Whether in the context of importing goods from Sicily or the Prime Minister discussing Malta’s strategic objectives, Malta’s thriving logistics industry has been much in the news recently. Alex Borg, a specialist in the field, and managing partner of Support & Supply Management (SSM) Group Ltd, spoke to Piers Allen about developments in the industry, and the importance of the stakeholders taking a unified approach.
The logistics sector is of strategic importance for the continued development of Malta as a regional hub. As discussed in last week’s editorial, although it is easily overlooked, without stunningly complex logistics networks, China, for example, wouldn’t be able to deliver to European consumers the cheap products to which we have become accustomed. Logistics networks are invisible in much the same way that the engine of a car cannot be seen, but without either nothing is going anywhere.
Alex explains that in Malta there are over 5,000 people employed in warehousing, freight and logistics. There are around 10,000 full-time drivers directly employed in the transport industry, with around 8,000-10,000 people employed as drivers for cars, coaches and buses. The Freeport, Alex adds, is one of the best in the region, with good technical systems and highly-trained people. Furthermore, it is being improved, he notes, since they are deepening the harbour to accommodate larger ships. But there are issues with the local infrastructure and Alex points out that having developed a second terminal, the current Freeport lacks warehouse space and is now operating at its limit. And similarly, while the airport has a superb long runway and great facilities, it lacks its own central warehouse.
Addressing these and other issues, Alex suggests that Malta needs to look at the whole logistics industry holistically. “We need a policy statement that includes sea, road, and air freight, and that it maps how we are going to connect these three modes of transport.” He explains that since Malta is “isolated”, it is especially important that we need to be competitive, which means first optimising inbound logistics (including the time it takes to handle documents). Secondly, Malta needs to examine the time taken to move the goods internally from one mode to another (whether air to sea or sea to air). Thirdly, Malta then needs improved facilities to accommodate the goods, along with, finally, an advanced ICT system with which to harmonise the whole process along the supply chain.
Despite the limitations already highlighted, currently there seems to be significant excitement around possibilities for developing Malta’s logistics hub potential. I ask Mr Borg what Malta’s logistics industry is doing to channel that interest into policy. “Through recent years there have been a lot of well-attended conferences focused on how Malta can grow its trade. In particular, I formed part of the logistics and transportation discussion during last year’s EY and Malta Chamber of Commerce conference on ‘Malta – Today and Tomorrow’,” Alex explains.
“The interesting thing was the high attendance at the logistics cluster, so EY, HSBC and SSM Group agreed we should keep on working to see how we can take logistics cooperation in Malta, further,” he went on to add. This early discussion led to a meeting in January of this year, and it was the success of this meeting which prompted EY, HSBC and SSM Group to start discussions about formalising the Logistics Group Malta, as an umbrella group bringing together all of Malta’s existing logistics representatives. The aim of Logistics Group Malta is to bring together the following four Maltese logistics organisations: Malta Association of Airfreight Forwarders; Express Association of Malta; Association of Groupage Operators and Association of Trailer & Truck Operators with the endorsement of the Chartered Institute of Logistics and Transport.
The plan, Alex explains, is then to meet with all the stakeholders to identify the issues they are facing and to draft a coherent policy paper for the logistics sector starting with the needs of the grassroots and then moving upwards. The policy paper is expected to be drafted by October and the aim is then to launch Logistics Group Malta, by next year, as the voice of the industry.
The lack of a coherent approach is a problem according to Alex. “Currently there is a lot of investment on the ground with warehouses throughout Malta, but there is particular demand for a logistics centre which can be used by many tenants. This is an established concept in Europe.” The point is that, as Alex explains, instead of every firm having their own warehousing facilities, they can share a common resource renting out what they need, as and when they need it. For a country like Malta, where land is expensive, and scarce, sharing resources makes more sense than continuing to build new facilities, spread around Malta, that would be underused. Asked where such a shared facility might be located, Alex points out the merits of placing it close to the Malta International Airport.
