A survey of family companies in Malta carried out recently by PricewaterhouseCoopers, revealed that as many as 60 per cent of respondents said that they are looking critically at strategic issues and that these companies are seeing their traditional comfort zones being slowly eroded, the parliamentary secretary in the Finance Ministry, Tonio Fenech said yesterday.
He said that it was clear that companies had to adapt and modernise their operations if they were to make headway in an ever-changing market environment.
The parliamentary secretary was addressing a seminar on the theme “Encouraging companies to go public”, organised by the Malta Stock Exchange yesterday.
The vast majority of local companies, he said, are small and family-owned and the path leading to the transformation of these companies from a private to a public setup – the theme of the seminar – often seemed hard and fraught with danger.
“Introducing outside shareholders and directors on the board who do not form part of the family group, is often regarded with a certain degree of suspicion while the costs and effort involved in upgrading the management and operational structures to the levels required in a publicly traded company may appear too onerous. In short, the local culture of setting up public companies is very fragile, and this, of course, impacts negatively on the activities of the capital market in Malta,” Mr Fenech said.
However, he added, it was clear that Maltese companies were facing new and more complex challenges brought about by changing patterns of consumer demand, new regulations, higher standards and strong competition. This process is inevitably pushing up the cost base of our companies. At the same time, liberalisation, new technologies and better transportation facilities have made it easier for new entrants to compete. These changes are prompting companies to make fundamental decisions, he added.
Mr Fenech said the Malta Stock Exchange was gearing to provide a solution to these competitive challenges.
“It is taking a critical look at the listing process in order to make it more efficient in terms of both time and costs. It is also working on new rules based on those of the hugely successful AIM market in London and updating its regulatory and technological infrastructure to increase connectivity with EU markets.
“It is making efforts to widen the range of financial instruments available to investors by taking advantage of new legislation relating to securitisation and pension schemes. In short, the Exchange is working hard to become a more effective instrument in the development process of the country.
He said the Exchange had prepared a detailed strategy plan whose overriding objective is to set up a group structure designed to create a flexible organisation in terms of the transparent segregation of the key activities of the Exchange.
“The other main objective of restructuring the Exchange as a group is to create the appropriate platform for the introduction of a degree of privatisation in the Exchange. The flexibility permitted by this setup would, in fact, provide the government with the opportunity of reducing its involvement in varying degrees at the different levels of the group, and at the same time, choosing the most appropriate partners in relation to the specific activities concerned.”