Smart City, which was meant to have been an ICT and media hub, is several years behind its contractual obligations and is not in a position to meet them according to the agreed timeframes.
In 2007, the then Nationalist government struck a multi-million euro deal with Smart City’s Dubai investors for the takeover of an extensive tract of public land at Kalkara.
Heavy penalties were imposed on the company in case of breach. Among the clauses, meant to protect the interests of Maltese taxpayers, are the possibility of contract termination and repossession of the land. However, the government appears so far to have failed to enforce its rights under the contract.
READ: Auditor-General asked to investigate why SmartCity land was not returned
The company, SmartCity (Malta) Limited, has admitted in its latest published accounts for 2016 that it is not in a position to meet several of its obligations under the deal. However, it did not make any provision for the millions of euros in penalties it should be paying the government as a result, saying that “the directors are confident that no such penalties will be imposed on the company”.
The directors added that “the company is in the process of commencing discussions with the government to regulate these matters”.
This newspaper asked the company to explain the basis on which its directors have come to the conclusion that the government will not exert its rights and impose any penalties, but a spokesman did not reply to the question, which was put repeatedly.
SmartCity was also asked to outline which obligations have not been met, to declare the value of the accumulated penalties it should have paid to the government so far, and to name the government official who informed it that no penalties will be imposed on the company.
The spokesman replied only that “the terms of the deed are in the public domain. The rest of the questions are commercially sensitive”.
The Sunday Times of Malta was also met with a brick wall from the Office of the Prime Minster when the latter was asked about its obligation to enforce the contract on behalf of the taxpayer.
The rest of the questions are commercially sensitive
There was no reply to the question of whether SmartCity is adhering to the conditions of the 2007 contract and to explain why the government has not yet enforced the deal and claimed its rights, particularly through penalties. The OPM also failed to mention the name of the government official behind the assertion that penalties will not be enforced.
The government holds 10 per cent of the shares in SmartCity (Malta) Ltd and is represented on the board of directors by Keith Schembri, the Prime Minister’s chief of staff, whose signature appears under the latest set of accounts.
The 2007 contract imposed a number of obligations on the Dubai investors. Central to them was the development of 330,000 square metres of public land into mainly ICT-related office space as well as retail and residential units.
In exchange, the public land was handed over to the developers on a temporary emphyteusis for 99 years, for just 50 cents per square metre.
The emphasis was on the employment-generating activities of the development, which had to be implemented in phases and completed by 2022.
Under the contract, if the development targets, split into phases, were not met according to the set schedule, the government could impose fines of more than €1,000 a day, until the development is completed.
The developers were also contractually obliged to create 5,600 jobs, staggered over the first eight years of the project – which ended in 2015. So far there are only about 1,500 employees working at Smart City, and most are employed by the government through various agencies relocated there since 2013, including the Malta Gaming Authority and Malta Tourism Authority.
Different penalties were to be imposed for failure to reach employment targets. Again, no penalties are known to have been imposed so far.
Meanwhile, the government is allowing the developers to trade large parcels of the public land originally intended as an ICT village – this for development into residential apartments and luxury villas.
So far, SmartCity has sold land to private developers to build a medical centre – which has also fallen behind schedule – and some 400 seaview apartments.
The land for the medical centre was sold to Synesis Ltd for over €5 million and tens of millions more are expected to be generated when more land is sold to Ricasoli Properties Ltd, managed by the same person who runs Synesis.
So far, SmartCity has refrained from giving any information on the sale of these plots, citing commercial sensitivity.
Last week, the Democratic Party called on the government to cancel the whole deal as it was “clear” that the operators have decided to turn the “supposed ICT and media village into another real estate project”.
The party also asked the office of the National Auditor to investigate the deal and to oblige the government to take back public property belonging to the Maltese people.
In the meantime, the operators of SmartCity have filed an application at the Planning Authority to re-draw the original master plan, enlarge it by some three times the original area, and build real estate units.
ivan.camilleri@timesofmalta.com