Tag: malta

The chivalrous quest of robotics and AI

Posted on by Colette Mangion

Author: George Mangion
Published on Business Today 9th May 2019

One may be intrigued by the incidence of the heightened tempo in party propaganda embracing the upcoming MEP and Local Councils elections by political parties.

The administration is in a race to announce new projects to please voters. The latest fad seems to be promising to build more social housing – and of course government has given the green light for the Gozo tunnel.

Party apologists find comfort and prosper in hailing the administration for promising so many ambitious projects. Definitely others equally made hay while the sun shine under the patronage of the pro-business attitude of the Planning Authority.

On to the subject of robotics and artificial intelligence (AI). This has become the flavour of the month and finds the wholehearted support of government which, for the second time, is sponsoring a mega blockchain and AI conference this month.

This is an initiative in the right direction and has led to other events which are being organised concurrently by the private sector.

PKF had put its shoulders to the wheel when, three years ago, it hosted an international event at the Microsoft Innovation Centre, Skyparks Gudja. The event styled “Blueprint for Innovation” saw an expert lineup of speakers. These included Gor Sargsyan, MD , Qbiticlogic  International Atlanta USA based in Silicon Valley, Stas Gayshan MD, CIC Boston US, Jeffrey Pullicino Orlando Chairman MCST, Joe Woods MD, Creolabs, Netrefer CEO, Kenneth Farrugia ,President FinanceMalta, Ing Joe Sammut CEO LifeSciences Park, top speakers from MCAST and University while the parliamentary secretary Silvio Schembri responsible for Innovation at OPM gave the opening speech.

Media comments were positive as all agreed that the island needs to do more to boost its contribution to R&D which based as a percentage of GDP is one of the lowest in the EU and in this context, the government in its 2019 budget is pledging to open the taps for more investment.

The good news is that for the MEP and local council elections all political parties are promising to increase investment in innovation and related Blockchain subjects.

Alas, we heard it so many times by the public sector that it plans to support an innovation and business accelerator centre of caliber. It seems that the spirit is willing but the body is weak yet the private sector is slowly moving to fill the gap.

It professes to be a true catalyst to anchor existing research within the diverse manufacturing community and to attract new ones.

There is so much at risk for our country in its quest to harness the best brains in the fields of digital research and AI.

The nonchalant attitude of maintaining the status quo – saying “if it is not broken then do not change it” – is deceptive.

The trajectory of new technologies can be enigmatic. They start off from an initial idea, which is often outlandish or somewhat crazy, going through a series of milestones in laboratories, and finally making the leap from laboratories to the real world.

One may ask-what are the potential new technologies being researched and studied locally and how would these be applied in to improve the competiveness of our manufacturing and services economy.

Three years ago, the author pioneered a familiarisation trip visiting Massachusetts Institute of Technology (MIT) in Boston, USA to explore links to promote Malta as a potential business accelerator and/or life sciences hub for innovators, inventors and entrepreneurs.

It is interesting to note that the Massachusetts Institute of Technology (MIT) is a private research university in Cambridge, Massachusetts founded in 1861 –  built in response to the increasing industrialisation of the United States.  The uniqueness of MIT is in its appetite for problem-solving – especially those intratable technical problems whose solutions make a tangible difference.

Be that as it may, while not taking giant steps yet within our limitations, one cannot but admire the world-class research ongoing in the Department of Physics at the University of Malta. A senior lecturer in quantum mechanics in the Department of Physics at the University of Malta is coordinating a pioneering project which involves group research.

The local team is concerned with developing the basis for a new kind of technology – machine learning which brings with it a substantial challenge.

What is machine learning and how does this science integrate with the latest craze of Artificial intelligence and its sister technology concerning driver-less cars?

Machine learning frequently involves solving problems of manipulating and classifying large numbers of vectors in high-dimensional spaces. Classical algorithms for solving such problems typically take time involving a number of vectors within the dimension of space.

Naturally with the advent of cheaper processors and huge data memory banks one can use super computers to manage data running at exponential speed. These so-called quantum computers are essential to manipulate high-dimensional vectors so common in clusters.

There are many applications which benefit from quantum learning using algorithms which lead to input-output relationships. This is important for tasks such as image and speech recognition or strategy optimisation, with growing applications in the IT industry and of course it is used to interpret real-time images relayed from multiple car sensors so prevalent in driver-less technology.

Ideas range from running computationally costly algorithms or their subroutines efficiently on a quantum computer to efficient translation of mathematical exercises involving various topics being researched.

Another application is in problem solving. Computers really took off only after it became possible to build not just single transistors but chips containing many of them, up to billions in the latest fast processors.

The limiting factor is their electricity consumption and heat generation so experimentation has started to use light as a source for running processors. This platform can be applied to improve devices across the board.

In the future, it will create a means for computers to work directly with light, which will run systems that are more efficient and use less power. One foreseen application is to create motion sensors so accurate that they could help us navigate underground, for example in digging long tunnels or underwater, where GPS signals are unavailable.

These technologies, which could disrupt markets and generate economic growth are merely the tip of the iceberg.

Understanding the inherent complexity of the quantum world, the ramifications how the laws of physics can disrupt information and its ability to adapt mathematical norms developed in quantum theory can place the island in a competitive stance where researchers are appreciated as creators of a bright future.

 

George Mangion

Author: George Mangion
Published on Business Today 9th May 2019
Get in touch: info@pkfmalta.com | +356 21 493 041

Evaluating Malta’s economic revival

Posted on by Colette Mangion

Author: George Mangion
Published on Business Today 2nd May 2019

With only a few weeks to go for the European and local council elections, the government is doing its best to showcase its economic performance.

The Central Bank of Malta report lauds the administration for its stellar performance and provides statistics to back this assertion.

It’s main line of contention is the achievement of a modest surplus which has surfaced in the past three years compared with chronic deficits in the previous 30 years.

This surplus peaked in 2017 at €387.2 and has slowed down to €250.8 in 2018. The surplus is calculated as the difference between total revenue €4,783.2 million and expenditure €4,532.4 million of General Government.

