Transport & Logistics

    Growing Transport Hub

    Transport & Logistics

    Cyprus is all about leveraging its strategic location, and with more airlines jetting in and multi-million investments in ports, the island is making a name 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 EU outpost in the Eastern Mediterranean.

    A natural transhipment centre for Europe-Far East trade, and conveniently located along the routes to 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 the recent commercialisation of Limassol Port, the island is set to see a competitive boost with the deal filling state coffers with around €2 billion over the next 25 years, and planned infrastructure investment of €100 million by the new port operators.

    Multipurpose Ports

    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.

    The Cyprus Ports Authority has focused its efforts on establishing 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 2016–2017 of the World Economic Forum ranks Cyprus 50th among 138 countries in Overall Infrastructure Quality.

    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 handles around 3,000 vessels per year and has an annual capacity of 600,000 twenty-foot 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 and redevelop the Larnaca port and marina area, with the aim to transform the existing port into a functional harbour, which will be in a position to host large cruise ships and yachts. Although with a main focus on tourism, the project presents an excellent investment opportunity, combining commercial port and passenger activities, with leisure, tourism and real estate development.

    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. The Cyprus Ports Authority plans to upgrade the port of Vasilikos, with funds of approximately €30-50 million, the majority of which will come from the EU. The aim is to expand the port and create better facilities for to the burgeoning oil and gas sector.

    Privatisation of Limassol Port

    2016 marked the successful privatisation of Limassol Port, launching a new era for the port as a commercial hub. The tender attracted big-name operators from around the world, with the winning bids going to German Eurogate International GmbH, as the majority participant, along with Interorient Navigation Company Ltd and East Med Holdings SA for the container terminal, and Dubai’s DP World Limited, as the majority participant, and G.A.P Vassilopoulos Ltd for both the marine services and the multi-purpose terminal.

    The deal was a strong indication of the renewed dynamism of the Cyprus economy and the recovery of investor confidence in the island. Not only is the multimillion agreement a source of much-needed revenue, but it will also upgrade Cyprus’ role in the South-Eastern Mediterranean – promoting it as a key regional centre of maritime commerce in the area. Compared to regional rivals, such as Piraeus and Haifa, Limassol Port has lagged behind in recent years. However, these new developments are sure to attract more business and international expertise, bringing the island on par with its counterparts in the region.

    Hydrocarbons Exploration Race

    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 development process of both Limassol and Larnaca Ports will further improve the level of service offered and significantly expand activities.

    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 international airports, has created a number of incentive schemes to reward airlines for growth, operation of new routes or year-round operations.

    2016 saw record-breaking numbers of arrivals, constituting an annual increase of 18%. International airlines have been quick to recognise the growth potential of Cyprus – with many launching and expanding existing routes. The country’s two 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 75 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.

    Cyprus is also improving existing aviation agreements and concluding new ones, for example with Lebanon, Saudi Arabia, Australia and many others. In 2016, the country launched a new company called Cyprus Air Navigation Services, whose operations are expected to begin in 2017 and provide a high-level of air navigation services.

    The Department of Civil Aviation is currently examining applications of new locally registered airlines that can enhance Cyprus’ connectivity further. Two such airlines – Cobalt Air and TUS Airways – have already been approved and have commenced operations, whilst two more applications are under review.

    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 amidst hopes of a 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 and transhipment centre for markets in Europe, the Middle East, and North Africa. 

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    Updated: May 2017

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