Solving the great land debate

David Lindsay speaks to Parliamentary Secretary in the Economics Services Ministry Edwin Vassallo and discovers the recently launched industrial land allocation scheme is far more than a mere question of freeing up land for small industry

Some three years of labour came closer to its fruition last week with the launching of a land availability scheme by Parliamentary Secretary Edwin Vassallo.

The scheme aims to tackle the supply shortfall for industrial space for the self employed and small businesses, for which there is a huge demand but which has not been easily avaliable in the past.

According to Edwin Vassallo, as opposed to simply solving the problem of land availability, the scheme delivers an entire package of solutions.

"Principally we are trying to solve a number of problems in one stroke. The scheme is not just aimed at those lacking adequate working premises but also at residents who have been inconvenienced by the presence of microenterprises within their immediate proximity," he explains.

"MEPA has been addressing this latter issue and through the scheme it is being strengthened in terms of enforcement in this respect. As matters stand, a business operating from an unsanctioned location is given an enforcement order to vacate its premises but these small businessmen would have no alternatives. This leads them to one of two solutions: to start registering for unemployment or to remain there working at the same place, in breach of enforcement orders, for lack of a better solution."

Apart from businesses needing to relocate, the scheme also caters for start ups looking to go into business, perhaps those being made redundant as a result of a restructuring processes being undertaken by many businesses and who are looking to put their acquired skills to work for themselves.

The scheme, through which an estimated 2,200 units would become avaliable, is designed to cope with an expected influx into the market segment over coming years.

A unique aspect of the scheme is that it will be creating industrial parks, as opposed to industrial zones.

The distinction is clear, according to Mr Vassallo, "The scheme is also providing a solution to planning issues as well. In the past industrial zones have been built up in a random, sloppy manner. Someone would have a field that ended up being placed within a scheme for industrial zones, he would then start selling allotments and garages would start being built with no planning, infrastructure or services being thought of, as has been the case in areas such as Tal-Handaq and Mriehel.

"This lack of planning is now a thing of the past. The future holds the type of planning in which we will see industrial parks organised with the proper infrastructure already in place, where mitigation measures and health and safety issues will be properly addressed and in which the environment and residents, if there are any residents within the vicinity, will be taken care of.

"The parks will be managed correctly with environmentally-friendly processes in mind. They will be landscaped with a percentage of land left as open space."

Now when tenants move into an industrial park, they won’t need to spend precious capital on infrastructural considerations, freeing capital for the small businessman to spend on purchasing equipment and machinery.

As such, the first pound spent would be the rental value of his unit. However, if the business fails or is liquidated, as is the case many times with start ups, tenants would be free to move out and move on.

The scheme is more than a scheme or a public relations exercise, according to Mr Vassallo, it’s a question of putting a vision into work.

He explains, "We have been working on the initiative for years, in line with our business plan published last year in which the scheme was identified as an objective.

"The way we are dealing with Tal-Handaq, Mriehel, Zebbug and other industrial zones also forms part of the scheme. The scheme is not just putting out more land for industry, it’s is ensuring we create the right environment for people to work in and in which to reach their full potential.

"Making the vision reality required a large effort, but I would say the biggest struggle, if you will, was not just finding suitable land and landowners to participate, but fighting the degree of prejudice existing against the self employed."

However, the scheme produces a positive multiplier effect and holds the potential of creating employment opportunities for a large number of people.

Mr Vassallo elaborates, "If, as MEPA has cited, the scheme would be putting forward some 2,200 working spaces, that means that the scheme could potentially impact the lives of 2,200 people and their families.

"Among these 2,200 people would be included those who were previously not in an industrial zone and were putting perhaps a whole street to inconvenience through their activities. With this consideration, the scheme can be seen as having a positive impact on whole communities as well.

"This is proof that the government is seeing to the daily issues of our people. If 2,200 units are eventually approved for development this would lead to the potential creation of some 4,000 jobs.

"Additionally, it would also mean that the project, if the 17 sites it encompasses had to be built up in a year, as is intended, would create a project of an estimated Lm12 million.

"However, we could end up with more or less than 17 sites but the truth is that we are looking at putting onto the market a number of sites scattered around Malta and Gozo respectively, with a view to the business location aspect of these microenterprises.

"Someone working in the south and who also has his customer base in the south would not accept a space, even if it were free of charge, in the north. By spreading the scheme throughout the Islands, we are being enabled to provide much needed industrial space in the right place and at the right price."

These 2,200 units would be developed by private developers on their own land by landowners who have had their land sanctioned by MEPA as suitable for industrial zones.

These private developers would be issued a building permit against two conditions – that the construction is completed in one year and that, if the need were to arise, the government retains an option to intervene at a maximum intervention rental rate of Lm6 per square metre.

Mr Vassallo elaborates, "This maximum intervention rate means that, if the market mechanism is somehow not working, the government would be able to intervene with this corrective action.

"We set a maximum of Lm6 because, at the moment, rates for such land average at Lm12 per square metre due to a scarcity on the market. But if we double or triple the land available, we believe that Lm6 is the level at which the demand-supply curve would meet on their own without necessitating government intervention.

"We are trying to help the market satisfy its own needs, which is why I believe we could go even cheaper than the Lm6 maximum by letting the market regulate itself. As long as we put the right supply on the market, market forces will dictate.

"In a way the government will also act as an agent between landowners/developers and those looking for space.

"As such, even if someone has built up an area and has not found occupants, the government would help to bridge the gap and find the right people to occupy it.

"On the other hand, if someone has been given a development permit on a previously relatively worthless piece of land that becomes valued in the thousands once developed and, for some reason, he decides not to rent while there are people asking for land, then government would intervene in that case as well.

"This type of scheme has never been carried out before, which is why we have been suffering from a serious lack of industrial space. We have some 300,000 square metres of land lying idle because landowners have the right to not develop or use the land. The scheme is, of course, 100 per cent voluntary for landowners, and the rights of ownership are being completely respected."

The scheme is currently in a six week phase of public consultation, which will be followed by the review of public submissions, the approval of revised documentation and finally approval by the minister and the House of Representatives – all of which, Mr Vassallo explains, could be concluded within eight to nine weeks.

Following these formalities, by December development plans should be forwarded by developers and Mr Vassallo expects that the beginning of next year would see work beginning on the industrial parks.