Speaking to Business Today this week, employers’ organisations criticised government’s rent reform bill to various degrees.
GRTU Director-General Vince Farrugia said the bill is “anti-business” and it came at a “very bad time”.
“It will surely lead to the closure of many small businesses who have faithfully served the community in many localities for many generations,” he insisted.
Farrugia said the bill furthered what happened in 1995 and now Malta would have “the most liberal anti-small business commercial rent laws of all the EU Member States”.
“It’s a sad day for SMEs in Malta,” Farrugia told Business Today. “It comes at a time when the European Commission is launching the Small Business Act and DG Enterprise is instigating Member State governments to provide more security and safeguards to SME’s”.
Farrugia explained how in Malta, a substantial number of small businesses had security of tenure under the pre-1995 rent laws, “which were not as prohibitive as recent propaganda made it out to be. Now this is being removed.
“For many small businesses, the removal will be effective as from June 2010 and not as wrongly promised by government in 20 years time. Many small business owners have been badly cheated. They trusted the politicians and they are now abandoned,” he said.
The GRTU Director-General also lambasted the consultation made by the Government on the rent reform process.
“The consultation with GRTU since the publication of the White Paper lasted only half an hour in one single session. The whole process was one grotesque messa in scena,” Farrugia told Business Today.
“Government is hoping that businesses will simply die and be forgotten by the time of the next election. It’s a shame.”
He explained that GRTU did what it could “but with both sides of the political spectrum in Malta keener on supporting the land owner and with many MPs with conflicts of interests as they look more from owners’ point of view then enterprise, the battle to safeguard small business interests was uphill all the way.”
Farrugia explained how the GRTU presented its proposals and was willing to negotiate a decent conclusion that would safeguard business while removing the discriminatory and unfair developments that occurred during the years that the rent laws were in effect.
“But our prime point was a request for statistics: we wanted government first to request business enjoying the safeguards of the old law to come forward and register,” Farrugia said.
Then on the basis of actual facts, the GRTU would have drafted proposals that would have correctly measured the economic and social impact of the new proposals.
“But government was in a hurry. It sought a quick solution that would give the lands department easy revenue. It also wanted to honour the commitments they made to landowners… What’s the use of the EU Commission advising Member States governments to do an impact assessment each time reforms effecting business are introduced?
“We knew from day one that government did not want to listen,” the GRTU chief charged. “The last decent discussions were held with Minister Dolores Cristina who was determined to do things correctly.
“When she was no longer in charge, no one was interested in the consequences, and these will be great, not on a national scale but for the thousand of families that will be badly hurt. In my view there is a ‘who cares’ attitude,” he said.
Asked to elaborate on those GRTU proposals that the Government had accepted in the legislation presented to parliament, Farrugia told Business Today: “The fiscal incentive to owners to encourage them to sell - as this fitted nicely with the drafters’ desires.
“But then government refused the counter-proposal also from us to give a fiscal incentive to tenants in rented commercial properties to encourage them to buy,” he explained.
“There is no statistical evidence to support the proposals. No impact assessment. No incentive to tenants to buy. No form of compensation either to owners of businesses who will not be able to face the new market-based rents or to their employees who will lose their job as a result of no fault of their own or of their employers or to bosses on long-standing contracts that will not be honoured as a result of increased rent costs.”
He explained how a proper survey would have identified all these cases and a proper compensation formula would have been found.
“Our interest was to have a separate law for commercial and residential as exists in most European countries and proper safeguards included, as in the case of the French law, so that small businesses who transform, say, a garage into a business establishment will not find themselves thrown out under some pretence or other not properly thought of in the renting contract,” Farrugia explained.
As things stand now, people wanting to start their own business or wanting to move up to better locations where property choices were limited would be at the complete mercy of land-owners,
“We wanted a pro-business Act from a government that boasts of being the shield of small businesses. Instead we have a land-owners charter,” he said.
“The bill is absolutely contrary to what GRTU has proposed. It is a negation of safeguards GRTU has acquired for small businesses over the decades of its existence.
In contrast to the press conference it held soon after the white paper for the reform was published, the Malta Chamber of Commerce and Enterprise (COC) was also critical of various parts of the bill.
Speaking to Business Today, COC Director-General Kevin J Borg explained that the Chamber, through its Rent Laws Committee, was of the opinion that “the bill does indeed tackle parts of the problem inflicted by the previous legislation but we maintain that it does not give a concrete way forward and may lead to confusion.
“In many instances, the draft bill opens a number of loopholes and several sections of it are open to interpretation and can lead to various ambiguities. Furthermore, the chamber believes that the bill still requires a number of clarifications,” Borg told this newspaper.
Way back in August, the COC said it was assured by the Social Policy Minister that the long-awaited overhaul of the Rent Laws would be enacted into one document “but it was unfortunate to see that references to old laws are still made and that parts of the previous legislation have not been repealed,” Borg explained.
The COC said it believed that where exceptions existed, these should have been listed within the draft law, otherwise the old legislation should have been abrogated.
“As a general principle, the chamber reiterates its position as formulated in its published reaction to the white paper. It is disappointing to note that most of its recommendations were not included in the bill,” Borg told Business Today.
The COC insisted that the state should remain the only carrier of the country’s social burdens. “The subsidisation of minimum rents is the sole responsibility of the State. This onus should not fall on the private property owner as the Bill still indicates,” Borg added.
Within the next few days, the chamber said it would be studying the bill in more detail.
The COC said it hoped to be given an opportunity to discuss it further with the authorities, “as it firmly believes that it does not adequately rectify all the years of injustices”.
Asked for their position about the rent law presented in Parliament, the Malta Federation of Industry (FOI) and the Malta Hotels’ and Restaurants’ Association told Business Today that they were aligning themselves with the Chamber’s position.
The Federation of Industry and the Malta Hotels and Restaurant Association said they subscribed to the Chamber’s position, while the Malta Employers’ Association refused to comment.
All trade unions ignored this newspaper’s reminders to provide their reactions to the reform bill.
