Occasionally we read advice that is so good, we have to share it. In this tourism
Extracted from Chris Lee & Partners Ltd. (Financial Advisors) newsletter:
Taking Stock 18 July 2019
Any business, indeed, any country, that does not carefully consider “right sizing” risks failure caused by inappropriate, unsustainable growth.
Ask the former CEO of Fletchers, Hugh Fletcher. If he has yet dismounted from his high, ivory horse he would today recognise the havoc created by Fletchers when under his leadership Fletchers sought diversity and scale without heed to its limited capital base; financial capital, human capital and intellectual capital.
Fletchers all but collapsed through misguided pursuit of growth, motivated by delusions of global grandeur.
Perhaps Fonterra would admit to the same failings as might Brierley Investments, Equiticorp and most of the childishly run property companies of the 1980s.
Today New Zealand needs to apply its mind to what are appropriate levels of growth, not just in areas like dairy farming but perhaps most obviously in tourism, where exciting but uncontrolled growth may not be our greatest opportunity but may be our greatest threat.
Will our country eventually turn off the tap of “free” 15 per cent GST revenue from tourists, by failing to maintain the very standards that attracted those tourists?
In the past I heard accolades from tourists that included the words, clean, green, friendliness, low crime, empty roads, cheap, clean motels, great food at affordable prices, low cost national parks and tolerance of foreigners. I am not sure I have heard those words so often in recent years.
I have suggested before that our tourism industry leaders should fly out to Malta to seek its help in solving the problems of exponential growth in tourism. Malta certainly has to deal with the problem.
Its rising standards of living and its rising national wealth followed the implementation of growth and wealth creation strategies.
Its first strategy was to exploit its wonderful weather by providing tourist facilities for those who could afford to chase its sunshine, its heat and its seas, the latter relatively clean because of its low population.
The second was to sell its excellent educational system conducted in the international language of English, to the wealthy, ambitious Eastern Europeans who could afford to give their youngsters an education that would give them access to global careers.
The third was to sell its languid lifestyle and generous social services to the extremely rich, supplying the Maltese citizenship and passport in exchange for a million Euros and a commitment to buy a house in Malta or create employment in well paid jobs.
The fourth was to sell its highly educated and skilled work force, in areas like engineering, mechanics, medicine, dentistry and, more recently, in software.
The biggest emphasis was on tourism. Malta, a country which last month reached the population milestone of 500,000, now attracts three million tourists each year. As a ratio of tourists per head of population, this is six to one.
Imagine New Zealand catering not for four million tourists per year but for thirty million, six times our population.
Imagine our need for hotels, motels, rental cars, roads, road barriers, international language signs, restaurants, adventure operators, ferries, sewerage and water systems, airport runways and customs officers.
How does Malta cope?
The truth is that Malta copes but with increasing discomfort, growing numbers of its villages frustrated by the constant development (last year was a record year for construction), the road building, the dust, the traffic jams, the car parking problems etc. The locals do not celebrate the success of the strategy as much as they
All of its strategies have succeeded, leaving many wondering why yet more growth is desirable.
The selling of education to Eastern Europeans remains controllable and attracts little criticism.
Indeed, two new international educators have just signed a deal to come to Malta and pay the Maltese government handsome royalties for the licence to educate another five hundred foreign students at a site long abandoned. They will build the facility with local companies providing
The selling of skills has worked brilliantly. Malta services aircraft for major airlines, like Lufthansa, and is now a country highly regarded for its development of technology and software.
The risky strategy of attracting the world’s internet gambling providers has created highly paid jobs and lifted wages generally, enabling young people to develop lucrative careers, and in the process lifting the tax take.
And the sale of passports
The countries providing the biggest number of new immigrants were, in order, Russia, Saudi Arabia and China. One in seven people living in Malta today was not born in Malta. The average for Europe is one in fourteen.
Russia and Saudi Arabia. Hmmm.
The two billion of passport revenue enabled Malta to reduce its debt to GDP last year from 51 % to 45 %, one if the lowest ratios in the world, comparable with Australia and barely a third of the debt level of its neighbour Italy. Malta’s success seems the more spectacular because of the contrast with its neighbouring island, Sicily, just a twenty-minute flight away. The southernmost Italian island, Sicily has low living standards, effectively no social services and precious little support from the wealthier North of Italy.
Sicilians now eye Malta in much the same way out of luck New Zealanders used to line up Australia.
Sicilians are excellent restaurateurs. There are now many such restaurants in Malta, whereas just ten years ago they were rare.
Sicily is, of course, noted for the informal groups who “supervise” its society.
Russia, Saudi Arabia and Sicily.
The result of all these successful strategies is that Maltese salaries have doubled in less than a decade. Pensions are generous. Education, right through to tertiary level, is free, providing exams are passed. Pensions begin at 65, though for policemen they can begin after 25 years service.
There is no unemployment. Indeed, Malta is forced to import people from Eastern Europe, Italy, Greece, Turkey, even Venezuela, to service the tourists. Many speak no Maltese and very little English. Young Maltese people do not want the relatively low wages paid to waiters and hotel staff.
The talk of peak tourism is widely reported in the excellent daily paper, The Times of Malta, and dominates discussion in cafes and town squares. I called in on a club for the local brass band people, discovering its Sky Channels displayed events like Wimbledon. At the
New Zealand should be observing and listening.
Of course, the locals acknowledge the growth in incomes in a country so blessed by the weather Gods. Good incomes make the midday siesta more affordable!
Yet there is one more result of all this rapid change that now enters cafe dialogue.
In a country which for centuries has enjoyed the leadership of the Roman Catholic Church, Malta has always maintained values that separated it from countries that worship the dollar (or Euro).
It has never been a contender for lists of corrupt countries.
The serious crime rates are a tiny fraction of its neighbour, Sicily, but the combination of internet gambling, new immigrants from countries where corruption is rife, and politicians singularly focussed on creating wealth may result in new challenges.
Malta’s Labour government is now attacked every day in the clearly independent, brave daily Times, to the extent that one wonders what defamation laws protect the public officers.
Having delivered jobs and higher wage packets,
Muskat would answer that he knew the man worked in the public service but had no idea which of the thousands of roles he occupied. How could a busy Prime Minister know where every Tom, Dick and Sebastiano worked!
Last week Muskat cracked. Ok, alright, yes, the man is in my personal advisory team. Ok? But not telling what he does.
Muskat has grown Malta’s economy at a scarcely believable pace; no unemployment, doubling of average wages, tourism numbers growing, construction everywhere, house prices and rentals rising.
Malta is the fastest growing economy in Europe averaging five per cent in recent years, whereas the likes of Germany and France average less than one per cent.
Malta’s population is also the fastest growing in Europe, though not from its birth rate, though that, too, is relatively healthy, despite the new desire of women to pursue careers ahead of motherhood.
As is the case in most highly educated countries women are having fewer babies, and at a later age than was the case ten years ago.
Yet the people seem unsure that all of these advances should continue at an unchecked pace.
Is exponential growth an opportunity or a threat?
I expect you might get the same conversation in the cafes of Queenstown, Wanaka, Waiheke Island and Auckland’s North Shore.