We escape the biting cold wind as the doors of the Prime Minister’s office, which is also one of the oldest buildings in Valletta, shut behind us. I am asked to line up to greet the Prime Minister of Malta and Dr Lawrence Gonzi is just what you would expect a Prime Minister to be – he offers a firm handshake followed by a diplomatic smile.

Only the day before, an unusual event in Maltese politics occurred – every member of Parliament, including the government and the opposition, voted unanimously to approve its SmartCity project. For once, the two sides were in agreement. It is difficult to tell, but Dr Gonzi seems pleased.

“It’s looking good,” he says, referring to SmartCity. “We are hoping that in a few weeks we will start work on the site itself and we can see some development.”

Things are looking good for Malta. Although it is a small island with a population below 500,000 and natural resources that are few to none, Malta has attracted a considerable amount of attention from foreign investors in Europe and the Middle East. Joining the European Union in May 2004 has cast more light on the island, but nothing has granted it such massive publicity as Dubai Technology, Electronic Commerce and Media Free Zone Authority’s (TECOM) SmartCity project. As Dr Gonzi describes it: “This project has put Malta on the global map as an IT-oriented country.”

He adds: “People are asking why Malta? How come this Dubai model, which has been so successful, chose Malta of all the countries in Europe?”

What’s more intriguing is the fact that SmartCity will become the first internet city in Europe. Besides enormous job opportunities, the $300 million project will create 5,600 guaranteed jobs in IT. This is expected to reach 10,000 when non IT-related positions are taken into consideration. A study indicates that it will contribute, in a conservative scenario, a 10 per cent growth in GDP. Although those might be perceived as humble figures, as Dr Gonzi puts it “for an economy like Malta, these are fantastic numbers.” He adds: “It is equivalent, if you transpose the proportion to other countries like the UK, we would be talking about an enterprise employing about 300,000 people at once.”

In addition to creating jobs, the project will bring in non-existing sectors that are IT and non IT-related. When it is completed in 2015, SmartCity will present young graduates with career opportunities in specialised areas such as software and media.

Dr Gonzi believes the SmartCity deal is clear proof of the transformation of Malta’s economy from “one that was in the past based on low-cost manufacturing industries into a modern technology-oriented economy based on knowledge and skills of all human resources”.

Business in Malta started picking up after it joined the EU and when Dr Gonzi was also appointed Prime Minister and Finance Minister. “I made a statement,” says Dr Gonzi, “I said Malta would target an entry into the Eurozone at the earliest possible date, which meant 1 January 2008. We started off with a deficit that was in the range of 10 per cent of our GDP, national debt that was growing and had reached over 70 per cent of our GDP.”

While the inflation rate in Malta had always been stable, concerns rose as oil prices skyrocketed. Criteria presented by the EU to the island presented numerous challenges, according to Dr Gonzi, but Malta emerged victorious on many fronts.

“Three years down the line, we are confident that we have now achieved the must-hit criteria; we’ve taken the deficit down to below 3%, we’ve hit 2.7% this year, our national debt is on a downward trend.”

Interest rates have also been stable, says Dr Gonzi, and so has the Maltese lira. Last year, foreign direct investment hit a record number for the republic amounting to $1.56 billion. Dr Gonzi says this was “a record amount in the history of this island since independence.”

Concluding the SmartCity deal added another $300 million worth of foreign investment. Dr Gonzi is convinced that the multi-million dollar project will not only attract further foreign investment to Malta, but will also bring an influx of business people to the island who will come to settle, buy property and bring their families with them.

“They will explore Malta and find that this little island has over 7,000 years of history. You can cross the island in 40 minutes and you will be able to see and touch archaeological and historical remains that span over 7,000 years – there were Arabic times, Roman, Carthaginians, Knights of Malta – history of the Mediterranean that is linked to the Arab world and the European world,” he adds. With so much history and cultural variety, Dr Gonzi is often told that Malta does not market itself enough, but he believes this will dramatically change with the onset of SmartCity, which will boost the tourism sector by being an “extraordinarily powerful marketing tool.”

