Article featured on the MBB Annual Report 2018-2019

The European Parliament elections that will be held this May will determine the shape of the forthcoming legislature, tasked with enacting bloc-wide policies. But, in the economic arena, what are local companies’ expectations of the EP’s ninth term? Rebecca Anastasi talks to the new president of the Malta Chamber of Commerce, Enterprise and Industry, Perit David Xuereb, and president of the Malta Hotels and Restaurants Association, Tony Zahra to find out.

Change is coming to the European Union this May, with the European Parliament elections set to precipitate a shift in the political composition of the House towards an increasing number of MEPs from new, smaller parties. And, for the next five years, this ninth legislature will determine policies on climate change, migration, security and the economy, within a context of rising populism and Brexit, both of which threaten the unity of the bloc.

“Malta has benefitted greatly from its EU experience. However, future success depends on the strength of the European project,” says the new President of the Malta Chamber of Commerce, Enterprise and Industry, Perit David Xuereb. While he notes the risks posed by “growing alienation and disappointment” felt by companies and citizens in the bloc – in the aftermath of the 2008 recession and the resulting rise of populist parties – he underlines the necessity to provide “legitimacy to the whole EU project” by enacting policies geared towards growth. “Maltese businesses, therefore, expect the EU to provide market conditions which allow them to generate growth and employment; to make the necessary reforms which would provide strong foundations to prevent or, at least, help us sail through potential future economic shortcomings; and to reconnect with EU businesses and citizens to solicit their trust,” he states.

Despite the challenges faced recently by the bloc, Perit Xuereb stresses that the EU should remain “committed to multilateralism” and do “everything in its power to mediate, reconcile and advocate reforms to preserve market access gains achieved over the years.” Free trade agreements should be continually promoted since “they mean nothing if they are not utilised by market players” and he advocates for the “coaching of enterprises to take up the opportunities provided by EU trade agreements.”

Sustainability is key, according to the Chamber President. Indeed, he underlines the necessity for the EU to pass legislation which upholds a balance between economic imperatives and environmental protection, while also encouraging businesses to constantly invest and innovate for the future, including in their use of natural resources. Moreover, “incentivising the development of public-private partnerships” by encouraging the sharing of finances and expertise, might bring about proactive solutions, he asserts.

The concerns and challenges faced by small and medium enterprises (SMEs) should also be on the agenda, Perit Xuereb stresses. “The protection and growth of SMEs can be ensured through streamlining the legal and administrative environment they operate in and by simplifying and making procedures more flexible. It is essential that pipeline EU legislation and initiatives that will affect how SMEs operate, avoid or eliminate disproportionate administrative requirements.” However, he also underlines that, on a local level, Government should resist over-regulation by bearing in mind that “the implementation of legislation should not go beyond what is necessary to achieve the objective” and by improving “the uptake of existing simplification measures.”

The EU budget is central to the economic buoyancy of the bloc, the Chamber President continues, emphasising that it is “the most important tool to enable the EU to adapt to future challenges and consolidate itself as a global economic power by ensuring focus is placed on the correct priority matters.” He refers to the EU’s commitment to prioritising investment in research, development and innovation, as well as in digitalisation, but cautions that important instruments, such as the Cohesion Fund, should not be neglected, since they provide a better standard of living for citizens within the EU.

Indeed, the anticipated decrease in the allocation of Cohesion Funds – due to the deficit caused by Brexit, as well as, in Malta’s case, the buoyancy of the local economy – does not bode well, according to Perit Xuereb. “Cohesion Funds are expected to be reduced in this budget and this is expected to affect vulnerable economic sectors, especially in less developed regions or transition regions. This is expected to negatively affect EU citizens at the core and, this, in a time of growing populism. This matter should be considered seriously,” he stresses.

However, Britain’s exit from the EU has already presented further challenges for businesses in the 27 member states and is likely to continue doing so. “It is this uncertainty which is affecting the business community in Malta. Businesses, citizens, workers and all other members of society in the EU that operate in the UK, or those in the UK that operate in the EU, will not know where they stand, until after the nature and logistics of Brexit are actually known, implying that planning is challenging,” he says.

In his opinion, the current deadlock has resulted in “uncharted waters where relevant businesses remain unsure on what will happen in the immediate future.” The Chamber President advocates for a further short extension which would “allow time for the ratification of the Withdrawal Agreement by the UK Parliament” but which would not “hinder the proper functioning of the EU.”

This was echoed by MHRA President, Tony Zahra, who listed the various Brexit scenarios and how these are likely to affect local businesses within the tourism sector in the next five years of the EP legislature. “The best scenario is an agreement which, in terms of trade, leaves everything, more or less, as it stands today; the worst would be a firm no deal which could impact the British economy – and local tourism – severely. We could lose at least 20 per cent of the UK arrivals in such a situation,” Mr Zahra states. However, he does not deem the repercussions to be debilitating for Maltese firms and the economy, since “losing 20 per cent of the UK arrivals translates to 5 per cent of the total arrivals” – a figure which could be replaced by increased tourism from other markets, he notes.

Moreover, and concurring further with Perit Xuereb, the MHRA President also notes the predicted increase of populist parties within the EP in the forthcoming legislature, stating that this could “present a challenge for the EU going forward.” He praises the EU’s four freedoms of goods, services, capital and people, saying that these are the cornerstones of the bloc’s unity and prosperity, which should not be taken for granted. “Maltese businesses expect that despite the bigger challenges, pro-Europeans work closer together to deliver on the promises of a European vision that provides prosperity, security and equal opportunities to all citizens. For this, legislators need to engage with social partners and civil society, and ensure that decisions taken reflect the aspirations of businesses and citizens at the local level and in their respective communities,” he asserts.

Growth can also be supported through enabling SMEs to access skilled labour and more finance, the MHRA President underlines. “Banks should be encouraged to consider qualitative viability, when assessing loan applications from SMEs, and frameworks should be put in place encouraging the development of alternative financing solutions,” he says. Indeed, SMEs can flourish if “market conditions are innovation-friendly and if barriers hindering innovation are mitigated,” which would involve more streamlined legal and administrative services, as well as “improved access to information for SMEs on markets, regulations and procedures that concern them both when it comes to the domestic market and also to provide their goods and services cross-border,” he explains.

This is also true for the tourism sector, according to Mr Zahra, as he emphasises the need for an extensive review to the 2010 Commission’s Communication, which sought to consolidate Europe as the world’s number one destination. This audit by the new House would aim to develop a new tourism strategy with a vision for 2030, he notes. “What is also necessary for tourism to grow is for the EU to dedicate a strong budget to promote Europe as a tourist destination. It should also have a focus on locations that go beyond mainstream EU destinations,” Mr Zahra asserts.

Indeed, while the EU budget is already expected to invest further in research, development and innovation, through a revised Horizon Europe programme, the MHRA President notes that these should be applied to tourism and hospitality. “Just like any other industry, this sector requires adapting and should make the best of these new EU priorities. It needs be at the forefront, working with innovators to design technology and systems that would make tourism operators more competitive. It should also be open to solutions provided by artificial intelligence and robotics, as these will undoubtedly shape future trends of the industry,” he continues.

Yet, sustainability within growth must remain a priority, Mr Zahra stresses. Concluding, he notes that as travellers become more experienced and environmentally conscious, sustainability will move up their priority list, which means that businesses should be supported to provide for the future. “Business is committed to introducing more sustainable practices as it shoulders its responsibility towards the planet. However, support is required. Business needs future-proof policies that incentivise the application of environmentally-friendly solutions and technologies,” he concludes.