INTERVIEW | Wednesday, 09 January 2008

Life of the Rotarian

International property tycoon Joseph Farrugia speaks to David Darmanin about his adventurous business life and the cruel politics that came with it

If you had to paint a perspective of the 1960s in Malta how would the picture look?
Rosy. They were boom years for Malta, especially after we gained Independence. While I was still reading for my degree in architecture and civil engineering, before 1967, I was already commissioned to build two villas. The property market back then was huge. As soon as I qualified, I found myself immediately in partnership with Architect Maurice Captur, with whom I had set up a very successful civil engineering and property development firm. Those were the days for that type of industry. Ask whoever made business in the 60s and you’ll get the same answer.

Is it not always the right time for the property industry?
Not if you find yourself in 1971, under Mintoffian rule, with your property worth half what it was worth the previous year. Policies adopted back then made us lose tremendous amounts of money. This was a very tough time for us.

Is this why you are outspoken on your political views?
No, I was biased before the downfall of the property industry. I was secretary of the PN Club in Zebbug when I was 18 and Vice-President of the Nationalist Youth Movement a few years later. When I was in my twenties I was naively convinced that making money would never be a problem. I figured that if I had to enter politics I would be incorruptible, so I decided to contest the 1971 elections under the PN ticket, which we had sadly lost. Luckily enough, I did not obtain enough votes to make it to parliament. I remember walking with Nationalist MPs to parliament to show them our support, and getting beaten up by Labour thugs under the eyes of the police. Justice had collapsed.

What did you do about it?
What any father who wanted to protect his children would have done. Admittedly, I still managed to earn a living back then, but I just could not take all the bullying. I was adamant on leaving the country, but the move had to be done carefully. I wanted to ensure that wherever I settled down, would provide me with an interesting and exciting enough way forward. One of the wisest local businessmen those days was Bart Attard of Panta Lesco, who had decided to invest in the Middle East early enough – when business in Malta was still at its peak. Since I was very interested in moving to a Middle Eastern country, I consulted him on the prospect. I remember Bart’s reaction as though it all happened yesterday. After guiding me through all options, he had told me that Saudi Arabia had just started developing grossly but that living there would be extremely challenging since there was no European influence whatsoever at the time. Soon enough, I joined a Saudi construction company as a minority shareholder.

Wasn’t this move somewhat risky bearing in mind that you sought safety for your family?
Although business potential was great, Saudi at the time was still very native. In Riyadh, where we lived, only three of the roads were asphalted – which is pretty indicative, bearing in mind that we’re talking of the country’s capital city. In other roads, hard gutters in which sheep skin and other waste was thrown were a common occurrence. You can only imagine how horrendous the stench was out in the streets. All of our building sites had to work on generators since electricity was extremely unreliable. Until the 1980s, you still had to go through an operator to make a phone call. While I was there though, I saw an incredible change and this was anticipated. At the time of the Saudi move, only my first two daughters were born. We had decided to send them to a boarding school in England for a variety of reasons, among which was the fact that some Maltese girls already attended the same school in the UK. Both of them are still in touch with their Maltese friends from boarding school. This process helped them retain their identity. In any case, the Saudi years were extremely successful and by the time we left, we were very well involved in the ex-pat community and had a fantastic social life there.

