MediaToday

INTERVIEW | Wednesday, 12 December 2007

No Drama

Some time ago, while browsing through a collection of old books, a shocking pink paper back caught my eye. Jien, as it is entitled, is a collection of poetry authored by a 1960s teenager who eventually became one of Malta’s foremost economists. Soon after graduating, J.F.X. Zahra was approached to head the research unit at the Malta Development Corporation, a project he left in 1983 to spearhead MISCO, a market intelligence company he co-founded with another two economists – Lawrence Zammit and John C. Grech. It was also in the 80s that he spent some time lecturing Economics at the University of Malta. At a time when major changes in financial legislation were taking place in Malta, Mr Zahra was appointed board member of the Central Bank of Malta and was eventually made Chairman of Bank of Valletta in 1998. “This was a very challenging period since at that particular time, aggressive competition had entered the market”, he admits. He has also served as Chairman for Maltacom in 2003 and two years down the line, he was asked by the PM to be responsible for the Euro Changeover process. Now he juggles this post with a number of directorships, chairing the National Commission for Higher education, and lecturing at the University of Messina.

How, if in any way, has your cultural background helped you with your career in financial services?
I have always been active in the cultural sphere along my career in financial services. Sometimes the two intertwine interestingly. I still make sure to find time to write poetry and work on projects that are related to the arts. In fact, I am currently involved with the University of Malta in a Masters Programme in collaboration with La Sapienza, Poznan and Paris XIII that brings together art, theatre, sports and neuroscience. Essentially this is a Performance Studies programme that has a very strong business dimension. In creating this programme, we aimed for building on the concept of a creative society piloting experiential learning in business. Such projects help me gain a wider perspective of what I am doing. The arts make you deeply respect the human being. The human factor underlies whatever we do, especially in Economics – a discipline that is intrinsically based on decision making and human motivation. I have learnt that dealing with finance and changes in management process requires a strong respect for the individual.

How did your NECC Chairmanship come about?
Back in 2005, the Prime Minister was consulting a number of people, including myself, on the benefits and risks of Malta going in for an early entry into the Exchange Rate Mechanism. I had told Dr Gonzi that with the right drive and determination, I was sure that we would have made it even before than the required two years. Some time after, I was approached to take up the challenge, which I immediately accepted. I realised that this was another mammoth job, possibly even bigger than when I was Chairman of Bank of Valletta. The Euro changeover affects a much wider span of people and businesses, since in itself, the project will in a way or another influence all economic activity in Malta.

What do you consider to be NECC’s most outstanding achievements so far?
I think that the way our communications strategy worked out indicates how a number of factors have enabled us to increase the awareness and acceptance of the changeover by the general public. First of all, a project of this calibre needs a results-oriented team with excellent executive powers. I was lucky enough to have been able to select committed and highly performing individuals in this regard. Secondly, we have managed to keep harmony between all stakeholders – be it social or economic groups, including the most vulnerable. This was a challenging task indeed. Thirdly, we have guaranteed the smoothness of this changeover by basing our strategy on principles of collaboration, cooperation, simplicity and transparency. We are also working very hard to educate the public, as a consumer, on how in practice the change will affect us, disseminating information on all possible implications.

What do you consider to be the NECC’s greatest challenges with Euro changeover?
There is the obvious challenge of having to deal with the technical aspect. This includes cash changeover, IT software systems, legislation, cash registers and point of sales systems among others. Then there is the greater challenge of preparing the Maltese public for the change. This is where our communications strategy played a significant role. We have had the task to deal with the anxiety of people against the backdrop of socio-political forces coupled up with the tension between the needs of the retailer and the consumer. What does not help in this regard is that from a cultural aspect, Malta is very close to perhaps the two most sceptical countries on the adoption of the Euro. In Malta, we have access to the scene in the UK , who have decided to opt out, and even worse - we are spectators of the Italian Commedia dell’Arte that has had the Euro issue caught up in an increasingly polarised political situation.

