[ANALYSIS] Sun shines but who is making most hay? Five risks Muscat faces on Corinthia

The Malta Developers Association is on the warpath over a deal to allow IHI plc a 99-year extension for land leased on St George’s Bay and develop 100,000 square metres of residential and office space – thereby lifting a restriction on touristic development – for just a premium of €17 million. Is this the first sign of cracks in the coalition, which kept Muscat in good graces of the business establishment?

Turn back the clock to 2007, when a record 11,343 dwellings were approved under the Lawrence Gonzi administration a year after local plans had allowed higher buildings in most towns, and development boundaries were extended to the benefit of the developers’ lobby.

However… stricter planning rules after 2008 introduced to assuage discontentment in the PN’s pale blue heartlands, left smaller developers even more frustrated at seeing bigger cats pigging on land acquired in previous land grabs.

Added to this was the impact of an economic downturn, which meant that developers were making less hay, as the sun lost its shine. The PN had simply lost its ability to keep everyone in the construction sector happy… and the perception that some animals were more equal than others, crept in.

By 2013 Malta saw a new realignment, with Labour’s Joseph Muscat managing to forge an unofficial coalition with the newly-formed Malta Developers Association. Upon being elected, it was Muscat’s turn to keep everyone in the construction industry happy by opening the floodgates of development through astute measures, like translating height limitations in local plans from storeys to metres, injecting new life in the construction industry.

Amid an economic boom, permits for dwellings swelled from just 2,707 in 2013 to 9,006 in 2017. It was time for developers to follow Sandro Chetcuti’s advice to make hay while the sun shines, without even resorting to drastic measures like extending development zones.
Does the latest turn – where the MDA actually warns of economic suicide if government distorts the property market by selling public land on the cheap and even threatening legal action – suggest that the times have changed again and what risks is Muscat facing?

1. Muscat has lost the ability to keep everyone happy

Prime Minister Joseph Muscat promised that his governement would continue with its reformist agenda
Prime Minister Joseph Muscat promised that his governement would continue with its reformist agenda

Widening the circle of beneficiaries of planning policies and decisions is one major factor distinguishing Muscat from previous PN-led governments, which were perceived to favour a clique.

In this way, Muscat has increased the number of those who have a stake in maintaining the status quo. But by offering public land on the cheap to Corinthia, Muscat risks fuelling the perception that some ‘animals’ are more equal than others.

The MDA had always been sceptical on land grabs benefitting individual companies. They had objected to the manner in which the ex-ITS site deal was valued and passed on to the Seabank Group for €15 million. But this time around, they are even more vociferous. Muscat’s failure to get a Paceville masterplan approved before deals are signed with individual developers suggests that he is facing conflicting pressures from different owners who want their piece of cake. This risks creating an unholy alliance between the developers in the area.

Yet Muscat probably still has enough cards in his sleeves to keep everyone happy. Land reclamation, housing projects and the pending revision of local plans may all be cards which Muscat can use to win over developers who are now frustrated at seeing Corinthia getting a preferential deal, but who would be willing to oblige when they are the ones to benefit.

2. He has provided an opportunity to the PN to re-enter the game

PN leader Adrian Delia
PN leader Adrian Delia

By pressing on with the Corinthia deal Muscat may have given the PN the opportunity to reconnect with the developers’ lobby on an issue which also angers environmentalists.

It is therefore no surprise that Adrian Delia, who had been very lukewarm on confronting the DB group over its high-rise project, has taken a firmer stand against the Corinthia deal. Corinthia may have miscalculated opposition in the PN, banking on its historic ability to wield influence with both parties, having offered jobs to former ministers like Karmenu Vella (PL) and John Dalli (PN).

Ironically one of the last land deeds approved by a Nationalist government was a 65-year lease for the Malta Fairs and Convention Centre at Ta’ Qali to Catermax, a joint venture of the Corinthia and Vassallo groups. The deed, which waived a €1.2 million “performance bond” originally envisioned in the initial tender of 2006, was unanimously approved by both sides of the House of Representatives in December 2012.

In this particular case it was former PN leadership candidate and PN executive member Alex Perici Calascione (who is married into the Corinthia owners Pisani family) who set up a meeting between the Corinthia Group and Delia. Moreover, the Corinthia land grab may be one issue that keeps the party united. For after opposing the deal with the DB group, the Busuttil faction is duty-bound to oppose a project based on the same valuation. Yet judging by the state the party is in today, it is doubtful whether its opposition to the project will result in any electoral inroads.

The re-opening of a communication channel with the developers’ lobby may have an impact on the party’s financing even if this risks conditioning the party’s stance on other environmental issues.

3. Developers are worried about their investments

MDA boss Sandro Chetcuti
MDA boss Sandro Chetcuti

Apart from complaining about the absence of a level playing-field, developers have hinted that the Corinthia deal may have a knockdown effect on property prices especially in the upper end of the local property market in areas like Sliema. The counter-argument to this is that projects like the Corinthia’s tap into the high-end market which feeds on the insatiable demand among the global rich. But developers fear that projects like Corinthia’s risk excluding them from the lucrative high-end market, thanks to land sold off on the cheap.

4. Discontentment is brewing among Labourites

Labour MEP Alfred Sant
Labour MEP Alfred Sant

Beyond the cracks in the ruling class, projects like Corinthia are bound to create ripples among Labour-leaning voters who remain critical of an economic model which uses public land to subsidise private residential development. Former Labour leader and MEP Alfred Sant has already questioned this model when he described a planning permit as a “huge mistake” and a “disaster” in terms of public interest and a continuation of “a series of disasters in terms of the public interest, that have included among others Chambray, Tigné Point and Smart City.”

It is doubtful whether this will, in any way, have an impact on Muscat’s hold in the party, but such criticism of the development model may weigh on the impending leadership contest if Muscat really calls it a day.

5. Environmentalists may find a wider audience

While the allure of glitzy projects remains appealing to a large segment of the population, including many former Nationalist voters who supported similar projects in the past, anger at rampant over-development among an increasingly vociferous segment of the population is bound to increase.

At the moment much of this anger is restricted within a segment of the more educated middle-class. But gentrification may be a double-edged sword, offering a prospect of a trickling-down of wealth but also anguish in communities like Labour-leaning Pembroke, now overshadowed by mega-developments.

Ironically Labour’s unassailable lead and the PN’s state of confusion have made it easier for people to speak up without fear of being automatically labelled PN supporters. For example, residents in Labour-leaning Xghajra have already started organising themselves to oppose land reclamation plans. Muscat himself had to reassure them in a speech he made to supporters in Zabbar.

Movements like Graffitti whose environmentalism is married to a critique of the development model pushed under different administrations may have a field day. The growth of such a non-partisan movement may stun Muscat’s space for manoeuvre to keep all the stakeholders in the construction industry happy for he could become more wary of generating more controversy by tinkering with development zones or embarking on large-scale land reclamation.

Yet Muscat knows that any such controversial decisions have to be taken in the year after next May’s European and local elections, at a safe distance from national elections due in 2022. Moreover, as long as the sun shines many will keep on busily making hay instead of lamenting that some are making more hay than themselves.

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