One may laud the administration in its policy of fiscal control which over the past six years has seen debt as a share of gross domestic product continue to decline. This peaked at 72% in 2012 and has now eased to 46%.

One needs to explain that according to the Maastricht Treaty, the gross nominal consolidated debt should not exceed 60% of GDP otherwise an excessive deficit mechanism status will be triggered and laggards have to suffer punitive fines until the situation is regularised.

In September 2018, the stock of general government debt amounted to €5,512.0 million, down by €234.8 million when compared with June 2018. This was largely due to a €233.1 million decrease in the stock of long-term securities.

Comparing 2018 over 2017, total revenue increased by €353.8 million, while total expenditure increased by €490.2 million. One notes that the decrease in general government debt was more pronounced than the surplus recorded in 2018 which as stated earlier had decreased from the record level achieved in 2017.

In order to arrive at the General Government sector’s positive balance for 2018, adjustments are made to the balance of the Government’s Consolidated Fund which in fact registered a deficit of €70.2 million – a decrease over the surplus of €182.7 million recorded in 2017.

One can explain this situation as follows.

This positive change is attributed to the accrual basis of accounting demanded under the Brussels rule, in which case accounting for the full proceeds (not the statutory 30% portion) from Investment and Passport scheme.

Obviously, this is a contributing factor which one expects to be of a temporary nature given the constant pressure from the Opposition to stop it.

Having briefly visited the salient economic achievements of our economy, one may ask how this growth compares with other countries which have also leaped ahead of the curve.

The first champion in the group of ex-Communist countries is Poland. It is the 8th biggest economy in the European Union. The country’s industrial base combines coal, textile, chemical, machinery, iron, and steel sectors and has expanded more recently to include fertilisers, petrochemicals, machine tools, electrical machinery, electronics, cars and shipbuilding.

Since 1989, it has increased its GDP per capita by almost 150%, more than any other country on the continent. Since 1995, it has also become the fastest-growing large economy in the world beating even the Asian tigers such as South Korea, Singapore and Taiwan.

Poland’s ongoing GDP growth performance is reaching 5% in 2018 and a projected 3.5-4% growth in 2019 and 2020. Other economic athletes are Czechia and Slovakia. These pose an unsmiling challenge to Malta’s own performance.

In fact, only 1.5% of young employed Czechs and 3.8% of young employed Slovaks were at risk of poverty in 2017.  In the Czechia, the at-risk-of-poverty rate among young employed people reached a peak of 5.2% in 2012, and the following year in Slovakia (6.1%).  As of January 2019, the unemployment rate in the Czechia was the lowest in the EU at 1.9%.

This compares with the rate in Malta of 3.5% in the fourth quarter of 2018.  One is surprised to read that Norway’s unemployment rate matches that of Malta at 3.8% but hit a record low of 2.4% in 2007.

An Asian champion is Singapore. This country is reputed to thrive on latest innovation and regularly funds start-ups and its SME’s to reach higher rates of economic success. It is no exaggeration, that its stellar growth is the envy of many EU countries and Malta could do well to learn some lessons from its commercial acumen.

Singapore’s seasonally adjusted unemployment rate stood at 2.2% in the first quarter 2019. It remained the highest jobless rate since the second quarter of 2017, amid signs of external economic headwinds and uncertainties in 2019.

Moving on, we meet the success of Japan where its jobless rate increased to 2.5% in March 2019 from a five-month low of 2.3%.

Having seen the picture of economic successes registered by competing countries, one cannot rest on our laurels even though it appears that Malta has started the righteous path to a stable recovery.

Our industry is still suffering from low technology and the country needs to double its contribution towards innovation and training of its workers to meet the exigencies of the so-called 4th industrial revolution.  Having said that, one lauds the government’s debt strategy. This ensures that the financing needs of the public sector are met at the lowest possible costs and that its debt service payment obligations are met in a timely manner.

The other positive aspect is that the debt levels (mostly local government stocks and bonds) remain sustainable while simultaneously minimising interest rate risk.

The cost of servicing debt is gradually diminishing yet one cannot overlook the fact that there is no sinking fund to repay such bonds. Reducing debt by a primary surplus, depends solely on the turnout of higher exports and the continued flow of proceeds from the IIP scheme. Quoting the Central Bank reports, it states that both components are expected to mitigate the upward pressure that interest expenditure once the build-up of debt recedes.

One appreciates the pressure on government to think out of the box in order to maintain economic growth and achieve its social responsibility to improve the well-being of citizens. More funding is needed to provide affordable social houses given the recent meteoric rise of property prices (this exceeds that of Hong Kong) and government aid to address the creeping cost of living for the low-income groups and pensioners.

Otherwise, the isle of milk and honey can aspire to move forward to meet its quest in reaching the top position as one of the gifted economic achievers.

 

George Mangion

Author: George Mangion
Published on Business Today 2nd May 2019
Get in touch: info@pkfmalta.com | +356 21 493 041

Land reclamation could make Malta a Singapore in the Med

Posted on by Colette Mangion

Author: George Mangion
Published on Business Today 25th April 2019

During a business trip to Singapore, I was fascinated by its success in many sectors notwithstanding the fact that it possesses no mineral wealth.

Singapore is roughly twice the size of Malta but houses over five million citizens in a densely-populated area. It comes as no surprise that over the past decades Singapore has invested heavily in land reclamation, including a massive freeport and an international airport.

Malta is contemplating using the massive tonnage of debris generated from the Gozo tunnel to a practical use. The controversial topic has recently hit the deadlines after parliament unanimously approved (except for the two PD MPs) to go ahead with the tunnel project.

As can be expected, the subject is highly contested by environmentalists and NGOs who argue against land reclamation because it will upset the ecological, scientific and archaeological habitat.

It follows that due to Malta’s size, its growing population density and unique island biodiversity any political announcement to encourage land reclamation are welcomed by property magnates.

Others claim capital for such a mammoth project should be diverted to solve the dire problem of lack of social housing.

This bone of contention is counter balanced by the suggestion towards re-use of abandoned dwellings to accommodate social housing for the elderly and potential redevelopment of some of these dwellings which are old and unfit for habitation. Of course, this is already done by the Housing Authority that is inviting developers to come forward and enter a joint venture to finance the development costs to rehabilitate derelict houses.