If Saudi was so successful, what made you decide on leaving?
Within a few years of operation, the company I was running had shot up from working with 4 employees to the recruitment of 82 office staff and 750 labourers. We were awarded a good number of tenders, almost all related to government projects. At times recruiting enough staff to meet work demands was very challenging. I employed most of my professional staff from Malta and London and was among the first people to bring in Philippine labourers in Saudi, 450 of them. Just to give you an idea of how fast-growing the company was, in 1982 we invested in a computerised system costing USD 500,000 to save up on scheduling, which was previously done manually. My staff was not paid exorbitantly, but I made sure to substantially reward anyone who was really productive. This had increased performance, drive, loyalty and motivation to a very high degree. At times, we worked 36 hour shifts without any qualms – the energy at the office was out of this world. To answer your question, one of my Maltese employees who had worked very hard through the Ramadan, had asked for Christmas leave to visit his family during festivities. Technically he was not entitled to it, but since he deserved that and more, I decided to grant him leave and a USD2,000 bonus to cover the cost of the ticket. To the company, the amount was a pittance, bearing in mind that the previous day I had signed a subcontract for USD3,000,000. This particular employee had approached me a few days later to inform me that the accountant had refused to pass on the payment and leave approval on direct orders of the majority shareholder, Mohammed Al Fraih. This was a very serious matter that required confrontation. During my discussions with Shk Al Fraih he had remarked that he did not like me doing “favours to Maltese friends”. The next day, I had decided to pay this bonus out of pocket and resign on principle. It must be said that I hold nothing against Mr Al-Fraih till this very day. I have always considered him to be a gentleman and I ended up conducting more business with him some years after this incident. This resignation had cost me a lot of money however. I left at a time when we had a good number of projects running – with two major construction sites that were more than two thirds complete. People in the construction industry will tell you that in such cases, most of the investment would have been already forked out and most of the hard planning done.

What followed?
This was 1984, so with Labour still in government, returning to Malta was not an option. We moved lock, stock to London – where I experienced yet another equally interesting phase in my life. I started off with the refurbishment of houses into apartments, leading me to the purchase of a 93-bedroom hotel refurbishing it completely and reselling it a year later. One thing led to another and in the late 1980s I got involved in a massive project in Portugal. We had purchased 1,000 tumoli of land, on which to build 100 villas, an 18-hole golf course and a tourist village. I still can’t fathom how we managed to pull this project through with all the difficulties we encountered. A corrupt architect in the municipality had mysteriously lost our file. By miracle, just inches away from loosing everything, the Portuguese authorities had resolved the matter – all thanks to a very helpful mayor who had re-arranged for the issue of permits within weeks. By 1993, we had sold all of it.

Did you not consider investing in Malta after 1987?
The day after the 1987 elections I came to Malta to celebrate. In my time here I decided that I wanted to create a state-of-the-art project in Malta. Just before leaving in 1971, the owner of Harley Street Nursing Home in London approached me to build a private hospital in Malta to complement his Harley Street facilities. With Mintoff in power, the idea had evaporated. Once PN was now back in government, I thought it best to take over from where I had started. I had joined another Maltese businessman and spoke to Minister Louis Galea, to look into the possibility of pushing an amendment in the legislation in order to enable the operation of a private hospital. Although the Minister thought that it was too early a call for such a change, he had suggested a meeting with the Order of The Knights of St John, who also had a similar interest. Unfortunately, we never managed to get the idea off the ground. Some time after, I had seriously considered a second idea – that of taking over Tigne Point and create a state-of-the-art project in the area. Teaming up with Angelo Xuereb in 1989, we spent a small fortune in consultancy to ensure that every aspect of the Tigne project would be looked into. When we eventually submitted a proposal for this project, the Prime Minister had informed us that the Government was of the opinion that it was too early for such a development to take place! Eight years later, the Tigne project tender was issued, to which Angelo and myself applied separately. Although I pre-qualified, I worked out that with the specifications imposed by the tender, the project would have never been feasible. This led me to address a letter to the Prime Minister, in which I quoted twelve reasons why I withdrew my application, explaining my disappointment to the way this project had turned out. Only two companies ended up applying. What turned out to be even more disappointing was that gradually all the twelve restrictive conditions mentioned in my letter to the Prime Minister were removed from the contract specifications or waived. I decided to let go of all this. I did not want to get involved in any controversy and to be quite frank, I had better things to do. Because of these two experiences, I decided to never invest in anything major in Malta.

