"It would be a grave mistake if Government forces an increase in minimum wage on employers, without considering the long-term repercussions"

Martina Said – 26th March 2017

Malta Chamber deputy president Frank Farrugia discusses the country’s economic outlook and business sentiment for 2017.

“When I first started supplying the textile industry, it was a time when the country depended on it. We were a one-stop shop as suppliers to the textile industry, ranging from machinery and equipment to fabric and accessories,” says Frank Farrugia, deputy president at the Malta Chamber of Commerce, Enterprise and Industry. “For a while, I moved into the production of garments as well, where we exported to mainland Europe and Denmark. Later, in 1990, I set up another company which focused on the supply of professional tools, garage equipment, engineering solutions and industrial maintenance. Both companies are still in operation today and my children have taken on the running of the latter.”

Apart from his business endeavours, Mr Farrugia has also been involved in numerous projects in Libya, including the supply of fire and safety equipment for Libya’s nuclear power station as well as the supply of reverse osmosis plants, although he admits that his involvement there has slowed down somewhat in view of the unstable situation that’s rocked the country for the last five years.
However, being a founding member of the Libyan-Maltese Chamber of Commerce, Mr Farrugia says that, despite the unrest and the country’s current social and political climate, the Chamber has never closed its doors, and never shied away from being there for businesses in need.

“The fact that we managed to keep the Libyan-Maltese Chamber open every day without interruption during some very dangerous periods is positive. Every day, we continued to certify documents which means that business is still going on, though not at the rate that it used to,” says Mr Farrugia.

And as Libya’s future remains uncertain, and investment opportunities scarce, what will become of the Maltese-owned business operations set up there? “Luckily, many Maltese business owners with operations in Libya foresaw the situation around three years ago and sought to diversify into other markets. The Malta Chamber, through Trade Malta, stepped in in this regard; we’re trying to help them tap into new markets such as Algeria,” he says.

On the national front, following a notable year of economic growth in 2016, I ask Mr Farrugia whether he thinks 2017 will surpass last year’s record achievements. “I believe we’ll keep up the momentum; while I don’t think we’ll reach the same figures as last year in relation to the GDP, on the whole, with the possible exception of the wholesale and retail sectors which are experiencing difficulties mainly as a result of digitalisation, most sectors are expected to continue to perform.”

Sustained economic growth widely depends on having the right person for the job, and this, Mr Farrugia says, continues to prove a problem. “A shortage of people with the right skills is one of the main challenges we’re currently facing, and on this, we need Government’s full cooperation, specifically on the issuing of visas and work permits to foreign nationals looking to work here. This problem could seriously hinder further economic progress.”

According to the National Statistics Office, data provided by the national employment body, Jobsplus, for December 2016 shows a significant decrease in the number of persons registering on the unemployment register compared to December 2015. It is a pretty unique scenario: despite there being a serious shortage of skilled workers to fill specific roles, there’s also a very low level of unemployment. Mr Farrugia, who is a director on the board of Jobsplus, says achieving such low levels of unemployment is encouraging enough, but it doesn’t do much to address the gap that exists between the number of unemployed persons and the lack of skilled workers.

“There are of course possibilities to engage unemployed people into the workforce to fill certain vacancies, but when it comes to specific and specialised vacancies, we encounter a number of issues, among them that the unemployed do not have the skills required by certain industries, they are sometimes reluctant to learn, their salary expectations are very high and they are constantly moving from one job to another. So there’s a mismatch here which needs to be addressed.”

Moving on to the hotly-debated topic of minimum wage, Mr Farrugia has a staunch positon on the matter, and is of the belief that increasing the minimum wage could have a serious ripple effect on employers and on the economy at large. The biggest issue that arises from increasing the minimum wage, he believes, is Malta’s ability to remain competitive.

The Chamber, together with other employer bodies, has discussed the issue at length with the Malta Council for Economic and Social Development (MCESD), says Mr Farrugia. “We prepared a document and presented it to Government, the Opposition and MCESD, and made our message clear: leave the minimum wage as it is. It would be a grave mistake if Government forces an increase in minimum wage on employers, without taking into consideration the long-term repercussions. There will be a boomerang increase on everything. Of course it’s important to analyse the spending power of a basic salary, but we must keep in mind that Malta’s industries are trying to compete with those of other countries, and increasing the base can affect the positive momentum we’ve been experiencing if it’s not done as it should be done.”

Mr Farrugia expresses similar views on the subject of pensions, which could have a negative impact on employers if mishandled. “In 2014, Government came up with the idea of the third-pillar pension, which we are in favour of and, if it is rightly administered, can achieve the required result. With the cost of living being as it is today, one cannot survive on a pension alone, so there is need for a solution here. However, we are against the mandatory second pillar, as it would add further pressure on the employer and employees.”

This is a snippet. Read the full interview on the latest issue of Commercial Courier.


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