INTERVIEW | Tuesday, 16 October 2007
Margarith Lutschg-Emmenegger, FIMBANK President and Vice-President of Competitive Malta, spoke to Charlot Zahra about Malta’s competitiveness and the country’s potential to become a full-fledged financial services centre at par with Luxembourg, the Netherlands and Switzerland
Why was Fimbank set up in 1994 and why did the bank’s management choose Malta as its operating base back then?
 The founders of the bank had decided for Malta due to a few factors, i.e. a good location (bridge between Africa and Europe), English spoken, good labour force and amicable tax laws. In the meantime it has also become an EU member (EU passport) and additional values have been created to make Malta a good location to offer international financial services such as a very professional and approachable regulator.
As a bank specialising in trade finance, how does Fimbank differ from other banks operating in Malta? What are Fimbank’s main areas of operation and where are its branches situated?
FIMBank is a highly specialist bank and its main activities are in international trade while most of the other banks in Malta focus on local/retail business. We have offices Marketing Offices through our 100 per cent subsidiary London Forfaiting Company in Istanbul/Turkey, Moscow/Russia, Sao Paulo/Brazil, New York/USA and Singapore - their Head Office is in London/UK, however, their back office/administration is domiciled in Malta (ISO 9000 certified since 2005) We have furthermore Representative Offices in Dubai and London and Joint Ventures in Egypt, India and Dubai.
What progress had been achieved in the bank’s forfaiting business since Fimbank purchased London Forfaiting in 2003? Can you please explain in layman’s terms what forfaiting involves and its importance in the banking business?
London Forfaiting Company is now a profitable organization, contributing to the groups profit - it has made FIMBank a global organization as can be seen from the above network it enjoys. Forfaiting is important for trade finance as it covers many instruments and activities, but most importantly it is normally a trading activity, i.e. it can add additional value by creating turnover, portfolio management and mitigation of risks for the banking group.
In December 2004, Fimbank acquired a 38.5 per cent share-holding in Indian factoring company Global Trade Finance Private Limited, a company incorporated in Mumbai, India and predominantly engaged in factoring business. How is the group’s Indian venture faring? Why?
The acquisition of 38.5 per cent in Global Trade Finance (GTF) formed part of our strategy to add Factoring to our product range (meanwhile we offer this product also in Dubai, Egypt and Malta) - it outperformed all our expectations. I believe their excellent performance has various reasons, i.e. Factoring is the fastest growing trade finance product in the world, India is one of the fastest growing markets and we have truly an excellent team there offer this product extremely professional.
Earlier this year, you visited China as part of a Maltese trade delegation seeking investment opportunities in this vast country which is fast growing into an economic giant. How do you evaluate the possibility of investing in China? Is the time ripe for investment in financial services there?
I believe it is high time to invest in China, especially for Factoring from our point of view (also in other areas of course) - unfortunately the regulations do not yet allow to offer this factoring product in China in the best environment, i.e. a Joint Venture company but only by departments of Chinese banks which is not optimal so that the Chinese client cannot yet benefit sufficiently from this product and the market is still small. On the mission with the Maltese government we hopefully created awareness with the Chinese government/authorities of this and maybe can influence the opening of this sector for the Chinese economy important but of course also for FIMBank creating a good business opportunity.
Apart from China, are there any other countries in which Fimbank would like to invest in the near future? Which are these countries? What type of investment is being envisaged by Fimbank in these countries?
You might have seen our announcement regarding the Memorandum of Understanding signed with Banco Latinoamericano de Exportaciones, SA (BLADEX) to promote Factoring and Forfaiting (potentially Leasing) in Latin America jointly. Bladex is a supranational similar like the IFC and initially investments in Brazil, Mexico and Argentina are planned.
Which are the major clients of Fimbank – in view of the bank’s global reach, are the majority of your main clients local institutions or overseas institutions? Can you give a breakdown of clients by country?
I cannot really provide such detailed information but our main client base is international - we have a few Maltese clients but they are in the minority. We are a Maltese bank but globally active.
In view of the ever-increasing emergence of Islamic investors from the Middle East and the Arabian Gulf, is Islamic banking on Fimbank’s agenda? If yes, what concrete measures have you taken to cater for these investors?
We are not (yet) offering Islamic banking but we will certainly have to look into it as it is becoming an increasingly important subject.
