IT TOOK more than a year for the government’s joint venture with Qatar for the development near the Hilton Hotel in Nicosia to be finalised. There were times when it seemed the deal would fall through because of the big divergence in the two sides’ valuation of the land which would determine the level of the investment. In the end, the Cyprus government was forced to significantly lower its valuation in order to ensure the project would go ahead.
Inevitably, it is now under attack from all the political parties, with the exception of AKEL, for having agreed a very low value for the plot, which means Qatar’s investment will be low and that state will have to borrow money, together with its partner, to complete the project. In order to deflect attention away from this reality, the government camp is now talking about the big net profits that will be made, claiming these will be between 150 and 200 million euros. What these figures are based on, nobody knows, but we suspect that the forecasted profits are being cited in order to justify the low valuation of the land – low price of land, higher profits.
All the current criticisms are of the government’s own making. It sold the proposed project as the cleverest deal ever struck by the Republic, creating the impression that all we had to do was name a price and the Qataris would come running to us with their millions, because they were extremely keen to invest in Cyprus. The government did not deceive anyone, but it was naïve enough to believe that this was what would happen. This is why it announced the project without first agreeing on the value of the plot, which would determine the level of the investment by Qatar; the value was estimated in excess of €100 million.
But the Qataris are obviously hard-nosed businessmen not in the habit of spending money for the sake of it. Not only did they hold out for a much lower price for the land, but in so doing they have, in effect, turned the project into a partnership with the Cyprus state, which was a pretty smart move on their part. They are happy to give a share of the profits from the eventual sale of properties but in exchange the state will also invest money in the project. Our state will be behaving as an entrepreneur, even though all the business decisions would be taken by its business partner, which is no bad thing.
The truth, however, is that the government made a complete mess-up of the enterprise. It set out for a specific deal and ended up with a completely different one, which it was forced to accept because the embarrassment is less than if the deal fell through completely.
