Robertas Dargis, director of construction company Eika, president of the Lithuanian Property Development Association (LNTPA), and a constant participant at MIPIM, has shared his thoughts with 15min on the competition that Europe currently engages against Asia, about how other countries see their authorities, scientists, and business people unite, while the situation in Lithuania is somewhat different.
The Baltic states dropping out
“MIPIN is the biggest feast for the European property trade, attracting everyone who wants to show what they've done,” the LNTPA president sums up the essence of the event. “Architects point the directions that architecture is moving; regions show off their readiness to receive investment; energy professionals suggest how to build more efficient structures. There come developers with ready-made projects, hoping to catch investors' eye. Buyers also converge in one place. It's a chance to see where the world is going, to talk about what changes await us.”
This year's show, according to Dargis, demonstrated a clear divide between Northern and Souther Europe. In the South, neither investors nor developers have much interest, while Germany and Scandinavia are doing quite well economically and financially. Russia, too, is in a relatively strong position: its cities and regions demonstrate new potential. Except, Dargis notes, that investors are very cautious: “Russia has created good investment environment, projects and opportunities are attractive enough, consumers are aplenty, but everyone asks: And what's next? How are we going to leave there? Will we be able to take our money with us?”
3 billion litas have been invested into our towns, yet there has been no increase in jobs nor change in living conditions. In essence, we've created preconditions for those towns to live even worse.
“Poland and the entire Eastern European region becomes an increasingly exciting land of opportunity,” he notes. “Unfortunately, the term Eastern-Central Europe does not include the Baltic states. They drop out of the radar, because their markets and objects are too small to attract institutional investors. Funds that operate here and were created specifically for the Baltic states are usually Scandinavian. Scandinavia knows us well, but, say, German, French, British investors don't find our countries so attractive.”
It is not only European regions that are represented in MIPIN, but also those of the US, Canada, and Asia. In Dargis view, the show is an important venue to present oneself, to network, to scout for capital. Yet it requires preparation: “Today, the European countries stand out by presenting projects that are not just beauty pageant show-off. Presentation of market analysis, opportunities, and solutions allow those with interest to see how the project might turn out. Lithuania used to present its projects, but these were merely presentations of potentiality – how it would be if someone cared.
“But the participants at the show are not 19-century gold diggers that sailed to North America and then went in caravans to Alaska, looking for gold. People who come here have the money, they know the term of their investment, they expect either big margins or stability and predictability. They have no taste for listening to stories about golden palaces floating in the sky. Bearing that in mind, Lithuania, too, has a place in such exhibitions.”
The problem is that Lithuanian representatives used to go to property trade shows without proper preparation. Dargis recalls a concrete example: “Klaipėda once brought a project of a fast tram line between Palanga and Klaipėda. It's a great idea to have a good transport connection there, allowing to develop intermediate territories.
“Holidaymakers in Palanga could hop on a fast train to Klaipėda, attend some events, and then come back in the evening. But the projects was not developed beyond a scale model and pretty flashing lights of the tram: no general plan solutions, the tram-line went along the beach, crossing the protected Klaipėda Regional Park, with no advice from environmentalists. If you decided to give the project a try, you'd discover it is almost impossible. Who can possibly invest into projects like that?”
The LNTPA president has one more example – one presented by the city of Vilnius in last year's MIPIM show. It was a project of improving its railway station. According to Dargis, the project would allow to develop the railway station zone – that has great transport links and infrastructure – in truly interesting ways. But after implementing general plan solutions, the entire stations would need to be pushed underground, shielded, and then the zone could be opened for developers. “Many years will pass before that happens and only then will you be able to calculate how much it will cost – it might turn out that the project is physically impracticable. It seems premature to bring and present it,” he says.
Synthesis of business, science, and authority
According to Dargis, property development requires the union of business, science, and the authorities. “Competition is fierce. It's no longer enough to say: I've got an excellent spot you could invest in. Lithuania, or at least its Prime Minister, has already realized that investments need to be bought. Investors pick the highest bidder who offers best conditions.”
Representatives of the Belgian town of Ghent presented how they developed the town with a population of 200,000, a small harbour, a university, and thriving business. Ghent makes use of all of its resources: the university, land, and infrastructure to attract the Japanese who develop biotechnologies and build biomedical companies.
