A giant tourism project in the Yeroskipou, Paphos, area, named Eden City with a reported construction budget of around €3 billion, is facing delays and may even be denied by the government because of a bureaucracy-induced glitch in calculating the cost of leasing a chunk of government land.
The planned project, proposed in January 2014 by Hungarian investor Sandor Kenyeres’ ATUM Developments Ltd, will feature hotels, residences, a marina, a mall, restaurants, flats, an art district, and even a man-made island.
Since the proposal was submitted more than two years ago, it has been held back due to various bureaucratic bottlenecks, not least of which is the need to agree the cost of leasing of a prime piece of state-owned land. A negotiating committee, comprising Interior ministry technocrats and representatives from the offices of the auditor-general and the Legal Service, was set up by the government in April 2015, and tasked with finalising the terms of the deal.
More than a year on, its work remains in progress. Talks between the negotiating committee and the investors have stalled over, chiefly, the cost of leasing the land.
“There has been a delay in the negotiation process due to a difference in the methodology used by our company’s consultants and the state negotiating committee to evaluate the land,” ATUM’s country manager George Voniatis told the Sunday Mail.
“Based on our calculations, the scenario supported by the state would render the project economically non-viable, since neither investors nor banks would be prepared to finance its implementation. The company is willing to continue negotiations in order to reach a common understanding the soonest possible. “
And so is the government, a source told the Sunday Mail on condition of anonymity.
“There is a serious distance between the cost estimated by the Land Registry and the price offered by the investors,” the government insider said.
“But, although the government is extremely keen to see this investment go ahead quickly, the political leadership has no say on the matter at this stage – it’s being dealt with exclusively by the technocrats on the committee.”
Nonetheless, Interior Minister Socratis Hasikos has been working on a plan to try to expedite the process by means of a mediating effort without interfering with the committee’s mandate, a source told the Sunday Mail. Although the Interior minister denied having any intention to meddle (“It’s the committee; I have no involvement in this.”) such nudging may well have already happened – in public, and by proxy.
Last Monday, President Nicos Anastasiades left no doubts as to where the government stands. In a televised interview, he was asked about the progress of the proposal amid rumours that it might be turned down over the leasing price.
“If one could hear the outrageous things being discussed, I wonder whether anyone would dare to consider investing in Cyprus,” an indignant Anastasiades told the interviewers.
“You can’t ignore the fact that an investment of over €3 billion might fall through because you want to impose rent [for state land] so high that it risks destroying the deal, thus incurring much more damage to the government.”
Though not explicitly naming them, Anastasiades was referring to the technocrats on the negotiating committee.
“At some point, certain institutions, or government officials, must realise that policy is set by the elected government, not by blind adherence to rigid rules,” the president added, noting that incentivising private investment requires some degree of flexibility.
“How does one calculate the rent for state land? Does he impose rent on the value of the land after it has appreciated by the investment? This is where reform is needed.”
Such quasi-meddling seems fully warranted. According to Voniatis, a green-light for Eden City will translate to the creation of more than 10,000 new jobs in the Paphos region, the generation of a peak GDP growth of up to 3.5 per cent over the 20 years of development, the generation of more than €750 million in direct state revenue, putting Cyprus on the international conference tourism map, attracting more foreign permanent residents to Cyprus, generating cash flow in the local market, and creating opportunities for local contractor companies. It’s just too big to ignore, even if technically the government has no say on the final decision.
Meanwhile, last month, Archbishop Chrysostomos complained publicly that the red-tape induced delays could well put the investor off.
“Thankfully the investor hasn’t left yet – if it were me, I would have left,” he said.
“In any case, I wouldn’t stand for the three-year wait.”
At the time, Hasikos had conceded some delay had been observed, but argued that it was fully justified by the sheer size of the proposed project.
“We will have an answer soon,” he told the Sunday Mail.
“The committee will announce its decision soon – whether the project will happen or not.”
But the archbishop’s thinning patience once more raised questions of the nature of the Church’s involvement in the project. The Church of Cyprus has long been known for its wide-ranging business ventures, which include the tourism and hotel industry, but its financial woes following the 2013 banking meltdown that saw its holdings in bank stock wiped out are no secret.
“The Church of Cyprus’ involvement in the project stems from the fact that our company has signed a lease agreement with it for a piece of land, on which a coastal tower complex with a branded 5-star hotel for meetings, incentives, conferences and events, health and wellbeing tourism will be constructed,” Voniatis explained.
The ambitious project has been regarded with some suspicion from the get-go. Some of its more extravagant features, like the man-made island, as well as the staggering €7-billion figure initially reported, prompted some eye-rolling by the more cynical.
Such scepticism has been unfounded, it turns out. Kenyeres, the billionaire Hungarian investor, has already built a five-star luxury wellbeing centre in the area, named Antara Palace. He has also sunk too much into Eden City to just walk away.
“The investor has already spent many millions thus far on this project,” the government source told the Sunday Mail.
“We are confident he has both the intention and the financial muscle to follow through with his plan.”