SmartCity office buildings on target but where are the jobs?

The construction of office space at SmartCity is in line with contractual obligations but the hi-tech village has fallen back on employment targets set out by the government when the agreement was signed four years ago.

When SmartCity officially opened its first office block, spread over 12,000 square metres, in October last year it had surpassed the contractual obligation to deliver between 8,000 and 10,400 square metres of ICT office space three years after the agreement was signed in April 2007. But with the project set to employ about 5,600 people when it comes to fruition in 2018, the number of new jobs generated as a result of companies opening shop there is well below target.

A government-commissioned study in 2007 had said that by this year the project should have directly employed 2,874 people, including 2,579 “knowledge and IT workers” if it satisfied minimal contractual obligations related to construction.

The study, titled Socio-economic Impact Assessment Of The SmartCity Project, by consultants KPMG, was tabled in Parliament when the motion to transfer the Ricasoli land to Tecom Investments, the Dubai company that operates SmartCity Malta, was being discussed.

An analysis carried out by The Times of the contractual obligations undertaken by Tecom Investments confirms the Prime Minister’s assertion that the project is “on target and, in certain aspects, ahead of schedule”.

According to publicly available information, by April last year SmartCity had to start the second phase that will see the company deliver between 12,000 and 15,600 square metres of ICT office space by October next year. The construction of blocks two and three should ensure the company meets this target, while blocks four and five would cater for retail space.

Permits for these four blocks have been issued or are in the final stages of being approved by the Malta Environment and Planning Authority. However, the same optimism cannot be expressed for the residential part of the project. Contractually, by April this year, the company had to start the process to eventually build between 8,250 and 17,600 square metres of residential space. Although the construction for this first phase of the residential buildings should come to an end in April 2015, no planning applications have yet been filed with Mepa.

But SmartCity is not only about buildings. The government has always justified the project by the fact that it would generate new high quality jobs and put Malta on the radar of IT companies.

SmartCity should have contributed €179 million in value-added to the economy this year, increasing to €233 million if the multiplier effect is taken into consideration, according to the KPMG study.

Although the company is only contractually bound by the final figure of 5,600 jobs when the project is finished, the study had projected that the ICT village would generate 2,874 direct jobs in its operational phase by 2011. The vast majority of the jobs should have been in IT services.

The study had also calculated the multiplier effect of SmartCity on the rest of the economy, which would have seen the number of new jobs created increase to 4,174 by this year.

A company spokesman said SmartCity had registered a 38 per cent occupancy rate but could not quantify the number of people employed by businesses that set up shop in the first office block.

However, the number of companies that have until now announced plans to open offices at SmartCity are nowhere near likely to employ 2,800 people.

The last announcement in September was that of Smart Technologies, a Maltese IT joint venture company, which said it was opening a new office at SmartCity to act as a support centre for clients operating from the IT village. No information was given on the number of people the company would employ at its new office but having been set up in 2008 to lease out computers it is likely not all jobs at SmartCity will be new ones.

Earlier this year, HP announced it would open a branch office at SmartCity to expand cloud services operations. However, HP managing director and enterprise business manager Franz Scherz said the company was not expected to employ more than 10 people initially.

In January, Cisco Systems, an international company specialising in networking solutions, said it was relocating its Malta office to SmartCity, which can hardly be classified as new jobs.

In March, the Saint James Hospital Group announced it was opening a health care centre at SmartCity, featuring a range of medical services including a dental clinic, an immediate medical care unit and cosmetic services. The hospital has filed an application for change of use with Mepa but if any new jobs are generated by the venture these will not be IT-related.

Similarly, Corinthia’s catering wing is operating a bistro café at SmartCity and this is unlikely to add any new jobs to the IT sector.

Meanwhile, no information has been forthcoming about American technology company DayBreak, which late last year promised to open an office at SmartCity, offering 100 jobs by the end of 2011 and 1,000 by 2014.

At the beginning of the year, the US company had also said it was looking for office space at the airport, where the Skypark business centre is being built, instead of at SmartCity.

The SmartCity spokesman shot down suggestions that a legal dispute with two contractors over payments due risked delaying the project. “SmartCity Malta had already signed up other contractors for the next phase and other works and, as can be clearly seen, work on phase two is moving at an excellent pace,” the spokesman said.

Two companies, Ballut Blocks Services and Bonnici Brothers, last month filed a warrant of prohibitory injunction against SmartCity to the tune of €1.8 million. The companies, involved in the building of the first office block, are claiming SmartCity owes them money for works they were contracted to do.

SmartCity has not yet filed its reply in court but the company spokesman said the dispute was with “just one contractor”. “During the construction phase of SCM01 (the first office block), the contractor claimed for unjustified work and we refused to accept,” the spokesman said.