Cyprus will always have a trump card when it comes to transport and logistics thanks to its geostrategic location. With a successful port privatisation completed in 2016, the island is set to strengthen its position as a key regional transport hub.
Cyprus’ strategic location has been a major factor in shaping its history throughout centuries and has established it as an attractive hub for inter-regional maritime traffic. Following the country’s accession to the European Union in 2004, Cyprus was transformed into a key outpost in the Eastern Mediterranean. A natural transhipment centre for Europe-Far East trade, and located along the coasts of the Levant, North Adriatic and Black Sea, Cyprus is easily accessed with minimum diversion from the main arterial routes. The country’s sophisticated infrastructure has already made a significant contribution to economic development and is the driving force behind its emergence as a regional hub for cost-effective cargo transport and processing. In 2014, around 7.84 million metric tonnes of cargo passed through Cypriot ports and terminals, representing an increase of 12% on the previous year. The ports and airports of Cyprus provide international business with efficient sea and air logistics solutions, and with multinationals competing to win the privatisation bid of Limassol Port, the island is set to see competitive boost.
The importance of the East Mediterranean in world shipping continues to increase as a result of enhanced trade, regional port expansions and the discovery of significant hydrocarbons deposits in its waters. The widening and deepening of the Suez Canal – currently handling 7% of global maritime trade – could also significantly increase traffic in the region and bring more transhipment companies to Cyprus.
Responding to increasing interest from major shipping lines to choose hub ports in the region, Cyprus has consistently raised the bar and adapted its port systems to better cater to the demands of international trade. The island’s two deep-sea ports of Limassol and Larnaca have been extended three times since their construction in the mid-1970s. Over the years, Cyprus has transformed from being a small traditional break bulk handler exclusively serving domestic imports and exports, to a fully-fledged container and cruise port hub for international trade, shipping and passenger services. Cyprus Ports Authority has focused its efforts on establishing its ports as efficient transit centres and upgrading its services in terms of security and safety, as well as invested in information technology applications to reduce the time that ships berth in its ports – resulting in less cost for shipowners.
Over the last decades, Cyprus has invested in developing an efficient transport and communications infrastructure in order to support all sectors of the Cyprus economy. The Global Competitiveness Report 2015–2016 of the World Economic Forum ranks Cyprus 44th among 140 countries in Overall Infrastructure Quality. The ambitious ports development programme has already produced results, with the EU ‘Transport Scoreboard’ ranking Cypriot port infrastructure amongst the best in Europe. The island’s position as a bridge between the EU and the Middle East markets was further strengthened with one of Cyprus’ leading logistics services companies, Eurofreight Logistics, signing a major agreement with UAE-based Al-Futtaim Logistics for supply-chain services and processing of European goods heading to the Middle East. Both Limassol and Larnaca handle passenger and freight cargo. Limassol Port – privatised in 2016 – handles around 2,000 vessels per year and has an annual capacity of 600,000 twentyfoot equivalent units (TEUs). In addition to being one of the major container transhipment centres in the Eastern Mediterranean, Limassol is also a significant cruise liner hub for mini-excursions in the region and has become a key stopover point for international liners that include Cyprus in their regular schedules. Larnaca Port, with an annual capacity of 250,000 TEUs, has undergone significant improvements in recent years. Plans have also been drawn up to expand the port to accommodate large cruise liners, establishing Larnaca as the island’s main gateway for passenger traffic. In addition to the two main ports, there are also specialised oil terminals at Larnaca, Dhekelia and Moni, as well as the industrial port of Vasilikos – which hosts VTTV’s €300 million oil and gas terminal.
Privatisation of Limassol Port
Cyprus completed the privatisation of Limassol Port in 2016, with port services offered to bidders in three parts: the licensing for the container terminal and for the provision of maritime services for 25 years, and the licensing for a multi-purpose passenger terminal for 21 years. The commercialisation of operations at the port of Limassol, Cyprus’ maritime capital, is expected to bring in €2bn to state coffers over the next 25 years. A consortium comprising of EuroGate International GmbH, which has the majority holding, Interorient Navigation Company Ltd, and East Med Holdings S.A, was granted the concession for the port’s container terminal. The port’s maritime services were awarded to a consortium of one of the largest ports operators in the world, Dubai-based DP World Limited (majority holder), P&O Maritime and GAP Vassilopoulos Public Ltd. The successful port privatisation is set to further strengthen Cyprus’ status as a key shipping hub.
Momentum from Hydrocarbons Exploration
Following the 2011 discovery of significant natural gas deposits in Cypriot waters, the country’s ports have also managed to attract a number of companies offering regional services to the hydrocarbon industry. The commercialisation process of both Limassol and Larnaca Ports will further improve the level of service offered and significantly expand port activity. With Cyprus’ plans of developing into a regional energy hub, the country can capitalise on its geographical position and offer specialised services to its regional neighbours – such as storage, servicing supply vessels, repair and maintenance. As an established and secure international business centre with an attractive fiscal regime, Cyprus can also provide good administration, banking and legal services to the sector.
Global Air Links
Air connectivity is crucial for the island economy, particularly because it relies heavily on international trade, global business and tourism. In 2014, Cyprus adopted an Open Skies aero-political strategy, with the aim to lift any restrictions in terms of the number of designated airlines, frequencies, types of aircraft, cargo flights and charter flights. In addition, the government in cooperation with Hermes, the management company of its two airports, has created a number of incentive schemes to reward airlines for growth, operation on new routes or year-round operations.
2015 saw record-breaking numbers of arrivals and international airlines have been quick to recognise the growing potential of Cyprus – with many launching and expanding existing routes. The country’s two international airports, Larnaca and Paphos, received a €650 million upgrade in 2009 and 2008 respectively, resulting in a combined capacity of more than 10 million passengers. The two airports are currently served by 70 airlines, operating to more than 110 destinations in 40 countries. Opportunities from both tourism expansion and geopolitical developments in the area are expected to increase the operations of carriers and attract new ones to enter the market. In fact, the Department of Civil Aviation has already approved three new locally created airlines, which are set to enhance Cyprus’ connectivity even further. Following the launch of TUS Airways and Cobalt, the third local airline, Orion Air, hopes to begin flights to the UK and Greece from December 2016. The airline is expected to begin operations with three 737-800s, and increase the fleet to seven aircraft by the end of 2017.
An Emerging Hub
With significant investment in infrastructure, privatisations and a range of qualified service providers meeting the needs of international trade, Cyprus has a promising future as an international transport and logistics hub. Its importance in world shipping can only increase, as the countries surrounding the Mediterranean basin continue to develop economically and with hopes of a 2016 solution to the longstanding Cyprus problem – the de facto division of the island. The country’s pro-business government is committed in its quest to enhance Cyprus’ role as an international shipping centre and further develop naval freight transhipment services. Already one of the most important stopping points for goods travelling between East and West, and with easy access to Egypt’s Suez Canal – the fastest crossing between the Atlantic and Indian Oceans – Cyprus is well placed to act as a central distribution point for markets in Europe, the Middle East, and North Africa.