Significant reforms and new measures to fast-track investment are set to boost the economy and attract new business to Cyprus, says CIPA Chairman Christodoulos Angastiniotis.
The bailout deal between Cyprus and the Troika has now been reached, but the banking crisis has negatively affected Cyprus’ image. Does Cyprus have a future as a financial and business centre?
Following current developments the financial sector will be downsized, but Cyprus continues to be a competitive business centre with all of the same advantages – such as the beneficial tax framework, close to 50 double tax treaties, high quality of life and excellent service provision. At the same time the economy overall is expected to become more competitive adding another edge to its development. Being an EU member state and with our strategic geographical location between three continents, Cyprus is also an ideal gateway for third countries to access European markets. Although facing challenging times today, we have a bright future and will rebuild Cyprus into the strong and efficient jurisdiction it has been for decades.
In addition to business and financial services, which sectors of the economy are showing increasing growth and opportunity?
Tourism is increasing every year with markets such as Russia and Ukraine growing rapidly. We are expecting more than 400,000 Russian tourists this year – our second largest source market – and now have direct flights to Ukraine. We have maintained our traditional UK market and are seeing more interest from countries like China. Cyprus is taking important steps to diversify the tourism product and attract ‘high-spending’ tourists by building luxury marinas and golf courses as well as upgrading our hotels and services – and a new addition to our product offering will be casinos. We are also taking steps to attract more sports, cultural, religious and medical tourism, which is a big opportunity for Cyprus thanks to its many excellent private hospitals and highly qualified doctors.
Shipping is another formidable sector and accounts for more than 7% of the GDP and we fully support the decision of the new government to create a new ministerial level position with sole focus on the shipping sector. Shipping is one of the success stories in Cyprus and the tax tonnage law passed in 2010 is the only EU-approved system in place today.
The energy sector of Cyprus has great prospects. This new-found wealth from hydrocarbons will certainly filter into all sectors and boost the economy. We recently signed agreements with an Italian and South Korean consortium ENI/KOGAS and with French energy giant Total to start natural gas exploration in Cyprus’ Economic Exclusive Zone following the successful exploration results of Nobel Energy in December 2011.
The world-class discovery of natural gas in Cyprus’ EEZ is sparking a lot of interest to invest in Cyprus, how do you think this will affect the Cyprus economy and what other investment opportunities and potential for growth do you see at the moment?
The discovery will bring more business and hydrocarbons expertise into the country. The natural gas reserves also open opportunities for new business, especially to energy consuming industries such as aluminium industries. Many of these are now located in neighbouring Middle Eastern countries and are now showing interest to relocate to Cyprus for two reasons: to operate within the EU to avoid paying import duty and to utilise our future cheap energy from natural gas for these high energy consuming industries. One of the biggest consumers of aluminium is the motor industry, which is mainly based in Europe.
There has recently been a lot of criticism about the close economic relations between Cyprus and Russia with allegations of money laundering and tax evasion in Cyprus. How would you respond to these comments?
These are unjustified claims. Why are no other low tax EU jurisdictions facing these questions as they also have a fair share of Russian business? For example 23% of FDI into Russia goes through the Netherlands, Malta and Luxemburg. Cyprus is going through an economic crisis and when you are in a vulnerable position, you are an easy target. Cyprus is on the OECD Whitelist, we have an on-going commitment to adhere to all international and EU anti-money laundering procedures and Cyprus is fully harmonised with EU legislation. We have an extremely stringent and well-monitored anti-money laundering system, which has been favourably rated by the Council of Europe Committee of Experts on the Evaluation of Anti-Money Laundering Measures (MONEYVAL). The European Commission’s own tool ranks Cyprus at the top of its relevant list. It should be noted that Russia itself has placed Cyprus on its White List thus trusting the right measures are in place. After all, it would be Russia that would lose out on money laundering in Cyprus.
Cyprus also ranked better than many EU countries – including Germany and the Netherlands – in its anti-money laundering regulation in the Basel Institute on Governance report. Transparency and security are crucial aspects for a business centre and there has been no basis for these claims circulating in international media. Now we have the challenge of combating this dent in our reputation and regaining the credibility and trust of our European neighbours.
