Agreement on long-term lease of island Lastavica with fortress Mamula, which is currently in parliamentary procedure, contains a number of disputable provisions to the detriment of public interest, directly favoring the future tenant – a Swiss consortium “Orascom Development Holding. They are an introduction into transfering state assets to foreign investors, according to the legal analysis of the document done by MANS Investigation Center.
The Committee on Economy, Finance and Budget will discuss on Wednesday the Agreement on long-term lease of the island Lastavica with fortress Mamula. The site of nearly 32,000 square meters is to be leased for 49 years, at an annual fixed rental price of €1.5/sqm. It is planned that future tenant pay €0.90 per square meter for the maritime zone, but is not yet known what the the total surface of that zone is.
Swiss “Orascom”, whose owner is the Egyptian billionaire Samih Saviris, committed to an investment of €15 million. However, instead having the cash for the project, the government allowed the future tenant to finance the project by pledging the rights from the lease contract. Moreover, he may assign the contract to a third party or lease a part of the future resort.
The planned warranty of the adequate performance is €1.5 million, but will be in effect during construction works and a year after the construction of the tourist complex. That means that the government has not provided any guarantee of being compensated in case “Orascom” or a third party would fail to pay the concession fee in subsequent years of the lease.
Furthermore, the government has agreed, without any grounds, to be consider investment such things as fees for consultants, while there is no controller in charge of monitoring the implementation of investment commitments, as the fulfillment of contractual obligations will be followed up through the annual auditor’s reports.
In addition, the contract stipulates that “Orascom” is required to build the so-called additional infrastructure, such as a submarine power cable from Cape Arza to the site, but ontroversial part is that the government guarantees that it will provide completely free of charge appropriate connection infrastructure to the place where the the power cable or water main is going to be built. The degree of development of connecting infrastructure on Cape Arza, the cost of which would be bore by the government, is not known.
When it comes to access to the site, there is a clear tendency that the island Lastavica will be closed to the public. This comer from a provision which stipulates that the access to the coastal zone is free, except for the parts where “the access is regulated by immigration laws, foreign trade, free zones, transport and customs, to which the access is forbidden due to the protection of private facilities or vessels, or on the basis of which the lease agreement and the site study envisage it to become a part of a private project. “
Finally, the lease agreement provides that the construction of a tourist complex on Lastavica is a „project of public importance and essential for the development of the tourism sector of the highest level.” The background of such provision should be directly looked for in the recently adopted amendments to the Law on VAT, which makes the import of equipment and materials for the construction of luxury restaurants with five or more stars tax exempt.
The government launched the tender procedure for the long-term lease of Lastavica in early 2013. Public invitation defined that the location would be leased for a period of 31 to 90 years, with a minimum rental price of €1 per square meter. It is not clear based on which criteria the government set the minimum price of the at €1, as it should have been significantly higher, especially when it comes to locations on the Montenegrin coast.
According to the bid of “Orascom”, the government will annually receive the income of less than €48,000 from fixed rent, which is certainly a symbolic amount, having in mind the exclusivity of the island Lastavica. After the construction of the tourist complex, the tenant should also pay a variable rent in the amount of 2 percent of operating revenues generated annually.
All the above clearly indicates that the agreement is a disputable one, and if the MPs do not prevent its adoption, the island Lastavica with Mamula fortress could be a new location on the Montenegrin coast that will be handed over into the hands of a foreign investor to the detriment of the public interest, the same one that has already been given Lustica almost free of charge.
Mamula Fortress is a valuable cultural and historical monument which is, according to Montenegrin law, protected as a monument of culture of the second category. It is one of the best preserved Austrian fortresses, once used as a prison.
The government did not react to numerous protests of the citizens of Herceg Novi and the coast, who believe that Mamula should remain the common good of the citizens, and as a valuable architectural and historical heritage, it should be preserved in its current form, without the possibility of the sale to domestic or foreign companies, without converting it to any form of elite tourism.
The Montenegrin Government has previously allowed “Orascom” to get Tivat’s part of Lustica, where they would build a luxury resort “Lustica Development”, worth over a billion euro, under extremely privileged conditions.
In 2010, Montenegrin prime minister Milo Djukanovic and Saviris pompously announced the beginning of the investment on 6.8 million square meters of land, where in 20 years there would be 8 hotels with 2,200 rooms, 1,600 apartments, 750 residential villas and a number of supporting facilities, such as schools, health clinics, marinas, shopping centersa and similar.
However, five years later, the government’s partner has managed to build only 70 apartments for the market, which is more than a clear indication that the investment is deferred.
The deal with “Orascom” for Lustica also contains a series of scandalous provisions, such as those that „Orascom“ may sold the leased state land or have the exclusive right to decide whether and to what extent to enable the citizens of Montenegro to be able to move around Lustica, which, according to the Constitution, is their territory.
This text is created with the support of the European Union within the project “Zero Tolerance to Corruption”. Network for Affirmation of Non-Governmental Sector – MANS is solely responsible for the contents of this article, and the views taken herein shall not in any case be considered as those of the European Union.
