For the last decade, the Cyprus investment promotion agency Invest Cyprus has forged ahead with its mission to promote Cyprus as an investment destination with the country attracting billions in fresh FDI in the last five years.
Invest Cyprus celebrated its 10-year anniversary last year. During this time Cyprus has overcome big challenges, how is the economy faring today?
After a very difficult period for our economy, country and our people, we were pleased to see Cyprus finally return to investment grade in 2018. The efforts of the government over the last six years, prudent fiscal management with surplus budgets, the repositioning of the financial system to healthy levels and the attraction of notable investments are some of the key factors that determined the return of the Cypriot economy to high growth rates and positive future projections. The economy is now recording growth rates of up to 4%, with expectations of rates that will exceed 3% over the next three years. Unemployment has dropped to 7.4%, the lowest level over the past eight years, and it is predicted that by 2020 the target of achieving full employment will be met. From our end, we are determined to continue working intensively to promote Cyprus as an attractive investment destination and a credible and competitive business centre. Increasing the inflow of foreign direct investment with added value is key to the dynamic growth of the economy and the establishment of long-term prosperity for Cyprus.
Since 2013, Cyprus has witnessed a boost in investor interest and has been able to greenlight numerous multimillion-euro projects and initiatives. What sectors have attracted the most investment?
Investments made between 2013 and 2018 in Cyprus reflect the scale of the efforts that have been undertaken in recent years. The gradual restructuring of the banking sector led to the attraction of important institutional investors as well as measures to sell off non-performing loans, which have enabled the financial system to operate on a more sound basis. Our banks are at a substantially improved level of capital adequacy and liquidity, while efforts to reduce non-performing loans also continue at an encouraging pace.
Several important projects have been implemented or are ongoing, boosting Cyprus’ image and strengthening its competitiveness. For instance, the marinas of Ayia Napa, Paralimni and Larnaca as well as the creation of the multi-purpose casino resort, a €600 million investment, with multiple benefits for the country’s economy. Worthwhile investments have also been made in the hospitality industry with acquisitions and the construction of new luxury hotels of well-known hotel management chains. There have been investments in the health sector as well, such as the creation of the German Oncology Centre in Limassol and the Eden Seniors Luxury Resort in Larnaca.
The gradual recovery of the real estate market cannot be underestimated, with sales recording an increase of 24%, and Limassol holding the crown with 36%. An increase in sales to foreign buyers was also recorded at 33% and sales of luxury housing by 45%. We have now moved from small to large developments, and high value transactions.
A special mention should also be made regarding the field of higher education. With the contribution of foreign investors, universities have upgraded their programs, which has also contributed to the significant increase in the number of foreign students choosing Cyprus for their studies. Further prospects exist in forging partnerships or attracting branches of foreign universities to set up base in Cyprus, and we are actively pursuing this end.
What other sectors are performing well or gaining momentum?
The shipping industry is recording continuous growth, which is why it was crucial to set up a Deputy Ministry of Shipping. Cyprus is currently the largest shipmanagement centre in Europe and among the top three largest shipmanagement centres worldwide. In 2016, the management of Limassol Port was taken over by private investors for the first time, with the state benefiting €1.9 billion from this agreement over the next years.
Developments that allow vast potential for the economy continue to be recorded in the energy sector. Conglomerates have secured exploration drilling licenses with all eyes on ExxonMobil, currently drilling. At the same time, the introduction of liquefied natural gas is expected. For this purpose, a tender has been called for the design, construction and operation of a Liquefied Natural Gas (LNG) Terminal Station in Vassilikos. The total cost of the project is expected to reach €500 million.
Numbers are also impressive in the tourism sector. In 2017 there was a 14.6% increase in arrivals, while in the first half of 2018, the increase was 9.6%. It is expected that by 2027, the number of arrivals of foreign visitors to Cyprus will reach 4.8 million, provided we continue to offer attractive packages and quality experiences to our visitors. The role of our two international airports in Larnaca and Paphos, which are linked to 120 destinations in 40 countries, is also important in this context. The recently established Deputy Ministry of Tourism will add significant value to this industry and the economy as a whole.
As for relatively new and growing industries, investment funds and audiovisual productions are key sectors. Investment funds established in Cyprus during the past five years recorded a 70% increase. In particular, they rose from 13 in 2013 to 172 in 2018, while the total assets under management climbed to €5.8 billion, marking an impressive increase. Efforts to attract at least one international bank to open a branch in Cyprus offering custodian services remain high on the agenda for this industry. The audio-visual and film production industry is the real newcomer with the launch of the Cyprus Film Commission and an attractive incentives’ programme. The first Film Summit in Cyprus was held with great success in October 2018, with keen interest from producers from around the world, while a particular American company has shown active interest in creating the first major production in Cyprus.
