Cyprus’ growth strategy will help fast-track major investments, promote competitiveness and implement e-Government administration to support new and existing investors.
Appointed as the Deputy Minister to the President in March 2013, Constantinos Petrides was tasked to assist the President on all major national and international issues, and assigned the political responsibility for developing a new growth model for Cyprus. Through this intiative, which includes restructuring the civil service, Petrides with his team have been formulating and implementing an Action Plan for Growth, which includes specific actions that contribute to the recovery of the economy, the improvement of competitiveness and the business climate, the encouragement of investments and the modernisation of the state.
What important goals and reforms were achieved in 2016?
Last year was a year of mixed feelings. On the one hand the seed for many reform initiatives was set. For the first time in the history of the civil service, there was a multi-faceted and multi-dimensional effort to tackle the pathogens of the system. In order to increase entrepreneurial activity in a more business friendly environment, a National Policy Statement on the development of the Entrepreneurial Ecosystem in Cyprus was created for the first time. Following relevant consultation with the business community, we proposed and achieved the revision of the Income Tax Law in order to improve incentives that foster investment opportunities in start-up and innovative companies in Cyprus. This measure is a tangible support to business innovation and development and at the same time recognises the efforts of young scientists and the start-up community in Cyprus.
In parallel, the simplification of the procedures implemented by the Departments of Migration, Social Insurance and Registrar of Companies is currently on-going, in order to substantially reduce the administrative burden for the benefit of both citizens and business. We have prepared the scheme for ‘Cyprus Start-Up Visa’, which simplifies the procedures for granting employment visas to highly skilled third country nationals and will facilitate foreign investment. We have also pursued a number of actions for promoting e-government within the civil service. We anticipate that within the following period we will initiate the tender procedures for e-signatures. This is an indicative and not exhaustive outline of the reforms promoted in 2016.
On the other hand, the voting down by the House of Representatives of the five Bills comprising the civil service reform in December 2016 was certainly a disappointment. However, we are ready to discuss any specific amendments the political parties would consider necessary in order to vote for the Bills.
What are your key priorities for 2017?
Our willingness and commitment is very strong and lot of targeted actions will be completed in 2017 to further promote competitiveness and a business friendly environment in Cyprus. We will present the first comprehensive strategy for tourism, which will entail reforms with a drastic long-term impact in the country’s revenues. We anticipate that our proposals for the establishment of three Deputy Ministries directly accountable to the President of the Republic will be welcomed by the House of Parliament and thus the inefficiencies of the current system will be addressed. We have also prepared a Bill that provides for the introduction of a fast-track mechanism for the licensing of important investments for the economy. The aim is, through changes in the way applications for strategic investments are being handled combined with a new legal framework, to create a new pathway for strategic investors that speeds up and reduces administrative burden.
We are fully aware that if we wish to lay solid and viable foundations for our economy we need to have a plan and concentrate our efforts on specific, targeted measures. This purpose is served through the Action Plan for Growth, which includes 70 targeted actions with specified timeframes. Emphasis is given on horizontal, cross sectoral level measures, which aim at improving the overall business environment, encouraging investment and entrepreneurship and promoting e-governance and on significant sectors of the economy such as tourism and research and innovation.
We do acknowledge that this is an ambitious plan, which demands continuous efforts and devotion in order to enhance competitiveness and to create more transparent and efficient structures for conducting business in Cyprus. Our commitment is evident from the progress made until now, which will constitute the basis for actions to come in 2017.
Cyprus has come a long way since its banking crisis of 2013, what is the country’s strategy to achieve sustainable growth?
We were from the beginning fully aware that the sustainable growth of our economy would only be achieved if fiscal consolidation and financial stability were complemented with a robust and sustainable new growth model. The core elements of our strategy are to increase competitiveness and utilise the country’s competitive advantages. To this end, we are implementing the Action Plan for Growth. Building on the actions initiated in the previous years, we will emphasise on further improving competitiveness and the business environment horizontally, as well as in enhancing the growth potential in specific sectors such as tourism. Our Growth Strategy tackles these issues and aims at accelerating the economic recovery, promoting investments and creating jobs, improving the competitiveness of the business environment and. Succeeding in this, will allow Cyprus to exploit its full potential as an attractive place to live and do business.
Cyprus has a proven track record of successfully attracting FDI, how important is foreign investment for Cyprus and what steps are being taken to ensure the country’s attractiveness?