This is a noble cause but in the meantime, there is nothing to stop us from utilising the resource of abundant debris resulting from either tunnelling or building a metro.

It is no exaggeration to say that Malta as an island with relatively soft rock has suffered continuous erosion by mother nature over the millennia.

Being contrite, we must admit that with a third of the island covered with concrete we can enjoy more elbow room for ample spatial living.

The Planning Authority commissioned independent consultants to carry out two major studies on land reclamation. One dates back to 2005 that explored the idea of disposing construction waste at sea, and another completed in 2007 exploring the feasibility of land reclamation at two specific areas.

It remains a mystery why the PA had in the past discouraged the environmental and economic feasibility of land reclamation within our coastal zone. To quote an ideal site, we can mention the coastline near Qalet Marku.

Here, one assumes that building debris from both the City Centre (DB) project and the Gozo tunnel can be deployed to form a cluster of islands.

Unofficially, we heard that ERA maintains that the coastline at Xagħjra is a preferred site since at Qalet Marku there are more environmental objections. Naturally, the construction lobby is very much in favour of sustainable work linked to large scale land reclamation work, which on its own can secure jobs.

The Prime Minister is encouraging the private sector to come forward with ideas and this is welcome. Any large-scale reclamation will inevitably stimulate the regeneration of key areas but designs have to be sensitive to aesthetic value and historical significance.
Ideally, the area coincides with functional considerations of a busy tourist centre. Perhaps that is why the Xagħjra coastline was chosen.

This means linking it to Smart City with a modern promenade, supporting multifarious commercial, cultural and recreation activities, albeit residents are vociferous in their protests against such a plan.

But we must reflect on how Malta created a thriving cruise liner industry in Valletta and the Cottonera jetties – both construed on reclaimed land.

In an ideal world, environmentalists need to tone down their opposition and carefully weigh the advantages of better paid jobs benefitting from a heavy investment to reclaim land from the sea. Certainly, land reclamation is not new to the Maltese islands and here I can mention with pride the success of Marsa Sports Grounds built entirely on reclaimed land, the sea originally reaching inland as far as Qormi since ancient times.

Turning to Msida, one can point to another prime example of a major land reclamation project while not forgetting the massive Freeport terminals in Birżebbuġa and the platform on which the Delimara power station stands.

Moving on to the advantages of reclamation, one remembers with nostalgia how reclamation changed the logistics at Msida. Originally when the parish church was built it was facing the sea. Really and truly, there will always be a price to pay when inert waste, usually from construction and demolition sources, is used for land reclamation. The hardest hit, from a purely environmental standpoint, is obviously the seabed, which not only loses its integrity in terms of physical characteristics but any biodiversity thriving on a particular site can be wiped out altogether.

The obvious collateral damage to the Posidonia meadows (seagrass) that lie over large tracts of seabed at various depths around the coastline merits serious consideration as the ecological significance of such meadows is well known in terms of stabilising the seabed and serving as nurture grounds for an immense variety of fish species and other marine organisms. Also, any excessive dumping of inert waste at sea to build retaining walls for land extensions is aesthetically unpleasing as it disturbs the water column by contributing to turbidity.

Ecologists warn us that such dumping takes ages to eventually settle down as sediment on the seafloor and it lowers the photosynthetic capabilities of aquatic species in that particular site to the detriment of the marine ecosystem as a whole. Another concern is the toxic element inherent in unsorted waste such as heavy metals, burnt oil or other chemical species that could be absorbed by the marine ecosystem and in the process, go to contaminate food chains.

The implications in terms of the resultant particulate matter levels in ambient air, for example, white and black dusts as a result of heavy machinery to move material is not to be under estimated.

Now that the government is waiting for completion of scientific studies before issuing tenders for the Gozo tunnel project there is some speculation where the millions be sourced.

The tunnel is certainly a controversial topic that has long grasped the imagination of politicians and will eventually challenge structural engineers to design a commercially sustainable link. If we optimise the resource out of future development projects and use them wisely as land extensions, then that will be the day when Malta may rise as a Phoenix out of the water and share the success of a novel Singapore in the Med.

George Mangion

Author: George Mangion
Published on Business Today 25th April 2019
Get in touch: info@pkfmalta.com | +356 21 493 041

Pushing our fate with Greco, Moneyval, IMF and Venice Commission reports

Posted on by Colette Mangion

Author: George Mangion
Published on Business Today 11th April 2019

A dark cloud floats over the island. One may blame climate change and hope it will pass away to let in the sunshine. Realistically, we know that living in hope is a chancy habit so let us collectively take the bull by the horns and start analysing the above-mentioned reports issued by international institutions.

Why did they hit us this year as if the administration does not merit some reprieve given that the economy has manifested an exemplary performance? For some time, since the Pilatus bank saga, one reads about critics pointing to a reform of FIAU and MFSA.

It is true that EU countries have not escaped the incidence of financial scandals such as the Russian monies laundered through Danske bank with a number of branches in Estonia, yet in Malta practitioners pride themselves that the regulatory net has always been effective to keep out the bad wolf.

Recent reports such as Greco, Moneyval (still in the interim stages) the IMF and the Venice Commission have tightened the noose on the administration to stem the leaks. While as a country our demeanours are spotted and sometimes over-amplified in Brussels, yet one must admit that the closure of three local banks last year has taken its toll on public opinion.

Practitioners are still feeling the cold blast of negative publicity. Moving on, femme fatale was the passport scheme. This was criticised at European level where media sources reported on the adverse comments by the Chairman of the PANA Committee who claimed that the IIP should be stopped.

Last year, the European Commission was reported stating that passport buyers must have a clear and permanent link to host countries. But the prime minister, showered positive comments on the IIP scheme whenever he was addressing delegates at various global events organised by the sole concessionaire – Henley & Partners.

He proudly announced the due diligence structure as administered by the government to classify as the gold standard. More comfort was showered by the General Counsel for Thomson Reuters attesting that the scheme is a textbook example of how to conduct effective and reliable due diligence.

