Blockchain in Latvia

Author: Lauma Lubane – Economist Intern

Blockchain is a fast-growing technology that is believed to change the everyday life of many industries starting from cryptocurrencies and gaming to banking systems and even curbing shadow economies. Although the concept of blockchain was first used in 1991 by Stuart Haber and W. Scott Stornetta, it was conceptualized only 17 years later by Satoshi Nakamoto, the developer of bitcoin.

The use of blockchain started to grow rapidly after 2016 expanding in new industries like gaming and banking. Blockchain is described as a distributed ledger transaction or more simply a transparent, secure, and incontestable log of transactions that can be accessed by downloading the ledger. Although blockchain technologies are mainly linked to cryptocurrencies (especially bitcoin), they can be widely used in other industries as well.

Today, in 2020, Baltics are one of the leading countries in the development of blockchain. Although Estonia and Lithuania outstand remarkably from the rest of the countries in the Eastern European region, Latvia does not fall far behind its neighbors and has invested an immense amount of resources to develop blockchain technology. And it seems that the hard work has finally been starting to pay off.

In 2017 all three Baltic countries signed a Memorandum of Understanding to support blockchain initiatives. As a part of the memorandum, in the same year, Latvia’s parliament passed a one of a kind startup law with a special flat tax regime for startups. Another government’s initiative is a startup visa to encourage the creation of startups that in turn would trigger blockchain and crypto-based projects. The Financial and Capital Market Commission (FKTK) helps new investors and businessmen by consulting them on the needed licenses in the blockchain industry.

It seems that the attractive tax regulation and support from the government has been successful because in the first five months of 2018 Latvian startups had raised over 28 million euros in organizing ICOs (initial coin offering) which was a huge improvement when compared to 37 million euros raised throughout all of 2017. The biggest contributors were a digital bank “Forty Seven Bank” (10.84M EUR), a global bitcoin exchange platform “Globitex” (9.7M EUR), and a platform allowing to invest in scientists’ intellectual property rights “Aeternum” (3.05M EUR).

Another Latvian based company using blockchain technology is Latvia’s national airline company “airBaltic”. In July 2014 the company announced that it would accept bitcoin payments for flight bookings. “airBaltic” was the first airline in the world to take such a step. Although in the beginning, the initiative did not get much interest, later the company’s representatives revealed that the number of payments in the cryptocurrency has increased.

Latvia is also known in the blockchain industry by hosting the largest blockchain event in the Baltics in November 2017– the “Baltic HoneyBadger” Bitcoin Conference. The conference was one of the most important events on blockchain in the industry as it hosted numerous well known and respected speakers as Elizabeth Stark, the leader of the “Lightning Network” initiative and Pavol Rusnak, the creator of “Trezor”. The conference was well received and earned a great deal of popularity across the industry. The event was continued by another “Baltic HoneyBadger” conference two years later in 2019, again in Riga.

The blockchain industry has evolved in Latvia not only in the private sector but in the public sector as well. At the beginning of 2019 Economic Ministry of Latvia introduced two pilot projects to boost the efficiency of the services offered by the state.

The first one would ease the process of acquiring the status of a limited liability company (SIA) in Enterprise Register (UR). Currently, the Commercial Law stipulates that the board of Ltd is obliged to keep the register of participants with each owner or other changes in relation to the owners, as well as the board must submit the current version of the register of participants to the ER within three days of the change. The use of blockchain technology would reduce the information flow time between the entrepreneur and the ER and ease the process of registering changes for both sides.

The second pilot project involves the implementation of the cash register reform that would strengthen the supervisory capacity of the State Revenue Service (VID) and provide a proportionate financial and administrative burden for businesses to ensure compliance with the requirements set for them, thus reducing shadow economy. One possible solution would be to create a system or use blockchain to transfer trade data to the SRS online. A special 48-hour tax blockchain hackathon was set up to find a technical solution in April 2019. Just in two days, a winner team called “Z Book” created a solution by using QR code as a signature-based on blockchain technology.

Although Latvia cannot be considered as one of the leading countries in blockchain technology, it has achieved immense progress in the last three years by creating an attractive law system and fertile ground for startups based on blockchain. Moreover, Latvia’s government has also shown its 21st-century side by initiating the use of blockchain in the public sector as well. And the fruits of such actions can already be enjoyed: more and more startups are created every year and blockchain technology is becoming more known and used in Latvia. Hopefully, this trend will go up and create more and more success stories in the coming years.

Author: Lauma Lubane – Economist Intern

Medical Cannabis in Latvia

Author: Lauma Lubane – Economist Intern

Cannabis and marijuana made from it are one of the most famous and widely used intoxicating substances. Although it is common to link the use of cannabis and marijuana to intoxication for entertainment purposes, medical cannabis is widely administered in medicine to relieve pain and alleviate symptoms of serious illnesses like cancer. However, Latvia’s legislation does not authorize the use, cultivation, or distribution of cannabis punishing the offenders with a several hundred euro fine.

Despite these restrictions, appeals of cannabis decriminalization or legalization appear from time to time in local media, creating a great fuss among experts and society. These appeals are in line with practices existing in other European countries e.g. Georgia and Luxembourg and their actions. The latest commotion was observed in 2019 when Latvia’s neighbor country Lithuania decided to allow the use of medicine containing medical cannabis for treatment purposes. In response to the decisions taken by Lithuania, some Latvian activists prepared a petition for decriminalization and legalization of medical cannabis.

The former received around 500 signatures, while the latter gathered twice that number of signatures. In the past 10 years, several similar campaigns were initiated to advocate the use of cannabis, the biggest of them being a petition in March 2015 for the decriminalization of cannabis which was signed by more than 10 000 members of society and submitted to the Parliament. Despite the effort, the proposal was rejected in September using the old and worn-out argument of drug damage. To smooth things out, some officials appealed (and still do) that it is necessary to continue discussions about this matter, but the initiative should come from the doctors and experts.

