Exports Head Upwards - Cyprus Profile

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Exports Head Upwards

Cyprus has established itself as a key EU trading post in the Eastern Mediterranean thanks to its advantageous geostrategic location at the crossroads of Europe, Asia and Africa. For decades, the island’s agricultural produce has been sought after in Europe and beyond. Today, Cyprus-grown produce is in even greater demand around the world, while exports of manufactured products are also on the rise.

Trade – deeply ingrained in Cyprus’ DNA – has played a pivotal role in shaping the local economy and the country has cultivated excellent and long-standing relationships with international export partners. These global export links have also supported the development of the island and its transport infrastructure into a modern and efficientregional trading hub and transhipment centre.

In 2018, exports including petroleum products registered a growth of 27.2%, reaching €1.57 billion, and excluding petroleum products exports stood at €927 million, increasing by 8.7% compared to 2017. Of manufactured goods, minerals and pharmaceutical products continue to head the list, followed by dairy products. Exports of manufactured items and the famous indigenous cheese halloumi increased by 13% and 21% respectively in 2018, and when it comes to agriculture, potatoes lead the way, followed by citrus fruit.

Cyprus has established itself as one of the most successful service centres in the Eastern Mediterranean, with spokes from this island hub reaching far into Europe, the Middle East, Asia and Africa. The export of services in 2018 brought in €10 billion, with the sale of both goods and services overseas accounting for 67.6% of GDP.

Strong EU Trade Links

Unsurprisingly, more than a third of Cyprus’ trade in goods is with the European Union. The main EU markets in 2018 were Greece, the UK, Sweden, Germany, France and Ireland. About a quarter of exports were to the Central America and Caribbean region, and to the Middle East and North Africa. With Cypriot industry growing, and efficient and modernised port and airport facilities already in place, the expectation is that the island will expand its centuries-old role as a leading Eastern Mediterranean trading nation.

To build on the momentum achieved, Cyprus is continuously searching for new avenues to promote its products. To this end the Ministry of Energy, Commerce and Industry , in cooperation with the Cyprus Chamber of Commerce and Industry (CCCI) and the Employers and Industrialists Federation (OEB), targets countries considered to have strong potential for Cyprus exports. Joint efforts by the government and the dynamic local private sector to open new and previously untapped trade markets are beginning to pay off.

Cyprus is already expanding trade ties with China – with a deal signed for the export of Cypriot dairy products to this vast Asian market. The two sides are also exploring how Cyprus could benefit from China’s Belt and Road Initiative (BRI). President Nicos Anastasiades, ahead of a visit to Beijing in April 2019, said BRI presented an excellent chance to develop further opportunities in trade and investment.

Agri-Exports Lead the Way

Cyprus has strong competitive advantages especially within the agricultural products category, and particularly in organic, gourmet and artisan products that are quintessentially Mediterranean yet hold an EU badge of quality. Since Cyprus’ EU accession in 2004, both primary and secondary exports have had to comply with stringent European phytosanitary standards and quality thresholds, which has only helped further promote Cypriot produce.

Agricultural products remain an important component of the economy, accounting for over 20% of domestic exports.At the top of the list is halloumi cheese, followed by the Cyprus potato. By far the island’s most important raw export crop, 86,000 tonnes of potatoes worth €42.3 million were exported in 2018. Thanks to Cyprus’ ideal climatic conditions, the country is able to harvest three crops annually. The spring harvest is the most important for export as it arrives earlier on supermarket shelves than the harvest of other countries, and the different varieties of potato are used for direct domestic consumption as well as for the production of crisps.

Other key fresh export produce includes citrus fruit, grapes, melons, vegetables and aromatic herbs, while a number of agri-food products are making headway in the international market, such as fruit and vegetable juices, fish and meat products. Cyprus has highly positive net exports in international trade under the dairy, eggs and honey category. In turn, these cashflows indicate Cyprus’ strong competitive advantages under that agricultural products category.

Star-Performing Halloumi

Perhaps the most globally renowned of the island’s exports is the famous halloumi cheese. Halloumi has become synonymous with Cyprus and can now be found in upmarket supermarket chains worldwide. With export numbers on a steady upward trajectory, it is no surprise the unique cheese has become one of the country’s biggest and most formidable trademarks internationally. The value and quantities of halloumi shipped around the world has grown every year, and in 2018 Cyprus exported 30 million kilos worth €194.3 million worldwide.

The Ministry of Energy, Commerce and Industry of the Republic of Cyprus is the registered proprietor of the Certification Trade Mark ‘Halloumi’ in Cyprus, the United States of America, the Kingdom of Jordan, the Sultanate of Oman, the State of Qatar and the Kingdom of Saudi Arabia. ‘Halloumi’ is also registered, as a Community Collective Trade Mark in the European Union, under the name of the ‘Foundation for the Protection of the Traditional Cheese of Cyprus named Halloumi’.

