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James Debono
The Ministry for Investments, Industry and IT has reacted to Business Today’s feature on the Kerala deal struck with Tecom for the Kochi internet city last Wednesday saying any comparisons between the Maltese and Indian deal “need to be made with caution and not by merely pointing out narrow argumentation on the basis of simplified tabulations.”
The Indian state government of Kerala will get a 16% stake in the joint venture with Tecom in the proposed Smart City in Kochi, against the 9% shareholding the Maltese government will get in Ricasoli. The 9% share has been awarded instead of a premium of USD20 million (Lm 6.6 million) for the land.
A 9% stake had also been negotiated with former Kerala chief minister Oommen Chandy, who lost power in an election in 2006. It is not yet clear how much money the Indian state government will have to fork out for its increased shareholding in the company.
The agreement to increase the Indian state government’s share from 9% to 16% was confirmed by Dubai Investment Company chief executive Abdul Latheef Al-Mulla, who led the DIC negotiating team. Negotiations between the Kerala government and Tecom are now in the final stages and the agreement is expected to be signed in two weeks’ time.
The Indian state government will be leasing 995,526 square metres of land in Kochi for 99 years for a one time sum of Lm8 million (RS 104 crore).
The Maltese government will be transferring 358,000 square metres of land in Ricasoli to Tecom for an annual ground rent of Lm65, 000. The Dubai investors will start paying the rent after eight years.
Asked to comment on reports that the Indian state government will get a 16% stake in the Indian equivalent of the Ricasoli Smart City, a spokesperson for the IT ministry said the agreement in Kerala is still to be reached.
“At any rate, if and when such agreement is reached, such comparisons need to be made with caution and not by merely pointing out narrow argumentation on the basis of simplified tabulations.”
Irrespective of what sort of agreement will be reached with the Kerala government, the ministry is convinced that it has concluded an agreement that is fair to both sides. “We believe that if any one of the sides would have emerged as a loser in the process, then the project would fail. Such long-term agreements work only if there is a clear win-win vision shared between the parties. If anyone stands to lose out, it would be pointless entering into such a risk and commitment.”
The ministry spokesperson expressed hope that Tecom will sign up the Kerala Smart City to realise the global SmartCity concept – from which Malta can only benefit. “The fact that the two Smart Cities will grow in synch together with common commercial targets is a unique and fantastic opportunity not only for the new ICT investors in SmartCity Malta but also for the current indigenous ICT industry which can start tapping the enormous potential which a state like Kerala offers in this sector.”
Lessons from Kerala
The imminent deal on Smart City in Kerala showed that even leading critics of the project ended up accepting it. On the other hand it also showed that criticism to the project did not snub the investors and resulted in a better deal for the Indian state government.
In opposition the communist leader V.S. Achuthanandan opposed the project going as far as describing it as an exercise in speculation. But after being elected he took a more pragmatic approach in an attempt to secure the 33,000 jobs promised by the Dubai company.
Under the new agreement the government will not give 100 acres of land free to Tecom as previously proposed. And, in place of giving the company 236 acres on outright sale for a price of Lm2 million (Rs.26 crore), the Government will now give it 246 acres on lease for 99 years for Lm8 million (Rs.104 crore)
The government will further get 16% stake in the joint venture, against 9% promised earlier but the Indian government is expected to fork more money in to the project.
Speaking to the press on 24 January 2006, Austin Gatt had revealed that that 358,000 square metres of land will be transferred to Tecom, a third of which must remain public and accessible round the clock. According to Gatt a total of 75% of the land will be earmarked for buildings that will generate ICT-related jobs while 25% will be designated for lodging.
According to the agreement signed with the Maltese, land use cannot change without the government’s consent and the public areas cannot be transferred to third parties. The government will get its shares instead of a premium of USD20 million for the land. The guaranteed jobs exclude employees that could come from Maltacom or any construction workers.
Though having only 9% shareholding, Gatt claims that the government will have a big say in various issues as the company cannot change its statute, be dissolved or reduce its share capital without the government’s blessing.
Opposition waits
Three weeks after the Smart City deal was announced by Austin Gatt, the documents pertaining to the agreement are still being finalised and reviewed and will be submitted to parliament in the near future, a spokesperson for the ministry told MaltaToday.
Opposition spokesperson for IT Leo Brincat, while welcoming the project in principle, insists the opposition will only formulate its position on the project after seeing all the documentation.
At present the agreement sets a ground rent of Lm65,000 for the land irrespective of whether the land is used for IT, commercial or residential purposes. The ministry justifies this by pointing out that whoever looks at the project as different components misses the whole point of the Smart City concept.
“This is not and will not be a real-estate deal. This is a project, which will catalyse a ghost town into a knowledge-based city providing ICT, media and ancillary services to the global community. If the government wanted to go for a real-estate deal it would have done so but this was never on the government’s agenda.”
This statement contradicts one made earlier by Austin Gatt in an interview with MaltaToday in September: “We will allocate the ICT land in the same way as we grant land for industrial projects like factories. As regards the commercial part we will allocate this land in the same way land is normally granted to hotels. As regards the land earmarked for villas and apartments we will be applying the same yardstick used when land was allocated to residential projects like MIDI.”
The ministry spokesperson insists that Smart City project will not be a real estate project, saying the latter were one-off premia that contribute a revenue windfall to the government. “This commercial element is covered by the 9% equity we have in the project and by the very low (practically zero) level of risk borne by government in the whole undertaking.”
However, the ministry insists that this is not the motive underlying Smart City in Malta. “We wanted to make a clear social economic statement to the South of Malta whilst at the same time make an extraordinary contribution to the country’s economic growth. Smart City will create an ICT and media cluster in Ricasoli which in turn will attract foreign direct investment and which will stimulate the creation of high-value jobs in Malta.” |
