INTERVIEW | Kurt Farrugia: A trusthworthy and organised jurisdiction

What is Malta Enterprise doing to assist SMEs during the lockdown introduced as part of the measures to combat COVID-19? What incentives and measures are most in demand amid the coronavirus crisis?

As the first point of contact for businesses, Malta Enterprise has been entrusted to administer the economic measures announced by the government mainly the Wage Supplement support measure, Quarantine Leave refunds for employees and the cost reimbursement for companies investing in facilitation of telework. All three have been successful in their own merit.

As expected, the largest number of applications received were for the wage supplement support measure with nearly 19,000 applications covering 87,808 employees. The wage supplement measure is proof that we are making a difference. Instead of employers having to make their employees redundant, jobs are being saved.

This is ensuring the companies hold to one of the most important factors of production – human capital. This is critical to ensure a fast recovery once the right conditions are in place. Businesses are being evaluated on the impact the pandemic has had on their operations irrespective whether these were closed by government or not.

Malta Enterprise has also launched an R&D Fund in collaboration with the MCST. Its aim is to facilitate research by academics and private entities on COVID-19 as a departure point. Such research can also be extended to outcomes that do not only address innovative and/or improved approaches related to the current pandemic, but also potential future waves and other antiviral relevant research.

Malta Enterprise employees are working round the clock to process all the applications received. In order to be able to conduct this phase swiftly and with efficacy, over the last weeks the various relevant departments within ME collaborated in order to streamline the process, improve accuracy and curtail abuses.

How do the measures and incentives introduced in Malta to assists SMEs compare to other countries in the EU?

While it might be interesting to compare different aid packages from a technical point of view, we will not gauge our success in assisting businesses merely via this comparison. Some quarters have stated that our aid package compares very well with that of other EU states and that the rapid and effective disbursement of funds surpasses what has been experienced in the remainder of Europe.

However, what is most important is to assess how our businesses are responding to this support. Indeed, we have liaised, discussed and debated with our social partners in order to iron out the most realistic, balanced and effective deal that we could provide. This discussion will continue; we have already revised our measure and we shall continue if needs be to improve our aid.

We started off by improving liquidity via deferring the payment of taxes and offering guaranteed and low interest loans but we have also directly intervened to preserve human capital and resources. In order not to let the internal capacity of our businesses to dissipate and with an aim to provide a social safety net for employees.

We are also cushioning off the direct effect of Covid-19 related changes by refunding moneys paid by employers on obligatory Quarantine leave and reducing their spend on facilitating telework by paying for part of the costs for buying or leasing of laptops for example.

Our eyes are set on what we can achieve in this downtime rather than what will be lost. In spite of the global crisis we are in, there are opportunities on which we want to capitalise. It’s in this spirit that we have launched an RDI fund for Covid-19 related projects and are shaping a proper economic strategy based on tangible niche market opportunities that will help us spring board when the ‘new’ normality is restored.

So far, the measures launched by the Government have been very successful as redundancies have been kept to a minimum which also reflects a sense of confidence in what is being done.

Have any SMEs shut down since the social distancing measures were introduced?

SMEs are the largest segment of company types in Malta and we as Malta Enterprise do indeed give them the importance that they deserve. Through our one stop shop ‘Business First’ which we run alongside the Chamber of SMEs we tender services to these businesses all year round.

From the outset of this pandemic we kept abreast with their changing circumstances in order to devise relevant support. We know very well that the effects of the pandemic have been very harsh for some of the businesses.

There have been businesses that have temporarily ceased operations until the timeframes of the pandemic effect are clearer. We will endeavor to keep track of the developments at every juncture and shall intervene further if there is the need.

On the other side of the coin, it is also true that the Covid-19 wage supplement scheme has saved thousands of jobs. We are doing our utmost to take decisions that truly reflect the disturbance experienced by our businesses.

What are the biggest challenges SMEs are facing at the moment?

Businesses are looking forward to bring their operation back to the norm and start opening up for business. This week government has announced the re-opening of certain services. Our assistance will still be available to those businesses that have been allowed to reopen their shops and outlets. As promised, we will continue to be of support as we have been these last two months and the financial aid will not stop abruptly but will be tapered in order to alleviate the shock experienced by businesses. We are fully aware that some businesses will take much longer than others to recover.

Which sectors have been worst hit by the measures?