Today, there are approximately a hundred countries offering investment migration programmes. Quoting Bruno Lecuyer chief executive of Investment Migration Council, he reminds critics of investment migration schemes that IMC has been diligent in establishing a code of ethics and professional standards for its members.

An initiative was launched four years ago to create a culture of professional excellence and some governments (Malta included) are also taking it onboard. Yet the excitement for the finance minister does not stop here since the recent publication of the IMF report has tinged some raw nerves. The report goes to recommend a number of steps to help ensure a sustained future growth.

Among such recommendations, one finds the standard advice urging government to improve support to start-ups. These are finding access to credit being hindered by red tape and the perennial demand by banks for tangible collateral. Equally important, is the need to improve training of the labour force to be able to attract more international companies to Malta.

Perhaps, an ideal way to improve the quality of the local talent is by setting up an innovation hub of international repute supported by venture capital. One cannot omit to caution against the breakneck speed that gripped the imagination of construction and property developers with an unprecedented increase of 24% in property prices.

Top estate agents never had it so good with some employing over 400 full-time property negotiators on generous commission basis. Naturally, when a property mismatch occurs this always leads to a bust – and without exception politicians rushed cap in hand to IMF. To mitigate this potential calamity happening in Malta, the IMF report notes that while local banks are adequately capitalised yet it calls for more prudence in lending and a programmed reduction in non-performing loans.

Again, it recommends an extra effort by government agencies to cut red tape and effectively support start-ups. The culture concerning the adulation of mega business appears grand on the political bandwagon yet it pays to create a culture that small can also be beautiful. Another topic, in the IMF report is the need for more social housing. There is a waiting list of 3,500 families seeking decent habitation.

This human malady is partly caused by the onset of gentrification which forces house prices to escalate. It is no surprise, that low-income workers cannot afford the rents on offer. For vulnerable households, the IMF recommends more rent subsidies granted by the State to deserving families and the acceleration of investment in affordable accommodation by Housing Authority.

Sadly, it does not rain, it pours and last week saw the publication of the Council of Europe’s Group of States against Corruption (GRECO). This is an evaluation based on an expert assessment of local institutions and the measurement of their effectiveness concluded last October 2018. Some comments are not entirely salubrious. While progress was made on a reform of a number of institutions yet the experts did not mince words saying inter alia that Malta “clearly lacks an overall strategy and coherent risk-based approach when it comes to integrity standards for government officials”.

Furthermore, the Greco report stated that “a system of sanctions is also clearly lacking” adding in their opinion that the criminal justice system was at risk of paralysis and that a redistribution of responsibilities between the Attorney General’s Office, the Police and the inquiring magistrates was required to avoid this situation.

The fly in the ointment was the remark that “certain institutions have also turned out to have no real added value after 30 years of existence, such as the Permanent Commission against Corruption”.

On a positive note, it reported that for a country of Malta’s size, it had an “impressive arsenal of public institutions involved in checks and balance”. Another smart move was the appointment last year of Dr George Hyzler as a Commissioner responsible for Standards in Public Office. Party apologists point that most of the recommendations by GRECO are on the same lines of the Venice Commission’s opinion and that weaknesses are already being addressed.

This can be seen on the action taken by the Tax Compliance Unit since the publication of Panama Papers in 2016/7 to try recovering taxes on undeclared earnings in tax havens.

This exercise yielded a princely sum of €9 million involving the audit of 237 taxpayers.

In conclusion, not everything is doom and gloom and one must congratulate government for creating financial stability, a reduction in public debt, a remarkable 6.5% increase in GDP, jobs for all, a community where 80% are property owners and instilling a general feel-good factor.

George Mangion

Author: George Mangion
Published on Business Today 11th April 2019
Get in touch: info@pkfmalta.com | +356 21 493 041

Malta in a race to catch up on renewable energy

Posted on by Colette Mangion

Author: George Mangion
Published on Business Today 4th April 2019

Can we be sure that the constant barrage in the media to combat climate change is not another hoax like the millennium bug?

Tree huggers tell us climate change is a process which may be caused by a number of factors including natural, but it can include geologic, oceanographic and atmospheric events.

It does not exclude human-induced factors. One can generalise that a common cause for high emission of greenhouse gases results through human processes such as burning of fossil fuels.

There exists an undeniable fact pointing to the increase in carbon dioxide concentrations and other greenhouse gases, such as methane and nitrous oxide caused by daily activities – mainly due to the explosion in car ownership, more travel by sea and air, not to forget emissions from heavy industry.

Reliable sources tell us there is undeniable evidence pointing to the fact that carbon dioxide is on the increase during the past two decades.

Readers may expect this is another article extolling the benefits of clean air resulting from the ideal solution costing millions of efficient plants generating Green energy.

The truth is not many governments shed tears for the lack of success in reducing national carbon footprint which undoubtedly is contributing to climate change. Between 1990 and 2007, we have seen greenhouse gas emissions increase by almost 50%.

It’s time to start reducing such emissions in order to mitigate the effect of climate change but it is unreasonable to expect that governments get focused in this quest and dig deep into their pockets to reduce the impact of climate change.

There have been various conferences and press releases by the EU extolling the benefits of renewable energy systems and directives were proposed by committees in Brussels to propose ambitious goals for Member States to step up their investment in Green energy.

The original holy grail was that by 2020, the EU would seek to obtain 20% of its total energy consumption requirements with renewable energy sources.

As a definition renewable energy includes wind, solar, hydro-electric and tidal power as well as geothermal energy and biomass and from studies published by the EU one notes that Germany leads the pack as a country which has invested the highest amount in this sector claiming to be the world’s first major renewable energy economy (in 2010, investments total 26 billion euros).

According to official figures, some 370,000 people in Germany were employed in the renewable energy sector in 2010, and it is no surprise to discover that most companies benefiting from this sector are small and medium sized companies. Certainly, concentrations of carbon dioxide in the Mediterranean have increased along with the atmospheric distortion which is giving us colder winters and higher humidity in summers.

