There has been a lot of news lately concerning the whole #MaltaFiles incident with a number of journalists, bloggers, industry experts and others covering this topic. I do not wish to get into the merits of the whole case but would like to highlight the strategic timing of the whole incident just as the country is in election mode and following the #PanamaPapers and corruption allegation at the highest level of governance of our country.
There is no arguing that our country has suffered a reputational blow over all these incidents. Regardless of one’s political views and who one blames for all this, the fact of the matter is that we are all affected by these incidents and we all must act collectively to restore our reputation.
With this post my main aim is to show how all industries are affected by our reputational damage and this is not simply something that has to do with the financial services industry in isolation.
The Multiplier Effect
First of all it is important to recognise the interconnection of industries and the multiplier effect that an industry has on the whole economy. If we take the financial services industry, one may read how it makes up around 15% of Malta’s Gross Domestic Product (GDP) – this means that statistically the income generated by this industry is roughly 15% of all income generated by Malta’s economy. That is just the direct effect – it is estimated that the indirect effect can raise the financial services industry’s contribution to GDP to as high as 30%.
Easy – think of the residential rental income and properties bought by foreigners working in this industry. Think of the commercial premises bought or rented by companies and practitioners working in this industry. Think of the money that clients and promoters of this industry spend on dining and subsequent personal holidays to Malta. Think of the people who have relocated to Malta entirely and the amounts they contribute across the board to our economy through their spending. The cars they rent to get around or the taxis they hire while visiting, the flights they pay for and accommodation they take up while here.
Not Just Financial Services
It is also very important to keep in mind that the country’s reputation has a direct effect not just on the financial services industry but on any industry that is in some way or another linked to foreign direct investment. So this will include the manufacturing industry, the export and tourism industry, the meetings and conferencing industry, the software development and IT network servicing industry, the gaming industry and so forth. In turn, all these industries have a multiplier effect on the economy. What this means is that even the store keeper of a hotel, the maintenance man of a manufacturing company (like the large semiconductor manufacturer in Kirkop), the checkout person at the supermarket, the cleaning staff of a restaurant and so many other jobs are all affected.
One must also keep in mind the large amount of direct and indirect taxes employees and owners of these entities pay. Thanks to the collective contribution, Malta is boasting a budget surplus, low unemployment and a growing economy. These things do not develop following a short term initiative but are the fruits of medium to long term collective efforts. As many will appreciate, reputation is something that takes years to build but days to ruin. Thus, in these challenging times it is of the utmost importance to give this matter serious recognition and devote all necessary resources to maintain our good name.
The Government’s Role
Although it is true that the government of the day has a bearing on the overall progress of the country and its reputation we must not fool ourselves by thinking that it is solely the government’s role to do so. The private sector has to be proactive at its own initiative to safe guard the name and reputation of our country. One has to see beyond the political noise and mudslinging that only benefits the few and not the many. Regardless of one’s political views, having a situation where the Police Commissioner, the Attorney General, the Financial Intelligence Analysis Unit (FIAU), the Malta Financial Services Authority (MFSA) and other high ranking institutions, as well as the rule of law itself, coming into question, is highly unacceptable. Whoever is in power after June the 3rd should give this the utmost importance and work with industry experts (from the many different industries) in order to have a public-private initiative that can truly benefit the whole economy.
The Bottom Line
It must be recognised that as a country we are constantly in competition with other jurisdictions. If Germany can attract a company to open shop or expand its operation in Germany, then it will do its utmost to attract such business. To whine and complain that other jurisdictions are targeting us and playing dirty is futile. It is a competition, so one must expect the other players to be competitive and use whatever opportunity they get to make us look bad and make themselves look good. Of course this does not mean that we just sit back and accept whatever is thrown at us. We must be prepared for the competition and have strategic plans to defend our name. The current political scenario is putting us at a disadvantage for sure, but every country goes through political issues and no political system will ever be free from its drawbacks.
The upcoming general election has made the situation worse by increasing the political barrage and giving more ammunition to our competition who seek to portray us as an offshore country with shady practices. I will however end on a positive note, we all know that the allegations against us in relation to Malta being an offshore financial centre are untrue and hence we can defend our good name with the truth and with facts. Governance issues can be rectified by replacing the people who have caused the issues and the country’s reputation can be restored. One powerful tool all citizens have is their vote and they must use this tool in a conscientious way to choose the party and political representatives that they feel can best help us on our mission to continue developing our economy and restore our good name.