Issue link: https://maltatoday.uberflip.com/i/292371
12 Business Today maltatoday, WEDNESDAY, 9 APRIL 2014 Commission eases visa policy to lure wealthy visitors The European Commission has adopt- ed a new set of rules designed to ease access to EU countries for visitors from countries subject to the visa re- quirement. The move was promoted as a way for ailing EU economies to earn many more millions from foreign visitors. By cutting red tape for travellers from China, India, Russia, Saudi Arabia, South Africa and Ukraine, the Commission says that the EU economy could earn as much as €130 billion in total direct spending over five years (in accommodation, food and drink, transports, entertainment, shopping, etc.), and could create some 1.3 million jobs in tourism and related sectors. The EU has a uniform visa policy within the Schengen area. Citizens from third countries in the so-called 'black' visa list require visas to enter the Schengen area. From this list, the countries with the highest number of visitors to the EU are indeed China, India, Russia, Saudi Arabia and South Africa, Ukraine probably being added because of political momentum. For years, EU Commissioner Antonio Tajani has campaigned for the easing of visa requirements, in order to bring in more tourists to the EU. In an interview with EurActiv in 2012, he pleaded for the easing of visa requirements vis-à-vis Russia, China and Brazil. Inadvertently, he appeared to ignore the fact that Brazilian nationals have no visa requirements to visit the Schengen area. Tajani also cited Slovakia's tourism minister, who had told him that for Slovakia, it was very important to have more tourists from Russia and Ukraine. He also said that his own country, Italy, is taking steps to bring in more tourists from China by opening mobile offices in cities other than the capital. To bring in more well-to-do visitors, the EU executive proposes to reduce the deadline from 15 to 10 days for processing visa requests, to make it possible to lodge visa applications in other EU countries' consulates, if the member state competent for processing the visa application is neither present nor represented, to extend multiple visas for up to three years to regular travellers, to issue short-stay visas at the border (usually the airport) valid for 15 days in one member state, as well as introducing a 'touring visa' valid for one year for touring artists. The new visa policy proposals comes on the heels of an embarrassing incident in October, when a number of Ukrainian journalists, invited to attend a conference in Brussels, were issued with visas valid for only two days, a decision that demonstrated the "bad will attitude" of the EU towards Ukrainian media, the journalists told EurActiv. The announcement coincided with the arrival in Brussels of some 40 heads of state and government from African countries for the EU-Africa summit, from 2 to 3 April. All African countries appear on the awkwardly titled EU 'black list'. The Commission's proposals must now be approved by the Council of the European Union, and the European Parliament, which can be expected at the earliest in 2015. Central Bank issues annual report The Central Bank of Malta has just re- leased its Annual Report for 2013. The Report reviews the Bank's policies and operations during the year and includes detailed financial statements. It starts with a statement by the Governor, which is then followed by an analysis of economic and financial develop- ments in Malta and abroad. The Report also carries a box on the Bank's esti- mate of household disposable income. Governor's statement: main policy messages In his statement the Governor notes that even though inflation in the euro area stands below the ECB's objective of less than but close to 2%, there is no sign of deflation. Recent price changes have been positive in all but three countries, meaning that price falls are not widespread. Moreover, price declines were only registered in a small proportion of the components of the HICP basket. Furthermore, there are no signs that low inflation is self-fulfilling, as long-term inflation expectations remain well anchored. In order to address economic imbalances and to implement structural reforms, various euro area countries have seen lower nominal wages. Unit labour costs in these countries have decelerated and have now moved closer to those in the better performing countries. The improving competitiveness of stressed economies may pose a challenge for the Maltese economy. The Governor stresses that it is essential for higher wages in Malta to be sustained by gains in productivity. Malta needs to remain flexible in carving out new niche markets. The quality of human capital needs to meet the changing requirements of domestic and export markets, implying that the education system has to provide the required skills. The authorities also need to extend programmes that attract foreign investment to Malta and improve the business environment. Concrete measures to bring down the debt ratio to the 60% benchmark are essential, the Governor argues, as room for fiscal manoeuvre is severely constrained. Turning to the Maltese banking sector, the Governor notes that this has contributed significantly to the resilience of the local economy to external shocks and to its alignment with the stronger group of economies in the euro area. In terms of the soundness of its banks, Malta ranked 14th place worldwide according to the World Economic Forum. The Capital Adequacy Ratio of Maltese banks remains well above the 8% regulatory minimum, while the solvency ratios are, on average, considerably higher than the EU average. Banking sector liquidity is ample. The Maltese banking sector is profitable, with the core domestic banks reporting returns on equity and assets that are better than the EU average. On the funding side, Maltese banks remain reliant on stable sources. On the assets side, while credit to households grew on a year earlier, aggregate credit to the private sector fell in 2013, in part reflecting the orderly deleveraging of the corporate sector. At the same time, interest rates on loans to business remain high compared with other euro area countries. There appears to be scope for further lowering rates, particularly in relation to SMEs, to be more aligned with core country rates. In this regard, the Governor points out that the eventual establishment of a development bank would provide further access to finance and may also complement the banks' funding of larger projects. Economic and financial developments On the global economy the Report observes that the recovery remained subdued and differentiated across countries and regions, though it is gradually strengthening in advanced economies. In the euro area there were some signs of an improvement as the year progressed, with the decline in real GDP, at 0.5% in 2013, being less pronounced than in 2012, when it contracted by 0.7%. Inflation in the euro area was also lower, at 0.8% at the end of 2013 compared with 2.2% a year before. During 2013, the ECB lowered key interest rates on two occasions, in May and in November. In each case, the interest rate on the main refinancing operations (MROs) was cut by 25 basis points to end the year at a historical low of 0.25%. Rates were cut against a backdrop of economic weakness and subdued monetary and loan dynamics, as well as low underlying price pressures over the medium term. In July the ECB introduced forward guidance, announcing that it expected key interest rates to remain at existing or lower levels for an extended period of time. The Eurosystem also continued to implement non-standard monetary policy measures. The Maltese economy continued to outperform the euro area average, with real GDP growth accelerating to 2.4% in 2013, from 0.6% a year earlier. Domestic demand recovered, but a fall in net exports dampened economic growth. For 2014, the Bank projects the pace of economic expansion to remain sustained, driven by a further recovery in domestic demand and a much less negative contribution of net exports.