Evidence shows that the increase in carbon dioxide concentrations is human induced and is predominantly a result of fossil fuel burning. It is a fact that greenhouse gases when controlled can serve a useful purpose that is to absorb infrared radiation from the Sun and re-emit it in all directions.

This natural greenhouse effect, resulting in creation of water vapour and carbon dioxide functions like a shield to protect the Earth surface from harmful sun rays. Pierce the shield and the surface temperature would be intolerable.

There’s also the problem of a gradual rise in sea levels.  It is estimated that over this century, we will encounter sea-level rise of between 0.18 and 0.69m. In the case of Malta, this is of some concern due to the east coast which will be particularly hit, especially low areas such as Sliema, Gżira and Msida, among others.  It goes without saying that a sudden sea-level rise will particularly impact our economy. The plus side of climate change is our geographical location.

Malta enjoys good exposure to rays of the sun yet it has not succeeded to increase production of electricity from use of photovoltaic panels to the 10% EU threshold. One may observe that awareness in Malta of the benefits of using such technology has improved since the arrival of the Shanghai Electric with its substantial investment in Enemalta.  It converted the BWSC plant to run on LNG. The foreign investment in Electrogas generating plant now running on LNG is also a blessing.

Sadly, Malta has so far been a laggard in solar energy generation, albeit positive steps have been taken to subsidize PV installations for home use.

Why is PV technology so effective? The answer is because a solar cell is the elementary building block of the photovoltaic technology. Recently, research in PV technology has been making giant steps by testing new prototypes made of semiconductor materials, such as silicon which due to their properties makes them highly conductive and in turn scientists are discovering ingenious ways how to capture the energy of the sun and convert it in electricity through an inverter.

Simply fitting more panels on rooftops looks easy but the demographic and geographic characteristics of the island create issues of spatial planning, given that space is limited and it is densely populated. But, it is not all doom and gloom.

Having started from zero in 1995 there has been a huge leap in the number of rooftop installations to date. Official statistics indicate that PV has grown at an average yearly rate of 35% from 1995 to 2005 (1,8 kW to 40 kW) and of 63% between 2005 and 2010. Ask any architect and he will point out that spatial planning is hindered by the limitation to open areas where to fit extensive renewable energy systems (RES).

These often clash with other planning needs and for this reason large-scale RES installations are not practical in Malta.
In conclusion, can the environment minister succeed to catch up for lost time, in the race for renewable energy – and succeed to win the coveted trophy.

To achieve this, we must produce 20% of total energy sourced from non-fossil fuels by next year – one can compare this to the quest of Joshua in ancient biblical times.

It was impossible for Joshua to penetrate the fortified walls of Jericho without the help of troops shouting and loud blowing of their horns.

George Mangion

Author: George Mangion
Published on Business Today 4th April 2019
Get in touch: info@pkfmalta.com | +356 21 493 041

The Reform of MFSA and Implementation of Vision 2021

Posted on by Colette Mangion

Author: George Mangion
Published on Malta Chamber 1st April 2019

One welcomes the new financial crime compliance plan Vision 2021 announced by the Malta Financial Services Authority (MFSA). This move did not come a moment too soon. It is essential that the rules of doing business within the global financial system are not only well-written but also robustly enforced.

Over the two decades that the sector was piloted by Professor Joe Bannister as chairman at MFSA, he saw the financial sector grow from a modest size in 1994, to give birth to a reputable centre of international business. During Prof. Bannister’s watch, commentators lamented that MFSA’s autonomy from the strings at Castille was paper-thin, so it comes as no surprise that the International Monetary Fund (IMF) and other international organisations are now insisting on its operational independence.

The latest move to remove dead wood from the ranks by granting early retirement is noted, since challenges that are facing the incumbent CEO (previously the Chairman and CEO of the Malta Gaming Authority) are significant. The demise of private banks such as Nemea, Sata and Pilatus last year were the fruits of past decisions, but realistically, three bad apples in the barrel does not mean that the entire domicile is beyond redemption. One welcomes the latest IMF report which has been requested by the government, as it gives a very piercing analysis of the factors which attributed to the recent shortcomings in the banking sector. However, it complimented the superlative growth in the economy, in particular, the financial sector. This contributes 11 per cent to the gross value added and also accounts for more than 10 per cent of employment.

MFSA as a single regulator employs 320 professionals. This is no small team to oversee approximately 2,300 licensed entities but MFSA envisages the scope for regulation is growing and wishes to recruit another 160 trained staff in two years’ time. With the current shortage of local professionals, this can only mean enlisting foreign experts. In the wake of international pressure, MFSA now wishes to further tighten the screws by clamping down on potential incidents that lead to the path towards money laundering and terrorist financing. The new CEO wants to be seen as a colossus fighting the infidels that penetrated the fragile fortress, leaving in their wake a stigma of AML and terrorist financings decoys. He claims that Malta needs to grow responsibly and set standards which are in line or better than those of our peers in Europe. Stoically, he embraces technology and innovation, entering the fintech space with optimism and preparedness. This is all very grand, but it needs a higher subvention from Government, possibly reaching €12 million at one go. It is a fact that the annual surplus (circa €10 milllion) posted by the Registry of Companies has always helped fund operations at MFSA with the balance repatriated to Government. This can now be ploughed back to fund the above-mentioned reform.

So why is MFSA contemplating securing the extra funding needed for a transformation to be sourced out of an increase in fees-charged to the sectors and its practitioners? MFSA has long stopped financing promotion of the sector, rightly saying it cannot be seen compromising its impartiality. This is commendable, but then the sector has to be actively promoted to compete with other jurisdictions that are constantly fine-tuning their laws and financial concessions to lure blue chip companies. Practitioners, out of a sense of duty, do not think twice to dig deep into their pockets to tour the globe and promote the island. Together we can succeed to rebuild our ranking as a top-class domicile with the help of Vision 2021.

George Mangion

Author: George Mangion
Published on Malta Chamber 1st April 2019
Get in touch: info@pkfmalta.com | +356 21 493 041

AI invasion – is Malta ready?