‘Halloumi’ marks certify that Halloumi is produced only in the Republic of Cyprus, by authorised producers, who meet the high standards and specifications set forth, with respect to the production, and labelling for cheese carrying that name. In July 2014, Cyprus submitted an application for acquiring a European Protected Designation of Origin (PDO) in respect of the Halloumi name, in order to further protect and maintain its name and reputation in accordance with authentic Cypriot production methods. The PDO application is still under examination by the European Commission.

Growing Wine Industry

An exciting growth area in Cyprus is wine production. Recognising the evolving success of this sector the government is working hard to popularise Cypriot wine in the European market. To give a further boost, the government has announced €23 million in subsidies to the local industry through the National Viticulture Support Programme for the period 2019-2023.

Boasting some of the oldest grape varieties in the world, and with evidence of wine production on the island since 4,000 BC, Cyprus is on a winning streak today. The work of over 70 boutique wineries has supported the rebranding of Cyprus as a new territory with exceptional and unique small-batch wines. Some in the local industry are experimenting with new varieties, while others have turned their focus to protecting and rediscovering old ones.

Four different wine regions have been designated as producing their own unique product with controlled appellations of origin. In each case, different proportions of indigenous Cypriot red grapes such as Maratheftiko, Ofthalmo or Mavro, or the white grape Xynisteri, are blended with smaller quantities of specified foreign varieties such as Cabernet Sauvignon, Cabernet Franc, Syrah or Merlot.

Exporting Services

With over 80% of the economy based on services, Cyprus has a wide range of expertise to support business both locally and internationally. The services sector has long been the backbone supporting cross-border economic activity and has also become one of the island’s top exports. Ranging from travel and tourism to legal, accounting and business support services, from banking and insurance, to shipping and ship management, from education and healthcare to information technology and software development.

Cyprus’ transformation into a European and regional support hub means that companies can take full advantage of its services, which include warehousing, headquartering, high-tech repair and servicing centres, along with software development and testing facilities. Cyprus-based enterprises also benefit from numerous government-sponsored incentive schemes, including the creation of industrial parks and free industrial zones, designed to encourage the diversification and expansion of manufactured exports.

Re-Exports and Transhipment

Already an established international business centre and a thriving21stcentury trading hub, the country provides a full range of regular and customised services to support the import and export of goods by both Cypriot and foreign companies to and from the EU, as well as internationally. Cypriot exports are supported by an excellent transport infrastructure. The island is served by over 70 shipping lines, connecting it to all key ports and destinations worldwide, and two international airports guarantee the fast and efficient transport of goods, ensuring Cyprus remains one of the most attractive bases for logistics and transhipment companies.

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Growing Fuel Exports

The island’s reputation as a leading logistics and support provider for the oil and gas industry in the East Med is complemented by its emerging role as a centre for the processing, storage and re-export of fuel. This is largely due to the development of a sophisticated €300-million fuel distillation terminal at Vassilikos, thanks to which exports of mineral fuels and oils jumped from zero in 2014 to €98 million in 2015 when the terminal opened, and reached €646 million 2018. Operated by VTTV, the Cyprus subsidiary of Dutch multinational VTTI, the terminal  processes so-called ‘white’ or ‘clean’ products that have already been refined, such as diesel or middle distillates. These are shipped to Vassilikos from producers in the Gulf and the former Soviet Union and are then blended or modified to meet the specifications of the European market.

VTTV is the first energy terminal of its kind in the Eastern Mediterranean which connects Europe and the Black Sea with markets in the Middle East and Asia. Product fuel oil from the Black Sea area heading to markets in Asia must first be transported in small ships because of shallow waters in the Bosporus. At Vassilikos, VTTV helps to ‘build bulk’ and processes the cargo to the correct specifications for it to be exported economically to neighbouring markets and to the more distant markets of Asia via much larger vessels. VTTV anticipates that in 2019 up to 240 vessels will call at its Vassilikos jetty – an increase of 46%  on the previous year – and the company is engaged in talks with the government about implementing flexible marine tariffs and port charges to make jetty transfers more commercially competitive.

As a percentage of Cyprus’ GDP, petroleum is only worth around 1%, but the industry has tremendous growth prospects with the country’s determination to establish itself as a key energy hub and a bastion of stability and security in the region. Further opportunities for growth are expected to arise from the implementation of the International Maritime Organisation’s sulphur cap on fuel content in January 2020, when an upper limit of 0.5% sulphur content will lead to demand for new blends for ship fuel.

Quality Exports

Cyprus’ strong track record of producing quality and sought-after exports coupled with the island’s healthy economic growth of almost 4% are encouraging signs of bright future prospects. Further down the line lies the possibility of Cyprus also becoming an exporter of natural gas, having already established its role as a service centre for the East Mediterranean energy sector. The island’s unique position along key Mediterranean trade routes is further strengthening its longstanding reputation as a service provider providing gives exporters strong competitive advantages.

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July 2019

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