Finance Ministry Parliamentary Secretary Tonio Fenech speaks at the recent conference organised by KPMG themed ‘Financial Services: a springboard to economic success’. In his address Mr Fenech explains how Malta as a country is now approaching the end of a cycle of radical reform and entering a new phase
The inroads that we have made in the sphere of modern-day international finance over a relative short 10 year time span can be credited to the efforts in aligning our legal and business structures to the developments of the global financial services requirements. Key players to this success story are firms such as KPMG, who, through their international links and networks have managed to promote Malta as a reliable, competent and efficient jurisdiction.
When we decided to embark on this ambitious project ten years ago, with the aim of transforming this sector into a vibrant component of our economy we firmly believed that Malta had the potential to be a leading international finance centre based on good regulation, healthy competition and consumer choice - a model which we believe inspires confidence and generates wealth.
We have managed in our task because of the skills and long standing experience gained in financing our commerce and industry, our tourism and maritime services; the experience and, I must emphasis, the willingness of our administrative and political establishment to adapt to change; and the determination of our financial entrepreneurs to succeed in an increasingly competitive world.
This vision was galvanised by an even grander vision of a country firmly anchored in the EU where our nation’s aspirations for a better quality of life could be fulfilled.
Change is never easy, and the difficult decisions that had to be taken included:
• the abolition of a relatively successful offshore regime,
• privatisation and liberalisation in the banking and insurance sector,
• fiscal reform,
• the set up of competition and consumer watchdogs,
• the introduction of greater transparency in the way our companies are managed,
• new standards of financial reporting,
• and new licensing and supervisory requirements.
It was the only way to make headway in a globalised financial world that runs on a network of interdependent systems and is driven by mutual confidence at both business and institutional levels. And although our project was ambitious and spread out over a considerable number of years, it did not have to take that long to see the first signs of success.
In the wake of all these legislative changes, new banking activity was attracted to our shores and new financial intermediaries were licensed to provide investment advice, fund management, administration and custody services. At the same time the range of homegrown and foreign financial products grew steadily, infusing a strong dose of competition and choice into our market. As the privatisation programme gained momentum, new investment opportunities also came onto the scene and were met with a huge response from a confident investor. In the light of all this our regulation has continued to develop to meet new challenges and at times even anticipate international trends in this area.
We are now approaching what may be termed as the end of a cycle of radical reform and entering a new phase where our legal and regulatory development takes place within a process that is more evolutionary than revolutionary in character. At the same time, EU membership has brought on a new spurt of business in the sector. New activity, for which access to a larger market finally meant that the last important detail had taken its place on the canvas, is increasingly strengthening the sector’s international outlook. It is a time when the confidence in our structures and the competitiveness of our country are being called to the fore. And we are confident we will perform well, because in the end it will again boil down to the human factor, and the human factor is something we could always depend on.
The stress test will come when we’re in the thick of the show, where our skills and experience are being tested to the limit as much as they themselves are being enhanced in the process. The stage has been energised, not least by the arrival of new players on the scene, firms and institutions that are used to playing to a global audience and with whom we can all grow in stature. There are some things we would do well to keep in mind.
In the first place, public/private sector co-operation, a key ingredient during the period of reform, should be sustained. One clearly has to recognise the spirit of partnership that prevails in this area. The working relationship that has been struck is helping us to overcome the challenges day by day. This ongoing consultation and coordination on strategic issues will guarantee that the sector will continue to grow smoothly and without shocks. But it does not stop there. It will also help us direct our resources to where they can be best utilised, creating jobs in the country that can fulfil the aspirations of our youngsters and thereby securing more economic success for our country in the longer term. It is with this in mind that the Prime Minister himself chairs a quarterly meeting with the industry practitioners and the public sector stack holders to ensure that our structures will remain dynamic and responsive to the market realities.
Second, an open and vibrant business environment, if we manage to maintain it, we would ensure that we harness all the opportunities that come our way. In a new international business environment where the world is our market, we have to make use of both our strength and our flexibility in equal measure. Small businesses, large organisations, employers, employees, all of us must combine our energies to provide an unsurpassable service. Indeed, it is up to every single member of the community to ensure success in an area that is as much a springboard as it could be a model for economic success.
Third, we should continue to foster a training culture that will sustain the level of service we are out to provide. A unique blend of factors may have seen us to where we stand today. For historic reasons, which we are familiar with, our legal system can relate well both with continental civil law and with common law concepts. This is our unique advantage. History has also given us strong communication skills. Our position has been hard earned. However, everyone who works in financial services knows - and everyone who aspires to, should know – that what we are selling for a living are our skills and expertise. We must therefore continue to invest our time and money on the enhancement of our intellectual resources, as that is where our main competitive advantage lies.
The future of the global financial services, trends and opportunities, the future regulatory challenges are all key themes to the strategies we would want to pursue. However, it is only our inventiveness, skills and creativity together with the swiftness of our response that can make us the more successful in this fast growing and demanding industry.