Posted on by Colette Mangion

Author: George Mangion
Published on The Malta Independent 21st March 2019

No article this week can fail to mention the current uncertainty that is facing the British economy due to the complex political manoeuvring on an agreed deal on how best to exit the EU. Be that as it may, the Western world is also going through other major changes in the political, economic and administrative fields. The advent of Artificial Intelligence (AI) is entering the economic stage through the backdoor but many feel that it is so powerful that we can only ignore its influence at our own peril. It is no minnow. Experts predict that it in 10 years’ time it will underpin $15.7 trillion of global economic growth.

Some fear it will wreck job opportunities and create mass unemployment in certain sectors yet others are less sanguine and think that it will simply transform current jobs and create new ones. The McKinsey Global Institute reckons that by 2030 up to 375 million people, or 14 per cent of the global workforce, could have their jobs automated away. Employers will have to decide whether they are prepared to offer and pay for retraining, and whether they will give time off for it. Many companies are sympathetic to the need for workers to develop new skills, but mass education is the remit of national governments and should not come at the employer’s expense.

This is debatable because less advanced countries do not have the resources to train workers to reach the higher technical skills required once the AI revolution becomes mainstream. Technological change always causes disruption, but AI is likely to have a bigger impact than anything else since the advent of computers, and its consequences could be far more disruptive. Being both powerful and relatively cheap, it will spread faster than computers did and influence many sectors.

Another important question is how to protect privacy as AI spreads. The internet has already made it possible to track people’s digital behaviour in minute detail. There is little doubt that in the coming years, AI will offer even smarter tools for businesses to monitor consumers’ behaviours, both online and in the physical world. This could become a threat to privacy.

A corollary of AI is machine learning. One can explain this as autonomous learning capacity which empowers a machine to learn on its own without being explicitly programmed. It is a subset of AI that provides the underlying system with the ability to automatically learn and improve from experience. Today, many US firms are competing to provide AI-enhanced tools to companies.

As can be expected, millions are invested to develop new technologies and companies that achieve a major breakthrough in artificial intelligence could easily race ahead of rivals and toughen global competition. More likely, in the years ahead, is that AI might contribute to the rise of monopolies in industries outside the tech sector where there used to be dynamic markets, eventually stifling innovation and consumer choice. The fear is that smart computer programs will eliminate millions of jobs, condemning a generation to minimum wage drudgery or enforced idleness.

Never mind the robots, fear the software as real-life experience has shown otherwise. For example, the arrival of automated teller machines (ATMs) spared bank employees the job of handing out cash and freed them to offer financial advice to customers. Obviously, some jobs could be made a lot easier by AI. One example is taxi drivers. Some fear that taxi drivers will be replaced by autonomous vehicles. But in future taxis will still be manned particularly when needed in town to manoeuvre around busy streets which are far harder to drive through than driving long distances down a motorway. Interesting advances powered by AI are happening in many medical areas in hospitals.

Other potential uses of AI is to detect cyberattacks, or coordinate fleets of drones, and it is useful for mass surveillance where many people congregate as there is facial recognition. Furthermore, increased automation gives more physical control to digital systems, which in turn makes cyberattacks even more dangerous. Regulation is needed to ensure that AI engineers are employing best practices in fighting cybersecurity and limiting the intrusion of cyber thieves especially in banks and sensitive data centres.

The fusion of AI and Blockchain systems will further enlarge the arsenal with tools for fighting cybercrime and make DLT databases tamper-proof. For example, when any transaction is recorded on blockchain that transaction is made known throughout the chain connecting users to each other. Therefore, it is not possible to tamper with a blockchain, which is why trust is built into the system rather than guaranteed by a ‘central owner’ of the data.

This powerful technology is silently ushering in the fourth industrial revolution. It will allow individuals to regain control of their own data, such as medical health or education records, and use it in ways that would not have been possible in the past. Blockchain and DLT technology will improve the tracking of intellectual property rights, as well as strengthen the concept of ownership in the digital sphere. Having discussed briefly the uses of AI, how can tiny Malta ever play a part in this success story? It so happens that Prime Minister Joseph Muscat has called for a global framework for regulating research into, and the development of, artificial intelligence technologies when he addressed a top conference in Shanghai China last year. AI, the internet of things and a best-in-class regulatory framework are now high on the government’s agenda, following the successful introduction of the world’s first comprehensive set of blockchain laws last year. Castille is smelling the coffee and the penny has dropped to lay the foundations for a digital innovation hub. The fly in the ointment is having superlative technical facilities to train a workforce with the right skills. It is a tall order, since millions are needed to train a workforce proficient in AI but it is never too late to start. The government recently announced the funding of a scholarship bourse for postgraduate degrees, as well as a lab to encourage the exploration of emerging technologies. One looks forward with courage to the next Delta Summit this year sponsored by the government with the hope that it will attract tech-evangelists and AI engineers to help us build a local ecosystem. One hopes this fulfils the vision of the prime minister and hallmarks his legacy at a time when he is rumoured to be contemplating his exit from the political stage.

George Mangion

Author: George Mangion
Published on The Malta Independent 21st March 2019
Get in touch: info@pkfmalta.com | +356 21 493 041

Artificial Intelligence: ignore at your own risk

Posted on by Colette Mangion

Author: George Mangion
Published on Malta Today 21st March 2019

The advent of Artificial Intelligence is entering the economic stage through the back-door but many feel that it is so powerful that we can only ignore its influence at our own peril. It is no minnow.

Experts predict that it in ten years it will underpin $15.7 trillion of global economic growth. Some fear it will wreck job opportunities and create mass unemployment in certain sectors yet others are less sanguine and think that it simply transforms current jobs and create new ones.

The McKinsey Global Institute reckons that by 2030 up to 375m people, or 14% of the global workforce, could have their jobs automated away. Bosses will need to decide whether they are prepared to offer and pay for retraining, and whether they will give time off for it. Many companies feel sympathetic towards the need for workers to develop new skills, but mass education is the remit of national governments and should not come about at the employer’s expense.

This is debateable, since less advanced countries do not have the resources to train workers to reach the higher technical skills required once the AI revolution becomes mainstream. Technological change always causes disruption, but AI is likely to have a bigger impact than anything since the advent of computers, and its consequences could be far more disruptive. Being both powerful and relatively cheap, it will spread faster than computers did and influence many sectors.

