25 January 2006

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Tourism: Labour’s economic ignition

The Labour Party general conference will tomorrow start debating and eventually approve a blueprint for tourism that talks of a subsidised helicopter service to Gozo, specific funds for a Gozitan tourist authority and a commitment to lower taxation on the sector.
Tourism is the single most important sector the Labour Party believes could kick start an ailing economy given the right impetus. Tourism spokesperson Evarist Bartolo says his party is committed to drive the sector in a serious way and with a clear aim of increasing tourist arrivals all the year round.
And the first thing a Labour government will do is review the level of taxation on operators in the sector even if that still remains a commitment without clear targets. Bartolo says the technical details will come closer to election time after a careful analysis of the situation.

Why does the Labour Party attach so much importance to the tourism sector as the main motor to kick start the economy?
Even if we just stick to official statistics, at least 41,000 jobs are dependent on tourism doing well. There are thousands of families in Malta and hundreds in Gozo, whose livelihood depends on tourism. If there is one economic sector which can deliver quick results, given the right pull and push, that is tourism.
We hear a lot about the impact of globalisation on manufacturing and how certain sectors might not have a future. In the services sector competition from other jurisdictions is also fierce. In such a scenario we must succeed in tourism.

But do we risk becoming too dependent on tourism?
It depends on what type of tourism you become dependent on. If you become too dependent on seasonal tourism that is a big problem because it means the country’s wellbeing depends on the wealth generated in the span of two months. But if we are talking of a very strong sector that is profitable all the year round, it is a totally different game altogether.
We have to aim for an all-the-year round increase in the number of tourists and as much as possible tap different niche markets.
It would be wrong to be dependent on one tourist market. There are various niches that can be exploited such as diving, English language learning, Gozo, pensioners and other areas.

Exploiting niche markets is a longer term strategy requiring certain investments. What short term strategy will you adopt to give tourism the ‘fresh start’ you are saying a new Labour government will give the country?
Tourism is a complex sector determined by three principle factors: private sector investment, government’s role and external factors over which we as a country have absolutely no control.
We cannot blame government for terrorist acts abroad which distort tourist travel but there are things we can focus on to make a difference.
One of the short-term issues which government can tackle is taxation. This government takes a very cavalier attitude towards taxation as if it has nothing to do with the price level of our product. If the various operators in the sector are burdened with taxation, it is obvious that to become profitable they have to raise their prices.
Unfortunately over the last few years taxation has been used as a revenue generator for government as if other competing destinations do not exist. I am sure that whenever government decided to impose a surcharge or a tax on this sector it has never carried out a comparative impact assessment with other destinations.
One of the first things a Labour government will do is use taxation not only as a means of generating revenue for government but also as a competitive tool to be able to compete effectively with other destinations.

Are you suggesting the VAT rate go down?
During negotiations with the EU prior to accession government did not care about the impact of taxation on tourism. Poland, Slovenia, Hungary and Cyprus had negotiated a lower VAT rate during negotiations for EU membership. In our case government did not even attempt to do so with the consequence that Malta has one of the highest VAT rates on the sector putting us at a disadvantage with our competitors.
But there are other taxes which fall under national competence and we will be looking at those as well. One of the first things a Labour government would do is find ways of helping the private sector compete better by easing the burden of taxation.
There are also issues related to administrative efficiencies. In one particular sector, English language teaching, we are doing well and can do much better. Last year we did well and from what operators in the sector tell me we will have another good year in 2006 but we can be doing much better if government uses the visa procedure as a competitive tool.
Government cannot simply allow the police to dictate who comes from which country and how many. I am all out in favour of stamping out abuse perpetrated by human smugglers but at least our visa procedures should at least match the efficiency of procedures adopted by the UK and Ireland.
Why are we turning away thousands of Chinese students and others from Latin America and the Gulf area as if we don’t want people to come here and learn English? This is crazy.
We need to have a speedy issuance of visas to encourage more foreigners to come here and learn English. In 2005 the UK had 70,000 Chinese students learning English. I am sure Malta can improve on the 1,000 or so Chinese nationals who came here to learn English.

Which taxes will be reduced and by how much?
At this moment we are taking a commitment to lower taxation as a general guideline but that will be followed by a technical document closer to the election outlining where this will be happening.
What is important is that we deliver on our commitment and do things seriously. In the budget for 2005 government said it was going to lower VAT on the conference and incentive sector. This is only being done in a piecemeal fashion. Operators in the sector tell me that VAT is only being refunded on food in the hotels but not on other services. This is one area where we can lower VAT without EU interference but is not being done.

