include the right derogations and transitional periods
to safeguard Malta's special circumstances. I would like to take this
opportunity to congratulate all those involved in achieving these objectives.
From the technical point of view, our EU Co-ordinating Unit and the
Malta Business Bureau continued in their vital, respective roles this
year. They took the lead in analysing the implications on the business
community of the provisionally closed dossiers in Malta's negotiations
with the EU.
To this end, we have sought to actively inform our members about important
issues related to these negotiated chapters through EU Help Desk and
Malta Business Bureau information meetings and newsletters. We organised
numerous information meetings on a multitude of subjects over the past
twelve months. These included Customs, External Trade Policy, the Four
Freedoms, Social Policy, Competition and Consumer Policy, the Environment,
Transport and many others.
The Chambers stand on Malta's EU membership was approved at a
special Council meeting held on Saturday, 5 May 2001. This meeting was
organised with a view to also serve as a brainstorming exercise between
Council members and permanent staff. Several interesting points emerged
from this productive discussion. The strengthening and autonomy of trade
sections; the role of the Officer group; the Chambers communication
strategy; and contact with other international chambers were amongst
the issues discussed during this half-day meeting.
As a direct result of this discussion, the Chamber this year amended
the Bye-Laws for the Regulation of Trade Sections as eventually approved
by Council in July. These amendments served to grant enhanced autonomy
to trade sections particularly in terms of the issuing of correspondence
and media releases. The amended Bye-Laws also sought to harmonise the
regulations across the Chambers eleven trade sections in terms
of constitution; membership eligibility; holding of meetings including
annual and extraordinary general meetings; taking of minutes; quorum;
and the executive committee.
Fiscal issues also featured prominently on the Councils agenda,
particularly during the first half of the year. This was due to unresolved
issues relating to VAT on travel agents and taxation on fringe benefits.
Both these issues were thoroughly contested with Government through
the active endeavours of the Chambers Taxation Committee. The
Chamber continued to lobby on the subject of fringe benefits until the
end of the year when we submitted our proposals for the 2002 Budget.
Following these submissions in November, Chamber representatives held
talks with the Commissioner of Inland Revenue. Unfortunately, however,
a number of proposals submitted aimed at ameliorating the situation
- were not included in the changes announced in the Budget Speech.
This year we also spent active endeavour in the issue arising from the
publication of the Trading Licences Bill. With particular reference
to Commission Agents Licences, the Chamber strongly objected to preliminary
drafts of the law wherein it was intended to repeal Articles 71-73 of
the Commercial Code empowering the Malta Chamber of Commerce as the
exclusive regulatory institution for the issuing of commission agents
licences - a responsibility which the Chamber has enjoyed since 1939.
Following representations to Government on the subject, we were assured
that the present procedures governing the granting of commission agents
licences, would remain untouched by the new legislation and that Articles
71-73 of the Commercial Code would not be repealed. We are pleased to
note that this has now been confirmed in the final draft being approved
by Parliament and that our views concerning other sections of the Bill
have been given due consideration.
Our Chamber has continued to keep a constant monitor of the local and
international economic situation. The Economic Affairs Committee and
our secretariat played an important part in this as a number of surveys
were conducted to assess the views of the general membership on several
economic matters as well as the economic performance of their companies.
Continues on page 19It was evident from the outcome of these surveys
that members believed there was a slowdown in business activity in all
sectors interviewed. Most respondents attributed the sluggish business
activity to the political divide that is thrusting the debate on the
EU membership bid. In their opinion, the hardening of positions is leading
to uncertainty regarding investment and trade.
On the fiscal front, members noted the contradictory stands taken by
policy makers regarding tax strategies. They claimed that this has led
to a tax vice which is currently squashing firms and households. Members
repeated their worries about the adverse cash flow position that is
leading traders to demand credit extension and to late payments.
We also asked our members on their opinions as to how they thought Government
should tackle the budget deficit. Based on the feedback we obtained,
we proposed to Government that no new taxes be introduced because the
private sector is already being heavily taxed and is in no position
to absorb any further taxation. We also insisted for a reduction in
government expenditure especially in those areas which are notoriously
liable to widespread wastage and abuse. We recommended that Government
maintained efficiency in tax collection and continued in its fight to
eradicate tax evasion.
Finally, we also urged Government to continue to encourage a business
friendly environment. The private sector must be assisted in creating
the level of national wealth required not merely for the attainment
of public finance targets but also to contribute towards the enhancement
of national competitiveness.
We are pleased to note that these matters were somewhat addressed in
the Budget Speech, although possibly not to the extent we expected.