Malta already has an international profile as a regional logistics hub, and Alex discusses the mechanics of the network and Malta’s particular strengths. “There are a huge number of freight forwarders in Malta and the industry in Malta is well-equipped with a variety of different service providers. Most of these operate in mainland Europe with a network of partners in other countries that allow them to offer specialised services.” The advantage of EU membership, as Alex points out, is that doing business within Europe is comparatively simple since all countries follow EU legislation; however, operating outside the EU is more difficult because of the lack of standardization of regulations.
Alex suggests that the best way to address this is to invest in staff knowledge and training, and to maintain a network of partners. Freight forwarders in Malta need to be highly equipped in terms of both equipment and knowledge. Perhaps because Malta has been a logistics hub for hundreds of years, workers in this sector rely too much on learning-by-doing, he suggests. However, Alex points out that since, “Clients are always looking for what is termed as a high level of response meaning transferring goods with speediness. For this purpose, freight forwarders need to ensure that their staff offer a value-added service.”
Training is important and in the last 10 years, he adds, many freight forwarding firms have trained their staff in-house. Historically, only the executives and sales staff have been sent overseas, or on local professional courses, to understand more about the logistics and supply chain sector. But the bottom line, Alex feels, is that the whole logistics operation needs a high level of training, yet even now there are only two organisations that offer logistics training in Malta: SSM Group and the University of Malta.
Alex firmly believes that the way forward is to find a way to connect Malta’s air freight to its sea freight without adding cost and one means to achieve this would be with a virtual FreeZone. The principle of a FreeZone is that goods are only charged import duty if they leave the physical boundaries of the FreeZone. Anything imported by sea through the FreeZone, and then exported from the same FreeZone avoids duty. However, since an airport is likely to be outside the physical confines of a sea-port connected FreeZone, even if something were to be taken directly from the FreeZone to be exported from the airport, it would still be charged duty. A virtual FreeZone, which connects the Freeport and the airport, would solve this problem.
Looking at the inbound side of logistics, Malta imports everything that it needs for its economy, so inbound logistics are important. Inbound, Malta is part of well-established networks, with a supportive trade and economic policy and good infrastructure, which none-the-less can be improved with more warehouses, as discussed. The areas where development and investment are required are in HR and information communications technology, and while Malta has a good foundation in both, more needs to be done, suggests Alex.
On the outbound side, on the other hand, Malta has limited control, since this is a question of using other international networks and negotiating good deals with other governments and logistics organisations. “Even if you are only talking about putting goods on a trailer and driving it through the EU, you have to follow EU regulations for each country through which you transit, and each country implements these regulations according to its cultural standards,” Alex explains. Which is why HR and ICT are so important since every logistics company needs staff with access to the data they need to make informed decisions, and who are skilled enough to negotiate the best deals.
“Another innovation would be to see the government of Malta and the management of Malta Freeport establish partnerships with other ports in the region, to share resources and to promote each other with the aim of creating more business for all ports,” Alex suggests. He adds that: “We have seen partnerships and collaborations in so many sectors and being situated next to one of the busiest sea lanes in the world, we should collaborate more.”
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How to participate in the TransLog Awards
Applications are open for the first Transport & Logistics Awards, organised with HSBC Bank Malta’s support, to recognise outstanding achievements of transport and logistics companies and individuals operating in these sectors in Malta. These awards will further raise Malta’s profile as a centre for transport and logistics, while being an excellent networking opportunity, not to be missed by active industry members.
The award categories are based on international benchmarks and values to recognise industry excellence in 12 key areas. Interested companies are invited to send an email on: [email protected]. Participation in the awards is free of charge.
The deadline for participation in the first edition of the TransLog Awards is Thursday, 28 August. The awards ceremony will be held during a gala dinner on Friday, 10 October. More information about the TransLog Awards is available at www.translogawards.com or by phoning on 2123 1015.
“TransLog Awards complement our own initiatives to support international trade businesses, such as the Malta Trade for Growth Fund which dedicated €50m towards stimulating international trade. These awards have our full support as they provide a deserved recognition to a vital sector in Malta and in this way HSBC will be supporting the whole Trade and Supply Chain cycle. Having more professional people in logistics means that our customers are better served and as a result encouraged to increase their international trade,” said Mr Michel Cordina, head of Commercial Banking.