Cyprus 2018 Presidential Elections - Candidate Interview
What will be your strategy to ensure the continuous recovery and growth of the Cyprus economy – to raise living standards, close the gap between rich and poor, and reduce non-performing loans? And what key targets have you set for yourself to accomplish should you be elected President?
The key to ensure that economic recovery is entrenched, is to maintain conditions of stability, to continue working for a pro-business economy environment and to proceed with ongoing structural reforms in sectors such as in the judiciary, public administration, local authorities, state owned enterprises and healthcare. The Government is also implementing an Action Plan for Growth, which includes a new law for facilitating strategic investments, a new Tourism Strategy and the establishment of three Deputy Ministries in key sectors of the economy – shipping, growth and tourism.
Combating the high level of unemployment is also one of our overarching goals and the key to strong recovery and growth of the economy. We are also implementing a number of active labour market policies, addressing especially youth and long-term unemployed.
We acknowledge that non-performing loans are the biggest challenge for the Cypriot economy. During the past year, there has been remarkable progress, supported by an acceleration of economic growth, and an increase in employment levels and disposable income. The improved economic environment and labour market conditions enhance the capacity of households and businesses to address their obligations. As a result, private sector debt is down to €52 billion, from its peak of €72 billion in 2012.
We have also introduced a holistic legal framework, establishing the right incentives for both lenders and borrowers to come to terms and restructure their loans. This includes a more effective insolvency and foreclosure framework and a law on the sale of loans, and a bill on loan securitisation is currently being drafted. Banks have multiplied their efforts to address the issue of NPLs, most importantly via outsourcing their management to internationally reputable service providers.
What do you see as Cyprus’ key strengths and most important sectors in terms of attracting new business? And how will you support the local business community and increase cooperation between the public and private sectors?
Key strengths for attracting new business are Cyprus’ EU and eurozone memberships, and its strategic geographical location ideal for exploiting new markets. Cyprus enjoys a highly educated labour force, advanced infrastructure and a broad range of quality business services. We also have a business-friendly climate conducive to investments. This is coupled with a stable and reputable legal system based on common law.
The most important sectors of the economy that can attract new business are tourism, shipping and energy. The tourism sector is undoubtedly one of the main drivers of economic growth in Cyprus. Last year, tourism exhibited a record number of tourist arrivals and the sector is set to expand further through the construction of marinas, a casino resort and investment in hotel capacity.
The shipping sector is another important growth engine for Cyprus in attracting new business. By combining strong geographical, institutional and commercial advantages, the shipping sector has managed to become the 10th largest merchant fleet in the world and 3rd largest merchant fleet in the EU.
The energy sector is also key for the Cyprus economy. Recent exploration activities for hydrocarbon reserves in the Exclusive Economic Zone of Cyprus, and in neighbouring countries, have revealed significant prospects of natural gas reserves, which will have significant implications for Cyprus.
In regard to the role of the private and public sectors, the private sector is dominated by SMEs and has a leading role in economic activity. In order to increase entrepreneurial activity in a friendly business environment, a National Policy Statement on the development of the Entrepreneurial Ecosystem has been established, with already over 50% of its actions implemented – many of which are triggering factors for entrepreneurial innovation.
Small to medium sized businesses are still struggling to adapt to the new post-bailout conditions, while private sector wages have not recovered and we have the highest percentage of private debt in Europe. How are you going to tackle these challenges?
Despite the significant economic recovery of the Cyprus economy, the private sector is still facing challenges. But action has been taken and progress is being made. Private debt has been coming down fast, and the elimination of the tax bias vis-à-vis equity and debt financing will facilitate the gradual deleveraging of businesses.
Additional implemented measures to accelerate the process of deleveraging and alleviate this burden include a new insolvency framework and amended tax laws to temporarily exempt loan restructurings from tax to facilitate and encourage the restructuring of NPLs. The Government has also implemented measures of reducing the tax burden on labour and businesses in order to enhance competitiveness, job creation, as well as growth.
The European Investment Bank's (EIB) support in the private sector was invaluable during the crisis, where access to lending by SMEs was almost impossible. From 2014, EIB has been providing loans with favourable conditions due to the provision of a state guarantee to ten banks operating in Cyprus. So far, loans to around 200 businesses have been offered, and more than 300 investments have been promoted, many of which would not be possible without the low-level EIB lending. The EIB schemes have significantly boosted the growth of our economy and have been a decisive factor in driving down interest rates.
Cyprus has seen a boost in FDI over the last few years, bouncing back as an attractive destination for foreign investment. How will you maintain the attractiveness of Cyprus for investors and what incentives will you introduce if elected?
Optimising Cyprus’ competitiveness has and will be amongst our top priorities. During the past few years, we have succeeded in turning an economy in distress into a success story that gained international praise. Through public sector reform, careful management of state finances and the enhancement of the tax and legal framework, the Cyprus economy is growing at a healthy rate.