What is the Labour Party’s position on low cost airlines?
In this day and age it will be completely crazy to be against low cost airlines. All contemporary trends in tourism show that before deciding to travel people also take note of the cost to reach their destination. If we don’t manage to get low cost airlines to come here they will simply take passengers elsewhere. There is no issue on this point.
Where I think we have to be careful is not to allow low cost airlines to cannibalise the existing airlines. We should be all out for trying to attract different low cost airlines.
But I would be very cautious about getting one giant to come here and take over. It would be wrong because we risk becoming dependent on just one airline at the expense of losing established carriers.
I am in favour of trying to entice different budget airlines from the 54 or so that operate in Europe to come here. A variety of low cost carriers would bring additional tourists to Malta.
Our disadvantage is that we only have one airport. Low cost airlines normally operate from secondary airports and this means that MIA has to compete not only with established airports but even with secondary ones. Just like established airlines are already competing with low cost carriers, MIA has to keep in mind that its competition is also coming from secondary airports.

But isn’t this a recipe for low cost airlines not to come to Malta? Malta International Airport will not slash landing charges the way low cost airlines demand.
As far as I know it was only one particular low cost airline that demanded much reduced landing charges. We cannot allow any airline such as Ryanair to dictate to us what it wants.
The operators are ready to lower charges and I am sure it can be negotiated. On top of that we need to look at how we can make air travel affordable. What we need to do is look at what low cost airlines want and see how best we can facilitate air access.
Low cost airlines will come as long as the route is profitable and if we as a country can guarantee the numbers. This is why it is important to get more tourists all year round.

One suggestion often made by tourist operators is to build an airstrip in Gozo and turn that into a secondary airport where low cost airlines can operate from. Do you see this as a feasible option?
I would really hope that eventually in Malta and Gozo we start handling policy and decision-making in a different way than we do now. My impression is that instead of taking decisions in a rational way after considering all advantages and disadvantages and studying the feasibility of proposals, we just rush into conclusion and then try to justify why we decided in that way.
The same goes for airports in Gozo. I still have to be persuaded that it makes economic good sense. I am not even talking about the impact on the environment here, which for me is such an obvious consideration that needs to be taken into account.
We cannot allow Gozo to be turned into a runway or a building site otherwise why should people go to Gozo in the first place if it resembles Malta. We’ve already jeopardised the quality of life in Malta because we have overbuilt, we should not do the same to Gozo.
We have to ensure a viable helicopter service which needs to be subsidised and in so doing we will only be imitating what the French, Spanish and Greeks are doing to overcome the insularity of small islands.
To be fair to most Gozitan tourist operators, they do not want an airport that puts the island in direct contact with our source markets abroad. They clamour for a small airstrip so that rich private plane operators, who at present are landing their small aircraft in Malta before hopping over to Gozo, will be able to land directly on the island.
But I suspect that this belief by some Gozitans in an airstrip is the result of desperation because they have seen their number of tourists going down and their operation heavily squeezed by severe seasonality. They are expecting their problems to be solved by having an airstrip but I don’t think this is a solution.

The document says a Labour government will subsidise a helicopter service but in the eventuality that this fails, alternative modes of air transport will be considered. What does this mean?
It’s simply not to close the door on that possibility. If we have a ferry service functioning better and a good helicopter service operating, we believe the issue of the airstrip will go away. It has come up on the agenda once again since the new helicopter operator is not serving the island well. A lot of flights are being cancelled. It is not fair to fly over from London with a ticket in hand for a helicopter flight to Gozo and upon arrival at Gudja you are told the flight has been cancelled.

Many golf course proponents argue that to be feasible a golf course would need to be part of a bigger package that includes the development of property next to the course. The Labour Party is in favour of golf courses as standalone developments. How do you reconcile these differing positions?
The Labour Party wants golf courses in Malta only if they are standalone developments. We are not going to accept golf courses which are an excuse for property speculation. The big drive that is going on in south east Europe and even Dubai in favour of golf courses is fuelled by huge property developers pushing the golf course as the green space between the villas. They are not doing it because they really believe in golf courses.
Apart from this the claim that a golf course will get us an additional 30,000 tourists has still to be proven. We know of situations in Spain and Cyprus where these golf courses have not made any significant impact on tourist numbers. The development today is deserting these countries and moving east into Bulgaria and Romania, virgin lands where property speculation is rife.
We don’t want this to happen in Malta. Some people want to build villas at Xaghra l-Hamra in Ghajn Tuffieha and as an excuse are trying to push for a golf course in the area.

