Issue link: https://maltatoday.uberflip.com/i/1273901
30.07.2020 6 OPINION T his week, we had another surge of infections mainly arising from massed gathering of youth parties at a local hotel. e image of serenity and normality that has been inspired by the government, is now being shattered by a sudden surge. The relentless drive of the virus has cost Malta about €120 million by way of a complete shutdown, closure of all ports, schools and ordering of all vul- nerable persons to stay cocooned at home. So far, there is no finite figure on the true cost of the lockdown, since no studies have been carried out to evaluate the losses by countless com- mercial entities with zero income. This was a national sacrifice, which was well administered by the health ministry - therefore full kudus are in order. We, all hoped that the number of cases had peaked but the resur- gence of 14 new cases last week made us fear, that unfortunately, like China we are witnessing the tip of a second wave. China this week, recorded 61 new coronavirus cases - the highest daily figure since April - propelled by clusters in three separate regions that have sparked fears of a fresh wave. 14 domestic cases were also record- ed in the northeastern Chinese prov- ince of Liaoning where a fresh cluster broke out in the city of Dalian last week. The irony is that such fresh in- fections in another China region of Jilin were announced just days after President Xi Jinping concluded an inspection tour of the province last week. Another continent which is hit is Melbourne, Australia. It has posted its highest number of new coronavirus cases since the pandemic began, even as officials expressed hope outbreaks in locked-down Melbourne may have peaked. Back to Malta, the Covid-19 situa- tion is making us feel like living in a surreal state - hoping and praying that no more cases are registered. But the advent of mass gatherings fuel the suspicions that cases will be inevitable. A marketing scheme by the government granting €4.5 million to organizers was recently announced to host foreign youth parties. These are usually pool parties where love, music and vodka are enjoyed without scru- ples (ergo no social distancing). It is obvious, on the other hand, that more visitors are badly needed since hotel and restaurant (and kindred in- dustries) sector cannot survive on do- mestic demand. No marketing effort (within reason) should therefore be spared so that recovery is hastened. What is debatabl, is the best and saf- est solution to salvage the industry. It goes without saying, that the millions paid to furloughed workers and issue of free cash vouchers by the State was a palliative and not a permanent cure. Such money went to temporarily suppress the queue of jobless but did not solve the age-old problems of the sector. The tourism sector needs a root and branch reform - away from quantity (eg low-cost arrivals) to reach an upper class cluster of quality hotels and simultaneous embellishment of the entire island. Fabio Axisa, president of the Mal- ta Institute of Accountants said this when recently interviewed by Times of Malta: "Our attractiveness and rep- utation as a jurisdiction were built on introducing reputable and blue-chip companies to Malta and focusing on substance. But over time, maybe due to the level of success itself, the strate- gy based on quality has been converted into a quantity game aimed at attract- ing as many companies and players as possible. And when you play the quantity game, you may attract a sig- nificant number of interesting players but the propensity of introducing pol- luters to the jurisdiction increases. As a country, we weren't good enough at identifying those polluters and taking action immediately and decisively". "There is this same debate in other sectors such as tourism. Should we fo- cus more on quality rather than num- bers? I think we'll come out of this phase, but we need to work hard." Remember how in May, MHRA had cautioned government that unless the sea ports and airport are immediately opened for business, then the 9,000 full time workers (and 7000 part-tim- ers) in hotels will face dismissal? The rushed decision to open for vis- itors this month is a risky one (but so did most other European countries) considering that a second wave of covid infections had gripped certain European countries. Consider how the rates charged at top hotels in Malta are still competi- tive but at their present low level, they cannot sustain the requisite quality so the image of a "sun, sea and cheap beer" island remains. This image has been exacerbated by the sponsoring of low-cost airlines. The mantra "go for quality not quantity" has also been the battle cry of ecologists who oppose the idea of 3 million airline passengers plus another one million of cruise lin- er arrivals which up to last year were clogging our roads and contributing to unprecedented air and noise pollu- tion. Now, with more EU funds at our disposal, we may sit back and rethink a permanent remedy to the faux pas that over the years, blinded us to go for quantity not quality (a paper-ti- ger). The solution is a challenging one, calling for surgery not palliatives. It needs a tourism minister with nerves of steel and full support by the cabinet for a long haul. Unless a root and branch overhaul is made of hotels and other restaurant amenities which are under-performing, then re- grettably we continue to dig our own hole-deeper. Ideally, we'll take a leaf from the Irish solution to their problem of a collapsed property sector which in 2007 sent its main banks to the bank- ruptcy register. A brilliant Irish solution is to set up an SPV – special purpose vehicle – to buy and manage the debts. Likewise, in Malta such out-of-a job workers are engaged in a SPV (or a Founda- tion with private shareholders) with decent salary and conditions until the reform is complete. The entity's main objective is to ac- quire, selected under-performing ho- tel properties and restaurants. These will be professionally valued at market values. To start, a €500 million initial fund will be an ideal sum, to create a PPP scheme to reform the sector. The footprint of pulled down assets so vacated can be used to embellish the environment. Take the example of the Zabbar local council, which has just embellished a plot of land (ced- ed by the government) to serve as a safe, open, inclusive and environ- ment-friendly space for children. In conclusion, now is the time to bite the bullet (before God forbid - a sec- ond wave sends everyone in a repeat lockdown). The money is available (€2.2 billion EU plus local treasury bonds borrowed of €2 billion). Pray, let us go for quality, clean air and up- grade the island credentials. Post-COVID recovery plan: surgery not palliative care George Mangion George Mangion is a senior partner of an audit and consultancy firm, and has over 25 years experience in accounting, taxation, financial and consultancy services. His efforts have seen PKF being instrumental in establishing many companies in Malta and ensured PKF become one of the foremost professional financial service providers on the Island