Cyprus has now focused on supporting more innovation and technology, as well as attracting international companies to establish headquarters on the island. Is this a long-term strategy and are these efforts bearing fruit?
In the face of international developments, we have taken the initiative to develop a targeted and systematic strategy to penetrate new major markets to attract foreign direct investment. Special emphasis has been placed on promoting Cyprus as a destination for the transfer of headquarters or activities of multinational corporations. It is worth noting the already established presence in Cyprus of leading international companies such as Wargaming, Sykes, Amdocs, 3CX, NCR, Thomson Reuters, VTTI, Schlumberger, Nielsen, who have chosen to have their headquarters here.
Similarly, emphasis is placed on innovation. With support from the US State Department and our organisation, Chrysalis LEAP organised in Nicosia the biggest entrepreneurship programme for green technology in Europe, the Middle East and North Africa in May 2018. For the same sector, we are promoting actions for both innovation and new technologies and we welcome the government’s action to set up a Blockchain technology monitoring committee as well as the Innovation Hub set up by the Cyprus Securities and Exchange Commission.
Invest Cyprus has also launched the ‘Invest Career’ online platform, where Cypriot and foreign professionals can match their talents and skills with existing jobs in their areas of interest, reinforcing the efforts of the Ministry of Labour, which has borne positive results in the key area of battling unemployment.
How will Brexit affect Cyprus, and is Invest Cyprus taking any specific action in light of the UK’s EU exit?
Brexit is a development that will undoubtedly also affects us. Cyprus has remained committed throughout this time to achieving a good and mutually beneficial agreement. We, from our part, created a specific strategy and planned a series of actions with March 2019 on the horizon, in a bid to utilise all the prospects that are opening up. We have aimed to identify and approach companies that wish to obtain or maintain their base in the EU. We have prepared a series of presentations and individual meetings with businesses and organisations for the purpose of transferring their headquarters and operations to Cyprus. We give particular weight to the field of investment funds, marine insurance and re-insurance and shipping companies which has tremendous prospects and already transferred their bases to our island and others which are in the process to decide since the Brexit date is approaching.
What key goals does Invest Cyprus have for the next few years?
Invest Cyprus has established itself as the main body to strengthen Cyprus’ position as a global investment and business centre and to increase the inflow of foreign direct investment into the country. In the last years, we developed a series of actions that were part of the agency’s strategy for the period 2017-2020 and aimed to place Cyprus on the map of competitive regional centres for a number of areas, while at the same time focusing on attracting value-added investment that create jobs and stimulate entrepreneurial and investment activity. Our activities have become more targeted on a global geographical sphere and we are focusing on alternative sectors of the economy, beyond the traditional strong sectors of tourism, real estate and shipping as mentioned before.
As Invest Cyprus we will continue to operate as the government’s support for investment and entrepreneurship. We are committed not just to continue, but to also step up efforts to provide support to investors and the state, acting as a link between the public and private sectors to build a better future for our country.
How do you see Cyprus developing in the next few years and what challenges do you see the country having to tackle in order to maintain its healthy economic growth rates?
There is room for improvement in a number of areas that will enhance the competitiveness of the Cypriot economy. The latest evaluation of Cyprus’ economy by the World Bank in the framework of the Doing Business report 2019 is of particular concern to us. Among 190 countries, Cyprus ranks 57th, falling four places compared to last year’s ranking in terms of the country’s business environment. We believe that with the establishment of the Economy and Competitiveness Council, which we welcome, the necessary steps can be taken to strengthen our country’s competitiveness and to solve the chronic problems that make it harder to attract investment. We recognise the huge efforts the government is making to change things, but the process is slow and other countries are moving much faster hence the drop in our rankings. In light of this, we believe that the voting of the investment law which is in the Parliament, will significantly contribute to the promotion and ease of investments, thus creating a more business friendly environment. Beyond the push for the investment law, it is also mandatory for us to tackle the reform of the public sector and local authorities as well as transform the digital sector. Foreign investors expect these improvements just as much as the Cypriot citizens, but the country has certainly returned to the path of development and in 2019 we will bring Cyprus to the fore. It is time for the world to learn what Cyprus has achieved in the past six years, and I am certain we will continue strengthening with new investments that will add value to our economy.