This has resulted in renewed investor interest and substantial investments in a wide range of sectors. From the operation of oil and gas giants in Cyprus’ EEZ, to the licensing of the first integrated casino resort for an investment of more than €0.5 billion, the impressive 18% annual increase in investment funds’ registration, the record numbers of the tourism industry in both arrivals and revenue and the commercialisation of the Limassol port, it is evident that our efforts have borne fruit. The challenge now is to keep up the momentum and to ensure we remain on a path of sustainable growth.
Red tape is a long-standing frustration for international business coming to Cyprus. A one-stop shop has been in the making for years – how will your administration ensure its fast implementation? And what other measures will you introduce to streamline bureaucracy to keep Cyprus competitive on the international stage?
The need to improve the regulatory framework is now a top-priority. In this respect, far reaching public service reform is being promoted and the improvement of the regulatory framework is being achieved through the implementation of the Action Plan for Better Regulation, which includes actions to modernise and simplify in specific areas, including e-government actions.
To effectively support local businesses as well as foreign investors, the government has placed before Parliament a bill for the creation of the one-stop shop and to provide the necessary support to local and foreign investors. New measures will simplify procedures, and increase transparency and accessibility of services.
Financial and business services are the backbone of the economy and account for a significant segment of the country’s economic output. Will you be proposing any changes to the existing tax and regulatory framework and going forward, what key markets do you see as the most important for Cyprus?
The biggest advantage for any economy is stability, transparency and effectiveness of the regulatory framework, which should evolve in line with international developments. I can guarantee tax certainty and verify that we have a clear policy stance in favour of an efficient tax regime which will continuously introduce new incentives.
The economy is growing at a healthy 3.5% and we appear to have entered an era of balanced budgets, thanks also to growth in the tourism sector over the last few years. What will be your policy to ensure future growth and sustainability in this sector?
Cyprus has been recording significant increases for the past 3 years. 2016 was a record year, whilst 2017 is already well on its way to surpass it, with an estimated 3.6 million arrivals.
Given the sector’s importance to the economy, we are implementing a number of targeted policies, including the development of high-value projects such as marinas, golf courses and a casino resort, launching of an EU-funded incentive scheme for the tourist industry, creating synergies between private and public sector and running promotional activities in niche markets.
We have also been developing a long term National Tourism Strategy 2030, aimed at repositioning the Cyprus tourism brand and making a strategic shift towards an upscale, enriched and diversified product, capable of attracting higher-spending visitors.
Our initial goals for future growth determine tourist arrivals by 2030 to exceed 6 million tourists annually, with 40% of these visiting Cyprus in the off-season period, from November to April. We are also working to ensure that all developments will be implemented in a sustainable and environmentally friendly manner.
Investing in research and innovation are key factors in spurring long-term economic growth, how will you support and promote these activities?
Research and Innovation (R&I) is a key driver of economic growth and an important factor in meeting global societal challenges. This is reflected in the Smart Specialisation Strategy for Cyprus, which includes targeted support to R&I in sectors where Cyprus has a competitive advantage. Measures aiming to attract private investments in R&I, enhance entrepreneurial innovation and promote synergies between the research and academic community with the business sector are promoted by the Government.
The National Policy Statement on the Entrepreneurial Ecosystem, approved by the Council of Ministers in December 2015, sets out objectives and actions to improve the framework conditions for business R&I, which among others includes the introduction of tax incentives for investments in innovative firms and start-ups, the streamlining of the regulations governing the creation of university spin-offs, the strengthening of intellectual property legislation, and the use resources from Structural Funds in a more targeted manner guided by the S3Cy.
The R&I Strategy of Cyprus also attaches great importance to the capacity building and the development of high quality Research Infrastructures (RIs) in the country. We also attach great emphasis on the promotion and support of the participation of national stakeholders in European competitive programmes, such as HORIZON 2020. In this respect, the programme ‘Teaming for Excellence’, is a great opportunity for Cyprus to pursue the creation of Centres of Excellence in R&I and greatly enrich the Research Infrastructures landscape of the country. Currently two such Centres of Excellence are under implementation, the KIOS Centre of Excellence on intelligent systems and networks and the RISE Centre of Excellence on interactive media, smart systems and emerging technologies. They will both benefit from substantial co-funding by the Government – by €15 million each.
In your view, what would be the ideal solution for the longstanding ‘Cyprus Problem’, and what economic and financial impact could a political settlement have for Cyprus?
We are steadfastly committed to a just and viable comprehensive settlement of the Cyprus Problem that reunites Cyprus and its people in a bi-zonal, bi-communal federation, in line with the relevant UN Security Council resolutions, international and EU law.
A solution that allows Cyprus to be a truly modern, independent and sovereign state, with no anachronistic rights of intervention or the presence of foreign troops, and which fully safeguards the human rights and fundamental freedoms of all Cypriots.
As I have repeatedly stressed, Cyprus is and will remain an EU member state post-reunification and this capacity provides the best guarantee for a reunited Cyprus and all its people. I am convinced that a viable and functional comprehensive settlement would yield, amongst other benefits, enormous economic and financial advantages, allowing Cyprus and its people to fully utilize our unfulfilled potential and prospect for further economic growth and prosperity.