Last year's visit by Prime Minister Muscat to China saw the signing of a Memorandum of Undertaking. This was a renewal of a previous one signed five years ago and incorporates the wishes of China in its unique policy to trade and negotiate more business with other countries.
The historical trade agreement was signed in Shanghai, a city that has rapidly developed into a world financial centre and now boasts the largest container port in Asia.
Malta and China agreed to strengthen bilateral cooperation in both banking and insurance, and the MoU encourages Chinese financial institutions, namely banks, insurance companies and companies operating in the Fintech sector, to establish offices in Malta. Given the recent closure of three small banks in Malta, there has never been a better time to strengthen our banking platform.
Such expansion in the banking sector by Chinese investors has already been functioning successfully in both Ireland and Luxembourg. The Prime Minister addressed an audience of politicians, investors and the leaders of multi-national and high-profile companies such as Jack Yun Ma, chairman of the Alibaba Group and Microsoft co-founder Bill Gates.
Mr Muscat said that Malta is the first country in the world with legislation to regulate blockchain. He referred to artificial intelligence and the fact that new technologies will change the nature of the labour market, even in Malta, as from next year robots will be assisting Maltese doctors and surgeons during surgery on Maltese patients.
One may wish to reflect on how Malta, being the smallest nation in the EU, can ever stand up to sign such an ambitious trade agreement with China. This comes at an opportune time, with China expeditiously building its own version of Silicon Valley in Shenzhen, located near the Pearl River delta. At this technical hub, China is pouring millions into luring talented people to team up as start-ups, aided by venture capital and subsidised laboratories looking into cutting-edge robotics, AI and related technologies.
Be that as it may, Muscat proudly announced his country's pioneering task to regulate Blockchain development and, later on, focusing on exoteric matters related to A.I. He said: "There are problems and great challenges in such a development. Malta is proposing regulations and regularisation and, as a country, we will have a framework on this." The Economist published an interesting article about China's relentless expansion in trade and manufacturing abilities.
China's policy over the last few centuries helped establish the Silk Road, a network of trade routes that linked China to Central Asia and the Arab world. The name came from one of China's most important exports - silk. In 2013, China's president, Xi Jinping, proposed the establishment of a modern equivalent, creating a network of railways, roads, pipelines and utility grids that would link China and Central Asia, Western Asia, and parts of Southern Asia.
This initiative, named as 'One Belt and One Road (OBOR)', is comprised of more than physical connections. It aims to create the world's largest platform for economic cooperation, including policy coordination, trade and financing collaboration and social and cultural co-operation.
To revive trade, President Xi Jinping allocated a massive sum of $900 billion to fund a global initiative and one hopes that this treasure chest will have a positive multi-player effect in a number of countries. This begs the question of how can consultants in Malta stand to gain in this Chinese initiative? The potential for professional services available to hundreds of new China companies is exciting.
To exploit this opportunity, PKF International has invited a number of its offices to meetings in Duisburg (Germany) at the offices of PKF Fasselt Schlage to discuss strategy with their Chinese counterparts. These meetings will be inviting Chinese investors to two-day conferences in Beijing held annually to discuss business potential with consultants from various PKF offices.
A welcome addition to a growing list of PKF offices in Hong Kong, Beijing and Shanghai is ZG. At the Duisburg meeting, Mr Gengchun Yao, Chairman of ZG, expressed his satisfaction that the organisation of a China desk at each PKF office will contribute towards a successful implementation of OBOR. In his opinion, the China desk at each of the participating firms underpin a unity of purpose. As stated earlier, China is also very active in the research and development field. This is an extension of the OBOR policy as it plans to export expertise in a number of unique products and services to face competition in the West.
Can Malta interest Chinese investment to set up an extension of their R & D initiative into Europe following the renewal of the MOU signed in Shanghai? This is not a self-centred pipe dream. Just consider how Malta attracted substantial investment through Shanghai Electric to convert the ageing Delimara power station to run on modern technology using LNG. Another unique example of OBOR put into action is China's Ningbo Shipping Exchange which is collaborating with the Baltic Exchange on a container index of rates between China and the Middle East, the Mediterranean, and Europe.
The latest news is that tenders will be issued for studies concerning the excavation of a 13 kilometre long sub-sea Gozo Tunnel. This is rumoured to be broadly linked to an island-wide land reclamation policy. The resource of a million tons of debris so excavated will provide the building material for extending man-made islands in strategic places. Such reclamation attempts were frequent in the past but now the need for more spatial living space is becoming more pressing.
Naturally, such projects need to be self-financing: they will be sustainable if they succeed in attracting inward investment.
In conclusion, can our country, albeit small and lacking indigenous materials, rise to the occasion and this year surf gloriously over the tide to seize this opportunity? Boldly embarking on this ambitious roadmap may be the swan song of Muscat who, it is rumoured, will not be contesting the next election. Before he departs, he can bequeath the golden legacy of land reclamation. Party apologists say it will shine a light to guide us along a journey at the end of which we can underpin GDP growth and improve our competitiveness levels. Perhaps, in this way, Muscat can grasp the opportunities that the Silk roadmap is offering.
A prosperous New Year to all readers.
George M. Mangion
George Mangion is a senior partner of an audit and consultancy firm, and has over twenty-five years' experience in accounting, taxation, financial and consultancy services. His efforts have seen that PKF Malta has been instrumental in establishing many companies in Malta and has placed PKF in the forefront as professional financial service providers on the Island.