Talks between Malta Enterprise and an Austrian textile group, which was interested in setting up shop in Malta, are expected to fail, The Sunday Times has learnt.
Discussions with Gama Textile Group were announced shortly after Denim Services Ltd said it would dismiss 800 workers and close down by the end of January.
Gama was planning to employ 400 workers in a project for which the government was expected to grant ?.5 million in soft loans, with most of the employees coming from Denim Services. Gama had also been involved in talks to purchase machinery from the ill-fated company.
A spokesman for the Investments Ministry said the process was derailed following a meeting between the company, Malta Enterprise and bank officials on Friday.
The government was providing all the assistance required for the company through Malta Enterprise, the ministry spokesman said.
"A letter of intent was issued in record time and in the interest of 400 workers we speeded up the due diligence process, which is still going on," he said.
The ministry would not give further details as to why the textile company is expected to pull out of the deal. However, sources close to the finance sector said that the disagreement was over the funding of the project.
Dieter Krestel, who is in charge of Gama's corporate communications, had told The Times that the workforce and machinery found in Malta would fit best with the company's present and future activities.
Among the reasons why Malta had been favoured was the experienced and highly professional workforce and the favourable logistics.