However, it seems that there is a certain disagreement between the ‘experts’ themselves. While oncologists and pain doctors see benefits of allowing administration of cannabis in the treatment of patients, other doctors are more cautious and scrutinize the decriminalization or legalization of cannabis claiming that after all cannabis and marijuana are and will remain a narcotic substance. A small group of experts point the fingers to society and argue that society is not ready for such a dubious and controversial step.

It may as well be true because the society is quite divided (although not that much as doctors) in regard to the use of cannabis in medicine. 2018 survey carried out by the research center SKDS revealed the negative sentiment of the society on the subject. Around 78% of respondents think that cannabis should not be legalized, while only 15% supported the idea. Although the proportion of those advocating the use of cannabis has grown in the past 10 years, fluctuating from 7% to 15%, this group is still relatively small and weak to make a bigger change.

The society’s negative attitude towards cannabis might be a result of Soviet heritage. The USSR prohibited the use of cannabis in 1974. After the collapse of the USSR, less than 2% of the population used cannabis, though in a short time the use of cannabis and marijuana skyrocketed to the levels of Western Europe, although these substances were acquired illegally. This might be the reason why Latvians almost 30 years later still look at the use of medical cannabis with suspicion and doubt.

Even though the use of cannabis and marijuana is illegal in Latvia, it is the most widely used narcotic drug. EMCDDA data suggests that in 2017, around 10% of adults in age from 15 to 34 used cannabis while cannabis resin and herbal cannabis were top 2 seized substances. In the same year state police seized 50 marijuana farms while in 2016 this number reached 49 farms.

Although the illegal acquisition of cannabis and marijuana is mostly for entertainment purposes, some use it as a medical treatment and face legal consequences. Therefore, legalizing the use of cannabis for medical purposes might take off some patient’s pressure and decrease the acquisition of illegal cannabis. On the other hand, officials fear that such a decision might alleviate getting cannabis and marijuana for the use of non-medical purposes.

Despite all the drawbacks and critiques, the cultivation of cannabis could become a fast-growing, million-euro industry in Latvia’s economy. Although it is not legal to grow cannabis, several local farmers and food companies have considered the benefits of such business. Food producing company “Getliņi Eco” assumes that with the right investments, the cultivation of cannabis would be more profitable than the cultivation of tomatoes and cucumbers which are the company’s current main two products.

Exporting cannabis would bring millions of euro back to the country with added value and would also improve research and development on medical cannabis in local universities, institutes, and companies producing medicinal products.

In spite of persisting commotions and the potential of it becoming a million-euro worth industry, the use of medical cannabis is still quite controversial in Latvia and it seems that it will not change any way soon. However, everyone can agree on one thing: this is a discussion worth having.

Author: Lauma Lubane – Economist Intern

COVID-19 lockdown: Will Brexit end without a trade deal?

Author: George Mangion
Published on Malta BusinessToday 30 April 2020

Will Brexit end without a trade dealWithout wanting to sound biased in favour of the EU, one must admit that London’s role as a world finance leader could also be in jeopardy. We hail the recovery of UK prime minister Boris Johnson, who was recently released from hospital after a three-week convalescing period following his Corona virus infection. He proudly resumed meetings with top ministers and advisers at 10 Downing Street while thousands of UK citizens were facing the brunt of being locked down during the past eight weeks of the pandemic.

The UK’s economy was badly hit by the lockdown and its health authorities are battling the consequences of infections, amid even stricter orders for citizens to maintain social distancing. Measures were taken not only to protect the health of the most vulnerable communities, but also their quality of life more broadly – including their financial security, mental health, access to resources, and social relationships. Even so, the economic and social disruption is clearly visible.

The streets of London, so ever fully populated by Londoners and tourists alike – are now bare and gloomy. Elderly citizens and other vulnerable persons are cocooned at home with only limited scope for venturing out except for buying essential goods or visits to doctors. All airports are closed except for airlines delivering essential cargo and many fear the slowdown will proceed to become a full-blown recession unless a vaccine is quickly developed. Scientists, all predict that a fully tested vaccine which can be produced by the millions and distributed globally will take another year to surface.

This unexpected calamity has exasperated the country with a double whammy of a recession combined with the possibility of a no-deal Brexit. Brexit will undoubtedly bring long-term systemic changes to the UK economy, politics and society, and there continues to be uncertainty about how leaving the EU might affect the lives of the UK’s inhabitants. Ideally, a full equalities impact assessment is conducted examining the potential legal and socioeconomic effects of Brexit on different groups of people.

The concern seems to be that the economic costs of abruptly withdrawing from the European Union without a trade deal might be buried by Boris Johnson beneath the damage wreaked by the coronavirus. Can this strategy be resisted and normality maintained since it goes without saying that vulnerable groups will be affected?  Undoubtedly, there will be unintended consequences. The poisoned cocktail of Brexit and the coronavirus in the UK will probably affect badly the lower working classes and the disadvantaged, albeit to a different extent. Indeed, Brexit without a trade deal is likely to exacerbate some of the deleterious effects of the virus. It can be argued that leaving the EU without a deal will make it more difficult to fight the aftermath of a pandemic.

The UK left the European Union on 31 January 2020. However, after three and a half years of debate since the 2016 referendum, there remains a lack of clarity about the UK’s future relationship with the EU. Some observers predict that at the end of negotiations it will obtain a Canada-style FTA, plus side deals on fisheries, data, judicial cooperation, transport, and energy. Back to the virus syndrome, it is noted that the UK will not seek to maintain membership of the European Centre for Disease Prevention and Control (ECDP), which oversees the surveillance of communicable diseases, including coronaviruses. Also departed is the European Medical Agency being relocated in Europe.

It boasts a centralised procedure for licensing new drugs; or the EU Clinical Trials Register which is another casualty under Brexit. The UK left the EU at the end of January and is now excluded from EU decision-making – and any collective support packages, for instance, the EU’s Coronavirus Response Investment Initiative – on the pandemic. The British government has stated that it does not plan to take the option to extend the transition period by up to two years. To keep to its promise, the government announced that negotiations on the future UK-EU relationship will continue, but they would be conducted online due to the coronavirus.

