The company set to finance the City Gate project is expected to make annual profits of anything up to €10 million, with the lion’s share going to government coffers.
Finance Minister Tonio Fenech gave the figure yesterday afternoon when he engaged in a debate on Malta and the financial crisis with his Opposition counterpart Charles Mangion.
Mr Fenech said the government’s proposal to finance the City Gate project through creating a Special Purpose Vehicle, Malita Investments, was intelligent.
“The SPV will borrow money at a cheaper rate than the government can and it will ensure the entire project is paid for, rather than added to government debt and forgotten about,” he said.
Parliament is set to vote on the SPV proposal on Wednesday. It has been criticised by the Opposition on a number of counts, most vehemently on the plan for government revenue from Malta International Airport and Viset to be diverted to Malita Investments for several years.
Malita Investments is set to be 70 per cent government-owned and will be floated on the stock exchange. Aside from MIA and Viset revenue, the SPV will also receive €5 million a year from the government as rent for the use of the Parliament building.
Mr Mangion argued that government and EU economic policy over recent years had prioritised austerity measures at the expense of economic growth.
While in 2006 private investment made up 22 per cent of the country’s GDP, that figure had fallen to just 11 per cent last year.
Capital expenditure was up by four per cent.
Together, those figures indicated the private sector “is in no mood to invest”, Mr Mangion said.
Mr Fenech disagreed, saying economic growth had to be sustainable – “the recession has shown us governments aren’t too big to fail” – and arguing that oversubscribed government investment schemes proved the private sector was eager to invest.
He chastised the Opposition for painting an overly negative picture of the domestic economy.
Doing so would scare off investors. “And then you [the PL] will become the answer to your own prayers,” he warned.
But Mr Mangion shrugged this off . “How can you heal a patient unless you diagnose them first? Investors come across problems first-hand... not talking about them isn’t going to solve anything.”
He claimed the government’s reluctance to set parliamentary or electoral time frames was making investors reluctant to invest.
The accusation prompted a sharp retort from Mr Fenech.
“Investor uncertainty is down to their fear of a Labour government. The PN has always been pro-business, so investors know where they stand with us.
“What Franco Debono does is of little interest to investors. But nobody knows what the PL’s economic plans are – that’s what creates instability.
“The PL should put forward more facts and less political clichés.”
Mr Mangion’s reply was curt: “We’ll publish our economic plans. Just name an election date first.”