Cyprus has a long history with Russia – both economically and culturally – and it continues to be a key market for business and tourism. Could you explain why there is so much Russian interest in Cyprus? How important is Russian business to Cyprus?
Russian business continues to be very important and recent developments have hurt relations, but we are working hard to recover from these setbacks.
Cyprus and Russia have a long history of doing business together and many Russians have moved to Cyprus over the decades. The sunny climate and the familiarity with sharing the Orthodox Christian faith makes Cyprus an ideal location to live and work. It is relatively easy for Russians to get a visa to Cyprus and Moscow is only a three-hour flight away, which is the same time many Russians have to sit in commuter traffic. The strong business relationship, tax efficiency and tax treaties that pre-existed the breakup of the USSR have provided a great infrastructure for Russian companies. Limassol in particular has a significant Russian community hosting Russian schools, churches, newspapers and radio stations, which make Cyprus a comfortable home away from home.
Aside from Russia, what other countries are showing interest in Cyprus? Is Cyprus actively targeting any specific markets globally?
Our significant natural gas discovery has increased interest in Cyprus – not least from the US, who is a leader in the field, but also from Europe and the rest of the world. Israel and other neighbouring countries have shown interest in fields like research and development and medical tourism. We are also seeing interest from the Gulf countries mainly in large-scale projects and developments. China is another emerging market for Cyprus and has already given a boost to the construction and real estate sector with the sale of more than 1000 homes to Chinese buyers. In the long term, China could become the next Russia for Cyprus in terms of business and our good relations have set the foundations for future opportunities.
Additionally, following the Arab Spring, many Egyptians and Syrians are looking at Cyprus as an option for their business due to the close proximity, the physically and legally safe operating environment and the similar Eastern Mediterranean culture.
CIPA is often the first point of contact for international businesses looking to invest in Cyprus. Are you seeing any evidence of a loss of investor confidence?
There has not been a loss of interest – on the contrary we have had a slight increase in investment inquiries. This economic crisis is also seen as an opportunity for many investors. To support business we have also implemented a mechanism to fast track the licencing of major investment projects into Cyprus and hope this will help counter balance the current economic situation.
Which sectors of Cyprus’ economy are currently providing the most interesting opportunities for foreign investment?
Energy, tourism and education are some of the most interesting areas for foreign investors. Also investment opportunities in large-scale projects, such as the development of luxury marinas, golf courses and multi-use residential complexes have been attracting significant interest from abroad. Research and private education catering to the foreign market has been growing steadily, transforming Cyprus into a major educational centre in the Eastern Mediterranean. Medical centres and hospitals that cater to the growing market of international medical tourism are also an increasingly interesting opportunity for investment into Cyprus.
How do you see Cyprus developing over the next five years?
The local economy is expected to have a challenging transition period over the next few years and we will suffer, but I am optimistic. The international organisations with offices and headquarters in Cyprus will find it significantly less challenging as their market is not limited to the economy of the island. The government is approving measures aimed at boosting our economy, which will include fast-tracking permits for large projects, tax breaks, and relaxation of measures to encourage foreign investment. President Anastasiades has also announced that the Cyprus company registrar will be fully automated in the next six months to speed up and simplify procedures. Bureaucracy was an obstacle holding up projects in the past and we are committed to creating a more efficient system that will support the business environment. We are finally restructuring and implementing reforms that are long overdue and with hard work we will get back on our feet and become even stronger. And once we start to profit from our hydrocarbons discovery, Cyprus could be one of the richest per capita countries in Europe.
Christodoulos E. Angastiniotis is the Chairman of the Board of CIPA and the Chief Executive Officer of VitaTrace Nutrition Ltd Group. He is also the Vice President of the Cyprus Chamber of Commerce and Industry, President of Lefkosia Tourism Development & Promotion Company and President of The Veterinary Pharmaceutical Importers Association.
He has participated in various economic, financial and business promotion seminars worldwide, presenting a number of papers on the role of Cyprus as a regional business and commercial centre. Christodoulos E. Angastiniotis studied in the UK and holds a post graduate degree MSc in Management Sciences from the University of Cranfield.