One cannot but lament the loss of some EU nationals working in the health and social care sector since Brexit, at a time when they are most needed. Readers may ask – why is there so much fuss about the UK leaving without a deal? For a start, the consequences of an economic divorce will most probably leave some disadvantaged people with less financial and social resilience, therefore, more vulnerable to both Brexit and the coronavirus.

Time will tell if the Chancellor’s financial package to fight the outbreak will be sufficient to meet people’s core needs. Last week, the European Union’s chief negotiator, Michel Barnier, said progress in four areas of discussion had been “disappointing”, while a British statement said, “limited progress was made in bridging the gaps between us and the E.U”. One can never be fooled that having eight months till the end of the year is sufficient time to reach a trade deal on complex issues which took over 40 years in the making.  To be realistic, it is pushing it when Boris Johnson reiterates that there will be no extension beyond the end of the year.

There are complex matters to be negotiated starting on the critical issues of aviation to fisheries, new customs posts at the border and a new immigration system. Little can be more vexatious than agreeing on how best to set up new border checks for both exports and imports. This could result in higher prices, border backlogs and delays, and even shortages of staples, such as food and medicine. When the prospect of a no-deal arose last year, some British companies and citizens began stockpiling goods. Thankfully, one major hurdle was solved that in case of a no-deal this will not lead to a so-called hard border between Northern Ireland and the Republic of Ireland, but rather to customs checks on goods traversing the Irish Sea.

Last year, saw several international firms which shifted their investments from the UK to elsewhere in the EU. Aerospace giant Airbus is a prominent example, pointing towards a policy of directing funds and jobs away from the UK if there is no trade deal. Such moves could put tens of thousands of British jobs at risk. Without wanting to sound biased in favour of the EU, one must admit that London’s role as a world finance leader could also be in jeopardy. Previously, as a full EU member, the UK’s financial services provided 11 per cent of tax revenue; 44 per cent of exports go to the EU.

If the majority of economic forecasts are correct and the UK’s economy suffers post-a no-deal Brexit, the negative effect will have an impact on all those groups represented in the low-income bracket (i.e. ethnic minorities, the disabled, refugees and asylum seekers, people who are precarious workers) who rely more on public services and benefits and have less disposable income and spending power. For those living in poverty or homeless, or suffering job losses, these impacts will also be deeply felt.

One augurs that Boris Johnson takes the bull by the horns and prioritizes the immediate damages inflicted by the pandemic and in a pragmatic manner seeks an extension so as to be adequately poised to resolve the tangled web of Brexit.

George Mangion


Author: George Mangion
Published on Malta BusinessToday 30 April 2020
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Covid-19 Measures – Follow the latest Government updates and measures

Covid-19 Measures - Follow the latest Government updates and measures

Covid-19 Government Measures
In light of the global health crisis the world is facing, the Maltese Government has introduced a number of measures aimed at alleviating the unprecedented difficulties which are being faced by private businesses and households alike. To assist you in understanding how these measures can be of benefit to you and your business, we briefly highlight the most notable measures in our official summary document. Follow the latest Government updates and measures: here

Malta Gaming Authority
We have updated our Covid-19 Measures document with the latest updates from the Malta Gaming Authority.
Read the document in the link below:

PKF Malta
In view of the COVID-19 virus outbreak, kindly be informed that as from Monday 16th of March 2020, our offices will be temporarily closed. Our staff will be working remotely and can be reached via email. Our company services will continue as normal to limit unnecessary disruption. This is in order to safeguard the health and well-being of the staff, clients, and any third parties. #stopthespread

Malta’s Position on Medical Cannabis in 2020

Author: Jurgen Dalli
Published on:  13/04/2020 on PKF Malta website

Cannabis has undergone a normalizing process given its wide adoption, social tolerance and generally speaking a broader cultural acceptance; going from being branded as a gateway drug to being used as a therapeutic alternative to conventional medicine. However, one ought not to forget that recreational use of cannabis is illegal, giving rise to several sanctions.

Therefore, normification is more appropriate than normalization, given the barriers cannabis still faces. Drug stores are now providing medicinal cannabis to aid ailments and infirmities, and although not curative, cannabis eases and alleviates the sufferings patients go through.

Given the ever-expanding medicinal capabilities present today, Malta has followed suit pioneering countries such as Canada, and in March of 2018 has officially legalized medicinal cannabis. The Maltese government has adopted the ‘Production of Cannabis for Medicinal Use Act 2018’; an all-encompassing Act regulating which entities are eligible to distribute and grow the plant, the process through which interested parties have to go through to be able to distribute cannabis and the manner in which medical practitioners are to prescribe cannabis to their patients.

This legislation does not authorize the production of cannabis unless and until an acknowledged licence has been obtained. This obviously does not permit the harvesting or selling of cannabis for recreational purposes, leaving such activities illicit and illegal. To obtain the aforementioned licence, entities are required to obtain a letter of intent from the Malta Enterprise. In order to apply for the letter of intent, the applicant must submit all required documents, due diligence documentation and relevant authorizations from other entities.

The applicant must be in possession of the relevant qualifications in line with the Mutual Recognition Qualification Act and any other additional request from the Authority or Malta Enterprise. There must be conformity with any relevant international obligations resulting from any treaty that Malta may be a party to and that production of medicinal products corresponds to the criteria in the Medicines Act.

Refused applicants can appeal with the Licensing Appeals Board given; factual errors, material procedural errors, and errors of law and material illegality; including both unreasonableness and lack of proportionality.  Grounds of appeal are similar to those pertinent to Article 469A of the Code of Organisation and Civil Procedure, leading to Judicial Review.

A fee of €35,000 has been attached to the application and an equivalent annual fee has to be paid. Furthermore, entities are required to pay €1/unit product transacted, in fulfillment of research and education to be undertaken by the Medicines Authority.

