Parliament backs SmartCity

Parliament yesterday cleared the way for the SmartCity project by unanimously approving a motion for the transfer of land at Ricasoli for the $300 million ICT project.

The motion was moved by Public Investments and IT Minister Austin Gatt, who said unanimous approval showed that in such important moments, Parliament could rise above partisan politics. Opposition deputy leader Charles Mangion said the opposition was voting in favour of the motion while maintaining the reservations it had raised during the three-day debate in Parliament.

Prime Minister Lawrence Gonzi said this was a milestone in the transformation of Malta's economy.

Opposition leader Alfred Sant did not take part in the debate.

Yesterday's sitting was opened by Education Minister Louis Galea, who said that if everyone pulled the same rope, all the people would benefit from SmartCity. More than SmartCity, this project, if successful, would result in SmartMalta.

SmartCity, he said, could be a prototype of sustainable economic development balanced with social cohesion.

The people were being challenged to employ their skills to achieve a quality of life that was among the best in the world. SmartCity was a tool towards transforming the country into a centre of excellence.

The government did not want Ricasoli to become a rich enclave, but a source of wellbeing that would be transmitted throughout Maltese society via three main sectors - jobs, education and culture. The government viewed SmartCity as an inclusive city which created jobs for people of different skills.

He said that the education sector was undergoing a process of reform and would serve as the springboard for the workers to take up the new challenges being offered to them by SmartCity. The University had 750 students following courses related directly or indirectly to IT. It was positive that the number of students achieving A levels in Pure Maths, a vital ingredient for IT courses, was rising fast, currently totalling over 330. Mcast too was doing sterling work in the IT sector in partnership with private training providers so that over a period of three years, there had been 860 graduates from its courses. This year there were as many students as the total of the past three years.

Dr Galea called for a redoubling of efforts in favour of the transformation of the environment. This, he said, should be another dimension of SmartCity that would transform the country into SmartMalta.

Charles Mangion (MLP) said one could not disagree with the vision that Dr Galea had spoken about. But beyond the political hype and the wishes expressed, everything ultimately depended on the contract which the government planned to sign with the investors, Tecom.

It was not enough for Dr Gatt to have said last week that if Tecom did not meet its obligations, the contract would be dissolved. That would only be recognition of failure.

The government needed to heed the lessons of the past. The Chambray contract was different, but in that case too, much had been said about improving the quality of life of the Gozitans, but that had not materialised.

The most important aspect of the contract with Tecom was the creation of new jobs but there was confusion in this too. The investors were binding themselves to create 5,600 jobs but that would not necessarily mean new jobs. Existing jobs transferred from other Maltese locations to SmartCity would be considered as jobs created in SmartCity, even though the country would not make any gain.

Furthermore the contract provided for the transfer on temporary emphyteusis of 350 tumoli of land. Land was a limited and precious resource and efficient use had to be made of it. SmartCity was said to be the biggest ever investment in Malta. Yet he knew of another company which between 2000 and last year had invested Lm183 million ($550m) in Malta and yielded significant value-added while using only about 20 tumoli of land.

The granting of such a large tract of land to SmartCity, therefore, had to be balanced with the gains for Malta.

It was being said that a minimum of 5,600 jobs would be created at Ricasoli within 14 years. But it needed to be ascertained that these jobs were really new and that they were jobs for the Maltese. The contract appeared to make it compulsory on the government to issue work permits for foreign workers. It was therefore important to ensure that as far as possible, job opportunities were filled by the Maltese.

At present 42 per cent of Maltese students left school without any skills. If such a high percentage persisted, Malta would not have enough workers to fill the vacancies at SmartCity. The Education sector clearly needed to redouble its efforts to prepare the workforce, particularly in the science subjects. There needed to be a plan grouping the University, Mcast and even secondary schools to address students to the economic sectors which were growing. Indeed, the contract should include a ratio of how many of the jobs at SmartCity would be in IT and how many would be in other sectors.

Dr Mangion observed that Dubai Internet City included tax free zones. The proposed contract with Tecom provided that the government would provide "incentives" to attract companies to SmartCity. What would be the nature of these incentives?

