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Parliamentary Secretary Edwin Vassallo says small business is the government’s fuse box. It’s also the main influence on his European vision.
Edwin Vassallo plays on the party’s initials by referring to his party as il-Partit tan-Negozjanti, the businessmen’s party. He sees no contradiction between being a popular party and a businessmen’s party as he firmly believes that Malta is fundamentally a nation of businessmen where everyone has a stake in a range of business pursuits ranging from property dealing to private tuition – he could be right, at least 90% of all businesses are small and medium enterprises, like Vassallo himself, whose Mosta clothing outlet is called Best And Less.
 Yet the outspoken parliamentary secretary sees a new threat to his party’s pro-business credentials. And the threat comes from over-zealous bureaucrats blindly following directives coming from Brussels.
Addressing a conference entitled Greening The Economy, Vassallo, sitting alongside Environment Minister George Pullicino and the parliamentary secretary responsible for finance Tonio Fenech, Vassallo did not have much to say on how small businesses can green their act but he did not mince his words in saying that when transposing EU Directives, Malta should not seek to be holier than the Pope, insisting that technocrats working in authorities like the Malta Environment and Planning Authority, whose job is to transpose EU directives, should understand the realties of the local market.
“After two years in the European Union we should have learned that we are not expected to copy word by word from EU directives. We can still reach the goals set by the directives without putting an extra burden on small and medium size enterprises.”
According to Vassallo it’s time for a stock-take of the situation and reflect whether we have learned the lessons. “We must make sure that those who are involved in the technical work also reflect the government’s commitment to promote small businesses.”
But is the government succeeding?
“We cannot simply succeed by imposing our will. It’s a matter of logical persuasion.”
Vassallo frankly says that he is very critical towards a many of EU directives affecting small businessmen in matters ranging from lifts to need of having an antechamber next to a toilet.
“Sometimes when these directives are drawn up, those drafting lack any awareness on the impact they have on the ground.”
Yet all is not lost for businessmen as these directives can still be transposed in a way that has a minimal impact on them. Vassallo insists that he is serving a role in the government by alerting it on any directive, which has a negative impact on businesses.
“The secretariat for small business is the government’s fuse box. When in danger we cut the circuit. We are in constant contact with business and when we anticipate a negative impact from these directives we can alert the technocrats, telling them, let’s find another way through which we can reach the goals envisioned by the directives.”
Still, before the EU referendum the PN had promised that these directives would improve the quality of life by setting up standards protecting the consumer and the environment. Vassallo might be taking a cue from his family business’s name by expecting to get the best deal for business by having less intrusion from European Union.
But he insists the Maltese government is not unique in this as all European countries transpose EU directives according to their circumstances.
“One cannot compare business culture in Germany with that in Greece and Malta. The easiest way when transcribing directives is to be holier than the Pope but we should be more entrepreneurial than that.”
But won’t we incur the risk of paying fines for infringements?
“Blind copying of directives might be the best way to avoid the risks of infringement procedures but this approach is not enough.”
Vassallo isn’t satisfied by sheer consultation, either. “We seek the direct involvement of those affected by the directives when transposing them to Maltese realities. When we gave our assistance to the Malta Standards Authority by engaging small businesses in the process, we had a greater success in implementing EU directives.”
Despite having his misgivings about the way some EU directives are implemented, Vassallo denies that he is a eurosceptic. “The European Union has its own charter for small businesses. Most EU Directives include clauses which allow more flexibility when dealing with these businesses.”
But bureaucrats working in the various authorities do not show the same flexibility. According to the parliamentary secretary most problems occur at a more grassroots level. Referring to the Health Department, he says that while the management understands the situation, overzealous enforcement officers show less understanding.
“We have learnt that convincing a manager is not enough. Convincing the 40 enforcement officers who work in the same department is more difficult. Sometimes some enforcement officers are more zealous than others.”
In the uphill struggle against bureaucracy, Vassallo claims a number of successes. For example Maltese boats like the luzzu and the kajjik have been exempted from a directive requiring a CE certificate for any boat build in Malta. “Together with the Malta Standards Authority we have found a way of exempting traditional Maltese boats from this directive. We simply followed practices in other EU countries which have also found a way to protect their own traditional boats.”
He also contends that consultation with stakeholders has increased since Prime Minister Lawrence Gonzi had decided to ask for an impact assessment to accompany every proposed legal notice which is presented to Cabinet. “Some legal notices have been withheld due to this procedure. Through this procedure this could have increased bureaucracy but this is a positive form of bureaucracy.”
Recently the government has postponed a legal notice aimed at setting up a mandatory deposit scheme for plastic bottles and beverage scheme. The aim of such of the scheme is to ensure that importers and producers reach EU directive targets on packaging waste recovery.
Vassallo claims he has no knowledge of the proposed legal notice but he is adamantly opposed to any scheme requiring retail shops to give deposits to customers returning packaging waste. The Chamber of SMEs (GRTU) has objected to the setting-up of a deposit scheme for plastic bottles and beverage cans.
“I do not agree with any system which allows the deposit of any form of waste at the retailer. We cannot create systems through which envisage incentives for big importers and producers while small shops end up taking the burden by becoming a skip.”
While objecting to the reform Vassallo insists that he is not using his veto. “I am not saying that because I disagree, this system will not be introduced. But as far as I am aware, things will not be proceeding in this direction. Surely if I am asked for my opinion I will be very clear; I disagree that small shops are turned into refuse collection sites.”
Although the parliamentary secretary opposes price fixing in general he favours controls in certain sectors. “I agree with price fixing for necessary items like water when sold in particular areas like beaches where competition is limited to a few establishments. This is not a free market situation. Therefore in these circumstances one it is acceptable to have fixed prices.”
