Cyprus has seen a rapid bounce back to growth thanks to bold reforms and prudent fiscal management, establishing the small EU economy as a strong contender. Building on this success, Cyprus is now fully focused on sharpening its competitive edge and attracting more strategic partners and international investors to the island, says President Anastasiades.
Cyprus has made remarkable progress in bringing its economy back to growth. How do you view the progress made so far and what important goals were achieved in 2016?
Four years ago, just after my election as President of the Republic of Cyprus, this country was faced with nothing less than economic collapse. Today, the Cypriot economy is emerging stronger and stands ready to face current challenges, utilising its full potential. We have restored the state’s credibility and that of the financial sector through the implementation of bold reforms, with hard work, patience and diligence. The Cypriot people have had to endure important sacrifices, and these have already begun to yield results. Benefits from measures taken will only be multiplying from now on. As early as 2015, the Cyprus economy recorded a positive growth rate of GDP amounting to 1.7%, the highest growth in the last seven years. For 2016, growth is estimated at 2.8%, which is one of the highest growth rates in Europe. This development is expected to boost the efforts to further ease unemployment, one of the most serious challenges we face. Following the successful completion of an ambitious economic adjustment programme last spring, Cyprus has returned to the international markets and gained access to lending with interest rates, which are now at historically low levels as a result of the continuous upgrading of the economy by international rating agencies. However, the banking sector has further challenges to meet, the most serious one being the restructuring of a substantial part of the NPLs. Addressing this issue will improve banks’ ability to provide new credit to the economy. It is encouraging that the upward trend of non-performing loans has begun to reverse after two years, and borrowers’ ability to repay their loans will keep improving while the economy grows.
What key targets have you set to be accomplished in 2017?
For Cyprus to continue on its growth path, we need to remain focused on the necessary structural reforms and the implementation of prudent fiscal management. We strive to reinforce the sectors that form our country’s comparative advantage: tourism, shipping, and services. Indicatively, I note the recent licensing of an integrated casino resort, the process for the Larnaca Port and the decisions for the development of more marinas. Our goal is to create a sustainable and a more productive, competitive and open economy. Cyprus has fought its way back to a prime FDI position, what further opportunities do you see and what kind of investment would boost the country’s growth? Attracting foreign investments in the productive sectors of the economy is our most important priority. Foreign investment is one of the key drivers of economic growth during a period of intense international competition and amidst the great challenges facing our country. We focus on attracting those investments from abroad that will stimulate economic activity, create jobs and contribute to the reduction of unemployment. Tourism, port privatisation, telecommunications, shipping, real estate, large-scale development projects, education, health, research and innovation – all these sectors offer growth opportunities. The energy sector is also a promising field. The discovery of natural gas reserves within Cyprus’ Exclusive Economic Zone creates excellent investment prospects in the energy sector and supplementary services. Not surprisingly, the emerging oil and gas industry to be created on the island is expected to provide a significant boost to our economy, creating growth and positively affecting other related sectors as well, including the renewable energy sector.
What do you see as Cyprus’ key strengths and assets in terms of attracting more business?
Despite the economic difficulties we have faced, our country’s comparative advantages not only remain intact, but have been further enhanced and expanded, setting them apart from most investment destinations. These include a significant network of 60 Agreements for Avoidance of Double Taxation, a highly qualified and professional workforce, and fully EU-harmonised tax and legal system. We have one of the lowest and most competitive corporate tax rates in Europe at 12.5%, making Cyprus an attractive investment destination and a highly competitive centre for international business, offering a platform for operations and preferential access to markets like Europe, Middle East, North Africa and Asia. The safe environment Cyprus provides, our traditional hospitality and our all-year-round good weather, have been pinpointed by various studies as comparative advantages, making our country a ‘value for money’ destination for both the occasional visitor and the investor.
With Brexit on the horizon, what impact will this development have on Cyprus and its relationship with the UK?