Dr Mangion asked the minister to specify the amount of land expropriated by the government for SmartCity and what its cost to the government was.

How much would it cost the government to improve infrastructural services to Ricasoli, including the re-routing of the sewage outflow further towards Xaghjra?

The contract enabled SmartCity Malta to transfer its land to third parties, and 98 years on, shortly before the emphyteusis expired, the company could request an extension should it retain any lands, practically at the same conditions as at present. The opposition did not agree that the government should bind itself in this way. Any renewal should be made on the basis of the circumstances and values of that time.

Indeed, according to the contract, SmartCity was free to transfer any area of the site, except public areas, to anyone without seeking government approval. This meant the company could start selling land and making money from the day after the contract was signed. The very least one could expect was an obligation for the investor to plough at least 50 per cent of its investment into the project before it could transfer any parcels of land. That would be an incentive for the investor to pump money into the project as promised. The opposition was moving an amendment to the contract in this sense.

Dr Mangion said the groundrent, at Lm65,000, was subsidised. He could understand the purpose for such a concession as a means to encourage investment in the site. But once the site was developed and the investor was realising his profits, surely Malta should enjoy a higher premium on the value of land where the emphyteusis was redeemed? The rates the contract proposed were practically a handout and needed to be reviewed.

Turning to enforcement, Dr Mangion said he felt there should not be any capping on penalties when development did not achieve contract obligations.

Dr Mangion said everyone agreed that the foreshore should remain fully accessible to the people. The contract, therefore, should include a clearer definition of what constituted the foreshore, including the foreshore created by land reclamation. Company regulations on access to the foreshore from the public areas should be agreed with the government.

It was understandable that a project of this magnitude would include a beach concession, but the contract should specify that the granting of such a concession should be approved by Parliament.

Concluding, Dr Mangion said that he had not been political in his remarks but had made objective suggestions to ensure that the success which everyone hoped for SmartCity would be realised. He then moved amendments to the contract in line of the suggestions he had made in his speech and said that otherwise the opposition had no objection for this motion to be approved.

Prime Minister Lawrence Gonzi said this was a historic moment for the country and it appeared that the opposition would back the motion, with reservations on the points it had raised.

As he had said in the budget speech, Malta was aiming to become a regional financial centre, a centre of excellence in health services, tourism and maritime affairs and a centre of excellence in IT. Step by step all these objectives were being achieved.

Mater Dei Hospital would open in a few months time, the financial services centre was making rapid progress. The Maltese ship registry had grown strongly and Malta was also doing well in the cruise liner industry. The education sector was growing, and now SmartCity was the realisation of the dream for the IT sector.

The challenge for the government after EU membership was to radically transform Malta's economic activity and SmartCity was a crucial element in this change.

That Malta had beaten off competition to attract SmartCity was a major achievement. One could argue about the contract conditions, including the groundrent of the site at Ricasoli, but one had to always keep in mind the bigger picture and the overall benefits for Malta.

The bottom line for Malta would be a leap of quality for the people. This was a message that Malta would do with nothing but the best.

This project was placing Malta firmly on the map as an attractive investment destination. It belied all those who claimed that Malta had lost competitiveness and was no longer attractive. With SmartCity Malta now had a new international brand putting it at the front of the IT sector with the obvious benefits for Malta's workers, particularly its young people.

SmartCity would also be of enormous benefit for the south of Malta, complementing other investment made by this government in the south, including the opening of the Access centre in Vittoriosa, the homes for the elderly in Cottonera and Zejtun, the opening of the Cottonera waterfront, and the planned redevelopment of Dock 1.

That SmartCity had come to Malta was not coincidental. This investment was coming here because of the government's commitment and vision on IT, Malta's membership of the EU and the professionalism of the people who proved to foreigners that the Maltese could rise to the challenge, as they had always done in the past when other investors placed their trust in Malta.

True, the government made mistakes, but the results it was achieving for this country was there for everyone to see, Dr Gonzi said. This project marked the opening of a new chapter in Malta's economic development, and he wished to thank all those who had been involved in the negotiations with the investors.

Winding up the debate, Public Investments Minister Austin Gatt said a positive vote on this motion would show that Parliament could rise above partisan politics.

