12 DECEMBER 2001

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A necessary process of change

Malta Chamber of Commerce President John E. Sullivan last week delivered a keynote address to the Chamber’s 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. Malta’s 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 Malta’s entrepreneurs are to become efficient and to be able to compete in today’s 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 Chamber’s full support to Malta's EU membership bid. Here, we unequivocally stated that the Chamber believes that Malta's place is within the European Union because:
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 Chamber’s 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 Chamber’s 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 Chamber’s 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 Chamber’s 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 Council’s 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 Chamber’s 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 country’s 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 country’s 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 today’s 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 pillars.
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 country’s 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 Chamber’s 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.
Malta’s 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.


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