The attainment of medicinal cannabis is possible through any Maltese doctor registered with Malta’s Medical Council and the acquisition of a prescription, however, medicinal cannabis may not be used as a first-line treatment, and doctors ought to prove that other alternatives were tried prior to prescribing cannabis. Upon adherence, the patient may then request a Drug Control Card; issued by Malta’s Superintendent of Public Health. This card coupled with an authentic prescription will enable patients to purchase non-smoke-able forms of medical cannabis directly from drug stores.

This nascent concept does not only provide new-found relief to people afflicted by illnesses but also introduces a vast array of economic opportunities. Cultivation of cannabis requires a sizeable quantity of staff to allow a smooth and pacey process and the local market would flourish with the creation of revenue from the exportation of cannabis.

The problem is the serious lack of information on medicinal cannabis; patients have commented on the lack of knowledge which is expected from medical practitioners, as some medical professions are reluctant to allocate marijuana as a form of treatment. Moreover, a simple consultation tantamount to an outstanding charge of €50. In relation to this are the hefty prices of the medication, patients have shown their dismay after discovering that some medication costs as much as €17 a gram, giving rise to a number of financial concerns as people suffering from these infirmities have limited working capabilities and hence a restricted budget. In addition, medicinal cannabis is not offered at a subsidized price.

One cannot separate cannabis from its long history as an illegal substance that is heavily abused. Stigmatization is a strong deterrent for many healthcare providers and uncertainty will only hinder the flourishing of the use of cannabis. The perception of the public needs to be updated, with the introduction of more information and frank discussions about cannabis, many would benefit. Continuous educational programmes for doctors and pharmacists are a must.

Similar to the medicine continuum, the beauty industry has jumped on the bandwagon. At the moment; CBD is one of the most buzzed words one will find in the beauty spectrum. CBD oil is cropping up in an increasing number of high-end creams, oils, and even mascaras. There is a difference between hemp-derived and cannabis-derived ingredients. Hemp oils are pressed from the seed of the plant, whilst cannabis-derived ingredients come from the plant itself. Whilst cannabis-infused products may suffer some form of scrutiny, hemp-infused products are completely legal given that their THC level is negligible.

The medical cannabis business in Malta has enjoyed a strong start and hit the mark right off the bat. Since the inauguration of this new sector in our economy, more than 46 international entities have applied to start investing in the sector, exporting to their subsidiaries and other subsidiaries all over Europe and the world such as Canada. Under the new Cannabis law, entities in Malta are allowed to produce, process, import, and cultivate cannabis for purposes of research and medicine.

However, they can only do so after being granted all the necessary authorizations, approval, permits, and licenses by the Medicines Authority. By November 2019, more than 26 projects had been approved in the field of medical cannabis, accumulating a capital investment of €153 million. This is a clear indication of just how the country has progressed in the area within a short period of one year after the law was introduced.

Some of the most notable entities in this industry are MGC Pharma, Columbia Care, Alvit Les Pharma, Aurora, Wayland, Affinity, Aphria, MPXI Malta, Bortex Group, Panaxia, Supreme and Nuuvera or ASG Pharma. All these entities undertook the tests imposed upon them by MSE and were issued with a letter of intent by the same regulatory body for their impressive effort and scores.

This rigorous and demanding selection process filters the best of the best entities and allows Malta to enjoy and boast an elite group of licensed medical cannabis providers whom share the vision set up by the Government. Malta opens its doors only to those providers who are not only serious but also to those who produce a genuine product and which will not tarnish Malta’s reputation. The applications were approved on the basis that they would create 700 new full-time jobs and supplement Malta’s exports by over €900,000,000 by 2022. Matthew Lawson, founder of the Canna Consultants explained that the pharmacy industry employs more than 3,000 people making up almost 15% of all people in the manufacturing sector in Malta.

Whilst Muscat boasted of the increased investment flowing into Malta, the PM emphasizes the vigorous verification process which was being adopted across the evaluation of the incoming propositions for collaboration. Muscat emphasized: “All the applications which were submitted, have gone through a minute evaluation process and a very thorough due diligence exercise, in order to ensure that only those applications which met our criteria and shared our vision were eventually approved.” This comes as a result of Muscat’s determination to attract the ‘right kind of business’. For this reason, the Malta Enterprise is said to have refused 19 proposals at the least.

Author: Jurgen Dalli
Published on:  13/04/2020 on PKF Malta website

Corona pandemic gives a boost to innovation

Author: George Mangion
Published on Malta BusinessToday 20 April  2020

One expects that in the near future, the exit path from lockdowns will be shaky, but enriched with a wealth of innovation and lessons learned to survive a new world. Living on this tiny island, we are constantly reminded by political leaders how the pandemic has a few silver linings – the air outside is healthy with less traffic pollution and the quiet in the streets makes us appreciate the beauty of mother nature blossoming unhindered in the best time of the year.

These are the only tangible benefits, given that the economy is on its knees and soon, we fear the onset of petty crime and theft revealing its foul head as can be expected from the thousands of unemployed cocooned at home and a larger number of employed workers being paid a social wage of €1200 monthly – not enough to meet expenses for a family. Equally in distress are a number of self-employed professionals including lawyers (Court is closed except for emergencies), engineers, accountants, notaries, dentists seeing their lifestyle wane and business revenue dwindle by the hour.

The killer virus is reported to have originated in China possibly due to humans having close contact with infected animals or by eating exotic food. It started in the Wuhan region, where inhabitants contracted the disease and thousands were forced into quarantine. This led to partial and full shutdowns of plants and factories in China, some of which were essential in the supply chain to service prominent Western technology companies. This, in turn, caused financial hardships due to the scarcity of certain items and higher prices due to the higher cost of shipping freight caused by the imminent collapse of major airlines flying cargo.

Indeed, we started reading how thousands of Chinese who were diagnosed positive started developing light symptoms, with doctors soon noticing that the virus may be easily transmissible even at an early stage of infection. Mother nature seems intent on chastising us for our deadly abuse of the environment and contamination of the ecology with massive over-crowding in cities and unbridled factory emissions in a concerted effort to boost GDP growth. The virus is fickle in its attacks on humans. It starts as a persistent cough which at first, one may overlook. Instantly, however, those with symptoms often feel unwell and take to their beds.