There is still an inevitable anxiety within the general public. Would you agree that many believe that prices will soar once we adopt the Euro? What is the NECC doing to counter this perception?
This is where the Italian story comes into play again. Romano Prodi introduced the Euro to Italy in 2002. Silvio Berlusconi became Prime Minister in April of that same year. This gave him carte blanche to make a political scapegoat of the Euro and painting it as the main source of economic ills in the country. Unbelievable but true, the Euro is still on the Italian political agenda till this very day. Political drama has actually encouraged the business owner to go along the perception and increase prices, resulting in the consumer to actually expect it. This is like a changeover campaign in reverse. In Malta we have been lucky enough to keep the changeover low on political sensationalism, and this has fortunately helped. That said, the Italian anxiety has to an extent rubbed off onto the Maltese, bearing in mind that over 40% of our population follows Italian TV stations regularly. If we were to observe changeovers in Ireland, Austria, Belgium and The Netherlands, to mention a few, things would be different. One must also make a clear distinction between real inflation and perceived inflation when touching this subject. We expect the price of pizza in January 2008 to be higher than that in January 2003. This is not necessarily because of the Euro. In any case, we have taken every possible precaution. To mention a few, we have worked on the dual display system, the Fair campaign, the linja ewro 154, the accessibility of the NECC team to answer concerns in a detailed and timely fashion, the rounding off system - where business owners are encouraged to round off downwards, and last but not least the collaboration with constituted bodies and the business sector.

How can you compare the work being done in Malta to that done in other countries that have joined the Eurozone?
In 1999, Europe experienced the first wave of countries joining the Eurozone, with the actual cash changeover starting in 2002. The second wave started with Slovenia in the beginning of this year. Malta and Cyprus will follow, enjoying the benefits of learning from Slovenia’s. One must make a clear distinction between real inflation and perceived inflation when touching on this subject. Cyprus seems to have progressed substantially since the first quarter of 2007. The reports we are receiving from the European Commission on Malta’s progress have always been very positive. The last report in fact, mentions that as a country, Malta has implemented best practice and strategies in this changeover. We are considered to be very well prepared. We have also had more than one opportunity to exchange notes with the Cypriot team. Needless to mention, such opportunities result in very valuable learning experiences. We have also conducted a series of successful twinning agreements with Ireland, France and Austria.

The Euro is undeniably strong vis-à-vis the US Dollar. Will this present a problem to companies like ST Microelectronics, whose exports are Dollar-denominated? Isn’t this a concern for most other European countries as well?
It is a fact that the Euro is becoming stronger when compared to the US Dollar, which will automatically make the Dollar more competitive in international markets. A strong currency on the other hand is indicative of the fundamental strength of the countries that form part of the Euro area. A strong currency will attract direct foreign investment because it gives signals of the strength of the economy. In Malta’ case, we joined ERM II on the 2nd May 2005 with the intention of not utilising the 15 per cent fluctuation band to our central parity rate. This was a sign of our currency’ s stability tradition. We have been reasonably successful in attracting foreign investment and increasing our economic growth during this period. A clear sign that our exchange rate with the euro has had a positive impact on our competitiveness on the international markets.

While accepting that the technical advantages in the adoption of the Euro are evident, what are your comments on losing a currency that has helped us build our national identity?
We live in a period of globalisation, with world populations slowly becoming citizens of the world. That said, people are still and should still be proud of their identity, be it national or regional. The EU is also paying a lot of attention to this factor, including its considerations in currency. I feel very proud to be using a European currency that defines my identity as a European and furthermore, I am prouder to use a European currency that reproduces my country’s emblem, cross or cultural heritage on its national side. We are global in the way we transact our currency but proud that our identity is thereby reflected.

What is the specific competitive edge that the Euro will give to Malta on both its import and export sides? Will it aid Malta’s competitiveness in any way?
Malta is an open economy with a trade that is highly dependent on Europe and countries within the European area. The Eurozone makes it easier for trading, not only among EU countries but also on a more international front. For instance, banks from the Gulf area have just been granted a license to operate in Malta. Business in Malta will not just be attractive to sectors related to financial services but also to manufacturing, telecommunications and IT, to mention a few. SmartCity is a clear example.

At the moment the team at NECC must be very busy taking care of last minute preparations. What are your comments about the work your team is carrying out?
The team at NECC, ably led by Alan Camilleri, is not only highly committed but also very dedicated and professional. This comes out clearly in the way it has dealt with the challenges imposed by the project. I can comfortably say that at this stage, we have ticked off our checklists in all that is related to the planning and preparations of the Euro Changeover. That said, the team is currently working round the clock to be able to deal with any last minute situations and concerns. The high motivation of the NECC team will again come to test during the last days before E-day.

What will happen to the NECC once we adopt the Euro? What is the NECC planning for the coming months?
The original idea was that the NECC would continue operating until June 2008, until when the mandatory display period elapses. We are now more likely to stay on for some time after that, for the cooling down period until September 2008. This would ensure that the monitoring of prices remains steady. After E-day, we shall be launching a communications campaign addressing the after-effects of the changeover, with of course a downsized team - since only part of the remit will have to be focused upon. The committee will of course keep on meeting after e-day, to be able to listen to and act upon the reactions and concerns of people affected by the change.


12 December 2007
ISSUE NO. 515


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