Insights | 15 December 2023 | TechIsland

Valentinos Polykarpou , Chairman, TechIsland

The influx of global companies investing in Cyprus has been instrumental in enhancing its reputation as an emerging tech hub and showcasing its potential, bringing in financial resources and introducing global expertise and networks that further enrich the local tech ecosystem.

How would you assess the current state of the Cyprus tech sector? Was 2023 a good year for the industry and what were key milestones?

The current state of the Cyprus tech sector can be positively assessed, particularly noting its impressive growth in recent years. In 2022, the ICT sector's total economic impact in Cyprus, which includes both direct and indirect contributions, was significant – reaching approximately €3 billion. This figure represents 13% of the country’s Gross Domestic Product (GDP), marking a substantial increase from 7% in 2019 and 8.5% in 2020. The year 2023 continued this trend of growth, underscoring the sector's significant potential and expansive impact. It plays a pivotal role in the overall development of Cyprus, driving job creation, fostering the development of new industries, and positively impacting other sectors. This contribution signifies a comprehensive and positive change for the country.

The tech cluster in Cyprus has grown and become more diverse in the last few years, what has helped facilitate this momentum in the sector and its development? 

The remarkable growth and diversification of the tech cluster in Cyprus recently are the results of various contributing factors. One of the primary drivers has been the government's proactive approach to creating a business-friendly environment. This has included implementing policies that stimulate investment in technology and innovation and providing incentives to both start-ups and established tech firms. Such policies have made Cyprus an attractive destination for tech investments. Moreover, the influx of international companies investing in the island. The presence of these global firms has been instrumental in enhancing the reputation of Cyprus as an emerging tech hub. These companies act as ambassadors of the country’s tech potential, showcasing Cyprus as a promising location for tech investments and innovations. This surge of international investment has not only brought in financial resources but has also introduced global expertise and networks, further enriching the local tech ecosystem.

Good infrastructure and support services are crucial in building up any sector. What critical infrastructure or technical elements and support services are essential for further nurturing tech start-ups and innovation in Cyprus? For example, Cyprus still struggles to scale up with limited funding options for start-ups, how could this challenge be overcome?

To further nurture tech start-ups and foster innovation in Cyprus, a holistic approach is needed to enhance infrastructure and support services. A critical step is to address the challenge of limited funding options. This can be tackled by offering more incentives to attract more venture capital firms and angel investors to the region. Additionally, upgrading digital infrastructure is essential. This includes ensuring access to high-speed internet and advanced telecommunications networks, which are fundamental for the operations of start-ups.

Another key element is the development of a robust educational ecosystem with focus on STEM (Science, Technology, Engineering, and Mathematics) fields and entrepreneurship. This will ensure a strong pool of skilled talent, vital for the growth of the tech and innovation sector. For this we need to strengthen collaboration between academia, industry, and government, to foster innovation and research.

Then of course we need incubators, accelerators, and co-working spaces that offer mentorship, networking, and business support services that can significantly aid in the growth of start-ups. Finally, developing a supportive regulatory environment that simplifies bureaucratic processes and nurtures tech innovation can help position Cyprus as a competitive destination for tech start-ups and investors.

How crucial is government involvement in fostering a tech and innovation ecosystem within a country, and what specific policies or initiatives should Cyprus prioritise to accelerate this development?

Government involvement is fundamentally crucial in developing a tech and innovation ecosystem. The state plays a key role in fostering growth and prosperity. This involves an ongoing dialogue and strong partnerships between the private and public sectors, which are essential for progress and for shaping the future of the tech industry in Cyprus. To accelerate the development of this ecosystem, addressing bureaucracy is of utmost importance. The government should work towards streamlining processes, significantly enhancing the business environment and encouraging both domestic and foreign investment.

Furthermore, promoting STEM education is critical to develop a local pool of tech talent. The tech sector in Cyprus, being relatively new, has not yet had sufficient time to cultivate an adequate local talent pool. Additionally, the country’s small size naturally limits the availability of homegrown tech experts. Currently, Cyprus has the EU's lowest proportion of STEM graduates at 13.8%, highlighting a significant gap between the available local talent and the labour market's demands. To address this, strategically attracting and retaining highly skilled tech professionals from overseas is necessary. However, given that the limited supply of tech talent is an issue throughout the EU, Cyprus faces competition from countries like Germany, Finland, Ireland, the Netherlands, Portugal, and Poland, which offer more attractive packages for professionals to relocate with their families. Thus, a comprehensive strategy is needed to attract and retain talent from abroad, while simultaneously upskilling and reskilling the local workforce. This approach ensures that Cypriots are well-equipped for tech roles, crucial for the long-term development of tech talent within Cyprus.

How should educational institutions in Cyprus align their programs to produce a workforce capable of driving innovation, and what ongoing measures are necessary to upskill or reskill talent to meet the rapidly evolving industry demands?

As a culture, we need to change our mentality and look at the bigger picture ahead. We need to move away from traditional employment mindsets towards roles, such as banker or civil servant, and focus on those that resonate with the tech-driven future ahead. The work environment is changing, and companies cannot find a tech-ready workforce.