Acute cases involving vulnerable persons may lead to the patient’s demise, as so far there are no proven vaccines and the number of confirmed cases has risen to close to two million worldwide. Health authorities have cautioned citizens to stay safe at home and undergo 14 days quarantine whenever they visit infected areas. They said the virus hitches a ride on droplets of saliva that come out of the respiratory tracts of infected individuals. These may be expelled during normal breathing or, more commonly, as a cough that propels them a few metres into the air. Or they may land on a surface, on which the virus particles they contain could survive for hours, or even days, and from which those particles may eventually be transferred to others who touch the surface and then touch their own face or mouth.

For the first time, we are being cautioned about the spread of a nasty virus which the common man in the street never bothered to notice – until stark reality checked in.

History reminds us how over the centuries there were plagues, pestilence, and deadly viruses that decimated whole generations. Each time a plague rules over the earth, it leaves millions of people dead. Consequently, for a period there are fewer workers to till the fields or work in factories so human labour came at a premium. Wages rose and the land was plentiful as there were fewer people to share it with, and as worker’s wages rose, so did literacy, giving rise to new thinking and freedom of thought.

Typically, in the past, it was the great plague that made citizens realize that the medical system they had previously relied on did not work to keep them alive, and this spawned the birth of modern medicine, grounded in science and innovation.

The Malthusian theory comes to mind to explain such phenomena. Malthus is a philosopher/scientist who predicted in 1798, that when the rise in population is greater than the food supply, there is a condition of disequilibrium. In his essay, he remarked that during such a period of disequilibrium, people will be subjected to wars, epidemics, famines, starvation, and other natural calamities which are named nature checks by Malthus.

Simply put, Malthus says that when humans fail to control excessive population growth, nature plays its role. The theory may not be totally valid nowadays since food supply has increased exponentially due to heavy investment in farm technology and the planting of better crops but the wrath of Mother nature manifests itself prominently in severe climate changes, hurricanes, and other natural catastrophes.

On the other hand, one may concede that the planet today is facing threats in all aspects of human existence – be this in terms of inequality in the global distribution of wealth, corrupt governments, avarice in public procurement, rapidity in depletion of natural resources, and decadence within State governance.

Notice the displacement of millions of migrants in the Middle East and in a host of other countries. But it is not all doom and gloom.

Pandemics breed innovation and accelerate change by providing an environment for launching and testing new ideas. Today’s coronavirus is already changing cultural and business norms shaking to the core those norms, we have taken for granted for decades and centuries.

One can mention two key areas where innovation has already borne fruit. Consider how intensive use of telehealth and teleconferencing facilities are becoming critical for enterprise operations to survive lockdowns during the pandemic. Remote working was already on the rise, but “working from home” is now the new normal.

This is the 2020 survival technology. It will lead to changes in the traditional workplace impacting teamwork, productivity, collaboration, human interaction, and communication. Since the coronavirus outbreak, there has also been marked investment in factory automation and remote operation that has brought forward improvements not expected for some time to come.

Anna Shedletsky, the boss of Instrumental, a firm that uses machine learning to help manufacturers improve their processes, says that in electronics manufacturing “we’re going to do five years of innovating in the next 18 months”. With more people having to work remotely, a lot of international travel could come to be seen as unnecessary, and companies may bring supply chains closer to home to avert disruptions. One expects that in the near future, the exit path from lockdowns will be shaky, but enriched with a wealth of innovation and lessons learned to survive a new world.

Some firms will emerge too weak to face the new dawn but others that embrace innovation will discern a stimulating Eldorado road leading to a pot of gold. In conclusion, the EU has allocated €500 billion to stem the tide – one hopes that some of it percolate into business accelerators to help start-ups in their quest to drink from the chalice of innovation. But this may just end up being a Utopian dream that will never materialise in a planet reigned by multi-nationals.

George Mangion


Author: George Mangion
Published on Malta BusinessToday 20 April  2020
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2020: A year which sets the cat among the pigeons

Author: George Mangion
Published on Malta BusinessToday 9 April 2020

a year which sets the cat among the pigeonsIn Malta, with an aging population and a growing trust gap between politicians and ordinary people, the lack of adequate investment in physical, social, and economic infrastructure is further accentuating the problems caused by the coronavirus pandemic.

With most professional staff in the financial services and banking sector working from home, now for the fourth week running, one cannot but reflect how our lives have changed dramatically listening to the regular daily sad news about the spread of the pandemic.

This fills the media waves making our subconscious feeling depressed and bereft of new inspirations. Can you blame us when none of us cocooned at home can look into a crystal ball and know exactly where we will be in the summertime? But if we will be in a bad place, we can make smart decisions not to slacken our resolve and keep up with the social distancing as advised by the health authorities.

We are witnessing how political leaders are constantly vying for attention reminding us that the sun will soon shine over the cloudy days that lie ahead of us in this Good Friday week.

Little can we empathize with how the elderly, vulnerable persons and pregnant women project their future in these dismal times. It is in the spirit of solidarity and other Christian virtues that we must support them in their temporary isolation as advised by the health authorities.

The bitter pill is the need to face the boredom of staying indoors and contemplate on their lack of mobility and human interaction. The picture they get from the media is that there is no way we can avoid drinking from the poisoned chalice of a pandemic – it comes with no known date of closure.

Recently, the unexpected happened with the entire Ħal Far open centre put under quarantine to try to contain the spread of COVID-19 after a number of migrants contracted the virus. Now, that the inevitable has happened, and the army has been called in to keep guard at the open centre, we need to ensure the response to close the entire compound is grounded in solidarity and protection.

Society needs to come together to help an estimated 1,000 residents in Hal Far who often lack basic items on a good day, let alone when they are unable to work for a quarantine period of 14 days. It is then up to our political leaders to think outside the box and in a non-partisan manner share the burden of the suffering among all and sundry.