Since arriving in Malta, how have you seen Malta’s financial services develop? Do you see a potential for turning the island into a centre of financial services, and what is required to achieve this in terms of a ‘centre of excellence’ for financial services?
I think the financial service sector is one of the best developed areas in Malta and has seen substantial growth together with IT. Yes, I do think that Malta could become a very important financial center competing with Luxembourg, The Netherlands and Switzerland etc. Good vision and marketing for the already excellent tax and regulatory system is needed but of course improvement of infrastructure and environmental issues need addressing too.
In your view, will a stronger euro benefit Malta, or does it spell bad times ahead for a dollar-export economy? Why? What measures can be taken to effectively address this problem?
I do not think that a stronger Euro will affect Malta substantially - we are in competition with other European countries with the same currency substantially so this should be a neutral effect.
Last February you were appointed vice-president of the CompetitiveMalta foundation. Why was CompetitiveMalta set up and what is its role in promoting national competitiveness? What concrete initiatives is CompetitiveMalta taking in order to address this issue?
CompetitiveMalta is a non-profit organization established by the private industry and non-political. It aims to make Malta more competitive. Please visit our website www.CompetitiveMalta.com for more details.
In its report about Malta, the International Monetary Fund (IMF) was critical of the way the country lags behind other EU countries in its growth rates and competitiveness, warning that Malta might slip further behind. Do you agree with this assessment or not? Why? In your view, what issues need to be addressed in order for Malta to regain its competitiveness?
Again, if you look at CompetitiveMalta’s website you will find some of our ideas and proposals. Malta does need to improve on many things, infrastructure, environment, law enforcement but most importantly it needs to create a Vision applying to everyone and all. The World Economy Forum will soon bring out the results for Competitiveness amongst approx. 100 countries and we will have the chance to again compare ourselves with other countries and find out where we are strong and where we are weak. This will again be a good indicator what needs to be addressed - but of course action is needed not only by the government and the opposition but by everyone - and this message in my opinion the government needs to bring across.
The IMF’s report about Malta also noted “with concern the concentration risks as demonstrated by the increased exposure of local banks to the real estate market”, recommending the introduction of incentives to the banks to bolster provision. What is your view about this issue? Are local banks overexposed to the real estate market or not? Why? How can this problem be addressed effectively by the banks?
The real estate market in Malta is very strong and represents an important part of the economy. Given that Malta is small and beautiful, I think that real estate can maintain value reasonably well but needs watching for over heating for the wrong reasons and the wrong projects. Local banks focusing only on local business will have a danger to have concentration in this very sector, diversification in product and looking abroad is the only answer I can come up with but clearly it is not my role to give advice to the other banks.
Do you agree with those who maintain that wages have to be kept quite low in order to maintain the country’s competitiveness? Aren’t wages in Malta already relatively low when compared with the rest of the EU?
Wages are very competitive in Malta. I believe, Malta should not compete on pricing but on value added going forward and much more concentrate on offering niche businesses which create high value added. To be the cheapest is not an option for Malta, it is too small and cannot compete ever with the China’s of this world. Important is that if you want to charge you have to give the service and that needs addressing urgently in Malta - this applies of course substantially to the tourist industry but of course it also applies to financial services and other areas. If a financial institution adds value by reducing risks for the client or increases business volumes a company can handle through the offering of, for example of forfaiting and factoring (both products were launched the first time in Malta by FIMBank) then it can charge adequately and both the bank and the customer will be better off - and the country will benefit too. It comes down again to having the right Vision for Malta - high value, high quality - smart - NOT huge numbers and cheap with poor service and quality!
During a meeting that a Competitive Malta delegation had with Prime Minister Lawrence Gonzi on 4 September which discussed the Nationalist Government’s vision for 2015, you were quoted as telling the Prime Minister: “We are simply not talking the same language” and “We need very clearly defined goals. So far it’s a little vague.” Why, in your view, is the Government’s vision for 2015 ‘a little vague’?
A vision must be understood by everybody - it needs therefore to be short and precise. At present the points of the 2015 vision while good are in my opinion too many and too exhaustive to be embraced by the man in the street. It is also not yet a very clear message with regard to the high value - high quality vision - but I have to say that it is already a great improvement that the Government has given a 2015 Vision - this can now be fine tuned and improved - and most importantly communicated clearly and strongly with focus.
[email protected] |