Cyprus is one of the countries most exposed to Brexit due to our legal and financial systems and our extended ties with the UK. An internal task force has been established at the Ministry of Foreign Affairs in order to coordinate Cyprus’ position on all issues related to Brexit at a national level. Our aim is to ensure that trade, commerce and investment issues are addressed in a way that does not have a negative impact on Cyprus’ economy, considering the fact that the UK is Cyprus’ second largest trading partner. Given the large numbers of Cypriots living in the UK and of UK citizens residing permanently in Cyprus, we need to ensure the continuation of these citizens’ acquired rights and status, such as residency and work permit status, pension and social security rights and medical care rights. We had the opportunity to have a constructive exchange of views with Chief Negotiator Michel Barnier and we reiterated that we consider it vital to maintain the indivisibility of the four freedoms, especially the freedom of movement and establishment, as thousands of Cypriots live, study and work in the UK.
What key markets or countries is Cyprus actively targeting and fostering new relationships with, in terms of energy, trade and bilateral agreements?
As an efficient and reliable business hub and an ideal investment gateway into Europe, Asia and the Middle East, Cyprus is constantly working to forge new partnerships and enhance our existing ties, with key regional and international markets. We are at present actively targeting countries in the Middle East and Central and Eastern Europe, as well as the USA, Canada, China, India and Iran, for the promotion of Cypriot products and services. The Republic of Cyprus also utilises the Trade Centres that it operates in Greece, the UK, Germany, France, Poland, Austria, the UAE, Lebanon, the USA, Russia, Israel and China. Particularly in the field of energy, Cyprus has excellent relations with its neighbouring countries in the Eastern Mediterranean region, which are maintained through the implementation of cooperation frameworks and constitute an important factor of confidence and growth for the area. Such tripartite cooperation frameworks are currently in effect between Cyprus, Greece, Egypt and Israel, as all countries acknowledge that energy constitutes one of the fundamental pillars of our mutually beneficial partnership and regional prosperity.
Cyprus has seen important US investment over the last few years. With new President Donald Τrump in the White House, how do you see US-Cyprus relations developing?
Cyprus has proven to be a stable and reliable strategic partner to the US through our mutually beneficial cooperation in an array of fields. We look forward to maintaining and further strengthening the excellent relations with the USA and the new US administration under the leadership of President Trump. Cyprus anticipates the continuation of the US active support to the current negotiating process for the solution of the Cyprus problem. A possible reunification of our island will bring vast benefits to the volatile region of the Middle East. Our desire is to continue exploring the many areas of bilateral cooperation, such as enhancing Cypriot-US security cooperation, including energy security in the Eastern Mediterranean. There is much that can be done to further enhance our bilateral strategic partnership to our mutual benefit. In the economic sphere, there is a wide scope to broaden our trade relationship. The stabilisation and recovery of the Cyprus economy is expected to gain pace in the coming years, offering rewarding opportunities for US-based investors to exploit the island’s strategic links to the Middle East, the EU and Europe in general. Furthermore, US interest in Cyprus’ energy prospects has been on the rise during recent years, especially from large US oil and gas companies in securing an offshore exploration license in Cyprus.
With fierce competition from other ΕU jurisdictions, how would you assess Cyprus’ current performance as an international financial and business centre?
Cyprus is a business services centre with strong regulation and supervision, with a well-balanced portfolio of quality services provided by high-calibre professionals. Even after the economic crisis in 2013, the business services sector exhibited considerable resilience, contributing significantly to the stabilisation of the economy. Improving the business environment still remains our top priority. There is a continuing process to modernise and reform the current tax and legal framework as part of our concerted drive to create a friendlier business environment. Efforts are also being made to strengthen the country’s competitiveness and its attractiveness as an international business and investment destination. Decisive structural changes and significant operational cost reductions have been instrumental in deeming Cyprus even more competitive and efficient. In this regard, we are implementing a series of measures, including simplifying procedures for the faster issuing of permits and licensing of investment projects and operation of businesses, as well as the speedier granting of residence permits to foreign investors and entrepreneurs on the basis of specific economic criteria. Other planned reforms include the upgrading and modernisation of our public service, a new investment law to facilitate licensing procedures for big investments, an institutional reform including the establishment of three Deputy Ministries for Tourism, for Shipping, and for Growth and Competitiveness, as well as the introduction of e-government and local government reform. We are also in the final stages of enhancing the legal framework for the investment funds sector, which is expected to enrich the financial services industry in Cyprus and the growth of the economy.
