In the aftermath of Claudio Grech’s resignation, JAMES DEBONO retraces the way Smart City became government’s futuristic vision and whether its credibility now hinges on the whims of Dubai’s oil sheiks
It all started in February 2006 with Prime Minister Lawrence Gonzi announcing a major project in the south of Malta two weeks before local elections were due.
A few days later, IT Minister Austin Gatt announced that discussions were underway with Dubai’s Tecom Investments, a subsidiary of the Dubai ruler Mohammed bin Rashid Al Maktoum’s giant holding company, for the creation of a Smart City. It was set to create 5,600 new jobs, 65% within the knowledge-industry, and turn the depressed south into “the core service hub of the island”.
From that point on, the word “smart” became an integral part of the Nationalist Party’s – and the government’s – political arsenal. As early as September 2006, the slogan ‘Int@SmartMalta’ was chosen as the theme for its Independent Day festivities. The PN was in such a rush to reap the political dividends from the project, that Austin Gatt himself said that using ‘SmartMalta’ as a slogan – while negotiations with Tecom were still ongoing – was not so ‘smart’.
But Gatt did not have any qualms about his own when he launched a blitz media campaign just a few months before the March 2008 general elections, in which the country was bombarded by photos of prominent personalities endorsing the government’s ‘Smart Island’ strategy.
The attempt to broadcast the ads on TV was thwarted only by the Broadcasting Authority, claiming that their broadcast right before the election would be too “political”.
The makings of a sacred cow Smart City became a panacea for the challenges to Malta’s future development. Those who raised questions on the way the project had been fast-tracked (namely through the Malta Environment and Planning Authority) were rubbished with a degree of intensity reminiscent of the treatment accorded to “enemies of the people” in Dom Mintoff’s time.
MaltaToday’s revelation in September 2006 that only 19% of the project’s footprint would be dedicated to information and communication technology purposes – the raison d’être of the project – and that 20% was for real estate, was dismissed as “absolute rubbish” and a “malignant and selective reading of a confidential document” by Gatt’s spokesperson.
Opposition leader Alfred Sant was also repeatedly accused of putting spokes in the wheel, when he questioned the real estate component of the project. Sant warned that Smart City would “serve to screen the transactions of luxury apartment entrepreneurs from abroad”, and that the government had camouflaged this intention by “boasting about the thousands of jobs in IT” Smart City would create.
“But we have been here before. At Chambray, at White Rocks, at Cottonera and elsewhere, the same generous job promises were made and then buried,” Sant said.
Reacting, the ministry condemned Sant for “consistently opposing the country’s technological development through a campaign aimed at sabotaging the greatest foreign investment in Malta’s history.”
And the campaign worked: Labour was forced to dispel any lingering doubts on the project on the eve of the 2008 election. Sant promised Labour would back the project, and his successor Joseph Muscat would go on to describe it as a “national project which has the full support of the Labour Party.”
Fast-tracking the project The government’s enthusiasm for the project was reflected in its fast-tracking through the planning system. In July 2006, Austin Gatt presented a motion to Parliament’s standing committee on planning and development to include the land earmarked for Smart City at Ricasoli for inclusion in the new development schemes.
In November 2006, MEPA went as far as changing the local plan to accommodate the development, earmarking Ricasoli for “information and communication technology industries” while permitting residential, hotel and commercial development on the same site.
The plan then paved the way for a new arterial road, linking Tal-Barrani road with Kalkara; and for the relocation of the proposed Sewage Treatment Plant from the Wied Ghammieq sewage outfall, to a pristine site in Xghajra.
The Ricasoli land – a vast industrial wasteland the size of 40 football grounds – was offered to Tecom Investments for a ground rent of Lm65,000 (€150,000) a year, increasing by 5% every five years.
On their part, Tecom promised to keep 33% of their investment development free, and invest a further Lm10 million (€24m) in its landscaping. Another 119,000 square metres of floor-space (the size of 20 football grounds) were earmarked for real estate and commercial development. Tenants could redeem their lease on the land earmarked for apartments and villas at just Lm1.75 (€4) per square metre.
Developing Smart City would produce 651,119 cubic metres of construction waste, the greatest generator of waste in Maltese history. Additionally, when fully operational the internet village would require twice the energy demand of Gozo, or some 9% of the peak demand of the entire country.
This significant impact notwithstanding, MEPA approved the project in October 2008, just two months after the environment impact assessment was issued for public consultation – a record time for any project of such a dimension.
Additionally, Tecom Investments and the Dubai Investment Group had also furthered their interests in Malta, with the acquisition of 60% of Maltacom – now renamed Go plc.
Cast in stone What makes Smart City different to other projects, where public land was sold at a pittance to make way for speculation, is that the agreement signed between Tecom and the government sets a Lm400,000 (€920,000) fine for each year in which the developers fail to create the promised jobs. Failing to complete the job in time will be met by a daily Lm500 (€1,150) penalty until works are finalised.
But will the Arabian sheiks honour their black-on-white commitments, despite a global recession that left Dubai bankrupt and dependent on a giant loan from its oil-rich sister emirate, Abu Dhabi?
After abandoning a similar venture in India (Smart City Kochi, in Kerala – on 14 June, Dubai announced it was no longer interested in developing the internet village), Tecom reiterated its commitment to invest €208 million in Malta.
But during the summer of 2009, key resignations among Smart City architects started fuelling speculation of Claudio Grech’s impending resignation and the slowdown in construction works at Ricasoli. International architecture firm Arquitectonica was dismissed by Smart City’s management in Dubai, and chief financial officer Antoine Portelli resigned. Additionally, senior project manager Martin Attard Montalto and infrastructure manager Joseph Anastasi had also tendered their resignations.