As for how the project came about, Dr Gonzi explains it started off with an initiative from TECOM that “wanted to try and find a suitable place to mirror its operations in Dubai, somewhere in Europe and they wanted to do the same thing in Asia.”

The idea caught Malta’s attention, as the government began to market itself as an ideal place for foreign investment. Dr Gonzi believes Malta already had a number of advantages including a “very strong” IT backbone which was established in 1987. This meant that the infrastructure was already fully in place.

“We are one of the countries recognised by the European Union as one of the most advanced in information technology and in e-government services. We have perhaps one of the highest levels of electronic government services provided on the internet,” says Dr Gonzi.

He adds that although Malta boasts a generation that is very much oriented towards IT and communications, a very large percentage of the population is “trainable and fluent in this particular sector”.

There are other reasons that prompted TECOM’s executives to place their investment in Malta. Apart from the advantage of being part of the EU presenting an entry into the European market, the majority of the Maltese population speaks English fluently as a second language which, as Dr Gonzi proudly says, “is an asset you will certainly not find in other countries”.

He adds: “The technology, infrastructure, and attitude were there and we marketed Malta as an ideal place to have this investment.

“TECOM explored the options and opportunities that existed elsewhere and when we finally came up with a package and a proposal that included a large piece of land on a part of the island that used to be an industrial land space, but for industries that are now passé, we said this was ideal for the SmartCity project to take place.”

Malta also “convinced the investors”, says Dr Gonzi, that it was heavily investing in educating and training its younger generations in IT as a guarantee that, in the next three years, the island will be able to provide a number of qualified graduates to work in the internet city.

“When we put all these together we had a winning package and Malta was chosen for this investment,” he says.

While negotiations took about two years, the “crucial” part of the talks have spanned the last 12 months. Things weren’t always going smoothly, says the PM. “They weren’t difficult negotiations, but they were negotiations between two sides that were looking for an investment potential which would be beneficial to both sides. We want the investors to make money, but we also want this investment to make Malta a success and we are quite convinced that this is what is going to happen,” he adds.

The project is expected to create a “multiplier effect” in addition to the initial $300 million, says Dr Gonzi. He believes that everything going into this project could multiply and double itself in a very short period of time. Although SmartCity is the biggest investment from the MENA region in the island, it is not the only one. Investors from countries such as Libya, Tunisia and Egypt have also had considerable presence on the island for quite some time.

“We have major investments from Libya, which has been in Malta for a number of years through a holding company called Lafico, a joint venture between Maltese and Libyans, mostly in the tourism and hotel sectors, but also in the manufacturing sector as well,” he says.

Dr Gonzi, however, is a firm believer that the SmartCity project will “confirm the vision” his government has for the future of the island in five different sectors. He optimistically says: “We see Malta in the next five years becoming the centre of the European and the Mediterranean region in information and telecommunications technology.” He adds that Malta financial services are strengthening and will become the “centre of excellence” in Europe and the Mediterranean regions as far as financial services are concerned.

“Malta already boasts one of the most successful financial services in the world,” he says.

Also on the agenda for Malta is transforming the island into a centre of excellence in health services. On 1 July this year, the PM will inaugurate a brand new state-of-the-art hospital that he promises will be at the cutting edge of health services technology.

“We will make Malta a centre of excellence in education with our Malta University with its 500 year-old history of tertiary education, making Malta an attractive place to which to bring foreign students to study,” says Dr Gonzi, adding: “We will continue to make Malta a centre for tourism purposes with a special relevance to the maritime dimension of tourism, that is cruise liner business and maritime affairs-related business.”

This is Dr Gonzi’s clear and colourful vision of Malta in five to 10 years’ time.

“What has been happening in the past three years, especially in the last few months, is putting in place the building blocks for us to be able to achieve this target,” he concludes.

Tamara Walid was interviewing Dr Gonzi on behalf of Arabian Business magazine