This is a call for common sacrifice, burden-sharing, and cohesive national policy. We have thousands of healthcare workers and other public servants putting their health and lives at risk to treat those infected both now and in the future. Can we give them a bonus in recognition of their extra duties?

We have teleworkers denying themselves not only the luxury of social life but the necessity of the company of their own families and loved ones at a time of great psychological stress in order not to risk contaminating them.

It is no comfort to hear stories of privileges enjoyed by political cronies who seem to have a grip over the state coffers to stick the snouts deeper in the country ’s trough.

The news that AirMalta has sacked all its part-time cabin crew and wants to trim off pilot salaries to €1,200 monthly is a strong message that the burden needs to be seen to be shared equally with other state employees.

This, of course, has been recommended by a sociology professor from university who suggests that a flat percentage is cut off all state employees’ salaries barring those who work in difficult environments such as the health, army, and police workforce.

Such a wage cut can be pooled into a fund to buy health equipment such as ventilators and secure alternate accommodation in hotels for the hundreds in quarantine. The noble gesture of three ministers who waived a month of salary is a gesture that should be replicated by other top salary earners in about 300 government agencies/regulators who may in a magnanimous move share the suffering of many business owners who have lost all trade since the beginning of March and face zero revenue with no reduction in operating expenses.

The government has not reduced any electricity tariffs neither taxes on fuel (even though oil prices are down to almost 35%). Business owners are making sacrifices to try and not to sack staff and to switch to working online at home. Can they succeed in keeping the commerce afloat? One cannot be so sure.

Granted that hotels, restaurants, bars, travel agents, casinos, owners of shops of non-essential goods, hairdressers, gyms, and many others cannot work remotely. There is some government aid for an effort not to terminate employees while others are making full use of leave entitlement. Typically, large hotel chains have placed their workers on a two-day routine and are trying to reduce their operating costs in the most pragmatic way.

Employees will be working from home for the first time, which means figuring out how to stay on task in a new environment that may not lend itself to productivity. But there are ways to deliver results and avoid going stir-crazy, from setting up a good workspace to the way you link to your team.

The challenge of remote working depends solely on who is managing the workers to maximize productivity, so traditional processes may not apply. Leadership practices must change for an organisation to get full value from telecommuting staff.

This means that with all good intentions and best endeavours companies admit that the teleworking performance will never match that which occurred when office routine was the norm.  Efficiency and productivity suffer in the long run.

In fact, the Economist Intelligence Unit (EIU) forecasts that the global economy will expand by a mere 2.4% in 2020. It notes that rich economies are expected to grow at roughly the same uninspiring pace as they did in 2019. A continuation of the global slowdown in manufacturing will also drag down growth worldwide.

In just two weeks, the newly unemployed in the United States are now more numerous than all the new jobless claims from 2008 to 2010 during the entire Great Recession. These unemployment figures are likely to be just the tip of the iceberg when it comes to the effects of the COVID-19 outbreak distorting economic activity.

In Malta, with an aging population and a growing trust gap between politicians and ordinary people, the lack of adequate investment in physical, social, and economic infrastructure is further accentuating the problems caused by the coronavirus pandemic.

Consider the three abrupt top ministerial resignations which have left a sour taste among the party faithful and the Opposition baying for retribution concerning a number of major political scandals that were regularly disclosed in a public blog by the assassinated journalist – Daphne Caruana Galizia.

The damage to the island’s reputation caused by such scandals as a financial domicile is palpable. The ECB’s recent reprimand to Bank of Valetta over AML and governance issues did send shock waves since this is a major bank which now, due to the Corona slowdown, is postponing its dividend payment.

In conclusion, the pandemic has galvanised the nation into strengthening the three pillars of governance, rule of law, and democracy.

George Mangion


Author: George Mangion
Published on Malta BusinessToday 9 April 2020
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Facebook Plans to Become World’s Biggest Central Bank?

Published on Medium

According to The New York Times (NYT), Facebook is creating its own cryptocurrency. It would be used on WhatsApp, which Facebook owns, to facilitate transactions between users.

Facebook’s move is clearly to counter the threat from up and coming messenging rivals Telegram and Signal. NYT said that the Facebook secret effort to build its own cryptocurrency “started last year after Telegram raised an eye-popping $1.7 billion to fund its cryptocurrency project”.

Between Messenger, WhatsApp and Instagram, which Facebook owns, there are a collective 2.7 billion users. If Facebook decides to back the value of its own digital with a basket of foreign currencies, then it could potentially become the largest central bank in the world — because that’s what central banks do; print money backed by a basket of foreign currency reserves.

Not only will this become monumental in world economic history, it is also going to become a serious and rapid threat for the existing giants of the finance industry.

Bye bye Visa and MasterCard

The two largest credit card companies in the world are Visa and MasterCard. They provide us with the ability to transact without carrying cash. They then settle those transactions with our banks.

If Facebook issued its own digital currency, and all its users had a Facebook mobile wallet with Facebook coins in it, then the need for credit cards will diminish more and more.

You make a purchase online, you pay for it with Facebook coins. Many apps have already integrated user sign-in with Facebook accounts. Payment is just another step away.

You buy a latte at Starbucks, you tap your phone at the counter to pay with Facebook coins instead of Apple Pay or Google Wallet. Facebook will definitely roll out marketing incentives for users to pay with their Facebook mobile wallets at the point of purchase. This is how existing mobile wallets battle it out for market share.

And if Facebook is backing the conversion value of its coins with real world money, few would see the need to convert the Facebook coins in and out of their Facebook mobile wallets frequently.

But why would you buy Facebook coins to deposit into your mobile wallet in the first place? Because of e-commerce.

E-Commerce F.0

When Facebook coins launch, it could bring e-commerce to a whole new level.

Facebook will achieve its dream of online merchants being able to post and sell items directly within its apps, down to the payment process. No more typing in credit card or PayPal account details. Online shopping will become a two-step process in Facebook apps. I see, I like, I click buy, I hit confirm. Facebook coins move from my mobile wallet to the seller immediately.