Another important question is how to protect privacy as AI spreads. The internet has already made it possible to track people’s digital behaviour in minute detail. There is little doubt that in the coming years, AI will offer even smarter tools for businesses to monitor consumers behaviours, both online and in the physical world.

This may become a threat to privacy. A corollary of AI is machine learning. One can explain this as autonomous learning capacity which empowers a machine to learn by its own without being explicitly programmed. It is a subset of AI, that provides the underlying system with the ability to automatically learn and improve from experience.

Today, many US firms are competing to provide AI-enhanced tools to companies. As can be expected, millions are invested to develop new technologies and companies that achieve a major breakthrough in artificial intelligence could easily race ahead of rivals and toughen global competition.

More likely, in the years ahead AI might contribute to the rise of monopolies in industries outside the tech sector where there used to be dynamic markets, eventually stifling innovation and consumer choice. The fear is that smart computer programs will eliminate millions of

jobs, condemning a generation to minimum-wage drudgery or enforced idleness. Never mind the robots, fear the software.

But real-life experience has shown otherwise. For example, the arrival of automated teller machines (ATMs) spared bank employees the job of handling out cash and freed them to offer financial advice to customers.

Obviously, some jobs could be made a lot easier by AI. One example is taxi drivers. Some fear that taxi drivers will be replaced by autonomous vehicles. But in future taxis will still be manned particularly when needed in town to manoeuvre around busy streets which is far harder than driving long distances down the motorway. Interesting advances powered by AI are happening across many medical areas.

Other potential uses of AI, is to detect cyberattacks, or coordinate fleets of drones, in hospitals and where many people congregate it is useful for mass surveillance through facial recognition. Furthermore, increased automation gives more physical control to digital systems, which in turn makes cyberattacks even more dangerous.

Regulation is needed to ensure that AI engineers are employing best practices in fighting cybersecurity and limiting the intrusion of cyber thieves especially in banks and sensitive data centres.

The fusion of AI and Blockchain systems will further enlarge the arsenal with tools for fighting cybercrime and make DLT databases tamper proof. To give an example, when any, say transaction, is recorded on blockchain, that transaction is made known throughout the chain connecting users’ to each other.

Therefore, it is not possible to tamper with a blockchain, which is why trust is built into the system rather than guaranteed by a ‘central owner’ of the data. Thus, this powerful technology is silently ushering the fourth industrial revolution. It will allow individuals to regain control of their own data, such as medical health or education

records, and use it in ways that would not have been possible in the past. Blockchain and DLT technology will improve the tracking of intellectual property rights, as well as strengthen the concept of ownership in the digital sphere.

Having discussed briefly the uses of AI, one may ask if and how can tiny Malta ever partake of this success story. The answer is blowing in the wind as it so happens that Prime Minister Joseph Muscat has called for a global framework for regulating research into, and the development of, artificial intelligence technologies when last year he addressed a top conference in Shanghai China.

AI, the internet of things and a best-in-class regulatory framework are now high on the government’s agenda, following the successful introduction of the world’s first comprehensive set of blockchain laws last year.

Castille is smelling the coffee and the penny has dropped to lay the foundations for a digital innovation hub. The fly in the ointment is having superlative technical facilities to train a workforce with the right skills. It is a tall order, since millions are needed to train a workforce proficient in AI.

But it is never too late to start. Government recently announced the funding of a scholarship bourse for post-graduate degrees, as well as hosting a lab to encourage the exploration of emerging technologies.

One looks forward with courage to the next Delta Summit this year sponsored by the government with the hope that it will attract tech-evangelists and AI engineers to help us build a local ecosystem. One augurs this fulfils the vision of the prime minister and hallmarks his legacy at a time when he is rumoured to be contemplating his exit from the political stage.

George Mangion

Author: George Mangion
Published on Malta Today 21st March 2019
Get in touch: info@pkfmalta.com | +356 21 493 041

MFSA rebranding: new wine in old wineskins

Posted on by Colette Mangion

Author: George Mangion
Published on Malta Today 6th March 2019

One welcomes the new financial crime compliance plan “Vision 2021” announced by the MFSA. This move did not come a moment too soon. It is essential that the rules of doing business within the global financial system are not only well written but also robustly enforced. Over the two decades that the sector was piloted by Professor Bannister as chairman at MFSA, he saw the financial sector grow from a modest size in 1994, to give birth to a reputable Centre of international business.

 

During Bannister’s watch commentators lament that MFSA’s autonomy from the strings at Castille was paper thin so it comes as no surprise that the International Monetary Fund and other international organisations are now insisting on its operational independence. The board of governors and CEO have always been nominated by the government of the day. The challenges that are facing the incumbent CEO (previously the chairman and CEO of the gaming authority) are significant. The demise of private banks such as Nemea, Sata and Pilatus last year were the fruits of past decisions and we are all too wise -now blaming that supervision was found wanting.

 

One welcomes the latest International Monetary Fund report which has been requested by the government and it gives a very piercing analysis of the factors which attributed to the recent shortcomings in the banking sector. But it compliments the superlative growth in the economy in particular the financial sector. This contributes 11% to the gross value added and also accounts for more than 10% of employment. MFSA as a super regulator employs 320 professionals. This is no small team to oversee approximately 2,300 licensed entities but MFSA envisages the scope for regulation is growing and wishes to recruit another 160 trained staff in two year’s time. In the current shortage of local professional this can only mean enlisting foreign experts. In the wake of Panama Papers revelations, MFSA now wishes to further tighten the screws by clamping down on money laundering and terrorist financing.

 

The new CEO wants to be seen as a Colossus fighting the infidels that penetrated the fragile fortress leaving in their wake a stigma of AML and terrorist financings decoys. He claims that Malta needs to grow responsibly and set standards which are in line or better than those of our peers in Europe. Stoically, he embraces technology and innovation, entering the FinTech space with optimism and preparedness. This is all very grand but it needs a higher subvention. It is a fact that the annual surplus (circa €10milllion) posted by the registry of companies has always helped fund operations at MFSA with the balance repatriated to government. So, why is MFSA contemplating securing the extra funding needed for a transformation to be sourced out of an increase in fees charged to practitioners. MFSA has long stopped financing promotion of the sector, rightly saying it cannot be seen compromising its impartiality.