National competitiveness is a subject which is well at heart to the
Chamber. In fact, on 5 October we held a successful conference entitled
"National Competitiveness the Way to Prosperity".
In the past, the Chamber has made several recommendations related to
the enhancement of Malta's national competitiveness which, to my mind,
have generally gone unheeded. The Chamber endeavoured to drive the point
forward with the Authorities that the competitiveness of the local business
community is hampered by a number of issues linked with the countrys
macroeconomic stability, infrastructure, labour market, and regulatory
reform amongst others.
During the conference I proposed the setting up of a Competitiveness
Council to monitor and benchmark Malta's competitiveness with that of
other countries as well as to provide recommendations related to the
enhancement of the countrys competitiveness position on an on-going
basis. I reiterate this recommendation again this evening.
A Competitiveness Council could be possibly set up within the remit
of the MCESD. Otherwise, it could be set up by the Chamber together
with other interested bodies who could mobilise expertise from within
the business community to benchmark Malta's performance vis-à-vis
EU member states and other candidate countries. A similar set-up has
been running successfully in Portugal since 1994.
At present, the Chamber is taking up another very important issue on
behalf of the commercial community. This is the incidence of Government
encroachment into areas of business interest through various state-owned
companies or public corporations. True to our fundamental principles,
the Chamber strongly believes that state encroachment in the competitive
market must be curtailed not encouraged. Throughout its 153-year history,
the Chamber has argued that the role of Government should be limited
to the provision of legal and institutional structure and to act as
representative of all the people. It must not play an active part in
commercial matters especially when doing so brings it in direct and
indirect competition with private initiative.
The Chamber is completely against cross-subsidisation of funds of public
entities in particular when these are in direct competition with private
enterprise. This would give an unfair advantage to public entities in
competing with the private sector which is, ultimately, the vital source
of government revenue.
Fellow members, we all agree that times could be better. This year we
have had to endure such pressing factors as fringe benefit taxation
and the closure of a number of supermarkets at the large end of the
retail market spectrum. The latter has exerted serious effects on the
rest of the commercial community.
To my mind this was an all new development for our local business environment.
In the circumstances, I appeal for you to ensure that you maintain your
ship on an even keel until the waters are somewhat calmer both on the
local and the international front.
Let us not fool ourselves and think that the tragic events of September
the 11th will have no effect on us. Some effects are already being felt.
It is inevitable because we form an integral part of todays globalised
world. Malta is a small and open economy. Its exposure to international
trade is one of the highest in the world. Our external economic relations
are, therefore, of an overwhelming importance since we rely so heavily
on imports, exports, tourism and other services - our main economic
We, as the Maltese business community, must show that we are equal to
the challenge. We are renowned for our drive, vigour and dynamism. Most
of ll, we have an enviable track record which justifies the optimism
for which we are renowned.
The tourism sector must be congratulated for taking timely and active
steps in conjunction with the Malta Tourism Authority in attempting
to level off any harm caused from the prevailing conditions. We can
and we should do the same in other sectors of the economy. We must search
for gaps left empty in the world market following the circumstances
brought about by the War on Terrorism. Although the world may never
be the same again, we augur that the world, in general, will return
to normality within a relatively short timeframe. This will serve to
reduce uncertainty that is so adversely affecting the business community
the world over.
My final appeal is to the countrys political class. I have just
mentioned uncertainty something that has been inherent within
the local business environment since well before this 11 September.
In a survey we conducted in May, nine out of eleven chairmen of the
Chambers trade sections identified political polarisation as one
of the major issues of concern in the national economy at present. However,
I must add that this polarisation is not only restricted to politics.
It is also prevalent amongst business organisations and employee unions.
The time is long overdue for all business bodies to get together and
form a single organisation under one roof. Likewise, trade unions should
also get closer together.
Maltas commercial community, and indeed the nation at large, deserves
a more stable environment to conduct its business and this will certainly
come about if our political parties cease to adopt entirely diverging
stands on various vital national issues. As we stated in our September
Commercial Courier Editorial, Malta benefited much more in those instances
where political consensus was struck such as in the case of financial
services legislation, the Business Promotion Act and the Trading Licences
Bill. We augur to have more of this attitude in Parliament to the benefit
of investment, employment and wealth creation opportunities that our
islands truly deserve.
The Chamber therefore augurs that the three social partners agree that
Malta's path towards long-term economic prosperity requires more stability.
Discussions within the Malta Council for Economic and Social Development
must therefore commence on the enhancement of stable economic policies
which will contribute towards the elimination of wastage of resources
and higher investment and which will lead to a social pact between the
Social Partners. This is now long overdue and has become urgent if Malta
is to remain competitive.