Those sectors that rely closely on contact with their customers. Undoubtedly, here we have sectors such as but not limited to tourism in its broad sense (including hotels, private accommodation, restaurants, bars, tour operators, transport companies, airlines, etc.), wholesale and retail trade (whilst people would still buy necessities such as food and beverage, other operators such as clothes shops were closed down and now that they have re-opened, they will still experience an anemic demand), administrative and support services, and transportation and storage would be the main categories.

The most hard-hit sectors in fact are also listed under annexes published together with the wage supplement. These annexes were also updated following the feedback received from businesses and self-employed. Sectors that fall outside of these Annexes still have the opportunity to make their case as well as these are being evaluated on a case by case basis. This also shows the level of personalized attention that Malta Enterprise is offering to the business community.

What do you envisage the financial cost to SMEs to be during this crisis?

The major financial cost, that of paying employees’ wages when the income is low, has been taken up by the Government through the wage supplement. This assistance is costing the government €50 million a month. Businesses can use their finances to invest in innovation and strategies that can help them recharge to start achieving growth again.

In these challenging times the scope is much wider than simply carrying out an accounting exercise. Whilst, we need to be prudent in our cost outlay we need to ensure that companies remain afloat. The prudence adopted by Government in the previous years and the accumulated budget surpluses enabled us to enter this pandemic on a strong financial foothold.

For how long do you think SMEs can survive under these current conditions?

The resilience of SMEs will depend on multifold factors. The answer is not clear cut as here we are referring to SMEs that are operating in different sectors. A recent survey carried out by the Chamber of Commerce shows that two to three months from now seems to be the breaking point for most of the respondents.

The theme should not be solely how to survive but rather how this time can be used to prepare for the future business world. Normality will not be the normality we all knew but rather it would be an environment where fast adaptability to the changes taking place will be the key to survive.

As Malta Enterprise we will continue to assists as best we can all those SMEs that are going through this difficult time. Our success is also related to the success of the SMEs that we assist on a daily basis. We all have the same objective.

Which sectors of SMEs do you think will find it hardest to get back on track once the measures are gradually phased out?

Together with other stakeholders we are working on a restart strategy to help businesses back on track. The wage supplement will still continue to be disbursed to the employees and will not stop abruptly but will be phased out slowly.

Certain sectors such as tourism in its broad sense will be probably amongst the last to recover. Malta is heavily reliant on this sector so the prolonged drag that this sector will experience will also curtail our recovery. Malta in 2019 received nearly 2.8 million tourists and our population is slightly less than 0.5 million. This clearly gives a magnitude of what we are speaking about and the wide-ranging impact on various economic sectors that an anemic tourism sector will have on the rest of the economy.

What we want to do is to continue to provide support to these sectors and that at the same time we ensure that they are set in motion again in a responsible manner. A clear balance needs to be found between economic and health interests. We want to see the long term success of our economy too.

The decisions are very difficult to call. Do you open up tourism very soon and risk another spike in Covid-19 cases which could also cause other economic sectors to stall again? Do you open up for tourists coming from what will be ‘safe’ countries? Can technology have an important role in opening up our tourism sector again? Do you leave an imposed quarantine on all those entering Malta? You will appreciate that each of these questions has various dimensions. At the moment it is crucial to assess on a daily basis developments taking place not only in Malta but also internationally to make the most informed decisions possible.

Foreign direct investment has suffered amid the coronavirus outbreak. How is ME planning to reestablish contact with interested foreign parties once the measures are lifted?

During this period Malta Enterprise kept constant contact with the FDI community in Malta. The assistance available has helped to ease the burden and to keep employees on their books.

When it comes to interest from potential investors this is truly alive and well. Our foreign investment promotion team has been actively holding webinars, online one-to-one meetings and discussions with clients who are still keen to go ahead with their plans to start up in Malta. Interestingly enough, we are still carrying out virtual business delegations. These can never replace fully the face to face meetings that we organize for investors with various entities whilst in Malta. However, they are playing an important role to ensure that investors would have already understood clearly what Malta has to offer.

The sound approach that Malta has showcased in these trying times ascertains our claim of being a professional, trustworthy and organised jurisdiction that can respond effectively to new challenges.

In recent days, we also had international companies from outside the EU contacting us because they are interested in investing in Europe and they are considering Malta as their springboard to Europe. The personalized approach that we offer to investors during these challenging times has definitely made us stand out from our competitors.

This makes us hope that our economic recovery will be in the form of a healthy rebound as long as we continue handling things as we are.