Cyprus is closer than ever to reaching a solution to the long-standing ‘Cyprus problem’, are you optimistic that a settlement can be achieved and what benefits would it bring Cyprus?
The recent Conference on Cyprus in Geneva in mid-January was an important and historic step towards our goal, which was and still remains, to achieve a comprehensive, fair and viable solution to the Cyprus problem, in line with UN Security Council Resolutions, international and EU law. During the last 22 months of intensive negotiations in four of the six chapters – governance and power sharing, economy, EU and property – significant progress has been achieved. The submission of maps by both sides for the first time in the history of the negotiations, prior to the Conference on Cyprus is a positive development, although there is significant distance separating us on these issues. The discussions at the conference on the Chapters of Security & Guarantees are also of high importance and pave the way for further deliberations. Our position is that it is anachronistic for an EU member state to have any third country guaranteeing its security, as EU membership offers the best guarantee.
I am obliged to emphasise in the strongest terms the importance of the progress that has been achieved so far, and that what is of significance and utmost importance is to remain concentrated on the continuation of the dialogue to address the remaining differences, rather than on misinterpretations or pretentious exploitation of events that distort our efforts on achieving our end goal of reuniting Cyprus.
All interested parties, and in particular Turkey, should show the same degree of commitment, participate constructively, and move forward with concrete and tangible steps, particularly on the Chapter of Security – which will strengthen the prospect of a positive outcome.
We are convinced that a reunified Cyprus, a member of the EU, will benefit all Cypriots and the wider region. Reaching a settlement will allow Cyprus to reach its full potential for economic growth and increase the attraction of major foreign investments and multinational companies, providing us with easier access to international finance and unexploited markets worldwide. It will also further stimulate and develop various economic sectors and create new jobs.
Tourism is anticipated to vastly benefit from reunification through an integrated tourism product able to penetrate previously untapped markets. The major reconstruction and infrastructure developments that will take place will boost the construction industry and attract more foreign investments. In regard to the shipping sector, the benefits from a potential opening of Turkish ports for ships under the Cyprus flag – a long standing obligation by Turkey – cannot be ignored.
A solution would also provide positive effects on EU-Turkey relations, and the overall security and energy architecture of the Union. It is in the best interest of Cyprus, which enjoys excellent relations with all its neighbours, to extend its partnerships in our immediate region through forging an alliance with Turkey. In an era of growing regional and global insecurity and asymmetrical threats, a solution would make Cyprus a symbol of hope that even the most intractable problems can be solved peacefully through dialogue.
Ηow do you see Cyprus developing in the next two years and what personal message would you like to relay to the international community?
Cyprus stands ready to face the challenges ahead and looks to the future with determination. We are ready to work together with our EU partners, to address today’s challenges and build a peaceful and prosperous future for the next generations. The discovery of hydrocarbon reserves in Cyprus and also the important ‘Zohr’ discovery create further synergies and a grid of alliances for broader cooperation in Europe and the Eastern Mediterranean region. There is no doubt that a solution to the Cyprus problem will be the most important reform for the economic development of the country in the coming decades. I wish to reassure of my determination to work tirelessly to reach a successful outcome and achieve a comprehensive settlement that will satisfy the genuine desire of our people, especially of the younger generations, to peacefully co-exist, collaborate and prosper in a European country, which fully respects their fundamental human rights and freedoms. A solution, which, as I have repeatedly stressed, should take into account the legitimate sensitivities and concerns of both communities of Cyprus, leading to a win-win situation.
Nicos Anastasiades is the 7th President of Cyprus and assumed office on 28 February 2013. A lawyer by profession and founder of law firm Nicos Chr. Anastasiades & Partners, he has also had a long career in politics. Anastasiades was first elected to the House of Representatives in 1981 and was the leader of his centre-right political party the Democratic Rally (DISY) from 8 June 1997 to 28 February 2013. He graduated in law from the National and Kapodistrian University of Athens and completed postgraduate studies in shipping law at University College London.
Nicos Anastasiades was born 27 September 1946.