There will be no exchange rate spreads and far lower transaction fees. Social networks, instant messaging and e-commerce will become truly integrated. Consumers will come to expect the convenience of two-click transactions. Existing e-commerce platforms using traditional payment gateways will have to adapt to compete.

Note: The above scenarios has been the case in China with WeChat wallet and Alipay for many years now.

Facebook becomes the biggest currency in the world

The NYT report said that, “ The Facebook project is far enough along that the social networking giant has held conversations with cryptocurrency exchanges about selling the Facebook coin to consumers.”

This could potentially create the biggest private currency exchange market in the world. The world’s population is about 7.7 billion people. China is the most populous country in the world at 1.4 billion. WhatsApp alone has 1.5 billion users. Put Facebook Messenger and Instagram into the equation, no other currency has anything close to a potential user base of 2.7 billion. That’s what the Facebook coin could become — the most held and used currency in the world!

It will spawn a foreign exchange market the size of which the world has never seen. Facebook could potentially become more powerful than any other central bank.

At the same time, as Facebook coins become more and more frequently traded by users, a market for Facebook coin derivatives will emerge — Facebook coin futures, forward contracts, options, interest rate swaps etc.

Facebook the next Silk Road?

The NYT article also said, “The big question facing Facebook is how much control it would retain over the digital coin. Working with cryptocurrency exchanges would take at least some of the regulatory burden off Facebook… will be harder for the company to make money from transaction fees and easier for criminals to use the coin for illegal purposes.

Facebook faces a real dilemma here. It has gotten a lot of public backlash for selling user data in recent years. But if it swings to the other extreme and guarantees absolute privacy like rivals Telegram and Signal, then it could potentially become another Silk Road, the Internet black market that first popularized Bitcoin when users started using it to buy and sell drugs.

NYT says Facebook coins could be issued as early as the first half of this year. The world will know the answers to the above scenarios soon.

As for me, I’m betting on something big to happen with cryptocurrencies. Investment bank JPMorgan is also issuing its own digital coin, but only for the institutional payments market. I’ve noticed that the last two times JPMorgan championed a new solution, that innovation goes mainstream, but not before it causes a crisis

PKF Malta officials attend trade delegations in Bulgaria, Poland and Japan

Published on Malta Independent on Thursday, 9 August 2018

PKF Malta Senior Partner George Mangion recently traveled to Sofia where he attended the EMEI Tax meeting which is organised by PKF International (PKFI).  Being a network of independent firms, PKFI is constantly on the lookout to organise various conferences and events for its members and non-members.

After Sofia, PKF Senior Partner, George Mangion attended a trade delegation to Poland. This trade delegation was organised by the Malta and Poland Chamber of Commerce.  During this visit, Malta and Poland Chamber of Commerce signed a Memorandum of Understanding to strengthen business ties in the interest of respective members.

The mission included a well-attended high-level Poland – Malta Business Forum which was addressed, amongst others, by the Minister for the Economy, Investment and Small Business, Chris Cardona and Hon Marcin Ociepa on behalf of Jadwiga Emilewicz, Minister of Entrepreneurship and Technology of Poland and later followed by a B2B meeting between the Maltese and Polish companies. During these B2B meetings, Mr. Mangion met with various Blockchain and virtual currencies organisers.  The next visit was to a business accelerator called The Heart. This is an organisation which offers assistance to corporations and start-ups to grow and innovate.

During the same week, PKF Poland celebrated their 25th company anniversary.  They celebrated it with various business partners and as well as with other PKF firms.  PKF Malta was invited for this anniversary where they enjoyed a Jubilee Gala with a concert and dinner.


Mr. Mangion together with the Head of Legal, Dr. Marilyn Formosa, and Asia Business Development Executive, Ms. Yolanda Dong also visited Japan with a business delegation organised by Trade Malta jointly with the Office of the Prime Minister of Malta, the Hon. Dr. Joseph Muscat between the 30th July and 3rd August 2018.

Published on Malta Independent on Thursday, 9 August 2018

MGA Publishes Directive on the Calculation of Compliance Contribution

Source: MGA
Published on 13/08/2018

Directive on the Calculation of Compliance Contribution
In exercise of the power conferred by article 7(2) of the Gaming Act, 2018 (Cap. 583 of the Laws of Malta), the Malta Gaming Authority is hereby issuing the following directive in order to clarify the manner in which applicable fees are calculated in terms of the Gaming Licence Fees Regulations.

Part I – Preliminary
1. The short title of this Directive is the Directive on the Calculation of Compliance Contribution 2018.
2. This Directive is applicable as of the date of entry into force of the Gaming Licence Fees Regulations.

Part II – Definitions
3. (1) In this Directive, save as provided in sub-article (2) of this article, all words and phrases shall have the same meaning as prescribed in the Gaming Definitions Regulations or the Gaming Licence Fees Regulations.

(2) In this Directive, unless the context otherwise requires:
“Shared progressive jackpot” means a prize pot shared across multiple licensees and operators, which prize pot increases by each additional contribution by players of the relevant licensees and operators.

Part III – Basis for the Calculation of Gaming Revenue
4. In calculating the compliance contribution due in terms of the Gaming Licence Fees Regulations, licensees shall refer to the definition of gaming revenue within the same regulations, and, for the avoidance of doubt, licensees shall refer to the below formula in calculating gaming revenue:
(A + B) – (C + B) = Gaming Revenue
A = totality of real money wagers1;
B = totality of bonus wagers and other player financial incentives, as per the definition in article 8 of this Directive; and
C = totality of withdrawable winnings, which for the avoidance of doubt excludes bonus winnings or other winnings that are not instantly redeemable.

1 This includes real money deposits or winnings held in the player’s account but does not include any amounts falling within the definition of B. However, items falling under the definition in article 8(ii) shall still be included under A, if, after they’ve been received by a player (at which point they are required to be listed as B), they are subsequently wagered by the player.