He said he did not agree with the amendments moved by the Opposition, in their detail, rather than the principle behind them.

The opposition was arguing that the investors should be bound to specify how many of the jobs would be ICT related. The investors were bound to create 5,600 jobs in eight years, and as far as possible, 60 per cent of them would be in ICT, but it was very difficult to precisely define an ICT job. For example, were all workers in call centres ICT workers or were they sales workers? Was e-gaming an ICT job?

The contract, however, provided for the building of office space for 5,600 workers, Dr Gatt said. Indeed, according to KPMG, the project spinoffs would create as many as 10,600 workers.

Referring to the transfer of companies from other locations in Malta to SmartCity Dr Gatt said that even if all current ICT companies in Malta moved to Ricasoli, that would only constitute 10 per cent of jobs in the new project. If the investor was not allowed to count workers of those companies as jobs created in SmartCity, the investor could be inclined not to employ them.

As for raising the penalties for contract default, Dr Gatt observed that this was the first time that there was any penalty - of Lm400,000 per year - for an investor who did not engage the number of workers as laid down in the contract. He felt this penalty was reasonable, but the important thing was that the jobs were actually created.

The reference to the Chambray contract by the opposition was unfair. Many lessons had been learnt. For example, it had not been possible for the government to dissolve that contract, he said. On the engagement of foreign workers, Dr Gatt said Malta had a chronic shortage of ICT workers and work permits were being issued for all requests. This situation was expected to persist for some years. However, as at present, government policy was that no permits should be issued where vacancies could be taken up by the Maltese.

Replying to the points made on expropriation, Dr Gatt said current law and practices were followed and on that basis compensation of Lm1.7 million was being offered.

Dr Gatt said only one beach concession would be granted and any change would be subject to a decision by Parliament.

Access to the foreshore would remain free to all.

Dr Gatt said the capping mentioned by Dr Mangion had been the subject of negotiations.

On the value of the land when an emphyteusis became perpetual, Dr Gatt said Malta was making its gains through its Lm7 million shareholding in SmartCity Malta and through the investment that would be made in the public areas as Ricasoli, apart from the project itself. Still, the rates on the land at Ricasoli were higher than on other investment projects, such as the Valletta waterfront. And one needed to remember the state Ricasoli had been in, when even those seeking factories refused to go there.

On the conditions proposed by Dr Mangion to ban the transfer of land before half of the projected $300 million investment was made, Dr Gatt said the investors would still remain bound by their obligations to develop the project, including the creation of 5,600 jobs. Indeed, he was confident that half the investment would be made in three years.

Concluding, Dr Gatt said that what ultimately was most important for Malta was that the new economy had come to Malta. This project was the result of hard work that started in earnest when the government in 1999 declared that Malta would seek to become an IT centre of excellence in the Mediterranean. It now wanted to become a centre of excellence in Europe .

SmartCity would be launched by Tecom in a major European capital and hopefully in another two capitals as well. This was the sort of priceless branding Malta needed. What people abroad were now asking was: Why Malta when everyone spoke of the Irish Tiger, the sharp growth in Latvia and Lithuania and cheap labour in Eastern Europe?

This was also the sort of question which all Maltese should ask themselves more so because up to some two years ago there were some here who still held that textiles were this country's future.

Truth was that this government wanted high value jobs for the people. It had repeatedly shown its confidence in the Maltese workers including the textile workers who lost their jobs and who had been retrained.

It was thanks to this government's vision and confidence that an agreement would be signed in the coming weeks for Lufthansa Tecknik Malta to employ another 500 aircraft technicians.

His appeal to all the people was to have confidence in their abilities rather than focusing on the problems when opportunities presented themselves, Dr Gatt said.

Malta had a lot to be proud of, including its education system, which was giving results as shown by the number of workers recruited in Malta to head companies abroad. The education system was far from being amateurish, as Dr Sant had said in a recent interview.

Malta, Dr Gatt said, needed to be flexible. It needed to play to its strengths and exploit opportunities while confidently facing the challenges of the future.

The opposition's amendments were then moved but rejected, the government voting against. No division was called.

The government motion was approved unanimously.