Chinese airport deal a dead duck

A MULTI-MILLION investment deal with a Chinese company to develop the old Larnaca airport is all but dead in the water, MPs said yesterday.

After reviewing a relevant report by the Accountant-general, deputies of the House Watchdog Committee described the agreement as “legally flimsy.”

Committee chairman Giorgos Georgiou (DISY) told newsmen later that the overriding impression from yesterday’s briefing is that the “entire process for selecting the financial operator…did not meet the general principles of the EU acquis with regard to public contracts, that is to say, transparency and equal treatment.”

AKEL MP Irini Charalambidou said that from the outset the deal was plagued by “complications and misunderstandings.”

After the deal stalled, the Chinese investor informed the Communications Minister in writing that he was withdrawing his interest. He then withdrew the initial withdrawal, “and therefore the interest continues to exist,” said Charalambidou.

MPs left a small window open, saying the deal might yet come through provided the procedures start from scratch and are in line with EU transparency guidelines.

Hermes Airports, the company managing Cyprus’ airports, and the privately owned Chinese firm Far Eastern Phoenix had concluded a deal that could yield a €600 million benefit for Cyprus.

The intended investment concerned developing the old Larnaca airport into a large commercial showroom, bonded warehouses for Chinese goods as well as a small conference centre.

Under the deal signed with Hermes, Far Eastern Phoenix would assume the management of the old Larnaca airport for the remaining duration of the concession agreement between Cyprus and Hermes, that is, 19 years, with an option to extend the agreement to 50 years.

The Chinese company is asking for a longer term lease – 50 years – than the 19 years Hermes is able to give.

As part of the concession agreement, Hermes must hand the airport back to the state in 2031.

Hermes Airports Ltd assumed management and control of Larnaca International Airport and Pafos International Airport on 12 May 2006, under a 25 year BOT (Build-Operate-Transfer) concession agreement with the Republic of Cyprus.

But legal questions have been raised over whether the state can offer the Chinese firm a further 31 years without a tender process.

Extending the deal to 50 years would violate the principle of equal treatment, given that had other investors known about this possibility they might have expressed an interest.

Moreover, publicity over the agreement was limited to the local media.

The deal hit a snag back in August, following allegations that the president’s top diplomat and his wife were personally involved.

A Justice Ministry probe is currently looking into whether Marios Ieronymides, the head of President Demetris Christofias’ diplomatic office, committed any disciplinary offences in relation to a deal between a Chinese investor and airport operator Hermes.

Ieronymides denied there was any wrongdoing on his behalf, but resigned nevertheless, acknowledging that his presence at the meetings was not appropriate.

The deal has been thrown into doubt as the Chinese businessman withdrew his interest after his company found itself in hot water over the allegations.

Chinese media spoke of a government official accused of corruption and that put his company on the watch list for corruption, which is strongly punishable under Macau law.

The future of the deal seems to be linked with the resolution of the case. Next week The House Watchdog Committee will discuss the matter further in the presence of the Communications Minister Efthymios Flourentzou.