e Malta Business OBSERVER
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June 25, 2020
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EDITORIAL
Not out of the woods For the past few months, COVID-19 has dominated local headlines and the general public’s attention, with many spending their days waiting for an update on the numbers of infected and recovered, while businesses have been scrambling to contain the financial fallout from the pandemic. But, while we have all been taken up with the minutiae of the developments in the coronavirus crisis, and occupied with trying to mitigate the damage, another, more earth-shattering, national emergency was waiting in the wings. For, the recent Court revelations during the public inquiry into the murder of Daphne Caruana Galizia and the proceedings in the compilation of evidence against murder suspect Yorgen Fenech have reminded us, yet again, that all is not well in the state of Malta – and it hasn’t been for a while. And, while Prime Minister Robert Abela’s brave move to initiate the expulsion of Konrad Mizzi this week is to be celebrated, why did it have to take that long? Who has gained from this delay? Why did the current administration bring a country to the brink – with international institutions threatening to blacklist us for failure to address moneylaundering shortcomings and for systemic flaws – before taking action? These ques-
tions have been asked before, and they will continue to be asked until credible answers are given. In addition, this week’s revelations – that Joseph Muscat asked his Chief of Staff to stop Yorgen Fenech absconding, as well as yesterday’s news that Fenech knew in late 2016 that an early general election will be called – point to one imperative: Joseph Muscat needs to be investigated on a number of fronts. Malta’s reputation is on the line here, and it’s been dragged through the muck these past few years. This has had a tangible effect on the health of the island’s business community and its ability to operate seamlessly with international partners, without the taint of corruption hanging in the air.
“Malta’s reputation is on the line here, and it’s been dragged through the muck these past few years.”
Moreover, the social instability this has caused has also impacted consumer appetite, although, incredibly, someone needs to explain to former Home Affairs Minister Manuel Mallia that civil society is not to blame for this. Rather, as Ombudsman, Anthony Mifsud, pointed out this week in the opening lines of his annual report, civil society has become a force to be reckoned with, and a check on the “negative corruptive ties between big business and the public administration”. And, it is, indeed, this toxic relationship which needs shattering, for the good of Malta’s democracy, and for the economic well-being of honest, hard-working businesses and entrepreneurs, and Prime Minister Abela needs to continue making tough decisions for the good of the country. Malta’s progress can no longer be sullied by the misdeeds of politicians – of whatever colour or stripe – working in cahoots with powerful individuals and holding this country to ransom, and our economic success cannot be built on such unstable foundations, which threaten to destroy the entire edifice. For, while we can hail our success in overcoming the worst of COVID-19 (so far, at any rate), the full economic impact of the political crisis might yet be revealed.
e Malta Business Observer is Malta’s leading business newspaper distributed with Times of Malta every month. Executive Editor Rebecca Anastasi
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BUSINESS OPINION
Yes we can – A business case for the Malta Metro
Dr Konrad Xuereb For the economy and quality of life to thrive, Malta urgently needs to invest in vital mass transit infrastructural projects. A Malta metro that extends to Gozo ticks all the right boxes, and addresses the key challenges facing Malta, namely population growth, sustainable transport and environmental protection. Some of the main questions raised recently by the public are addressed below: How much would the proposed metro cost and how would it be financed? The capital expenditure for the entire metro project, including the anticipated 40 trains, would be approximately €4 billion. Part of the capital costs of the metro link to Gozo (approxi-
mately €675 million) could be eligible for EU funds (for example through the Ten-T programme). Moreover, €1.575 billion would be financed by government bonds with maturity over 20 years. The remaining €1.75 billion would be paid by the national coffers, amounting to €175 million per annum over 10 years. What would the revenue and running costs be? Assuming a population of 500,000 by 2030, and 2.5 million tourists per annum (ie same as 2019), and only one in four using the metro for a return trip every day, then 53 million passengers would use the metro every year. To put this in perspective, nearly 58 million people used public buses in Malta in 2019. Considering a typical fare of €2 per trip, the target revenue from ticketing would amount to €245 million per annum. Revenue from leasing space in stations, and from advertisements, would generate a further €55 million per annum. The total target revenue would therefore amount to €300 million per annum. maintenance Considering costs on the whole metro system of €75 million per annum, en-
ergy costs of €15 million per annum, operating costs of €40 million per annum and a further contingency of €20 million per annum, the cost to run the metro would amount to €150 million per annum. How long would it take to recover the investment cost? Given target revenue of €300 million per annum and costs of €150 million per annum, and considering €40 million per annum to service the government bonds, the payback period to cover the full capital cost would only be 30 years. The payback period would be halved if one considers the indirect cost savings, notably the reduced loss of productivity, smaller health care costs, and an ameliorated well-being of the population. How long would it take to build? The metro would be built in three phases. The first (red) phase, would be 25km long with 13 stations, taking five years to construct. The second (blue) phase, would be 10km long with four stations, taking a further two years to build. The third (green) phase
would be 15km long with three stations, taking another three years to construct. Detailed studies would take five years prior to commencement of works. This amounts to a total duration of 15 years from the commencement of studies to the completion of the entire metro system. What about commuting time? The proposed Malta metro consists of a single metro line. It captures the densest zones of population (urban centres, tourist hotspots and business centres) with the shortest possible length of metro. It would take merely 32 minutes by tube to travel from the airport (MIA) to Victoria, Gozo, with a train departing every 5-10 minutes. The proposed metro would also address the key challenge facing Gozitans – that of being able to commute to key destinations in Malta quickly and reliably. What about the waste generated? The total amount of inert waste generated would be ~4 million m³. Subject to detailed environmental studies, the inert waste could be used for land reclamation to form a nature reserve.
This could be complemented by an offshore wind and/or solar farm, with the renewable energy created connected to the grid, thus offsetting the energy demands of the metro system. Are there small cities with metros? Small cities, including Lausanne, Rennes, Catania and Brescia, have metro systems.. Lausanne in Switzerland only has 140,000 inhabitants and is the smallest city in the world to boast a metro. Over 45 million people use the metro every year. Would the metro generate considerable employment? In addition to the hundreds of workers involved in building the entire system, the metro would create direct employment for well over 1,000 people, in addition to considerably more indirect employment to cater for complementary services. Dr Konrad Xuereb, is a Director at KonceptX, an architectural and structural engineering firm with offices in Malta and London. He holds a doctorate in structural engineering/future-proofing buildings from University College London.