Tony Zahra was appointed chairman of Malta Industrial Parks three years ago. He explained to Vanessa Macdonald that he had to balance cleaning up legacy issues with getting things moving for the future.

MIP has just reported a pre-tax profit of €5.2  million on a turnover of €14 million.  This is much better than it was...

The results have been encouraging. It  means we have more money to invest in  expanding operations and to invest in future economic growth.

There have been a number of significant changes to MIP’s investment portfolio. In  February 2014, MIP was given a concession agreement for €46.5 million. What this was? You now have assets of several hundred million…

Basically we have a service level agreement (SLA)  with the government to operate properties  on behalf of the government. MIP uses the straight line method for accounting for its turnover. It is just a way of presenting its accounts; we have not increased our assets but converted part of tangible assets to intangible, taking the amortisation over the period of the SLA.

MIP has taken out nine loans, three of which are linked to Air Malta:  €50.8 million directly for Air Malta land and €69.5 million which is part Air Malta and part Ricasoli. Has the government merely solved the Air Malta problem by transferring the burden to you?

Not quite. It is MIPs remit to administer property and the Air Malta sites are among them.

People assume the head office site is invaluable because of what MIA did with SkyParks…

MIA did a very good job there but in Malta, there is no gold in the ground. It takes several years from the time you conceive the idea, get the permits, develop it and start getting your return. During that time economic cycles can change. You have to be careful that whatever you develop takes into consideration future needs and that if there are strong headwinds, you can survive the period until the sun comes out again – as it always does.

Apart from the head office, what have you taken over?

Other buildings and some land at Luqa including the old terminal building.

Isn’t that already being used for cargo?

Some of the building has tenants – but not all of it. There is a big opportunity, because these sites could be transformed into valuable properties. But I am a bit cautious: if anyone doing a project of this nature does not acknowledge that he might have problems on the way, then he is not being realistic… However, we are going to be well financed so that if there are problems, we can overcome them.

Two years ago when I interviewed you,  MIP was saddled with almost €100 million in  ‘apparent’ debt. What happened?

We did a couple of things. The most important is that we renegotiated many of the loans, spreading them across a longer period than before, and also renegotiated the interest rates, which saved us a lot of money. The result is showing in the profits too.

You said the profits would help with  projects… What about the removal of asbestos?

This year, we budgeted €1 million for the  removal of asbestos, which was used widely in the 1970s and part of the 1980s. Virtually all the factories that have sloping roofs – called northern lights – have asbestos.

Asbestos is not a problem unless it is disturbed – and when it is disturbed, there cannot be anyone in the building. So we are tackling it as and where we can when units become available, doing the work in between tenants, so we don’t disrupt operations unnecessarily.

In addition, it is a question of resources as there are only a few companies in Malta which can handle this specialised operation. It will take time but we will eventually tackle all  the factories.

What have you achieved with regards to collecting arrears and evicting non-paying tenants?

The first thing we did was to invoice ahead of the rental due date. The rent is due and payable on the day it is due, so we now invoice two months before and have people who chase payment, a system which is more in line with what would happen in the private sector. We also make it a point to remind tenants that the rent is not ‘optional’. Obviously,  occasionally, companies run into genuine difficulties so we spend some time listening to them as we are not out to make their lives even more difficult. However, we have to be convinced that you are in difficulties. If you have money for a car or a yacht, then you have to pay us the rent.

The rent is not ‘optional’... If you have money for a car or a yacht, then you have to pay us the rent

One of the biggest problems was that people were allocated spaces which are no longer being used for productive activity. Have you evicted anyone?

If they are not using the factory for economic activity, we are telling them: ‘Please give us the property back because we need it badly for people that want to use it.’

Great. But have you managed to free up  any space?

Yes. We would like to think that the people that we talk to are reasonable. We are also  very reasonable people. But MIP can also be strong and take bold action against abusers…

You just signed a new MOU with the Chamber of Commerce, Enterprise and Industry. How does it differ from the one signed in  2012, which does not seem to have been  very successful?

The 2012 agreement was based on service charges and so on. We are now going in a different direction. The first agreement we signed was for Mrieħel, an industrial area which is only 25 per cent handled by MIP while the rest belongs to private entrepreneurs. We were looking after our part but the private sector was not doing the same with theirs.

Now, we set up a foundation for the Mrieħel estate where the private sector and the public sector pooled in money to look after the estate. It is being managed by the private sector with representatives from the government, chaired by Louis Farrugia of Farsons. Who better to look after it than the people that are there?

We are looking to replicate this model for the other industrial estates with the respective associations as the private sector will do a much better job than we can.

We recently found out that MIP will probably lose the EU funding for the Safi Aviation  Park extension…

We depend exclusively on contractors. We come up with a project, apply to the Planning and Priorities Co-ordination Division (PPCD)  and go to tender through the government procurement channels. But then the contractor has to deliver. In PPCD contracts there are penalties if projects are not completed in time and MIP will ensure that they are imposed.

So it is not MIP that will lose the money…

We have been waiting for the Ta’ Qali crafts village for some 25 years. Is it actually going to happen now that you have a permit?

Ta’ Qali’s €18 million financing should be coming from EU funds for the current Budgeting period. We presented a good bid to he  PPCD for the project and expect an official reaction very soon. As soon as we get the go ahead – in the next year or so – we would be ready to press the button.

I have had a lot of pressure put to bear on me but we have a clear vision for Ta’ Qali.  We had big names that wanted to get space there. But no, this has to be for artisanal operations. It should only be a for one or two-man entities working there and selling their crafts.  And we do not need several canteens… Everyone wants to have a few tables and chairs outside their factory!

There was considerable controversy over the development of Park 4 at the edge of the airport. Will it go ahead?

It will happen but at the right time. At the moment there is a lot of development at Safi Aviation Park with large investments by companies like Aviation Cosmetics, Medavia, SR Technics and others.

Once Safi Aviation Park is fully utilised,  Park 4 will be the next phase.

Stakeholders have been talking about logistics but the government has not come up with the Act yet, after years of talking…

Logistics may sound simple but it is not as there are regulation issues, customs and port practices and other rules and regulations.

The government has indicated that this is the way it wants things to go.

How do you see logistics? Is it pie in the sky or will it really offer value added?

We have already granted space to internaitonal and local companies involved in logistics and related activities. As we said before. you should not rush on this issue because there are implications.

You need to compare now to where we started 40 years ago when manufacturing started in Malta. At that time, we needed huge factories, mostly for textiles, employing 300 or 400 people with enormous machinery.

Since then manufacturing has shrunk – not only in terms of numbers but also in terms of space required.

And the space has to be different too, which requires investment in the units.

And who would be responsible for the free trade zones? Malta Freeport Corporation thinks it should be, not Malta Enterprise… Where does that leave you?

Malta Enterprise has been leading the initiative as has been the practice with other new industrial niches like aviation, maritime, ICT, healthcare etc.

A number of government authorities will form part of a group of important stakeholders that will eventually facilitate the flow of goods through and within Malta.

There may eventually be a regulating agency – existing or new.  What is most important is that Malta captures a portion of logistic activities that are happening in the Med.