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In a ideal world, Austin Gatt says state-owned TV would not exist. Some heartening words from the minister responsible for PBS
Investments Minister Austin Gatt does not mince his words. With the many decisions he takes it’s the financial bottom-line that counts. Even the election result will depend on the financial bottom-line for every voter. Frankly, he concedes, the PN will surely lose if it fails to improve living standards. That trademark frankness, Gatt’s brusque manner and dismissive attitude with opponents, does not even absolve his own party of criticism.
 Asked whether it was wise for the PN to hijack his futuristic internet city’s name by tagging it to the Independence Day slogan “Int@SmartMalta” at a time when discussions with Tecom were still at a delicate stage, Austin Gatt replies with a resounding “no”, claiming he only learned of the slogan from the newspapers.
“We are still negotiating with the Dubai investors. I am making it very clear that although the project is close to my heart and I want it to materialise, I am not willing to do the project at all costs.”
The project has attracted its fair share of controversy after the much lauded internet city was revealed by MaltaToday to constitute just 19% of the land at Ricasoli being allocated for Tecom: the rest is a big property development project. Gatt’s ministry claimed the figure was irrelevant to the 5,600 job creation commitment the Dubai investors are supposedly going in for. But why didn’t he declare from day one, that Smart City would have included villas and apartments?
Gatt insists it was written in black and white since the first statement by the ministry on the project back on 23 February. Indeed, the choice of words in the ministerial statement did hint at a residential element alongside its ICT core, but the words “real estate” or “property development” were well hidden behind euphemistic phrases like “a significant component of the site will be developed as open space enhancing the environmental quality of the ICT and media business park, lodging, tourism and commercial areas of the site.”
Smart, really smart. Then on 22 March when the heads of agreement with Tecom was signed the ministry gave a clearer hint, acknowledging that “the project will include a lodging area and other activities to help attract knowledge-based operations to the site.”
Now isn’t there more than a semantic difference between real estate and a “lodging area” catering for the project’s employees? Gatt insists the reference made to “lodging” was a clear indication that the project included a residential component, pointing out that the 440 villas and apartments will cater for 8% of the internet city’s working population.
But will Tecom also sell these apartments like any other real estate agent? “They will have 440 villa and apartments. Obviously they will be selling or renting these properties. They are not here for charity. They are here to make money.”
Gatt’s major defence for allowing the Dubai investors to invest in property is that the residential component is an essential part of the concept behind the Dubai Internet City the government wants to emulate. “The DIC concept consists of ICT offices, commercial areas and lodging areas. If we do not want it, we don’t do it… we cannot benefit from the advantage of 5,600 jobs without including all three components of the concept… Our premise was that of importing to Malta the Dubai Internet City model which is the most successful information technology hub in the world.”
Still, Gatt is infuriated by any notion that only 19% of the project will be dedicated for ICT, proffering other figures showing offices rising up to six storeys while the rest of the project will be mostly limited to 2-3 storeys. “If the open spaces earmarked in the project are not taken into account and one factors in the number of storeys, it emerges that 48% of the built up area will go to ICT, 28% will consist of commercial development and only 24% will be residential. The ICT component will guarantee 3,600 jobs and the commercial component will guarantee 2,000 jobs.”
But recent Maltese history is full of examples of hotels being transformed into apartments which do not create jobs. Will the government guarantee that the two hotels in Smart City are not transformed in to apartments? “It has already been agreed with the Dubai investors that no change of use will be allowed without the consent of the Maltese government.”
Gatt also reveals that the ground rent paid to the government on the land at Ricasoli will vary according to the use of the land. “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.”
PBS is another hot potato in Gatt’s ministerial brief. The new chairman of the PBS editorial board John Camilleri had served as PN administrative secretary and also as personal secretary of former Prime Minister Eddie Fenech Adami. So doesn’t John Camilleri now impinge on the impartiality of the national broadcaster?
“I am absolutely against the idea the integrity of a person is in any way tarnished if he was once upon a time involved in politics. John Camilleri should be judged on the merits of his actions and not on prejudice.”
Gatt also points out that Camilleri is no longer involved in the political fray, his term as PN administrative secretary having expired 20 years ago while his stint with Fenech Adami ending back in 1992. But in order to defend Camilleri’s appointment, Gatt goes as far as comparing the political independence of a private newspaper with that of the national broadcaster.
“Roger de Giorgio led the PN’s electoral campaigns till 1996,” he says about the MaltaToday co-owner. “He used to lead the party’s newspapers and NET TV until 2000. Does this mean that Roger de Giorgio is not independent in his thoughts? Saviour Balzan was an AD candidate… does this disqualify him from being the editor of MaltaToday?”
But neither Balzan nor de Giorgio have been appointed to occupy a key strategic position in a public entity; they simply own newspapers and owe their loyalty only to the readers of their newspaper rather than to the state. Don’t the rules in a private enterprise differ from those in a public entity?
Gatt insists that when it comes to measuring political independence the same yardstick applies. “Roger and Saviour own a newspaper which proclaims its political independence despite their political background, and rightly so. My argument is that one can still be independent despite ones political background.”
The PBS currently has two captains – Tourism and Culture Minister Zammit Dimech who is responsible for the station’s public service obligation, and Austin Gatt, who is responsible for its financial well being. Gatt says this division in powers is the only way to transform PBS from a financial bottomless pit into a viable enterprise. “PBS started from a situation where 20% of its funding came from licences. Gradually PBS started absorbing 100% of licences. With the excuse that PBS had a mission as a public broadcaster, PBS had no bottom line. At this rate Lm1.2 million a year from licences were not enough and the station made Lm300,000 in losses on top of that.”
