Issue link: https://maltatoday.uberflip.com/i/621909
45 Events maltatoday, Sunday, 3 January 2016 Central Bank of Malta issues economic update for third quarter 2015 Economic activity in Malta con- tinued to expand robustly in the third quarter of 2015, with real gross domestic product (GDP) increasing by 5.4% on a year earlier. Growth was driven by domestic demand. Indicators for tourism point to further ex- pansion in the fourth quarter of 2015. Buoyant economic activity is being ref lected in the labour market, with employment ex- panding and the unemployment rate remaining at historically low levels. Price pressures were moderate. The annual rate of inf lation, based on the Harmonised In- dex of Consumer Prices (HICP), stood at 1.3% in November. Mal- tese residents' deposits continued to expand at a rapid annual rate in October, while the annual rate of growth of credit to residents stabilised at 4.8%. As regards fiscal developments, the general government deficit narrowed in the second quarter of 2015, while the deficit on the Consolidated Fund also decreased during the first ten months of the year. On the external side, the current ac- count of the balance of payments remained in surplus in the third quarter of 2015. Economic activity in Malta continued to grow strongly dur- ing the third quarter of 2015, with real GDP rising at an an- nual rate of 5.4%, following a re- vised growth rate of 5.8% in the previous quarter. During the quarter under re- view, growth was driven by do- mestic demand, which rose by 9.1% on a year earlier. In turn, the main driver was a rise in gross fixed capital formation, which grew sharply when compared with the second quarter of 2014. Private consumption and, to a lesser extent, changes in invento- ries also had a positive impact. In contrast, government consump- tion fell. Overall, domestic de- mand contributed 7.5 percentage points to real GDP growth. Gross fixed capital formation rose sharply for the second con- secutive quarter. In the third quarter it increased by 39.7% on a year earlier, mostly ref lecting higher spending on machinery and transport equipment. Spending on dwellings also increased. In contrast, non- residential investment declined, while the other components of investment, which include investment in software, were broadly stable. Overall, investment contribut- ed 5.7 percentage points to real GDP growth. Private consump- tion also went up, expanding at an annual rate of 5.1% in the third quarter, ref lecting contin- ued growth in compensation of employees. It added 2.6 percent- age points to GDP growth. In contrast, following several quarters of strong growth, gov- ernment consumption declined by 5.4% on the third quarter of 2014, lowering GDP growth by 0.9 percentage points. Although government wages and interme- diate consumption increased, receipts from sales of govern- ment services, which are netted against such expenditure, rose even faster. Changes in inventories had a slight positive impact on growth. Exports rose by 3.4% year-on- year, mainly as a result of an in- crease in foreign sales of servic- es. Meanwhile, ref lecting strong growth in aggregate demand, imports rose by 5.3%, supported by goods imports in particular. With imports growing faster than exports, net exports de- clined, dampening GDP growth by 2.1 percentage points. Nominal GDP expanded at an annual rate of 8.0% in the third quarter of 2015, marginally slower than the 8.1% recorded in the second quarter, largely ref lecting developments in the annual rate of growth of gross value added (GVA), which eased to 8.4%, from 8.6% in the previ- ous quarter. Services remained the main contributor to growth in GVA. In turn, the strongest contributions came from the sector comprising wholesale and retail trade, the sector in- corporating professional and scientific activities and the sec- tor incorporating financial and insurance activities. The GVA of the sector which incorporates public administration, health and education also contributed sig- nificantly. Smaller positive contributions were also recorded in utilities, the real estate sector and the sector comprising arts and entertainment. In contrast, GVA in the manufacturing sec- tor fell in annual terms. MGA issues guidelines on technical infrastructure for remote gaming licensees Following a public consultation with re- spect to the use of cloud solutions by the remote gaming industry and an assess- ment of the feedback received, the Malta Gaming Authority (MGA) is publishing a set of Guidelines with respect to the technical infrastructure hosting gam- ing and control systems used by remote gaming licensees. The original consul- tation document and feedback received can be accessed on the MGA's website through mga.org.mt/consultations-pub- lications/ The purpose of these guidelines is to update the MGA's approach when imple- menting its regulatory requirements and procedures with respect to technical in- frastructure. They are intended to guide operators, licensees, service providers and stakeholders on the MGA's compli- ance objectives when evaluating an ap- plicant's or licensee's technical set-up. The approach adopted by the MGA in attaining its regulatory objectives is based on these Guidelines which are in- tended to provide the necessary f lexibil- ity for operators to exploit the benefits of technology, including cloud solutions while ensuring adequate supervision over an operator's gaming and control systems, to safeguard the players and the MGA's regulatory interests. The