You are known for a mega investment in Italy. What did this consist of?
In 1990 I was involved in the purchase of land in Tuscany, close enough to Siena. This was a dream property consisting of a Monastery built in 950 A.D. on 740 Hectares of land. Our initial plan was to set up a golf course, a residential area, a hotel and spa… the works. The issue of the permit for the refurbishment of the monastery took five years to arrive. When communism collapsed in Italy, the raison d’etre of the Christian democrats shut down with it. In practice, the Italian political situation in the 90s (albeit more peaceful) was in chaos and led to a business disaster. With this situation, coupled up with the fact that Italians tend to be very provincial, we sold the monastery and eventually it was converted it to our designs anyway. For a while, we still kept the agricultural side of the business going, in which I learnt a line of business that was completely new to me. In true Tuscan style, we dedicated ourselves in producing some excellent Chianti most of which was sold to the prestigious vintners Antinori. Most of the agricultural land was sold in desperation at the slow progress achieved with the Authorities. Seventeen years down the line, we are still waiting for the approval of the construction of a hotel on this land.

How long have you been retired for? What led you to this decision?
It was more or less a gradual process. I had decided that I needed to slow down, and since I still have business interests in Italy it took me a number of years of coming and going until I finally decided to move back to Malta as a legal resident. This happened 3 or 4 years ago. Mind you, I am still involved in business in London and Italy. Retirement is a big word. I would find it difficult to stop completely. On the other hand, there were times in my life where in a month I’d visit six different countries. There comes a point in life where you have to wind down, and I did. Now I dedicate a lot of my time to the Rotary Club in Malta, of which I am President.

If you had the power to go back in time, what would you have done differently?
Nothing at all. I love the way my life turned out. I had the energy and enthusiasm I needed to follow my dreams and embark on many adventurous projects. Of course, from a business point of view, it is impossible to be completely free of certain regrets. In any case, the ups and downs of business are all part of the game – and it is this roller coaster that provides the excitement that this type of business brings with it. I was lucky enough to establish myself internationally. I have not only been very lucky to work in a line that is free from restriction of size, but also to have visited the world.

How did your activity in Rotary come about? Were you ever involved in clubs or charities while you were at the helm of your business career?
I got involved in Rotary Club about seven years ago as a member and eventually became President. I find this type of work extremely fulfilling. Admittedly, I didn’t have much time on my hands for charity work in the most active days of my career, although I was involved in a very interesting project while I was in London. The Malta Charities Association, as called, had started with a small group of Maltese ladies living in London who decided to start organising an annual cocktail party in which funds are raised for charity organisations in Malta. I joined them about three years after it started. Year after year, the event grew and it became a fully-fletched organisation of which I was Chairman for a number of years. In my last year in London we raised £55,000 at the annual event. The support we had for this was incredible. A number of Maltese artists used to support us by donating painting and sculptures that were auctioned during the event. In the mid-nineties we sold a painting by Kenneth Zammit Tabona at £2,500. The Association is still very active and successful today.

What about your children? Where are they now?
I have three daughters and a son. The eldest daughter is an osteopath residing in Sicily whereas her younger sister is a doctor based in North West Pakistan with Medecin Sans Frontier. My third daughter is a nutritionist and lives in Wales. The youngest, who studied politics, is now working in a think-tank based in London. With their upbringing, they have learnt how to be citizens of the world, while appreciating their Maltese identity.

What else, besides Rotary, are you into now that you have more time on your hands?
Wine is one of my greatest passions. We produced Chianti commercially in Italy for a few years, with a produce of 160 Kilohectares. I love buying wine and learning about it. I do not consider myself a wine collector though. It is not worth preserving wine with the risk that by the time it reaches its optimum, my palate would have deteriorated with old age. I purchase good wine and enjoy it with friends and family. I also read a lot, mainly books related to history and politics. And as my close friends are aware, I am also a keen entertainer and have a very active social life.