Cyprus is focusing on advanced high-tech products for niche markets, with hope that these value-added activities could facilitate a resurgence of productivity and protect the island’s production heritage.
Cyprus is the perfect base for the small-to-medium- sized manufacturer seeking access to both the European Union market of 500 million and the burgeoning markets of the Middle East, North Africa and Asia. Its strategic location, coupled with its sophisticated transport and logistics infrastructure, offers considerable advantages to the producer hoping to expand into new markets. Companies forming links with Cyprus are able to benefit from the country’s EU and eurozone memberships and from numerous tax advantages. Businesses located in Cyprus are superbly placed to supply new and existing markets in the region, while benefiting from the island’s well-developed infrastructure and highly skilled labour force.
Cyprus is radically restructuring its manufacturing base and actively seeking to attract new high-tech and knowledge-based industries. Regrettably, the sector has been hit hard by the economic recession of recent years. Prior to the 2013 bailout, Cypriot manufacturers were slowly emerging from a lean period when they were squeezed between high-wage producers in the west using cost-efficient modern production techniques, and low-wage mass producers in South-East Asia. They responded by repositioning themselves to focus on higher-value niche production, more appropriate to Cyprus’ modern-day economy and its highly educated workforce.
From being traditionally agricultural, Cyprus embraced industrial development in the 1960s and today specialises in the manufacture of mediumand high-technology products and semi-customised small-batch products. Main growth industries have been in ICT sector manufacturing parts, instruments and electronics, as well as consumer products such as food and cosmetics. Cyprus’ key industrial products are: pharmaceuticals, food, beverages, chemicals, mineral products, machinery and equipment. Of these, only pharmaceuticals and non-metallic minerals have experienced growth in recent years. Today, manufacturing contributes approximately 5% of GDP and accounts for 9% of people in employment. The main destination for Cypriot manufactured exports is the European Union, which constitutes over 50% of the market, while exports to the Middle East make up around 15%.
SMEs Leading the Way
The majority of manufacturers are small and medium- sized enterprises (SMEs), which employ less than 10 workers. This makes the sector flexible and open to innovation. The government is seeking to improve SMEs' access to finance and overseas markets, and to maximise the commercial potential of local research and development in order to open up untapped areas of productivity. The adoption of modern production technologies has already created new opportunities for traditional enterprises to compete globally and the sector is attempting to secure its future by establishing itself afresh in specific niche markets. The pharmaceutical and non-metallic mineral sectors have already succeeded in making this transition towards the provision of value-added products for a specialist market. Since 1999, both areas have shown consistent growth. In a bid to support SMEs, Cyprus also offers opportunities to make use of 10-year tax breaks for new export orientated companies, access to training grants and soft loans, as well as funding opportunities for small start-up companies.
Demonstrating consistent excellence and conformance to internationally approved quality standards, consumers are using and trusting Cypriot-made pharmaceuticals in over seventy countries worldwide. Cyprus is in a unique position to exploit its position in Europe with respect to the manufacture and distribution of pharmaceuticals. Cypriot pharmaceutical products can be found from the EU to Australia, Costa Rica, the Gulf and Middle East, Africa and all across Asia and the Pacific, establishing ‘Made in Cyprus, Made in EU’ synonymous with quality.
One such niche success story is leading Cypriot pharmaceutical company Medochemie Ltd, which develops, manufactures and distributes generic pharmaceuticals. It has nine plants in Cyprus, one in the Netherlands, and last year expanded still further, opening its eleventh plant in Vietnam. In June 2016, Medochemie was also ranked among the one thousand companies listed by the London Stock Exchange (LSE) as being exceptional and inspirational. The LSE's top 1000 list showcases the important role that progressive SMEs can play for economic development and how they can act as models for other European businesses.
Copper mining and metallurgical production in Cyprus commenced 5,000 years ago, and although due to the size of the island there is limited scope for a big mining industry, a few players have been successful in Cyprus, despite the size of the island limiting the scope. Hellenic Copper Mines have the only active mine in Cyprus, constituting the world’s longest continuously producing copper mine with over 4,000 years of history. Due to the technical challenges of operating in a small market, the company places strong emphasis on innovation – an indicator Cyprus ranks well on – and was the first to introduce hydrometallurgy in Europe. Other areas of potential interest include the preliminary surveys done by mineral exploration company BMG, which is in the process of identifying sites for high impact exploratory drilling in the Kalavassos district of the Troodos Mountains. Food and beverage manufacturers are also attempting to grow and develop specialist markets for their products and are marketing halloumi cheese, olive oil, fruit and vegetable juices and wine to a more specialist customer base.
Solutions through Innovation
To continue to meet the rigors of the global market, Cypriot manufacturers are constantly following developments and technological advances in their field of activity, while the government continues to encourage manufacturing by improving the infrastructure and creating industrial parks and free industrial zones. Innovation is the pivotal driving force in this sector and could bring new opportunities and open new niche areas of industry. Also, due to the high cost of electricity production in Cyprus, the use and development of renewable energy is seeing a boost, with manufacturers striving to become self-sufficient and add value to the production process. However, the recent discovery of natural gas is expected to further facilitate innovation and growth within the manufacturing sector, with prospects of using the island’s own energy supply to lower the cost of production.