Cyprus is seeing more business with solid substance and transparency, which is a welcome and positive trend of quality over quantity, says Deloitte CEO Christis M. Christoforou.
Deloitte is one of the largest and fastest-growing professional services firms in Cyprus and has developed a highly specialised and efficient team to support international business clients who operate from or through Cyprus. With over three decades of experience under his belt, CEO Christis Christoforou is seeing a shift in today’s professional services landscape.
Cyprus has now officially exited recession, how are Deloitte’s operations in Cyprus doing at the moment?
Having in mind the circumstances of our economy, we cannot complain. During the last five years, we’ve topped the ‘big four’ list from a growth point of view. We still rank third in size, but experienced the highest growth among the big four audit firms and have seen a steady 3% annual growth from 2009 to 2014. However, due to the financial crisis the overall situation continues to be quite flat, so to speak. There have been challenges, and we have seen a change in our services in that we are substituting the traditional core audit revenue with more advisory revenue. International business is still solid, and has shown remarkable resilience, a fact that has well and truly proved international expectations wrong. We haven’t lost any clients, and the underlying reason for this is that the comparative advantages that have long attracted international companies to Cyprus have been completely protected. Overall, we are definitely a sector that has done well in the wake of the international financial crisis, compared to many other economic sectors.
What developments are you currently seeing within your industry?
At the moment, the smaller firms are suffering more, because obviously the larger advisory work which is done for the government, the public sector and for the banks is done by the big firms or even some international firms who have the relevant expertise. Some companies are struggling to cope in the face of increased regulation and obligations, and today in our profession we seem to be doing much more for less. This is a global phenomenon that our industry is struggling with at the moment.
Cyprus has an ambitious plan to privatise state-owned assets and has been set a target by its international lenders to raise €1.4 billion from these efforts, what are your views on this?
Countries should have less government involvement in activities that require more expertise and specialisation, such as telecoms and electricity authorities, so overall I believe the privatisations in Cyprus can offer interesting opportunities for foreign investors. No doubt this will be a difficult process, and especially today since our economy is much healthier from a fiscal point of view, thus making the reasoning for raising funds through privatisations less acute. However, there needs to be more political consensus on what direction we should take as a country, and place more focus on creating a strong vision for what we want to achieve.
What opportunities do you see for growth and investment in Cyprus?
Cyprus has always been a service-oriented economy, so all service-related industries and sectors provide potential for growth. The tourism sector in Cyprus has much room for improvement as the figures of both arrivals and revenue generated have stagnated in the last ten years, reflecting the lack of investment in upgrading this sector. However, in the last year we have seen various foreign investors making acquisitions and setting up tourism related operations in Cyprus, showing this potential is being recognised. New hotels, golf courses and marinas, as well as the new casino resort will hopefully create more momentum for increasing our numbers. We need to attract foreign investment into Cyprus to spur growth. The oil and gas sector is another area of interest with big potential, but these developments are increasingly dependent on the political issue of solving the Cyprus problem. It may take some time, but the real estate sector will eventually make a come-back and regain its position as a growth sector. Cyprus could also become an interesting regional hub for education and health care provision, and these are two areas that continue to offer much investment opportunity.
What type of projects do you think would be good investments in Cyprus?
Not an easy question, because every investment project needs to have business rationale subject to certain parameters. However, the casino resort bid will be interesting and could be a game changer for Cyprus if we succeed in attracting the right investor and making this a billion-plus project. It is a truly unique opportunity as there is only one licence for this type of project, which would certainly attract more visitors to our shores and diversify our tourist product.
Do you think Cyprus could establish itself as an attractive hub for e-gaming companies?
I don’t see why not. With today’s technology, you can operate virtually from wherever you want. Cyprus is continuously developing its infrastructure and connectivity and has potential to become an attractive high-tech location for these types of companies. But in order to achieve this, the government needs to make it priority to establish Cyprus as an attractive jurisdiction to these types of companies from both an incentive and technology point of view.
What markets do you think Cyprus should be looking at in terms of trade and business?
Although it may sound general, our market is the world. No one can afford to only look at one or two markets any more. Obviously we’ve been lucky enough to have great access to our traditional markets of Russia and Ukraine, but Cyprus must also diversify due to geopolitical pressures. We need to attract the global investors. There is much talk about China, and mainly because of the residency and citizenship schemes that we offer, but China is a difficult market with most business diverted to Hong Kong and Singapore. We cannot ignore countries like China and India, but it’s a slow process. For us a key market continues to be Western Europe and increasingly the US, which are also primary markets driving the growth of the global fund industry. Iran is a new prospect and as one of the largest oil producing countries could present many opportunities, but we will have to see how and when sanctions are lifted. South America and Africa are also growing more interesting for Cyprus.
With a raft of tax reforms and developments emanating from the OECD and the EU, how do you see these impacting your industry?
It’s a changing landscape for our industry worldwide, and it was about time to concentrate on serious business. What we are seeing is more clients and business with solid substance and transparency, which is a positive trend. The times of no substance are over, thanks to the increasing pressures from international authorities. It’s more about quality than quantity, and this is exactly the type of business we hope to see more of in Cyprus.
What are your expectations for Cyprus in 2016 and the next five years?
We should see some positive growth, but it’s a slow process. However, considering how far we’ve come as a country in just two years after the banking crisis and bail-in, we are doing very well from a fiscal perspective. Cyprus has brought stability back to the economy, and we have met our targets by good margin so far. Returning to the international markets in such a short time showed the determination of Cyprus, and I hope we can keep going from strength to strength. What we need is more private sector initiative and the government to introduce more incentives to attract more solid foreign investment and to streamline processes to help rebuild our reputation. I expect 2016 to bring more growth, stability and reforms, and hopefully it will lay the foundations for a better 2017.
Chief Executive Officer of Deloitte Cyprus Christis M. Christoforou has over 30 years of experience serving clients in Cyprus and abroad. He serves as the Lead Client Service Partner for key strategic clients, is the Vice Chairman of the Nicosia Chamber of Commerce and Industry, and serves on the boards of the Institute of Accountants of Cyprus, the Cyprus Investment Promotion Agency and Transparency International. Christis is the Honorary Counsel of the Republic of Lithuania for Cyprus.