With a boost in hydrocarbon exploration, new foreign investment pouring into large infrastructure projects and tourism numbers at an all-time high, Cyprus is poised for sustainable growth, according to Minister Lakkotrypis.
What important goals and reforms have been achieved in 2016, and what are your key priorities for 2017?
Our Ministry covers a number of important sectors and we have a set of key priorities for 2017. With regard to tourism, we aim to maintain the increased growth accumulated over the past two years, both in terms of arrivals and revenue. For 2016, our all-time record year, tourist arrivals increased by 20%, whilst revenue up to and including October rose by 13%. We also want to promote the large infrastructure projects that we have embarked on, especially the integrated casino resort, which is expected to begin construction in 2017, following a successful licensing procedure that attracted an ambitious proposal by the consortium of Hard Rock, Melco and local CNS Group. Another major project is the Ayia Napa Marina, which began construction in 2016. In addition, we are very pleased to have received interest from strategic investors through the international tender procedure for the development of the Science and Technology Park (STP) in the Pentakomo area, which will undoubtedly be instrumental in our efforts to promote innovation and entrepreneurship in Cyprus. Commerce is another sector crucial to our economy. To enhance Cyprus’ status as a major trading hub in the Mediterranean, we are now hard at work to build on the positive momentum we have achieved over the past two years, in terms of exports of services and products, especially those of processed agricultural products. We are actively targeting key markets such as the Middle East, Central and Eastern Europe, the USA, Canada, China and India. Moreover, we are moving forward with the completion of the necessary structural reforms currently underway at the Registrar of Companies and we will be putting out a tender for a turnkey ICT solution to create a more efficient Registrar.
Cyprus has potentially significant deposits of natural gas in its Exclusive Economic Zone (EEZ), what is the current strategy for exploiting the reserves and developing an oil and gas industry on the island?
Despite the many challenges faced today by the global oil and gas industry, the Republic of Cyprus remains committed to implementing our strategy of exporting Cypriot gas regionally, which will also enable us to bring it to our shores for electricity production and other uses. An important step towards this end has been the successful farm-in of BG International, later acquired by Shell, with a 35% interest in Block 12 of Cyprus’ EEZ – the other consortium partners are Noble International and Delek Group. Block 12 includes the ‘Aphrodite’ natural gas discovery and this development constitutes an alignment of upstream and midstream interests, as Shell is a company with substantial technical, financial and marketing capacity. In parallel, work is currently being done with regard to finalising the ‘Aphrodite’ field’s development and production plan, the conclusion of the necessary bilateral agreements with Egypt, as well as the various technical studies.
Cyprus has forged many alliances regionally and with major energy companies. Could you outline what kind of international cooperation has been agreed on, and how do you see these relationships being developed over the next few years?
It is becoming increasingly obvious that a new source and potential route of supply is just at the backyard of Europe, here in the Eastern Mediterranean, where around 2,000 bcm of natural gas have already been discovered. Part of those gas reserves is, of course, located in our EEZ and we are convinced that there are still much more to be discovered. Especially following the 2015 discovery of the giant ‘Zohr’ gas field in offshore Egypt, the interest of oil and gas majors in our region has been significant. For Cyprus, 2017 signals the second wave of exploration activities in our EEZ, both by existing and potential new licensees and aiming at more discoveries of natural gas in the near future. Our vision is to develop a new gas route, the East Med Corridor, which will comprise of different infrastructures to export our region’s gas. Based on our country’s geography and many advantages, Cyprus is well positioned to have a central role in the regional energy developments and stands ready to help in facilitating the necessary synergies, joint projects and investments, by making use of the concrete partnerships it has developed with the countries in our region, including Lebanon, Israel, Egypt, Jordan and Greece.
What additional investment potential is there in the energy sector of Cyprus?
Besides the obvious multi-billion investments relating to gas exploration and exploitation, the finalisation of the master plan of the Energy Centre at Vasilikos area, has also initiated a new era with regard to the development of new energy infrastructure on the island. This includes, amongst others, plans for the future construction of an LNG Plant, as well as the ongoing relocation of the oil and gas reserves infrastructure, which has historically been located in the Larnaca area.
What effort is Cyprus making in introducing more renewable energy infrastructure and how is it planning to meet its 2020 energy-savings target? What scope for foreign investment do you see in this area?
