Issue link: https://maltatoday.uberflip.com/i/1103271
11.04.19 12 OPINION George Mangion George M. Mangion is a senior partner of PKF Malta, an audit and consultancy firm | gmm@pkfmalta.com A dark cloud oats over the island. One may blame climate change and hope it will pass away to let in the sunshine. Realistically, we know that living in hope is a chancy habit so let us collectively take the bull by the horns and start analysing the above-mentioned reports issued by international institu- tions. Why did they hit us this year as if the administration does not merit some re- prieve given that the economy has man- ifested an exemplary performance? For some time, since the Pilatus bank saga, one reads about critics pointing to a re- form of FIAU and MFSA. It is true that EU countries have not escaped the incidence of fi nancial scan- dals such as the Russian monies laun- dered through Danske bank with a number of branches in Estonia, yet in Malta practitioners pride themselves that the regulatory net has always been eff ective to keep out the bad wolf. Recent reports such as Greco, Money- val (still in the interim stages) the IMF and the Venice Commission have tight- ened the noose on the administration to stem the leaks. While as a country our demeanours are spotted and some- times over-amplifi ed in Brussels, yet one must admit that the closure of three local banks last year has taken its toll on public opinion. Practitioners are still feeling the cold blast of negative publicity. Moving on, femme fatale was the passport scheme. is was criticised at European level where media sources reported on the adverse comments by the Chairman of the PANA Committee who claimed that the IIP should be stopped. Last year, the European Commission was reported stating that passport buy- ers must have a clear and permanent link to host countries. But the prime minister, showered positive comments on the IIP scheme whenever he was addressing delegates at various global events organised by the sole conces- sionaire - Henley & Partners. He proudly announced the due dil- igence structure as administered by the government to classify as the gold standard. More comfort was showered by the General Counsel for omson Reuters attesting that the scheme is a textbook example of how to conduct ef- fective and reliable due diligence. Today, there are approximately a hun- dred countries off ering investment mi- gration programmes. Quoting Bruno Lecuyer chief executive of Investment Migration Council, he reminds critics of investment migration schemes that IMC has been diligent in establishing a code of ethics and professional stand- ards for its members. An initiative was launched four years ago to create a culture of profession- al excellence and some governments (Malta included) are also taking it on- board. Yet the excitement for the fi - nance minister does not stop here since the recent publication of the IMF re- port has tinged some raw nerves. e report goes to recommend a number of steps to help ensure a sustained future growth. Among such recommendations, one fi nds the standard advice urging gov- ernment to improve support to start- ups. ese are fi nding access to credit being hindered by red tape and the perennial demand by banks for tangi- ble collateral. Equally important, is the need to improve training of the labour force to be able to attract more interna- tional companies to Malta. Perhaps, an ideal way to improve the quality of the local talent is by setting up an innovation hub of international repute supported by venture capital. One cannot omit to caution against the breakneck speed that gripped the im- agination of construction and property developers with an unprecedented in- crease of 24% in property prices. Top estate agents never had it so good with some employing over 400 full- time property negotiators on generous commission basis. Naturally, when a property mismatch occurs this always leads to a bust – and without exception politicians rushed cap in hand to IMF. To mitigate this potential calamity hap- pening in Malta, the IMF report notes that while local banks are adequately capitalised yet it calls for more pru- dence in lending and a programmed re- duction in non-performing loans. Again, it recommends an extra eff ort by government agencies to cut red tape and eff ectively support start-ups. e culture concerning the adulation of mega business appears grand on the political bandwagon yet it pays to create a culture that small can also be beauti- ful. Another topic, in the IMF report is the need for more social housing. ere is a waiting list of 3,500 families seeking decent habitation. is human malady is partly caused by the onset of gentrifi cation which forces house prices to escalate. It is no surprise, that low-income workers cannot aff ord the rents on off er. For vulnerable households, the IMF recom- mends more rent subsidies granted by the State to deserving families and the acceleration of investment in aff ordable accommodation by Housing Authority. Sadly, it does not rain, it pours and last week saw the publication of the Coun- cil of Europe's Group of States against Corruption (GRECO). is is an eval- uation based on an expert assessment of local institutions and the measure- ment of their eff ectiveness concluded last October 2018. Some comments are not entirely salubrious. While progress was made on a reform of a number of institutions yet the experts did not mince words saying inter alia that Mal- ta "clearly lacks an overall strategy and coherent risk-based approach when it comes to integrity standards for gov- ernment offi cials". Furthermore, the Greco report stated that "a system of sanctions is also clear- ly lacking" adding in their opinion that the criminal justice system was at risk of paralysis and that a redistribution of responsibilities between the Attor- ney General's Offi ce, the Police and the inquiring magistrates was required to avoid this situation. e fl y in the ointment was the re- mark that "certain institutions have also turned out to have no real added value after 30 years of existence, such as the Permanent Commission against Cor- ruption". On a positive note, it reported that for a country of Malta's size, it had an "impressive arsenal of public institu- tions involved in checks and balance". Another smart move was the appoint- ment last year of Dr George Hyzler as a Commissioner responsible for Stand- ards in Public Offi ce. Party apologists point that most of the recommenda- tions by GRECO are on the same lines of the Venice Commission's opinion and that weaknesses are already being addressed. is can be seen on the action taken by the Tax Compliance Unit since the publication of Panama Papers in 2016/7 to try recovering taxes on undeclared earnings in tax havens. is exercise yielded a princely sum of €9 million involving the audit of 237 taxpayers. In conclusion, not everything is doom and gloom and one must congratulate government for creating fi nancial sta- bility, a reduction in public debt, a re- markable 6.5% increase in GDP, jobs for all, a community where 80% are prop- erty owners and instilling a general feel- good factor. Pushing our fate with Greco, Moneyval, IMF and Venice Commission reports