Building a strong start-up ecosystem and attracting big international brands to set up headquarters in Cyprus would give the country's economy a vital boost for growth.
With Cyprus’ return to growth, is PwC seeing more business?
In terms of international business, we are seeing growth from existing clients who are looking primarily for tax advisory and compliance services to be able to meet their obligations in the new regulatory tax environment. In terms of business overall, we see growth in consulting, corporate finance, but also in tax advisory and audit. Clients also appreciate the combination of industry expertise and use of technology that we bring to the audit process. As a firm we grew during the crisis and we continue to grow.
What international trends are influencing your sector?
There is a drive in the direction of more regulation, higher levels of compliance and transparency. There’s also a big debate internationally about taxation. Tax systems are complex and not aligned with the current economic environment and globalisation. Today’s global economy is increasingly based on knowledge rather than on tangible assets. International tax systems need to be simplified and adjust to the globalised knowledge-based economy. As PwC we’re at the forefront of these developments and have tremendous expertise in our tax advisory and in our tax compliance practice to ensure that our clients are on top of the requirements of the changing landscape. In Cyprus, the direction is for even more transparency, compliance and for international companies to create and demonstrate substance in the country. International trends obviously affect Cyprus. We are feeling the implications of the difficult economic conditions in Russia and the fact that we are a safe European country in a geographical area with a lot of instability, both aspects provide challenges as well as huge opportunities.
Cyprus has had a tough few years following the 2013 crisis, is the country back on track?
Conditions have improved significantly and Cyprus has exited from the memorandum according to the original time plan and without using all the money available in the program. The economy is out of recession, the credit ratings have improved and the country is back in the markets. However, we should not be complacent. Work on loan restructuring to reduce the high levels of non-performing loans should continue and we need to focus on making the economy more competitive and attractive to foreign investors. Ultimately we need sustainable growth, to start creating jobs. So things are moving in the right direction, but there’s still work to do. We are three years post the climax of the crisis, we have come a long way and met our targets and that’s a reflection of the hard work and commitment of the people of Cyprus.
There has been much talk about developing a better environment for start-ups in Cyprus and PwC has been a strong advocate in supporting entrepreneurship. What should be done to establish Cyprus as a start-up hub?
In the context of corporate responsibility, PwC has focused on supporting entrepreneurship and innovation. Essentially we are trying to meet two objectives, to offer our expertise to primarily young people wanting to start a business and to foster a culture of entrepreneurship in Cyprus. We are heavily involved with business angel networks and start-up incubators to help build up this environment. However, we must be realistic and admit that Cyprus is still at the embryonic stage in terms of start-ups and has quite some wayto go before we are on par with countries like Israel. But as a country we have made a start and it’s important that all market participants engage in the process. A key driving force is to also attract top talent to our universities to apply research in a number of fields, and to combine it with business partnerships to ensure that academic research is converted into business propositions. This in turn would attract more risk capital into the country, which we need to support start-ups. Therefore we should find ways of introducing risk capital propositions either through the stock exchange or through the funds industry and further develop a culture of business angels and private equity investors in Cyprus.
A welcome move is also the launch of Cyprus’ first-ever Science and Technology Park (STP), a project currently seeking strategic investors. The STP aims at attracting more research and innovation companies to Cyprus, but we should also have a broader agenda in terms of fostering this type of entrepreneurship. It shouldn’t be restricted to a certain geographic area or institution, but a national strategy on how to support and attract innovation and new technologies, as well as new ideas and business propositions.
What sectors do you see providing opportunities for growth and investment?
Privatisations have recently been the most visible area of investment opportunity, with the commercialisation of ports and telecoms, and the launch of a casino resort project. These offer obvious opportunities for investment and have garnered a lot of international interest. Beyond these, there are opportunities in tourist and energy infrastructure projects as well as in establishing headquarters in Cyprus and strengthening the island’s role as a regional centre for business. My experience with a number of international companies that have recentlycome to Cyprus is that they have a strong focus on the availability of good talent and the stability of the economic, fiscal and political environment. These are aspects that Cyprus should promote actively to the outside world. What we also need to work on more is increasing air connectivity, as easy access is essential in strengthening our position both as a tourist destination and as a regional business hub.
Cyprus has been looking at ways to cultivate its oil and gas sector, how do you see the country’s energy landscape developing?
PwC was one of the first to set up a dedicated energy team and we have developed a lot of expertise and capability in this area. We are servicing a number of the energy sector players in Cyprus and our view was always that this is an excellent long-term prospect for the country. We should look at countries like Norway, where it took several years until they developed not only the gas fields, but also the industry. Cyprus needs to invest to build capability, expertise and implement a long-term plan for the development of this sector, which currently faces challenges due to the low oil prices. Given international trends there should also be more focus on renewable and clean energy investments. Up to now, this area has seen more small to medium sized-projects, however, to really capitalise on opportunities we need a national strategy in terms of how we move forward in the clean and renewable energy space.
If you could choose three types of foreign investment for Cyprus, what would be on your wish list?
First, it would be great to have a big US multinational to set up its regional headquarters in Cyprus and to establish a strong presence in the country. Second, I would like to see a well-known brand defining fund or an asset management company or an international investment bank to set up here to put Cyprus on the map in terms of investment funds and financial services. And third, Cyprus would benefit from attracting a big investment from China to demonstrate that we are the European gateway to the East. These three types of investors would give Cyprus a bigboost in attracting more business.
With the lifting of sanctions on Iran, what opportunities do you see arising for Cyprus?
Iran is a new interesting market. It’s important for Cyprus to leverage its geographic position and in that context Iran could be an opportunity, in the medium to long term.
Cyprus is on a solid path to recovery despite the blow to its image following the crisis. How do foreign investors and your international clients view Cyprus today?
There has been a positive shift in views as we have substantially regained credibility over the last three years. We need to continue on the same track by improving the credit ratings and significantly improving the doing business and competitiveness rankings.
What are your expectations for Cyprus in 2016?
The expectation is for the economy to continue growing. Addressing red tape and continuing with reforms that make the economy more competitive will greatly facilitate this. Cyprus has a huge potential and great prospects. We have entered a new phase and we need a comprehensive growth strategy and policies that facilitate investments and business activity to realise it.