It has been billed as one of the biggest architectural competitions of all time, an international contest open to practices both tiny and titanic, for a vast cultural complex for a world-famous institution, with a multi-million pound budget on a spectacular waterside site. It could mint the next Frank Lloyd Wright or Frank Gehry, and change the city’s skyline forever. But the race for who will design the Guggenheim Helsinki museum has spawned an unexpected side effect.

As the deadline for entries drew to a close this week, a counter-competition was launched as a riposte to what critics have branded a misguided vanity project, and a symbol of the Finnish capital selling out to an American brand.

“Many city managers have been seduced by the fantasy that a high-concept museum, designed by a starchitect, will turn around its urban fortunes in a similar way,” said the organisers of the rival competition, a group of independent arts organisations that have come together under the banner of Next Helsinki. “But what if there was an alternative call for ideas – open to all – to rise to the challenge of imagining a richer future for the whole city?”

The competition – pitched to “attract innovative ideas about how to more fully meet the city’s cultural, spatial and sustainability needs” – is the latest step in the increasing volume of discontent over the Guggenheim plan, which has faced a frosty reception since it was mooted three years ago. The project comes with a €130m (£104m) price tag, plus a hefty $30m (£19m) licensing fee to be paid to the Guggenheim for the privilege of using its brand – both of which have been perceived as onerous demands on a country that has been mired in recession for the last two years.

“I’m not paying my taxes to be handed over to an American corporation to do with what they want,” says a burly security guard, manning the entrance to the Helsinki harbour where two gargantuan icebreakers are docked, around the promontory from the proposed Guggenheim site. “If we’re spending that kind of money, it should be on our own national museum, not another outpost of a global company.”

The architect of the dock’s new floating office, Mikko Summanen, is more optimistic. Indeed his practice, K2S Architects, has entered the official competition – along with, he fears, every other office in the city if not the world. “I think the Guggenheim will be good for the city,” he says. “Helsinki needs an iconic attraction like this to compete with other cities in the region and give people a reason to stay. Our airport is a huge stop-over hub for international flights from Asia and Russia, but people don’t leave the airport.”

Conscious of the cultural lures of neighbouring Baltic capitals – from Stockholm’s Moderna Museet and Oslo’s Astrup Fearnley Museum, to Denmark’s Louisiana Museum and St Petersburg’s majestic Hermitage – the notoriously modest Finns feel they’re missing out. “We have to promote Helsinki,” says the city’s mayor, Jussi Pajunen. “And that’s why we need international brands like the Guggenheim.”

It is a comment all too reminiscent of a remark made by a former deputy mayor, one local tells me: “He once said, ‘What we need is a Prado here. Er, no, I mean Prada.’ He really was more impressed with Miu Miu than Murillo. The city officials are still hankering after global brands to feel that they are somehow international players.”

Dazzled by the promise of the Bilbao effect, dozens of cities court the attentions of the Guggenheim every year, hoping to become the next pearl in its necklace. The latest Gehry-designed titanium behemoth is planned to open in Abu Dhabi in 2017. But not all have been successful. Franchises in Las Vegas, Berlin, Salzburg, Vilnius, Guadalajara, Rio de Janeiro and lower Manhattan have all been cancelled or closed down. And, as New York urbanist and Next Helsinki juror Andrew Ross warns, these aspiring cultural capitals should be careful what they wish for.

“If you accept the global Guggenheim brand, you’re also taking on a lot of the baggage that comes with it,” he says. “Namely, human rights abuses in United Arab Emirates,” where workers on the Abu Dhabi project have been held in bonded conditions, their passports confiscated and wages postponed.

In Helsinki, the Guggenheim question has become an issue that strikes to the core of national political debate. The project has been promoted by the conservative majority, and largely opposed by the Social Democrats and left-of-centre party members.

“It’s a private enterprise, so it’s simply not part and parcel of Finland’s welfare society to support that kind of organisation with public funds,” says Kaarin Taipale, organiser of the Next Helsinki competition and co-author of a book that traces the history of the Guggenheim Helsinki project. “Everything would be financed by the city – the land, the construction, the upkeep of the building, the salaries, the license fee, everything.”

She argues that, although there has been a heated public debate, the choice has only ever been yes or no to the Guggenheim plan. “The promoters are using the old Thatcherite saying, ‘There is no alternative,’ but there has never been a proper conversation,” she says. “We need an educated, enlightened discussion. Democracy only works if people have enough information abut the choices they are making.”

The Next Helsinki competition calls on “architects, urbanists, artists, environmentalists, students, activists, poets, politicians, and all others who love cities” to suggest alternative uses for the waterside site, with a deadline of 2 March next year.

“We hope to find new ideas about dissemination, participation and collaboration,” says US critic Michael Sorkin, chair of the jury that includes a diverse range of voices, from Finnish architectural professor Juhani Pallasmaa to American sociologist Sharon Zukin. “Not simply the anachronism of another conventional containment vessel for yet more of the too familiar media of traditional art production.”