On 17 September, finance minister Tonio Fenech confirmed that construction works on the Smart City project at Ricasoli went through a slowdown during the first half of the year. Just a few months earlier, in July, Claudio Grech had insisted that the project was bang on schedule, and that the first office building would begin its operations next year.
Austin Gatt also told The Times Business that Smart City was “definitely not in breach of the contractual obligations” – but by then, the resignation of his former right-hand man (and chairman of the Malta IT Agency) Claudio Grech was being strongly touted.
In August, Grech played down the rumours by specifying he was “currently still employed with Smart City at the moment.” He also denied he was serving his notice, stressing that he was on holiday. Just a month later, Grech cited “diverging operating views” as the reason behind his resignation. It is an ominous statement, considering his major role in the project – first as the government’s chief negotiator with Tecom, and then as the CEO chosen by the Dubai company to head Smart City Malta.
What’s certain is that if Tecom backtracks on its commitments, it is the government’s political credibility that will be at stake. After trumpeting a 5,600 job promise before the 2008 election, anything less will be a heavy political price for the government to pay.
Timeline Smart City Malta
2006 23 February – Government announces ‘advanced framework discussions’ with Dubai holding company Tecom Investments for futuristic ‘internet village’ dubbed Smart City Malta.
29 March – Heads of agreement signed.
16 May – Tecom-Dubai Investment Group consortium acquires a 60% controlling stake in Maltacom, the national telephony company
2007 22 January – Cabinet approves agreement framework.
5 March – Smart City master plan finalised and presented in Parliament.
8 March – KPMG issues feasibility study on Smart City’s socio-economic assessment
20 March – Unanimous approval of project in Parliament.
24 April – Deed and final investment agreement signed.
11 October – Preparation for demolition at Smart City site begins.
2008 14 June – First phase of Smart City Malta launched.
15 June – Ratification of Claudio Grech’s appointment as CEO.
6 October – MEPA approves Smart City development permits.
9 November – Smart City Malta gets personalised postcode.
19 November – Smart City Malta / BV joint venture as SCM01 general contractor.
2009 14 June – Dubai announces it is dropping its plans for Smart City Kochi (Kerala).
30 August – Claudio Grech denies he has resigned from Smart City.
17 September – Finance minister Tonio Fenech confirms that construction works on went through a slowdown during the first half of the year.
22 September – Key resignations among project officers.
29 September – Claudio Grech resigns.
Profile
Claudio Grech Matthew Vella Claudio Grech started his political career in 1999 after spending three years carrying out human resources management for government. He joined Austin Gatt in the justice ministry as a policy coordinator for local government.
In 2000 he was allocated the responsibility of implementing electronic policy, and a year later he was appointed secretary to the e-Malta Commission, as well as programme director of the e-Government programme.
He was retained by Austin Gatt back in 2001 when he faced criminal court procedures over the falsification of a police identity card. He then appeared before the Public Service Commission, defended by Anglu Farrugia (Labour deputy leader), over his candidature for the police exams, in which he was acquitted of any charges.
In 2003 he joined Austin Gatt as head of his secretariat, where he coordinated government policy for all public investments as chairman of Malta Government Technology Investments Ltd.
Between 2005 and 2007, he led the government’s team in the negotiations for Smart City with Tecom. Government holds a 10% stake in Smart City Malta.
According to Grech, the relationship with Tecom “started coincidentally” when Tecom came to Malta in 2005 to use Maltacom’s data centre for a co-location service [Tecom later bought a 60% stake in Maltacom]. Speaking to arabianbusiness.com, Grech says he then “met the guys” and partly from discussing this relocation service, “which is relatively minor, we started thinking about how to extend this idea into how to replicate what Tecom had done in Dubai Internet City and Dubai Media City.”
Officially, Maltacom’s privatisation and the Smart City bid were two distinct processes despite the common presence of Tecom Investments. But experts’ reports from Gartner, the government’s consultants on the Maltacom privatisation, had revealed that the overall attractiveness of the Tecom bid was dependant on the parallel introduction of the Internet City concept in Malta.
Likewise, advisers Lehman Bros strongly pushed for Tecom’s recommendation on the strength of its plans for an internet city. Gartner’s report revealed that Tecom provided no evidence that it possessed any greater internal engineering expertise than Maltacom, but was clearly spearheading its bid with its commitment to fund what is now dubbed Smart City, the backbone of minister Austin Gatt’s futuristic IT vision.
Grech is now the chairman of the Malta IT Agency (MITA – successor of MITTS). In the past he refuted suggestions that his role as CEO of Smart City Malta could lead to a conflict of interest. With one hand on what was, until recently at least, set to be Malta’s biggest ever infrastructural project, and the other on the government’s most sensitive IT agency, Grech’s appointment opened him up to claims of conflict of interest.
“The fact that the former head of secretariat to Austin Gatt is the CEO of Smart City Malta and now also MITTS chairman, could lead to a potential conflict of interest for the man who is formulating Malta’s IT policy,” Labour MP Chris Cardona had said.
Grech himself led the government team in negotiations with Tecom between 2005 and 2007, before being employed as Smart City Malta chief executive. As the non-executive chairman of MITA, Grech was in the driving seat of Malta’s information and communications technology policy, while at the same time managing Tecom’s interests in Smart City.
“Without any prejudice against Mr Grech’s capability, Labour sustains that such a role could lead to a conflict of interest between the management of a private project and that of a government agency… the implementation of a political strategy for ICT should not be confined to just one project, but spread over the entire country and involve all interested partner,” Cardona had said.
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