Cyprus, having achieved around 9.6% of gross final energy consumption by the end of 2015, has already exceeded its intermediate 2015-2016 targets, which were set at 7.45%. To get to our 2020 target of 13%, we are now seeing increased development of renewables in terms of solar energy parks, but more importantly, we are encouraging individuals and businesses to generate their own power through distributed photovoltaic systems. This is a trend we expect will follow an accelerated growth rate with the maturing of energy storage technologies, and to this end we are also working to deploy in Cyprus a full smart meter roll-out. In any case, as we move forward with the introduction of competition in the electricity market in two stages, starting from this year, we anticipate significant investment opportunities for large Renewable Energy Sources (RES) projects. Large scale RES projects that have been already licensed and are expected to be developed in the following years include photovoltaic parks with total capacity of 30MW, awarded through a competitive bidding process under a Fit-in-Tariff scheme, as well as two concentrated solar power stations (CSP), with capacity 50MW each.
Tourism has seen record-breaking numbers over the last two years. How will you keep this momentum going and what areas are showing the best investment potential?
The numbers of arrivals to Cyprus were stalled for many years, vis-à-vis international growth trends, primarily because more markets were coming in with the ‘sun and sea’ concept and it became increasingly harder to differentiate our tourism offering. This is why over the past three years we have embarked on an agenda to diversify our offering by promoting special interest tourism, lengthening the tourist season to attract more visitors in winter months, and introducing large tourism infrastructure projects. A highlight will be the integrated casino resort, with the estimated investment for this mega project expected to exceed €650 million. It will be a unique resort in both Europe and in the region, as it will also include rich entertainment and MICE (Meetings, Incentives, Conferences, and Events) facilities. We will also continue developing nautical tourism with our new marina developments, as well as golf tourism with the operation of additional courses. Significant investment potential exists in upgrading both the quantity and the quality of our existing hotel stock. Overall, our top priority is sustaining the increases in numbers we have accumulated over the last two years, of 30% in tourist arrivals and an estimated 18% in revenues.
The professional services sector is a key driver of the economy, how is this sector performing and what is the country’s strategy in promoting its expertise internationally?
Cyprus has a widely acknowledged reputation of offering value-for-money services of the highest standard in the accountancy, legal and financial fields. Therefore, promoting the services sector is another top priority for us, as we continue to work for the expansion of Cyprus’ network of double tax treaties with other countries, as well as for the implementation of important structural reforms, for example, in the Department of the Registrar of Companies. We continually monitor and look for ways to make the business environment more attractive and efficient, and actively utilise all available mechanisms to promote our country’s expertise and many advantages overseas, including the competent Cyprus investment promotion agency Invest Cyprus.
What other key investment opportunities do you see in Cyprus at the moment?
We expect to see more investment in the oil and gas industry, as despite the momentum we have been gaining, the sector is still in a stage of infancy. Cyprus is a strong operating base for companies with activities in the Eastern Mediterranean and we have put in place a transparent and solid legal framework, aligned with EU directives – be it in the up, mid or downstream. Moreover, Cyprus also offers a beneficial base for auxiliary services to this industry and we have already seen much interest from international companies in setting up here. Our island could also become a significant fuel hub in the region, evidence of which is the successful operation of the sophisticated oil storage terminal at the Vasilikos area by Netherlands-based global oil terminal company VTTI. Obviously, in this regard and for trade in general, the widening and deepening of the Suez Canal will increase the traffic in our region and could bring more opportunities to Cyprus. Finally, in conjunction with other major tourism infrastructure projects, we are encouraging the creation of new hotels of all categories. Another important area where we would like to see more investment is in technology, research and innovation projects.
How do you see Cyprus developing in the next two years and what message would you like to relay to the international community?
Cyprus has managed to complete the adjustment programme in record time, already reporting significant growth rates. We are determined to keep making prudent fiscal decisions, whilst at the same time strengthening our growth potential and further improving our investment framework. We have worked hard during the last three years to ensure that our country’s reputation and comparative advantages not only remain intact, but are also enhanced significantly. The international community is most welcomed and can expect our assistance in exploring available prospects and to take full advantage of the many opportunities offered in all sectors of our economy.
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