 

This is commendable, but then the sector has to be actively promoted to compete with other jurisdictions that are constantly fine-tuning their laws and financial concessions to lure blue chip companies. Practitioners, therefore dig deep into their pockets to tour the globe, attend conferences, seminars and give presentations so that the island stands a better chance to compete. The logic to tax practitioners with higher fees may not a good idea. Practitioners cannot be blamed that the regulator is calling for “adequate resources” to preserve the effectiveness and operational independence of the domicile. This extra funding is warranted in a scenario that saw financial institutions constantly changing their business model and Malta’s attempt to harness blockchain and digital currencies.

 

Certainly, a generous tax revenue is collected from the sector and this goes towards the general welfare of the community so now that foreign observers such as IMF and EU have reported weaknesses in the armoury, it goes without saying that Castille needs to put money where its mouth is. Moreover, investment in the latest supervisory technology, business intelligence and knowledge management tools will become mission critical to the success of the MFSA. Last year, no money was spared to host mega Blockchain conferences promoting the island to qualify as FinTech hubs, FinTech strategies, and as a centre of excellence but at the same time Castille shies away from helping local firms who put their shoulder to the grinding wheel.

 

Therefore, it is opportune for PKF Malta in launching The Bit-Pod concept. This is a meeting place for informal discussions among practitioners, engineers and DLT enthusiasts to network and discuss latest topics on the vast subject of this technology. It is a non-profit organisation, as it helps connect entrepreneurs (mainly start-ups) to people, programming engineers, and other resources across the DLT and virtual currencies domain. Whether you are looking to connect, learn, share, or work, The Bit-Pod offers a selection of opportunities to network with other start-ups this may help you scale the slippery slopes of licensing and running an ICO or a virtual wallet. Back to regulation, the fly in the ointment is the need to renovate banking supervision. Again, referring to the Financial Sector Assessment Program on Malta’s financial stability, this found that the banking sector was in good health, but warned that high exposure to property-related loans and rising property prices posed a risk to the country’s financial system.

 

It found that our retail banks face challenges coming from a property and construction boom. It emphasises that “Core domestic banks’ high exposure to property-related loans, together with the rapid house price appreciation, poses a risk,”. It does not come as a surprise, that in the shadow of the disgraced Pilatus bank one expects the IMF to be vigilant and not ignore aspects of alleged money laundering transactions at that bank. Pilatus bank (last audited by KPMG) was the centre of political controversy ever since a series of leaked FIAU intelligence reports flagged evidence of money-laundering and serious compliance shortcomings two years ago.

 

In conclusion, on a positive aspect we note the comment by EU in its latest “Country Report” saying the rally in the economy is exemplary but as can be expected we cannot rest on our laurels. Castille must strive to ensure that its development is sustainable in the long term.

George Mangion

Author: George Mangion
Published on Malta Today 6th March 2019
Get in touch: info@pkfmalta.com | +356 21 493 041

The Evolution of Malta’s Rental Market

Posted on by Colette Mangion

Author: James Camilleri
Published on Malta Chamber 4th March 2019

Contrary to what is being experienced in this decade, in the previous century, rent regulation in Malta was terribly rigid, creating other types of problems. During the Second World War, various legislative enactments were targeted at the dire situations of a population devastated by hardship. However, these pieces of legislation remained in place even after the conflict between nations subsided. This inertia of the lawmaker made relations between landlords and tenants very problematic and handicapped the rental market.

The Maltese population generally leans towards home-ownership, and though this may be influenced by several factors, the lack of adequate regulation of the rental market is bound to be a contributing factor. The present rental market is a knot the Government needs urgently to unravel, and yet previous experience has proved that it is a minefield no legislator can lightly tread through.

The Parliamentary Secretariat for Social Accommodation within the Ministry for the Family, Children’s Rights and Social Solidarity had issued a White Paper Consultation ‘Renting As A Housing Alternative’ from 15th October to 30th November 2018. The amendments being proposed included the establishment of a period of one year as the minimum length of a residential lease and duty of landlords to give a suitable notice period of their intention not to renew a lease. The deposit requested on the signing of lease agreements is another currently unregulated area of the rental market that would benefit from legislative intervention. This, in fact, is an element of property leasing that is causing instances of abuse both from the side of landlords and from tenants.

Revising the rate of rent within a lease period is yet another cause for contention between landlord and tenant, as landlords wish to be able to periodically revise the rate of rent to be close to the market value, whereas tenants are reluctant to see the rate of rent increase. This in turn leads to landlords offering short leases rather than longer ones. It is hoped the proposed registration of lease agreements will have the desired effect of ensuring there is a check on the agreements’ compliance with new regulations, possibly avoiding the risk of tax evasion experienced in the past.

It is the lower income-earning tenants or would-be tenants that are facing the worst cases of strife, for example, by being outbid by groups of eight or more foreigners who are unwittingly capable of sharing an apartment intended for two or three persons. The harsh reality is that people who cannot cope with the recent property market price hikes are being pushed into the dreaded state of homelessness. The White Paper mentioned above envisions the setting up of a department for overlooking the rental market falling under the Housing Authority. In essence, a rental contract would need to be registered with this department, including a form from utility billing company ARMS indicating who the tenants on the contract are. As already mentioned, the deposit at the point of contracting is a possible cause for contention and the White Paper sees this amount being declared along with the said registration. Registration of a rental contract will be the responsibility of the landlord, although a tenant may register the rental contract should the landlord fail to do so.

The changes in social and economic realities being witnessed are creating tensions in the property market that should have been tackled by the legislator many years ago. But it is useless pointing fingers at previous legislatures. The present Government needs to urgently intervene, while keeping in mind the mistakes made by post-war legislators, where over-regulation lead to stifling of the market.

Author: James Camilleri
Junior Legal Assistant, PKF Malta
Published on Malta Chamber on Monday 4th March 2019.