Selling the brand

This article was published in The Malta Independent on Sunday - 03 11 2013

_______________________________________________________________________________

Successful businesses control strong brands.   The brand value, although not found anywhere on the balance sheet or financial statements, is along with technology and intellectual property rights, the most treasured corporate asset.

Just see what length corporations go to promote their brands, to enhance their appeal and protect their value from attacks by official competitors and counterfeiters.

According to a survey conducted by Brand Finance the following is the table of the most valuable ten global brands:

Ranking 2013	Ranking 2012	Brand	Brand Value Estimate in millions USD
1	1	Apple	87,304
2	6	Samsung	58,771
3	2	Google	52,132
4	3	Microsoft	45,535
5	5	Walmart	42,303
6	4	IBM	37,721
7	7	General Electric – GE	37,161
8	10	Amazon	36,788
9	9	Coca Cola	34,205
10	12	Verizon	30,729

In 2006 Coca Cola was the top brand and Apple, Samsung and Google, now the top three global brands, were not even in the top ten league.  Nokia was the 6^th most valuable global brand back in 2006 whereas in 2013 it had to be rescued through a take-over by Microsoft.

Brands matter!  If the Apple brand is estimated to have a value of more than USD 87 billion which is not on its balances sheet,  that amounts to some 20% of its market capitalisation and its value has to be nurtured and protected.   Nokia slept on its laurels and did not smell the challenge as Apple launched its first I-phone in 2007.

Brand building is a very long process demanding timely investments, research and development in quality products which not only meets but anticipates client needs, and huge investments in aura building through promotion and advertising which make clients proud of carrying the product or consuming the service even if they have to pay premium prices for it.   It is the reason why yuppies want to be seen carrying an I-phone in one hand and a Starbucks cup in the other as they enter their hedge fund offices with a Luis Vuitton handbag/man-bag hanging from their shoulders.

Malta needs to invest in its brand.   It will help us attract more and better quality tourism.  It will put us more frequently on the shortlist of investors considering where to place their next project. It will help us compete to attract financial services that presently restrict their functions to London, Luxembourg and Dublin even though we have the elements with which to compete, bar the track record.

The on-going controversy about government’s proposal to launch of an Individual Investor Programme has to be considered in the context of whether it helps or hinders the building of the Malta brand.   Government is proposing to offer citizenship to a very restricted international clientele who pass strict checks on their suitability for citizenship and who are prepared to pay nearly one million dollars for acquiring Malta citizenship for their own and their immediate family.

Government is leveraging our soft assets as good housekeepers should.   Every country tries to make the most of the resources it is endowed with.   Oil countries build their oil industry, technology countries build brands like Apple and Google which were mere garage operations a couple of decades ago.   Switzerland built its successful economy on financial services and pharmaceuticals in the context of a stable neutral country in the heart of Europe.  So there is nothing untoward in government’s plan to leverage our asset as a peaceful and stable location to generate revenues which can then be used for further development.

The Opposition is being highly critical of the Programme; so critical that one has to make an effort to understand whether they are against it as a matter of principle and should not be launched whatever the conditions, or whether they agree with the principle of drawing economic value from citizenship awards but are not agreeing with the proposed specific mechanisms of government’s scheme.

Assuming that in spite of pronouncements indicating the contrary, the Opposition is not against the scheme as a matter of principle, then one finds three major objections that have been raised by Opposition members, at least as I understand their criticism:

1.       That the Scheme as proposed renders Malta as a disreputable tax haven attracting shady characters to launder their ill-gotten riches through Malta’s brand.

2.       That the Scheme has no conditions regarding minimum residency and clients can acquire Malta citizenship without any obligations to live here.

3.       That the scheme bears no conditions to make other investments in Malta beyond the payments necessary for the acquisition of citizenship.

The government would do well to open up further consultations with the Oppositions to re-assure that the first objection is based on misplaced fears and that the due diligence process would be robust and would help to build rather than devalue the Malta brand.

As to the second and third objection, whilst desirable, such limitations would exclude a large swathe of prospective and desirable clients from considering Malta citizenship.   The typical  applicant would be a successful and fully law-abiding entrepreneur in a rather unstable country, or in a country whose stability is being threatened by exogenous or indigenous events, who plans to continue his business in his native country, but requires an insurance policy to have a place they can still call home in case the perceived threats materialise.

If the Opposition is genuine in its objections there should be no major difficulty in government giving the necessary assurances to ensure that they back the Programme or at least do not object to it.    However there is enough reason to conclude that the Opposition’s objections are not based on  genuine reasons; that their objections are mostly because they cannot accept seeing government exploiting an opportunity which they did not smell and are uncomfortable seeing government acquiring financial resources which would permit it to deliver on its electoral promises.

This is  a fair observation considering that the Leader of Opposition made a statement in the House last Wednesday which is shocking and which attacks the very foundations of our democracy.   He is reported to have stated in parliament that “a future PN government would review the citizenship scheme being introduced by government and may even withdraw citizenship awarded to foreigners”.

This is a scorch earth policy at its best.   It is the style of pseudo- democracy which pays homage to the Tea Party in the US Congress that the minority view has to prevail on the will of the majority even if it means bringing the country to a standstill.   It is absolutely no way to expect to gain genuine consultations from the majority.

When in government the PN will have all the power to stop or change any Programme introduced by its predecessor.   What it does not have a right to do is to disown any obligations properly contracted by the Government of Malta.  Just imagine what would happen if the present Labour government disowns any contract signed by the last PN government, including the BWSC contract, no matter how much they disagree with it.

Irrespective of whether a future PN government would have any constitutional right to withdraw citizenship without reason as laid out by law, it is very damaging to the Malta brand for such loose talk to be made by the Opposition Leader in parliament as it creates instability and seeks to de facto impose the minority view on the majority.     It is irresponsible loose talk that really makes us look like a banana republic.