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Govt involvement in MidTown scheme 'could have negative repersussions for Rock'
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The decision of the Government to negotiate with the developers of the Mid Town project to become a majority shareholder in the first phase of the development is a serious error of judgment which could have negative repercussions for Gibraltar.
It exposes the Government to a number of unnecessary risks which it would not need to take if it was able to repossess the land and allocate it to another developer.
The reason that the Government have given for their policy decision is that there is a general lack of office space which is proving an obstacle for companies seeking to establish or expand their operations in Gibraltar. They have argued that normally this demand for office space is met by private sector developers but “because of the international banking crisis and credit crunch, it is almost impossible for private developers to obtain bank finance for such projects.”
They added that if the Government became a majority shareholder on the development of the first phase of Mid Town, this would ensure that “taxpayers get their fair share of development profits.”
The Government did not explain in their statement that the reason for the lack of office space "is because they relocated the hospital into an office block at Europort, instead of constructing a purpose-built hospital elsewhere," said the Opposition.
And add: They also did not explain that the taxpayer would be open to the majority share of the loss as opposed to the profit if things do not go according to plan nor what happens with any possible profits on other phases of the project which would presumably be easier to sell once the first phase has got off the ground.
Moreover, the argument that the Government is now putting forward to defend its policy is not consistent with what they have advocated in the past. Their view has been that for the Government to become the developer of aspects of the project, “would have exposed Government and not the developer to the risk of cost overruns”.
They have also claimed in the past that “private developers secure better prices from contractors than Governments”. It is therefore very odd that they should be so concerned about cost overruns and prices from contractors at one point in time, and then at another point in time negotiate the majority shareholding in a private development as if the same concerns no longer apply.
Commenting on the matter, Shadow Minister with responsibility for development and planning Dr Joseph Garcia said: “Quite apart from all this, it is not clear whether the developer was willing to look at other ways of financing the project other than through banks. For example, the developer could have negotiated the same deal with another private entity in exchange for shares in the project in the same way as is happening with the Government. They could have taken the decision to sell part of the land for the project or establish some kind of joint venture company through which the capital for the project could have been made available.
"The impression has been given that Government intervention was a last resort when this may not necessarily have been the case. The Opposition reiterate its view that the manner in which the Mid Town project has been handled from the very outset leaves much to be desired.”
14-09-10
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