01 February 2006

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Business Today

The year of the businessperson

The GRTU is facing internal turmoil over accusations that the council’s top posts were manoeuvred to reflect a more government-friendly organisation. But when talking to Business Today before the discord became public, GRTU President Paul Abela insists that for him the organisation’s members are “king” irrespective of their political creed.
He insists that the issue about a block vote being distributed during the GRTU general conference held earlier this month is more “talk” than reality.
The votes clearly show that if there was any talk of a block vote it did not translate into a concrete result, Abela says.
The GRTU President says that regulations and “abnormal costs” in 2005 created a disheartening atmosphere for small businesses. He wants 2006 to be the year of the businessperson and hopes government will finally be enterprise-driven.

The Prime Minister has set up a Better Regulation Unit to review past and upcoming regulation in a bid to streamline bureaucracy and cut excessive red tape. What is the GRTU expecting from this unit?
The GRTU would want antiquated regulations that are a hindrance to doing better business removed but we need to see which regulations are to be touched because in some instances our members would not necessarily construe certain legislative measures as a hindrance.
The financial resources of the GRTU are not big and to perform such a legislative review requires somebody who is really focused on the matter. Vince Farrugia performs miracles here, he sometimes leaves me breathless with his relentless drive but there are human limits. In this sense it is positive that the Prime Minister has assigned a high-ranking civil servant with the GRTU, who would be performing the legislative review on our behalf in liaison with the unit set up at the office of the prime minister.

The introduction of new regulations brought about by EU membership is a must. What does the GRTU expect from government when introducing new legislation?
During John Dalli’s time at the finance ministry it was practice to have every legal notice issued by any ministry pass through the finance ministry so that the impact of that legal notice on business is evaluated. Today that practice has been taken up at a higher level because every legal notice must have the stamp of approval from the prime minister’s office before passing through.
This is a positive aspect because even legal notices which at face value do not seem to impinge on businesses could have indirect consequences on GRTU members.
The GRTU wants to be consulted when legal notices are drafted because there have been instances when we negotiated a compromise that made sense to both government and our members.

Is it a problem that most departments and ministries do not have people running them who are business oriented?
The GRTU is saying that 2006 should be the year of the businessperson. If this country wants to move forward it has to give businesses the space to operate in. Only business can create productive jobs.
Government has to be enterprise-driven. Parliamentary Secretary Edwin Vassallo is responsible for the self-employed and now even government has noticed the importance of involving Edwin more. He understands us because his background is in business and when some minister lets go one of those critical comments against businesspersons, Edwin can correct that impression.
Other ministers do not have regular contact with businesspersons but Edwin lives and sleeps with us. Those who phone him are self-employed persons with some problem or other related to bureaucracy.
I do not expect every ministry or department to have people conversant in business matters but if cabinet uses Edwin Vassallo more as a focal point when new regulations are to be issued, it would facilitate things for us because Edwin knows what it takes to run a business.

What do you mean when you say 2006 has to be the year of the businessperson? What are you expecting?
The GRTU conducted a survey among its members and 65 per cent said they expected their business in 2006 to perform the same as it did in 2005. 20 per cent said they expected a better performance while the rest are expecting a slower performance.
What I want is that when we conduct another survey towards the end of 2006, those 20 per cent who said they expected to perform better do actually increase their operation, those 65 per cent who expected a similar performance as 2005 will decrease because most of them would have performed better than expected and more jobs would be created.
Everybody is eager to have more business and like a chain reaction, more business means more jobs. Even if ‘more business’ is just a feeling created in the knowledge that government is less of a bureaucratic nuisance can be conducive to a better performance by the self-employed.
Currently there is this feeling that every department and authority is there to pile on regulations and this is disheartening businesspersons.
If government adopts a better approach towards business that could create a positive atmosphere that can eventually lead to more jobs being created.

What is disheartening most self-employed?
In 2005 small businesses were faced with a lot of regulations and abnormal costs such as the surcharge on water and electricity bills. The GRTU disputes the surcharge capping arrangement for large industries because it is discriminatory against the smaller businesses. If government wants to give large industries such as ST a capping limit for the surcharge, all well and good but it should be an incentive for all businesses.
If I am a baker, shouldn’t I have the surcharged capped at a certain level?
The baker has had to endure a 55 per cent surcharge, now down to 47 per cent, over and above other costs which have increased. At the end of the day the baker makes his calculations and realises that his costs have increased. He cannot increase the price of bread because it would become uncompetitive when compared to the cheap imported products and the only road left in front of such a baker would be to eat from inside, reduce his profit. The baker will obviously complain that his business has fared worse than the previous year and this will gradually create a negative ripple among all operators. It is a domino effect.

Would you have ever imagined it possible to have a disheartening atmosphere under a Nationalist government?
Such an attitude can prevail under any government if the administration is not on the ball with what businesspersons are feeling. Irrespective of whether it is a nationalist or socialist government, unless the administration has its hands on the pulse of business, private enterprise can regress. And if businesses regress, automatically government will feel the pinch.
What is government after all? It is us, everybody. When Minister Austin Gatt comes to us at the MCESD and says that government will be absorbing so much of Enemalta’s fuel costs, he is simply saying that we will be absorbing that cost. There is no bank account called Malta Government from which money is issued.
The Nationalist government has over the time liberalised the economy and allowed it to flourish but the mistake every government makes is to listen to those yes-men around the table. To feel what businesspersons are experiencing ministers have to go on the ground.
We at the GRTU conducted a survey among our members. It would have been easy for us to poll the members of the council, 16 of us. It would have given us a feel but does that reflect all businesses? No, we went to our members and asked them for their opinion.
Our members are a good reflection of the economy because they represent a wide spectrum of activity. It is wrong to simply listen to those around the table, the bureaucrats.