approach focuses on the utilisa- tion of a technological environment which has the required level of security and data integrity allowing the MGA to have timely access to all the regulatory data in order to ensure that it remains well positioned to conduct its supervi- sory functions, at pre and post licensing stages including the possibility to carry out regular inspections, auditing and/or ad-hoc investigations. IoD Malta joins call for less regulation, more professionalism from Maltese managers and directors The Chairman of Malta's Insti- tute of Directors (IoD) James Satariano led a well attended Directors event at the Malta Fi- nancial Services Authority (MF- SA) during which the keynote speaker Dr Roger Barker, Direc- tor of Corporate Governance at the IoD in the UK and Dr Louis de Gabriele, one of Malta's top lawyers from Camilleri Preziosi Advocates, unanimously called for less regulation and more pro- fessionalism from Malta's mana- gerial and director professions. De Gabriele made an impas- sioned call to arms for local directors to add significantly more value and to deepen their knowledge to become more ef- fective, reflecting a key theme in Barker's presentation. Barker explained that lack of expertise among directors is a perennial problem. Most direc- tors of large companies strug- gle to properly understand the business. Today's companies are engaged in wide-ranging opera- tions, do business in far-flung lo- cations with global partners, and operate within complex political and economic environments. Some businesses, retailing, for one, are relatively easy to fath- om, but others such as aircraft manufacture, drug discovery, financial services, and telecom- munications, for instance, are technically very challenging. He related the anecdote of catching up with a friend who had served for many years as an independ- ent director of a technology company. "The CEO had suddenly re- signed, and my friend was asked to step in. 'I thought I knew a lot about the company, but was I wrong,' he told Barker. "The knowledge gaps between the directors and the executives are huge'." To close those gaps argued Barker, large companies need independent directors who have the expertise to properly evalu- ate the information they get from managers. He posited that perhaps more important, the directors must know what ques- tions to ask about information they are not getting. Barker then went on to out- line 10 emerging and important trends on EU Corporate Gov- ernance and how these would impact on all EU nations includ- ing Malta. He singled out the main issues in European Corpo- rate Governance across five key areas: Board structures, co-de- termination, differences in legal duties, ownership structures and cultural differences, particularly in business norms and practices. Barker said that the three most important issues in EU corpo- rate governance currently are cyber-security, governance in sport and charity, and, prevent- ing scandals through enlight- ened governance within the ex- isting governance frameworks. He also suggested that everyone involved in governance thinking should be looking at the impact of digitalisation on company law and corporate governance, as well as assessing the role that in- novation has today. Louis de Gabriele, who heads the Corporate and Finance prac- tice group of at his legal firm, made a seminal presentation on 'the Maltese Dimension'. De Gabriele argued that issues of corporate governance are as much cultural in nature as they are functional. He stated that transposing rules or guidelines of best practice from one cul- tural background to another is indeed a challenge that cannot be under-estimated if we want to have rules and guidelines that are effective. In a wide-ranging address de Gabriele covered the role of cor- porate governance in smaller local firms, then in major local firms, moving to the local list- ed companies and the current Code. He also covered features of Maltese company law deal- ing with directors' duties and to the structure of the economy and the impact that Government and the main retail banks have on governance issues within lo- cal firms. He made two specific recom- mendations to be debated in a forum moderated by ecoDa Policy Committee member Ed- win Ward together with Barker, firstly, for institutional and professional investors to take a more active role in the debate on corporate governance and to take new initiatives in this re- spect, acting as a check on pub- lic companies; and he reiterated his view that Maltese business professionalise the board of di- rectors, enabling them to un- derstand better their role within the company and their authority and power. Closing the Workshop IoD's Chairman James Satariano said that many stakeholders have forgotten the competitiveness' aim of Corporate Governance. He said, "governance is not only about compliance, it's about act- ing with honesty and integrity in our business lives. Too much regulation runs the risk of a check-the-box exercise, which can be dangerous. It is important to draw conclusions from past regulation, to challenge wheth- er they were useful in practice, whether regulations are compat- ible with our international en- vironment and if they reinforce our competitiveness." To find out more about becom- ing an IoD member kindly con- tact Honorary Secretary James Arrigo on (+356) 21 247 400 Ext 1 or email: jamesarrigo@mari- namilling.com Roger Barker (second from left) and James Satariano (second from right) at the directors' event