In the past years, whenever a new idea was successful, other businessmen simply followed. One of the latest crazes was the opening of wine shops in different localities. “We cannot change this mentality. It happens all over the world. There is always a space for small businesses. The market in Malta has grown and so has the rotation of business as new shops open and other close. This is a natural cycle.”
But does this not also reflect a lack of innovative ideas? “The fact that wine bars are opening in Birgu is itself an innovation as new business is penetrating a new place. “
Another craze was the mushrooming of adult clubs where scantily dressed Eastern European girls dance and offer lap dances to clients. Vassallo disagrees with this business trend. “This type of business is not acceptable for me because it is not regulated by any legislation. Perhaps they have found a loophole but I frankly think that Malta does not need this sort of business.”
For the past years businessmen have complained that the economy is shrinking. But according to Vassallo this is not the case. The problem according to the parliamentary secretary is fragmentation. He insists that overall business activity has expanded to the extent that every citizen has some form of business interest.
“If we have 400,000 persons, we have 400,000 self-employed as everyone is to a certain extent engaged in some form in business. Everyone at one time receives a commission on property or offers some sort of service. In this country we have too much commercial activity and not a lack of it.”
Still if one were to believe the tax returns of most businessmen, one cannot be very optimistic on their prospects. Only 48 per cent of self-employed persons declare more than Lm4,200. Are businessmen living in poverty or is this a sign that most of them do not reveal their earnings?
Edwin Vassallo thinks twice before commenting. “With the fragmentation of business, profits are decreasing. In any business one has a constant flow of the same sum of money from which one gets a return for living expenses. With the exception of those who own or deal in property very few businesses, earn thousands of liri.”
Edwin Vassallo has no difficulty in declaring his own earnings from his “best and less” retail outlet in Mosta. “Today I make a net profit of Lm5,000 to Lm7,000 a year today. I can easily make Lm12,000 from my business if I could stay in the shop myself. But since becoming parliamentary secretary I had to employ someone to take my role.”
Edwin Vassallo’s wife Caroline is also involved in the family business. She has also benefited from a free trip to Emilia-Romagna as part of an EU funded trip open to Maltese fashion shop owners, which attracted great criticism from the Labour press. Vassallo even presented a commemorative plaque to his wife and the other 14 participants.
He admits that he was fully aware that his wife was chosen for the trip. According to the parliamentary secretary it was very difficult to find 20 shop owners to participate in this visit and his wife was one of the few who had accepted. “My wife is involved in the family business and she had every right to participate as any other person engaged in business. Had I been a justice minister, can’t my wife practice as a lawyer? Can’t the minister for education send his kids to a government school or the university?”
Still one would have expected a parliamentary secretary to exercise more caution and refrain from choosing his own wife as a participant in this EU funded project. “Next time I will be more cautious… Maybe I did not understand the implications. But still I have no remorse on this episode, as I have not taken any advantage over others. We are a family business like any other and my wife has a right to benefit from these opportunities. For example I have encouraged my wife to participate in a course organised by the Edward Debono Foundation.”
Edwin Vassallo is also taking the brunt for the length of time taken to embellish the main square of the locality, even if he is not directly responsible for the project. “The Mosta project does not simply entail changing the pavement. We had to change the road configuration, which meant changing electricity cables and water culverts. An overall like this requires time. The contractor involved also worked at slow pace.”
But Vassallo promises that the project is now nearing conclusion.
The next challenge businessmen will face is the euro changeover. In countries like Italy, the introduction of the euro was accompanied by rising prices as businessmen marked up their prices.
“I am convinced that we can make a social pact with businessmen to the effect that no price increases take place. There is no correlation between adopting the Euro and prices. What happened in Italy was a consequence of changing a weak currency, which had denomination of thousands of liri in to a stronger one. In Germany this did not happen.”
Many businesses have lamented from the decline in tourism. But Vassallo acknowledges that everyone, including retailers share the blame. Have businessmen been poor brand managers of the Maltese product?
“We have to instil a greater sense of responsibility in everyone. Fundamentally branding is an issue of responsibility. If everyone is responsible we will succeed. If not we will all go down the drain.”
But Vassallo sees a silver lining in the tourism crisis. “This is a learning experience through which we can reflect on past mistakes. When tourism numbers were increasing everyone took tourism for granted and everyone acted irresponsibly by earning a bit more than what was due. Now we should realise that we cannot over charge tourists or slacken on standards. Everyone rendering a service has some soul searching to make.”
Over the past years the self-employed category has had a fundamental role in swinging the electoral pendulum. In 1996, following the introduction of VAT, the MLP had made inroads among this category. With the current wave of disgruntlement will this category shift back to Labour?
Vassallo admits that much self-employed who have lost their trust in both parties. But rather than a shift to Labour he detects a new mood among business circles. “Today businessmen are thinking that a change in government will not affect them but this is not the case.”
Vassallo insists that an ideological chasm still exists between the two parties. “As a leftist party the MLP believes in government intervention. It is still proposes setting up a new Sea Malta run by the government. On the contrary the PN favours less government intervention and more commerce. The PN is the Partit tan-Negozjanti – the businessmen’s party. Under the PN business has always flourished. On the other hand the MLP is still a socialist party which believes in controls.”
Yet state intervention is not the sole prerogative of the MLP. The PN also intervened in the economy by introducing fiscal burdens on business. Vassallo says fiscal mechanisms do not amount to state intervention. “Our vision is to create the right climate for business to flourish. When the PN is in government businessmen are confident enough to challenge its policies because they have high expectations.”
But according to Vassallo during the 1996-1998 Labour interlude businessmen were more subdued. “When the MLP was in government, they simply said ‘what can you expect from a socialist government?’ This resulted in a climate of resignation.”
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