Cyprus has retained its well-deserved reputation as a thriving business hub and a growing financial centre and must now focus on facilitating large-scale energy sector investments and attracting more tech-focused multinationals to relocate to the island, says Minister Lakkotrypis.
Continuing on your second term as Minister, and with such a vast and important portfolio to manage, what important goals have you set for this year?
As the name implies, the Ministry of Energy, Commerce, Industry and Tourism is responsible for overseeing some of our economy’s most important productive sectors. As such, in 2018 we are working hard to maintain the positive momentum achieved on all fronts, among others by applying a comprehensive Tourism Strategy for 2018-2030 in an effort to sustain the excellent performance of Cyprus’ tourism over the past three years, which has led to increasing winter arrivals and overall revenue. Also in 2018, we will launch our new Industrial Policy aiming to actively support the strong numbers achieved in recent years for exports of both services – €9.9 billion in 2017 from €8.1 billion in 2014 – and domestically produced goods – €1.25 billion in 2017 from €735 million in 2014. For the energy sector, we are promoting the further use of Renewable Energy Sources (RES), a major overhaul to the electricity market in order to enable efficient competition and last but not least, the hydrocarbons exploration and exploitation activities in the Exclusive Economic Zone (EEZ) of the Republic of Cyprus.
The economy is growing at a healthy rate thanks also to growth in the tourism sector over the last few years. How will you ensure future progress and sustainability in this sector?
GDP growth in 2017 was at an impressive 3.9%, with tourism sector revenue recorded at €2.64 billion, accounting for around 13.8% of GDP. It is important to note in this context that after two successive years of historic records, 2018 is also progressing positively for Cyprus tourism, as arrivals for the first quarter of the year increased by 29%. Obviously, our aim is to ensure that the sector continues to grow in a sustainable manner, especially with regard to the high numbers we have been recording in the winter months, from November to March. Increased arrivals during winter, usually referred to as the low season, are a clear sign that we are moving in the right direction, as visitors doubled in the winter of 2017-2018 compared to winter 2012-2013. To this end, we have prepared and will soon start applying our new national Tourism Strategy for 2030. Its overall objective is to improve the performance and revenue yield of Cyprus’ tourism by enhancing the competitiveness of the industry, expanding our market base, developing a diversified product and a strong brand, as well as alleviating the problem of seasonality. Accordingly, our government is now dedicated to promoting and facilitating investments in large tourism projects such as marina and golf developments, as well as Europe’s first integrated casino resort to open its doors in Limassol by 2021. In addition, we offer incentives for hotel upgrades, we apply an open skies policy to improve connectivity with current and new markets and we actively promote the simplifying of visa procedures for foreign citizens wishing to visit Cyprus.
Energy has become another key sector thanks to discoveries and exploration in Cyprus’ waters, how do you see this area developing and what additional investment and business opportunities do you see emerging in the oil and gas sphere?
The oil and gas industry, still in its infancy in Cyprus, is another sector with truly exciting prospects. Apart from the many major companies licensed for exploration in the Cypriot EEZ – ExxonMobil, Qatar Petroleum, ENI, Total, Shell, Noble Energy, Kogas, Delek Group – we are already witnessing the activities of international companies offering auxiliary services to the industry and throughout the Eastern Mediterranean region from Cyprus. Certainly, our overall goal is to bring to Cyprus the large-scale investments needed for efficiently exploiting the underwater wealth in our EEZ, promoting for example projects such as regional pipelines to LNG plants in Egypt and the ‘EastMed Pipeline’ to mainland Europe. At the same time, we are making every effort to ensure that the know-how we now import can help us harness and export it in the future, thus creating a sustainable, knowledge-based economy.
Cyprus has also seen more investment in renewable energy solutions over the last few years, what plans does the government have to boost this important sector and what are your current targets?
At the end of 2016, the total contribution of RES to gross final energy consumption stood at 9.27%, surpassing Cyprus’ third indicative target of 7.45% in the period 2015-2016, as per the relevant European Directive. To promote further the use of renewables, and to meet our 13% target by 2020, the government is running a number of different schemes. We are planning to make 2018 a very important year with regard to RES developments. Up to April 2018, we have been accepting proposals for more than 350 MW installation capacity from RES, for projects that will later operate in the liberalised electricity market. In fact, 350 MW can contribute to around 12% of the average electricity demand in Cyprus. With an eye to cutting costs of doing business in Cyprus, we are introducing a net-billing scheme, whereby businesses using RES to produce electricity will be compensated for the energy they do not use. We feel this will complement perfectly the very successful net-metering scheme we have been running since 2013, whereby households and businesses use photovoltaic installations for their energy needs. I have to point out here that presently, the installed capacity of photovoltaics has been boosted to 4% of total electricity demand, a figure that we expect will grow to at least 14% by 2020.
The professional services sector has long been a significant driver of the economy, what do you see as Cyprus’ competitive edge and what key incentives does Cyprus offer to attract more international business?
Overall exports of services have been increasing steadily over the past three years, rising from €8.1 billion in 2014 to an estimated €9.9 billion in 2017 – a percentage increase of around 22%. Financial and other business services account for around 24% of these exports and figures such as these are proof that over the past years Cyprus has managed to retain its well-deserved reputation as a thriving business hub and a growing financial centre. Key sectors like tourism and shipping have been performing extremely well and others, including the funds industry, have been showing very promising prospects.
All these coupled with the many advantages offered for doing business in Cyprus – robust and transparent legal and regulatory framework, attractive tax regime, highly educated and skilled workforce, access to European and regional markets, EU and Eurozone membership – mean that our small Mediterranean island truly is a highly attractive business and investment destination.
Cyprus has successfully attracted foreign direct investment (FDI) over the last several years, what type of new investment opportunities do you identify as crucial for the country?
We are in fact interested in attracting investment in various areas throughout industry, in cutting-edge technologies and the film industry to name just a few. One area I would like to particularly point out is creating the necessary incentives for large multinationals to relocate their headquarters to Cyprus, especially those involved in telecommunications, computer and information services. The reason for this is that the latter are sectors showing very promising growth – their exports have increased by an impressive 80% between 2013 and 2017, from €1 billion to €1.8 billion.
How do you see Cyprus developing in the next four years, and what message would you like to convey to the international community?
Currently, Cyprus has one of the fastest growing economies in the EU and we are committed to working hard to ensure the country remains firmly on a path of sustainable growth. To this end, we aim to maintain a stable and competitive tax regime, whilst continuing to invest in our human capital, mainly through support of higher education and research. We will also continue to stand by the local and foreign business community, always striving to create a more business friendly economic environment. Our island is after all, despite its small size, a well-known centre for international business, ideally located and always ready to cater to the needs of enterprises wishing to expand and operate in Europe, the Middle East, the Gulf States, Africa and Asia.