5. In calculating the compliance contribution due in terms of the Gaming Licence Fees Regulations, licensees operating Type 3 and Type 4 gaming services shall refer to the definition of ‘charge’ within the same regulations, and, for the avoidance of doubt, licensees shall calculate the ‘charge’ as follows:

a. If the licensee’s revenue is derived as a part or percentage of the player’s contribution, then the ‘charge’ shall constitute that part or percentage of the totality of real money wagers by players playing in terms of the MGA licence after deducting any player financial incentives wagered which fall under the definition in article 8(ii) below; and/or
b. If the licensee’s revenue is derived in any way other than the above, then the ‘charge’ shall constitute the gross portion of monies that are economically retained2 by the licensee after only deducting any player financial incentives wagered which fall under the definition in article 8(ii) below.

6. The licensee shall, upon request by the Authority, provide data relating to:
a. the totality of real money wagers;
b. the totality of player incentives, which include jackpot contributions and bonus wagers and other player financial incentives;
c. the totality of real money winnings, excluding bonus winnings or other winnings that are not instantly redeemable; and
d. jackpot winnings constituting a seeded amount, and/or jackpot contributions listed as player financial incentives.
7. Real money winnings also include winnings awarded other than in fiat currency denomination, such as movable or immovable property, trips, tournament entry fees, virtual goods and currency amongst other things, which prizes shall be valued according to the lower of the market value at the time of the winning and the price paid by the licensee to purchase said prize, and in the absence of a purchase price, the deemed value shall be the market price at
the time of the winning:

Provided that the licensee may, at any time, be requested to provide a breakdown of all winnings not paid out in fiat currency and included as part of real money winnings, including a description of each item, and the appropriate value:
Provided further that incentives given to players which are not directly related to game winnings, such as prizes awarded as part of a marketing scheme, shall not be included as part of ‘real money winnings’ for any purposes of this Directive.

For the avoidance of doubt, the direct cost of tickets incurred in pursuit of the provision of lottery messenger services shall not be considered part of the monies economically retained by the licensee. This reasoning shall not extend to direct costs of tickets incurred as part of a risk hedging strategy for a secondary lottery offer.

8. For the purposes of this Directive the phrase ‘bonus wagers and other player financial incentives’ is restricted to include player incentives (such as promotional gaming credits, free bets, bonus bets, bonus wagers and other forms of player credit or player credit equivalents) where:
(i) the use or consumption of the player incentive by the player is effectively equivalent
to a real money wager by the player in that it may directly result in real money winnings that are instantly redeemable by the player 3;
(ii) where the player financial incentive is, in the hands of the player, immediately
equivalent to a real money winning which is instantly redeemable by the player,
at the time when they are used or consumed by the player (for items falling under (i) above) or received by the player (for items falling under (ii) above
4) as the case may be, and the term ‘bonus wagers’ and / or ‘player financial incentives’ shall, wherever used in this Directive, be read and construed accordingly.
Provided that where a licensee offers jackpots containing a portion of the prize which is seeded capital, the portion of the jackpot prize that is seeded capital shall, if won, be included as part of the totality of real money winnings, and in the case of a shared progressive jackpot, if won, the licensee shall only deduct the portion of the seeded capital which it contributed directly itself, if any. Provided further that any portion of real money wagers that is contributed towards a
local jackpot or a shared progressive jackpot shall be excluded from real money wagers for the purposes of articles 4 and 5 of this Directive but shall be included as part of player financial incentives for all purposes of this Directive. Similarly, therefore any local jackpot and shared progressive jackpot winnings derived from the contribution referred to in the preceding sentence shall be excluded from real money winnings for the purposes of articles 4 and 5 of
this Directive:
For the avoidance of any doubt the reference to ‘any portion of real money wagers that is contributed towards a jackpot or a shared progressive jackpot’ above shall not be interpreted to refer to any amounts of the real money wagers which are payable by way of royalties or by way of any other fees due to any other person and shall only be interpreted to refer to any portion of the real money wagers contributed to the prize pot.

9. No portion of the real money wagers, or of the gaming revenue that is attributable to any portion due in terms of gaming tax, VAT, income tax, corporate tax and other taxes, shall be excluded from the calculation of the totality of real money wagers, or the totality of gaming revenue, as applicable.

3For example, a bonus wager, a free spin or a free bet, whereby any winnings derived therefrom would be directly and immediately redeemable by the player.
4 Following this, any use or consumption of the financial incentive by the player within the context of a wager, shall be equivalent to be a real money wager as per the definition of A in article 4 of this Directive.

10. There shall be no deductions allowed other than those specified in this Directive.
Part IV – Minimum Compliance Contribution

11. The minimum compliance contribution shall start accruing on the day when the relevant game type approval is issued, as applicable.
12. With respect to the payment of the minimum compliance contribution in terms of regulation
6(1)(a) of the Gaming Licence Fees Regulations, the minimum amount payable on the twentieth (20th) day of that month commencing immediately after the month in which the licence period commences shall be deemed to be the minimum stipulated in the provisos to regulations 3(2), 3(3), 3(4) and 3(5) of the Gaming Licence Fees Regulations, pro-rated accordingly for that specific month, and for the avoidance of doubt, the full minimum amount shall not be due until a full licence period elapses.

13. Without prejudice to the provisions of regulation 27(3) of the Gaming Authorisations Regulations, the compliance contribution shall continue accruing until the day that the licensee informs the Authority that following the applicable termination procedures, the gaming operations under the purview of the applicable licence or approval have halted, and that the Authority is able to confirm the same:

Provided that if the amount due is the minimum compliance contribution, it shall be pro-rated accordingly according to the number of days of that particular month during which the gaming activity was still operational.

14. Licensees approved by the Authority as being start-up undertakings shall refer to regulation 9 of the Gaming Licence Fees Regulations, and to the Directive on Start-Up Undertakings (Directive 1 of 2018) for the applicability of the compliance contribution towards the same.

Source: MGA
Published on 13/08/2018