What Tourism Really Needs

The Malta Independent on Sunday



According to MHRA what tourism really needs is EU membership. I spent 11 years working closely in the tourism industry and for nearly two years between 1995 ` 1997 I was also elected as Vice-President of MHRA. So my views on the matter are not merely text bookish.

What tourism really needs is a co-ordinated policy for product improvement, a strategic market plan to address our product to those niches with high value-added where we can really compete, and a national plan for raising the awareness of the importance of tourism for economic well-being even among those not directly involved in the industry but who still leave their impression on it.

No EU membership or partnership is any panacea for tourism.` But if anything EU membership brings far more real disadvantages than advantages for its development.

`What tourism really needs is a co-ordinated policy for product improvement, a strategic market plan to address our product to those niches with high value-added where we can really compete` Take just two specific matters will make us immediately less competitive once we become EU members. Once we form part of the single EU market Tour Operator from EU countries selling Malta holiday packages will have to charge VAT on their profit margin.` Presently they don`t do so because the travel is to Malta as a destination point outside the single market.` This measure on its will raise the price of a Malta holiday by about 2% which if not added to the consumer price (quite difficult in these soft market days) will have to come out of the local operators` margin.

Then consider the privileges tourist visitors currently enjoy for duty free importation into Malta and back into their own country.` Once Malta forms part of the single market these privileges will fall away making our product less competitive than it presently is.

For the MHRA this immediate loss of competitiveness means nothing. It seems that the brainwashing has worked so much on our tourism chiefs that they enjoy the pain of complying with EU bureaucracy.

Their survey argues that this pain is justified to avoid a bigger pain which could possibly come if EU countries would impose discriminatory airport taxes for travelling out of the EU. This is speculation to the extreme. The pressures inside the EU would point more to the adoption of VAT on internal travelling as part of a single-market rather to make discriminatory taxes against travel to non-EU destinations.

`It seems that the brainwashing has worked so much on our tourism chiefs that they enjoy the pain of complying with EU bureaucracy.` This is quite understandable. The single market is domestic territory and the EU is free to adopt taxation on domestic consumption as it deems proper. Imposing discriminatory taxes for travelling to outside EU destinations would immediately bring retaliatory action from such destinations, including the US, who source substantial tourist business to EU destinations.

Why did the MHRA not build its study on the scenario of inclusion of VAT on single-market travelling` Why did the MHRA not consider that under partnership our government could compensate such disadvantages by compensatory reductions in the applicable VAT rate`

And by what stretch of imagination has MHRA concluded that beyond the temporary subsidies financed by our taxes (including their own taxes) food cost will not rise under EU rules`

What tourism really needs is apolitical organisations who work in the interest of the industry like the MHRA used to do when I was vice-president and finally convinced one and all that a VAT rate beyond 5% on the hotel content would damage the industry.

Tourism, potentially the mainstay of our economy, is no longer generating the growth we desperately need. And this in spite of substantial Maltese private sector investment in top notch hotel products.

While industry chiefs pour extravagant millions into hotel products to make them real five star quality, the government obsessed with the EU project, keeps the country at large at a two star rating with decadent environmental problems and lack of complimentary products outside our hotel stock. Government keeps ignoring the cultural and heritage content which could make our tourism product a true attraction differentiating from that of our competitors and permitting much better margins.



`While industry chiefs pour extravagant millions into hotel products to make them real five star quality, the government obsessed with the EU project, keeps the country at large at a two star rating with decadent environmental problems and lack of complimentary products outside our hotel stock.` Differentiation means we can only compete effectively by being different. If we are just like the rest our economies of scale disadvantages would throw us out of the game. Flexibility will enable us to move quickly to grasp as they arise, opportunities thrown up by our policy of differentiation.`

Reflection would easily lead to the conclusion that flexibility and differentiation are the exact anti-thesis of EU membership that is built on principle of uniform application of common rules and policies.`

A partnership arrangement would on the other permit maximum use of differentiation and, flexibility as the uniformity of application rule would not apply. The EU should be much more accommodating in meeting our needs within a partnership model than they can ever be within membership. The problem of precedent is an obstacle to negotiate concessions in the membership model which will not arise in similar strong terms in the special relationship model.

There remain two points which I can presume pro-membership readers would be quizzing me about at this stage. Why do I take it for granted that a partnership model is possible when so many visiting EU dignitaries make it a point to stress that we really have no alternative to membership` Secondly why should I be optimistic that Malta will find the internal discipline to negotiate a good special relationship package and impose on ourselves the desired level of discipline which membership would force upon us by compulsion`

Malta`s membership is good for the EU. The loss of our ability to leverage the geo-strategic location is their gain.` So the urgency for us to join is more from their side. It`s up to us not to let ourselves be rushed into an irreversible position without exploring all alternatives.` The argument that we will miss generous funding if we do not join in 2004 is now dead and buried.

Like heaven, the EU can wait.



Regarding our ability to negotiate a better deal outside membership I believe it` because with an electoral mandate to seek such a relationship, the EU will not be able to force membership upon us and would be more than willing to make a reasonable deal with Malta as we are too important to be disregarded. Obviously nobody will tell us so explicitly but unless we know our strengths and weaknesses we can never negotiate intelligently.` Hoteliers should known it.