Government could have gotten more from aquarium concession, NAO finds

A National Audit Office has found that while the concession national aquarium had reached its predetermined objectives, more could have been done to ensure a more balanced partnership between the public and private sectors.

Such agreements, the NAO found, should “reflect a more balanced partnership where risks and benefits are equitably shared between the two main players”.

The concession agreement was signed between the Malta Tourism Authority and the contractor in 2011. The aquarium opened its doors in 2013.

The contractor had spent a total of €15.4 million on the design and infrastructure of the aquarium, €7.5 million of which were European funds and €1.35 million were the government funds.

The NAO noted that the a 50-year rent-free concession, as had been granted to the operators, was longer than the norm “since it limits government’s opportunities to revise the agreement at more frequent intervals”.

“While the Service Concession Agreement was forward looking and included claw-back clauses, such provisions did not fully anticipate the potential of significant positive changes to the economy or tourist arrivals,” the NAO found.

The NAO pointed out that by 2017 there was an annual increase in tourists visiting Malta of 16%, which translated into a 25% increase in visitors to the aquarium. To this effect, envisaged profits increased from 12.69% quoted in the Cost Benefit Analysis (CBA) to 16.2% estimated by MTA.

However, as government is not a beneficiary of revenues generated by the project, a financial imbalance was created in the returns attributable to Government and to the Contractor within the project period.

Despite this, the MTA argued that revenues were not a priority when the project was originally discussed as the government said it was after the positive economic benefits within the project's locality.

While not necessarily clearly visible at the time of project commencement, such a financial imbalance could have been ratified through a much stricter claw-back clause, the NAO said. "In this case, this could have entailed compensation for the land concession, which would have become chargeable or reinvested in the development of the Qawra / Buġibba area if company revenues far exceeded the original estimate."

Within the 50-year Service Concession Agreement period, the government could have been compensated more fairly and would have been entitled to a share of the financial benefits emanating from the project if a claw-back clause was included.

The NAO said that this should serve as a reference for future deals similar to this nature.