So if a standalone golf course is not viable, the Labour Party will not be insisting on having a golf course at all costs?
Yes. We believe that Marsa can be upgraded to international standards and Maghtab could be rehabilitated to host a golf course. There are some beautiful golf courses in the United States built on rehabilitated landfills. It will take some seven to 10 years to completely rehabilitate Maghtab but we have been wasting so much time on this controversy, if we get down to working on the project it will eventually materialise.

What is your assessment of the reforms at the Malta Tourism Authority and what will Labour be doing differently at MTA?
One thing that we will be doing differently is to give specific funds to a Gozitan tourist authority that will be entrusted to market Gozo as a distinct destination.
I don’t think it is fair for Gozitan operators to simply live off the scraps of their Maltese counterparts.
As regards the restructuring process, I think it is still too early to give an assessment. We should give it time to work itself out. We also have to see what impact the closure of MTA’s foreign offices except those in Britain and Germany will have on tourist arrivals. Only results will show us whether that was a good move or not.

What role does Air Malta have in Labour’s tourism plan?
Everybody agrees with the indispensable role played by Air Malta to help expand our tourism industry over the years. Labour still believes that Air Malta and tourism should be intimately linked. It is not a good idea to have Air Malta and tourism under two different ministries.

The consequence of what you are saying is that Air Malta may be obliged to service a route for tourism’s sake even if it might not be profitable for the airline. How would you justify this?
That is not a bad idea and Air Malta has done this in the past and to a certain extent still does today. Malta has the disadvantage of size so an airline before deciding to operate to the island will look at the numbers to see if it is a profitable concern.
You don’t blame them but for an island like us it is worth the price having an airline such as Air Malta operating those routes and experimenting with others. Many established airlines have considered operating on certain routes only after Air Malta had initially explored the viability.

Tourist operators complain of a poor infrastructure that does not match the high standards found in some of our hotels. What are your short-to-medium-term plans to upgrade the general environment?
When tourists come to Malta they do not stay in hotels. Because of our small size all of Malta and Gozo are tourism zones. I don’t agree with referring to Bugibba, Sliema, Mellieha and Marsaxlokk as tourism zones. All the island is a tourist zone and what worries me is that when two years ago the World Tourism Council carried out a survey on the state of the environment, Malta was listed in the bottom 80.
The quality of the environment, cleanliness and the level of service we give have nothing to do with two, three, four or five star tourists.
We need projects such as the Bugibba development which in just 18 months, under a Labour government, saw the transformation of the locality into a pleasing experience. We transformed Marsaxlokk. There are concrete efforts that can be made to address these issues.

Improving the physical environment may easily fall within government’s remit but how do you enforce better service standards in shops, restaurants and other outlets with which tourists come in contact?
If operators don’t have the excuse that government is unfairly pressing them with taxes, we can ask them to do their bit as well. As a regulator the MTA should be vigilant in terms of standards and prices. We cannot adopt an attitude that turns a blind eye to what some of the operators themselves are doing.
The training of people to better develop human resources is something government can undertake as well and we will be doing it.

Last week in Business Today a British party promoter said that Malta has the potential of being a party destination for clubbers but is losing out because of restrictive closing times for entertainment establishments. Will a Labour government consider revamping the regulations that bind the entertainment industry?
All that we can do to attract tourists to Malta we should consider. I am not sure though whether the youth market that finds Ibiza attractive is suitable for Malta because our tourism needs to make social sense as well. There is a youth market we should go for but I’m not sure it is the Ibiza style market we have to be aiming for.
Before taking any decision to extend opening times we need to study the impact it will have on our own youths. We’re here in the midst of a discussion on alcoholism and young people and to take steps to extend the opening hours of pubs is something we should be careful about.

Most of the hotels in the conference and incentive sector get requests from clients for sex-related services which are not available legally. Don’t you think that some of our social constraints are also economic constraints in terms of the revenue they can generate for the country?
It could be but I don’t think in any way that we should go back to the times when Strait Street was a buzzing red light industry in Valletta. There is nostalgia for the time and this is acted out in plays or referred to in songs. But because of the size of our country and the way we live as a community, I wouldn’t promote that type of sex tourism. Those who want these added sex-related services don’t need to have the law changed, they know from where to get them.

Evarist Bartolo was talking to Kurt Sansone

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