Another thing from the show that stuck in Dargis' memory were ways how expensive cities intended to compete with Asia.
“Europe understands that it cannot compete with shovels and crowbars, since Asia has much more diggers who can do everything faster and cheaper. Say, in Indonesia, 100 US dollars is a decent pay, while in Europe it's out of the question. So Europeans build gigantic centres. Stockolm, in Sweden, is building a medicine centre, Karolinska, that has an area three times the size of Vilnius Akropolis. It is being implemented by way of the PPP (public-private partnership) that is so unloved by Lithuanians – in order to attract a private investor and operator, since they work much more rationally than the state. Why couldn't Lithuania do something like that? We have huge clinics in Kaunas and a medical school. Santariškės (a hospital in Vilnius) could specialize in heart and vascular diseases. We have a vast post-Soviet area, we could at least secure flows from our closest neighbours in Belarus, Ukraine, Russia. That would be competition and income of an entirely different order,” Dargis shares his daydreams.
Germans do not build, they demolish
According to the LNTPA president, negative demography has huge effect on Lithuanian towns. “Instead of speaking about sustainable expansion, we should change the vocabulary – sustainable or uncontrollable contraction. Some towns have seen their populations contract by 30 percent. Especially in the young demographics. So do we really need to renovate schools that bad? Or would it be better, looking twenty years ahead, to leave one school, as kids will be scarce? And kindergartens should perhaps be exchanged for retirement homes or social homes? Perhaps we should patch up the existing buildings instead of building new ones? One needs to make rational decisions on how to run cities. Our problems have not been discussed this years, but last exhibition had a discussion on the managed contraction of East Germany and urban regeneration in areas that had also lost about 30 percent of their residents.
“Over the past ten years, Germans have demolished around 300,000 flats! At least they have money to clean up historic town centres. They even implement programs like this: they renovate apartments in old towns and let people stay there for two or three months. If they like it, they can buy the apartments on preferential terms, while old blocks get demolished.”
Billions in smoke
“Every country has its own problems, but others deal with them,” Dargis notes. “Public institutions work on those problems, they allocate funding and manage to reign in certain processes. I can't remember if our country has had a single discussion on that over the past few years. The Ministry of Interior distributes EU money, allegedly intended for underdeveloped towns. However, we don't accomplish anything with them, beyond repairing public spaces. 3 billion litas have been invested into our towns, yet there has been no increase in jobs nor change in living conditions. In essence we've created preconditions for those towns to live even worse. Since, after you build a park, put up benches, pave alleys, you need take care of their maintenance. And that requires money – without having created any instruments to generate additional revenue. That means raising municipal taxes or the mayor going to the national government to ask for money for infrastructural upkeep. The state should think about its towns, life in them, create conditions for investment, work, recreation, tourism. At the moment, Lithuania is like a kid without a nanny.”
According to Dargis, Lithuania has enough experts who grasp the challenges and have offered many solutions. None have been implemented, because no one in politics understands the scale of the problem. “Authorities think that it is not very important, they are perpetually surprised at why people are leaving. It is ridiculous when the Parliament Speaker accuses people of lacking patriotism. Before one speaks, one must do everything in one's power to make those people stay, to give them jobs and opportunity to provide for their families and adequate life quality. One must realize that we live in the 21st century, that we are part of global Europe. In MIPIM itself, it is no longer countries that showcase themselves, but rather regions and cities. The competition now is not between, say, Germany and France, but between regions – competition for capital, science, and business. That's what guarantees high standards of living,” he stresses.
However, Dargis remains optimistic and thinks that next year, Lithuanian regions should prepare and take part in MIPIM 2013. He brings up an example: “One Greek is sitting on a stump. A man comes by and asks: How long will it take me to get to Athens? The philosopher says: Go. The man: No, I want to ask, how long. The philosopher retorts: Go. The man, realizing it won't work, walks away. The philosopher suddenly cries out from behind: Two and a half hours. The man is surprised: Why do you say that? The philosopher replies: I needed to check how fast you could walk. So Lithuania must walk so we can see tangible steps and not just ticking over.”