Foreign Direct Investment (FDI) represents an important tool for economic growth, particularly amidst today’s highly competitive global environment, but also for reforming the economy. It also contributes to job creation, promotes entrepreneurship and innovation and cultivates know-how and expertise. By capitalising on its competitive advantages and continuously improving its business environment, Cyprus has retained and enhanced its long-established reputation and international appeal as an attractive and stable investment destination. A series of growth reforms have either been implemented or are in the process, and more are expected to follow. Recent and upcoming measures include legislation enhancing transparency and compliance, the implementation of e-Government administration and the fast-track mechanism for major investments. Such measures are complemented by targeted sectoral reforms such as a new tourism model, incentives for investing in innovative enterprises and start-ups, as well as streamlining the legal framework and providing incentives for the rapidly developing investment funds sector. In addition to our commitment to continued reform, we also place great importance in effectively communicating with both potential and existing investors, in order to present the investment opportunities the island has to offer, and to cater to the ongoing needs of investors throughout their investment cycle.
What key investment opportunities do you see in Cyprus at the moment?
We see significant interest in both traditional sectors as well as emerging sectors. As regards traditional sectors, the privatisation of the Limassol port is opening up new opportunities in the areas of shipping and logistics. The tourism sector is also being enhanced through large scale investment projects such as the Integrated Casino Resort and a number of marinas across the island. The adoption by the government of a new tourism sector strategy in the course of 2017 will further boost the Investment profitability and opportunities in this sector. The real estate sector has also recovered significantly in recent months, with investors showing interest in both commercial and residential projects. With regards to emerging sectors of the economy, investment funds are rapidly increasing in both the number of registered funds as well as the level of funds under management. There are prospects also in the sector of energy, not just with regard to hydrocarbons, but also in the provision of ancillary oil services, as well as renewable energy projects. It is worth mentioning, that there has been a significant increase in investments of 9.1% for 2016 so far.
What do you hope to achieve through the creation of the three Deputy Ministries for economic development, tourism and maritime affairs?
We propose the establishment of three Deputy Ministries in areas where there is great potential, comparative advantage and simultaneously there is a need for enhancement of political supervision and guidance, as well as of the promotion of growth enhancing horizontal actions, while aiming at the creation of an efficient governance structure. In this respect, the bills for the establishment of Deputy Ministries for Tourism, Maritime and Growth and Competitiveness have been approved by the Council of Ministers and are currently before the House of Representatives. These initiatives fall under the general framework of streamlining the operation of the state sector and aim to address the inefficiencies of the current system, the fragmentation of responsibilities, the overlaps of competences and the lack of horizontal coordination.
Specifically, in the area of Tourism we are proposing a structure that will allow for the creation, promotion and monitoring of a comprehensive and horizontal national strategy for tourism, the advertising of our touristic advantages, as well as the identification of areas for improvement in order to render the sector more attractive.
The proposal for creating a Deputy Ministry for Maritime Affairs endeavours to put in place a structure with concrete responsibilities, easily identifiable, that will adapt to the international challenges of the sector by formulating a targeted national strategy and promoting Cyprus abroad as a maritime centre.
The Deputy Ministry for Growth and Competitiveness will consolidate and simplify procedures that are now dispersed among ministries and departments regarding growth. Its presence will cultivate an entrepreneurial culture in the public sector approach, which will be further enhanced by the promotion of actions on e-government and simplification of procedures. The aim is for the new structure to act, inter alia, as one-stop-shop for investors interested in strategic developmental projects and thus to overcome the time consuming procedures of the current system.
How is Cyprus perceived by investors today and what measures are being taken to further strengthen its international image and reputation?
Cyprus’ main advantage is a fully transparent and stable regulatory framework. As well as always ensuring full compliance with all EU provisions and directives, including anti money-laundering directives, significant measures have been taken to enhance transparency and compliance. Such measures include voluntary early adoption of the Common Reporting Standard, as well as the application of OECD BEPS requirements, provisions of the Financial Action Task Force on Money Laundering (FATF), FATCA requirements, and the Financial Stability Forum laws and regulations.
In addition, a number of reforms have been introduced or are in the pipeline, in order to ease the way business is made, including measures modernising the legal framework, further tax incentives, and simplified licensing procedures. These reform efforts have greatly contributed to the enhancement of the image of Cyprus and have boosted investor confidence. Also a number of promotional campaigns have been undertaken, which will continue into the next year, in order to inform foreign investors and stakeholders about the steps taken to enhance Cyprus’ competitive advantages and business environment.
How do you see Cyprus developing in the next two years and what message would you like to relay to the international community?
Our growth strategy aims at strengthening competitiveness, facilitating Investment and further enhancing the extroversion of the economy. Our government is truly committed to its reform efforts with both horizontal and sector specific reforms and incentives. This is reflected in the recent approval by the Council of Ministers of the introduction of a Deputy Ministry for Growth and Competitiveness. This is a key milestone in our reform initiatives, as it will enable the government to focus on its growth strategy and on the high priority aim of streamlining procedures and ensuring that timely, high-quality, comprehensive support is provided to new and existing investors. We are confident that the efforts undertaken will further boost investor interest and will consolidate Cyprus’ position as a transparent, resilient, dynamic business and investment destination.