The remedy for this malady was creating a structure, which gave a fixed monetary value to the public service obligation. “By allocating Lm500,000 to finance the station’s public service obligation, Zammit Dimech decides on what kind of programmes are needed.”
Still the PBS’s accounts show that it has not even spent Lm331,252 of last year’s half-a-million subvention. How on earth is this possible when many are worried that the station is losing its public broadcasting mission?
Gatt insists this is not the case and claims the difference is the result of a formula through which if programmes subsidised by the subvention generate advertising revenues, a percentage of that revenue is paid back to the government. “When programmes financed through the PSO generate advertising revenue, 30% of this revenue has to be refunded to the government. If a programme costing Lm1 million generates Lm300,000 in adverts, Lm100,000 have to be refunded to the government.”
Gatt explains that when this happens the Ministry for Tourism and Culture can either deduct the percentage of advertising revenue it is owed from the total amount given to PBS – by giving PBS Lm100,000 less from the subvention – or by saving this money in order to give it to PBS the following year.
In 2005, the chairman of the editorial board Fr Joe Borg noted in his annual report that the PBS was abandoning its public service mission because the majority of programmes are of a commercial nature. Gatt admits he is “a bit concerned” but insists the solution is not to revert to the old system but to persuade the Ministry of Finance to allocate more money for the station’s public service obligation.
“We have set two simple aims: that of ensuring that PBS breaks even and that of ensuring it fulfils its mission by providing more public broadcasting. To reach both ends one has to increase the subvention by an extra Lm500,000.”
Austin Gatt insists the financial bottom-line is essential in PBS just as it is in any private company. “Even your newspaper cannot survive without adverts. How can Saviour write his articles if half of his newspaper is not filled with adverts?”
But Gatt fails to see any difference between a private newspaper and the public broadcaster. “The reality in PBS is the same. The government can say I do not want adverts. But than it has to fork the money by increasing the public service obligation.”
Despite his insistence on the company’s bottom-line Austin Gatt concurs with the view that PBS has a mission. “Today it has even a greater mission as it is the only serious station in Malta and the only one which is independent from politicians. But ultimately it has to survive on money.”
More ominous is his revelation that “in an ideal world” where independent private TV stations dominate the airwaves, Gatt would see no role for a state-owned TV station. “In my opinion, the state does not need to own a station. It should encourage the emergence of serious private stations and farm out the public service obligation to these stations. But we have not reached this stage.”
For the past months Austin Gatt was viewed as the main obstacle to the arrival of low cost airlines to Malta in his bid to protect Air Malta, writing soon after the advent of LCC that Air Malta would not simply survive, “even in an altered market – but will also return to profitability.”
Air Malta was alarmingly anxious with LCCs, in a confidential report warning it stood to lose Lm23.6m if Ryanair and easyJet reach a traffic of 1,540,000 passengers. What had changed?
Gatt says the report was a reply to an MHRA report on LCCs, which he says was based on incomplete information, and that the Air Malta report was written at a time when LCCs wanted a subsidy on the volume of passengers they bring, rather than on specific routes. “This would have had a very negative impact on Air Malta as it would have meant that low cost airlines would have operated in established airports like Heathrow where Air Malta is already established. The situation has changed now as the government has only agreed to subsidise certain routes. This will not penalise the routes which are profitable for the national airline.”
Despite early retirement schemes, Air Malta is still overstaffed. Will it have to cut down on staff to return to profitability? “Not necessarily. In the present situation if one were to factor out the increase in the price of oil, we would have ended with a loss of Lm1 million with all the workers in Air Malta.”
Has the voluntary retirement scheme envisaged in the pact with the unions reached its targets? “As regards numbers it was a success. We aimed at 10 per cent and that it is what we achieved. The problem is with the mix of the workers which have accepted the package.”
But Gatt insists the main problem with Air Malta was not the number of workers – the airline just couldn’t foresee the number of vacant seats on each flight until it was too late. “The administrative change which has taken place and which is kicking in this financial year is resulting in greater yields from the same amount of passengers. With a professional seat management system in place we can foresee the seat allocation and therefore our seat pricing system can fluctuate from day to day.”
A new season of collective agreement negotiations is about to start and fireworks between the GWU and Austin Gatt are already flaring. Can enterprises like Air Malta and Enemalta which remain overstaffed as a result of past political meddling, be restructured without reducing superfluous workers?
Gatt dismisses the perception that he advocates an “extreme capitalist policy” through which workers are disposed off when they are not needed. “Experience shows otherwise. One should practice a policy based on a proper allocation of resources. It is true that a number of superfluous workers are a drain of resources. But if the unions are reasonable one can always find ways of finding useful work for everyone. Problems emerge when unions adopt a militant and intransigent position.”
Although speculation on a snap election has mounted during the past weeks, Gatt is definitely not in an election mode and thinks the election is far away, denying that we’re already in the prelude of the electoral campaign. Is he worried about disgruntlement among Nationalist voters?
“The disgruntlement which I hear in my district is completely different from that in Sliema. For example the environment is not an issue in my district but am sure that it’s the top priority in Sliema.”
He also points out that although a number of Nationalists could be disgruntled about something, it does not mean that one would not vote for the PN. “Basically in a country which is fully democratic, where there are no conflicts of principles… people will decide on the basis of their pockets. It all depends on how people are living and the prospects they see for their children.”
So will the PN lose if people do not see any improvement in their living standards by the next election? “Yes, in that case we will definitely lose the election.”
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