Tecom - our partners

I use the word partners on purpose. SmartCity is not just another real estate project like the ones we have been accustomed to. For Malta this is a long-term partnership with a global player of world renown that has shown its mettle in its home country and is now venturing overseas, replicating a concept that has gained it worldwide fame.We did not go for a partner that might have been excellent in ICT only, or in tourism only, or in property development only. We have engaged a partner that has literally built a city where before there had been nothing but desert, gained experience and expertise in various business spheres, attracted trillions of dollars in foreign investments, millions of workers and is a shining example of how a vision can - with skill - be translated into ideas, projects and profits.

We are partnering with an organisation with an excellent and proven track record. The fact that this is a long-term partnership - rather than a one-off straight deal - is evidenced by innumerable contractual provisions that would not normally be agreed to on a simple commercial basis. In spite of the fact that the government will hold only nine per cent of the equity in SmartCity (Malta) Ltd (the company that will invest in and operate SmartCity), Tecom have agreed that the government's consent is required if the Memorandum and Articles of Association of the company are to be changed, the company dissolved or its share capital decreased.

This ensures that the most important ground rules do not change without our agreement. In and of itself this is a reflection of the goodwill and common goals shared between Tecom and us.In this context, Tecom, understanding that this is far more than a commercial deal for Malta, are guaranteeing all the obligations of the operation with regard to the construction timeframes, the constructed components, the employment obligations, all penalties and related financial obligations. This guarantee will remain operative even if parts of the land are transferred to third parties or the ground rent redeemed. They have also agreed that their investing company (SmartCity Dubai) will not transfer its shares outside the Tecom Group before the project is fully completed (14 years) or the obligation to create 5,600 jobs is fulfilled.These agreements are of critical importance to the government because it ensures that, until the project is finalised, our partner remains Tecom and the ground rules remain unchanged - notwithstanding any transfers that may take place in the meantime.

With a long-term project like this - eight years for completion of the ICT phase and 14 years for the rest - it is critical to know that your partner will remain with you to the end. Tecom have also recognised the sensitivity concerning land use and were committed from the beginning not only to the design of a project of high standing but also to ensure that agreed land uses are adhered to. This led to a contractual framework wherein the use for which a particular area is zoned in the agreement cannot be changed without the government's consent.

Furthermore, once the project's master plan is approved by the government (and there is agreement that the master plan has to have that approval before the parties actually sign the contracts) it cannot be changed without the government's consent. In practical terms, that means that a hotel cannot be turned into apartments (or vice versa) without the government's consent. This condition applies not only to Tecom but also to any third parties that may acquire the land from the operating company.It is for these very same reasons that Tecom undertook to leave a full one-third of the development as open spaces - that is a massive 116,802 square metres of land, which is 66 per cent more land than is going to be used for lodging purposes (72,268 square metres). This on its own should prove to any non-prejudiced observer that this is not a speculative project.

These numbers - as everything else in the master plan - cannot change without the government's consent. The development of the public spaces will be financed by Tecom that agreed to spend $10 million, which, in my view, can be considered a premium on the deal, from which the neighbouring communities will gain a unique open recreational space, which shall not be funded from their taxes.

Tecom have also agreed to maintain the public spaces throughout the contract but the spaces remain public, under the government's control for public use and access. They essentially will pay for a high-end public park where an industrial desert of decrepitude and desolation now exists.This kind of arrangements only come about because both sides act as partners rather than as simple traders, because both sides believe in the project and because both sides understand the importance of the project to Malta.

Dr Gatt is Minister of Investment and IT.

Tomorrow: The financials.