Prior to the budget the GRTU clamoured for a tax cut. The Prime Minister has set up a committee to draw up a review of the taxation system and deliver a report by June this year. What are you expecting to read in this report?
Reducing taxes would spur businesses to create more wealth. I recall when George Bonello Dupuis as finance minister had reduced company tax from 65 per cent to 35 per cent and government’s revenue increased rather than dropped because the economy was given a new lease of life and more wealth was created. This is like contraband. If barriers to trade are dismantled it simply becomes unprofitable to break the law with all the risks associated with such behaviour.
If the self-employed are penalised with more taxes, the less government will be collecting in dues. Government has to give honest taxpayers incentives to work more and create jobs.
I have to mention the issue regarding host families. The moment government set its eyes on taxing host families many reasoned that it was not profitable for them anymore to earn a few hundreds of pounds when half of what they earned will end up being absorbed by taxes. What happened? That family’s income retracted and consequently there is less money circulating in the economy.
In any tax reform Government needs to have the assurance that it will still rake in the necessary funds to finance education, health and other services. We are waiting for the report but as yet the committee has not asked to meet with the GRTU.

In Eastern Europe there is the movement towards a flat tax system that applies for both companies and individuals. Do you agree with such a regime?
I don’t agree with it. I don’t believe it is a just system. A flat tax regime is going back to systems of the past.

The prevalent image of a businessperson is that he or she is a thief. Does it worry you?
It does worry me that people have this perception. Sometimes it is the unions that add fuel to the fire when they imply that all business people are thieves. Let’s face it, somebody who is employed can simply resign from work and find a job elsewhere if he or she is unsatisfied with the employment at hand. A businessman cannot do that. He has to compete each and every day in a liberalised environment. The difference is that a businessman is willing to take the risk of hypothecating his property to invest in the business he believes in while others are not willing to undergo that risk.
It is unfair to label all self-employed as thieves.

From where do you think is this perception coming?
It is nothing new but maybe it is also a by product of envy. You get people who see their neighbour driving a more expensive car and the assumption is that the person is a thief. What the general public does not realise is that any self-employed individual practically works more hours than a salaried individual. Small enterprises many a times engage part time accountants and these offer their services after hours, which means the person responsible for the business will have to continue working because of the paper work that needs to be done.

The European Union index on research and development spending puts Malta at the bottom of the league. Doesn’t this portray a negative picture of the entrepreneurship of Maltese businesspersons?
The self-employed and small businesses, within their limitations, have started investing in research and development. To adapt to changing market conditions small businesses have been innovative.
Research involves much more. As an organisation, the GRTU will this year try to tap EU funds so that our members will be able to benefit from them for research purposes. Most self-employed do not have the necessary resources to invest in research, which explores avenues outside the company’s main line of business.
One area where Maltese businesses can gear themselves much more is EU tenders. The EU is an institution where numerous tenders are issued regularly. It offers a new opportunity for doing business for many sectors of the economy, whether it is printing of brochures and documents or the organisation of conferences.

Most companies in Malta are family-run businesses. Does this pose as a handicap for expansion and development?
It is a handicap but the mentality is gradually changing. Up to 50 years ago businesses were mostly run by the father and his children. Today this has changed to include the father and his brothers apart from the children. Running such a business becomes more problematic. There are families who have realised that children do not necessarily possess the ideal business acumen to carry the family concern forward.
The number of family-run companies that are engaging outside managers is on the increase. Engaging a manager outside the family and paying him or her good money was taboo in the past but things are changing.
As regards flotation on the stock exchange, I do not think that enough was done to encourage companies to list, even if on the alternative listing. There are too many restrictions to go on the market.
Abroad, even SMEs the size of Maltese companies, go to the stock exchange to raise capital and diversify shareholding. In Malta we had started the alternative listing but after the initial fervour little was said about the possibility of companies to participate.
It needs to be publicised more. Listing on the stock exchange will enable family-run companies to become more professional.
The stock exchange needs to carry out a survey and ask why companies have not considered floating on the market. Now is the time to give the stock exchange a push because bank interest rates are very low and unattractive for investors.

During the GRTU general conference there was a block vote making the rounds. What was the reason behind the block vote? What does it say about the internal politics of the GRTU?
People talk of a block vote but in reality it did not materialise. The election was conducted and from the voting results it is clear there was no block vote.
I have to applaud the 25 contestants who participated in the election and that is a positive development. From the 16 who were elected there doesn’t seem to be a block vote.

But GRTU members did receive SMSs with a list of candidates for whom to vote for…
These are normal things. In the past the general meetings of the GRTU used to be attended by 30 or 40 people. The last general meeting was one of the most successful we had in years. The GRTU members are enthusiastic and that is why we had a good attendance. I believe there was more talk of a block vote which in reality did not translate into anything concrete.

Is there a problem in the GRTU between those members who are inclined towards the PN and others who are inclined towards the Labour Party?
We do not treat members according to their political affiliation. From the 16 members on the executive I do not know what political inclination they have and it does not interest me. I was a mayor for the Nationalist Party in Swieqi but I treated all residents equally.
God forbid politics infiltrates in the GRTU. We were never a political organisation.
As GRTU I am here for the service of my members, irrespective of who they are.
All I want is that both major political parties respect the self-employed.

Having been a former PN mayor, will you be treating government with a silk glove?
If my members are feeling that the government of the day is implementing measures detrimental to their wellbeing, I would be ready to take action.
Under a Nationalist government I have led stevedores on at least three protests, even closing the ports. The member is king for us.

Paul Abela was talking to Kurt Sansone

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