To address this, it’s essential to equip young people with skills that are relevant for the tech future. This includes not only hard skills related to technology and digital tools but also vital soft skills like project management, design thinking, and new product development. These skills will prepare them not just for existing roles but also for emerging ones in the fast-evolving tech landscape.

Foreign tech experts can play a crucial role in this transformation. By transferring their expertise to the local workforce, they can provide insights into global best practices and advanced technological applications. In addition, tech companies can contribute by providing training and upskilling opportunities to the local workforce. This will help bridge the gap in the demand for STEM talent.

Continued dialogue and expedited actions involving both the public and private education institutions and the tech industry are imperative. Such collaboration is essential to effectively address and adapt to the evolving educational and industry demands. By fostering a strong partnership between educational institutions, government bodies, and the private sector, Cyprus can create an educational ecosystem that is responsive to the needs of the tech industry and prepares students for a future dominated by technology and innovation.

What type and size of tech company is Cyprus ideal for? Is it more beneficial for any particular segment/line of tech operations or development? 

Cyprus presents an ideal location for a variety of tech companies. The market's size and characteristics make it a perfect testing ground for pioneering technologies and business models. This is particularly true for sectors such as fintech, healthtech, proptech, and cybersecurity, where innovative approaches can be trialled and refined.

Additionally, Cyprus’ favourable tax regime, including incentives for intellectual property and research and development, positions it as a cost-effective location for tech development and operations. This aspect is particularly appealing for companies aiming to optimise their tax positions while expanding their operations within the European market and adjacent regions. Therefore, Cyprus is not just beneficial for a particular segment or line of tech operations but offers a versatile and conducive environment for a wide array of tech enterprises, especially those seeking to innovate and grow in a supportive and strategically positioned location.

How would you characterise the investment landscape in terms of tech in Cyprus? What opportunities are there for investors and what hurdles or challenges do you see?

The investment landscape for technology in Cyprus is both dynamic and promising, presenting a range of opportunities for investors. The country's strategic geographic location, coupled with a thriving economy and favourable government policies, positions it as an attractive destination for technology investments. The pro-business environment in Cyprus are key factors drawing global ICT firms and start-ups. This has led to Cyprus becoming a preferred location for establishing regional headquarters, service centres, and various tech operations.

However, there are challenges that investors need to navigate. The relatively small domestic market and limited local funding sources can pose hurdles. Additionally, there is a need for more robust infrastructure to support high-tech industries effectively. Another significant hurdle is bureaucracy, which can impede the ease of doing business. Addressing this issue, particularly through the digitalisation of the public sector, could greatly enhance the investment climate. By tackling these challenges, Cyprus can further solidify its position as a vibrant hub for technology investment, offering a landscape with opportunities for growth and innovation in the tech sector.

Tech and innovation should be inclusive and sustainable. How can Cyprus ensure that its tech ecosystem fosters diversity, inclusion, and sustainability in both the solutions created and the individuals participating in it?

To ensure Cyprus' tech ecosystem is both inclusive and sustainable, a multifaceted approach is essential. This involves enhancing STEM education to be more accessible to underrepresented groups, possibly through scholarships and mentorship initiatives. Encouraging start-ups to focus on sustainable technologies is also key, which can be supported through grants and tax incentives. From an HR perspective, companies should adopt inclusive hiring practices, fostering work environments that support a diverse range of employees. It is also important to learn from global best practices and adjust strategies based on the local market. Last but not least, engaging with various stakeholders to understand and meet their individual needs will lead to more practical solutions.

What is the mission of TechIsland and how is it trying to achieve its goals?

TechIsland was established in 2021 and has rapidly grown to become Cyprus' largest tech association, with over 270 member companies. Our mission is to transform Cyprus into a tech hub. As a non-profit organisation, we are committed to improving the operating environment of the tech industry, uniting diverse stakeholders to foster sustainable growth, and driving economic prosperity in Cyprus through technological advancements.

One of our key accomplishments has been establishing a unified voice for the tech industry, enhancing industry collaboration and forming dedicated working groups to identify solutions for specific issues. In addition, we have created professional sub-communities, such as the HR Community, the FinPro Community, the MarComms Community, as well as the Women In Tech® Cyprus within the global Women In Tech® movement. These communities are central in nurturing shared expertise and collaborative efforts.

Another significant initiative is the development of the Cyprus Tech Ecosystem Platform, highlighting our dedication to promoting Cyprus' technology and innovation sector. This platform is a live map that monitors the tech landscape, demonstrating the country’s capabilities both domestically and internationally.

TechIsland's commitment extends to making substantial societal contributions. Following the 2021 wildfire, we mobilised our members to fund recovery efforts, including the reconstruction of the Regional Primary School in Arakapas. Additionally, our members contributed to the Project ‘KtiZO’, led by the Ministry of Interior to refurbish apartment buildings for displaced individuals and donated to the Independent Social Support Body to assist people facing financial hardships or educational challenges. Furthermore, recognising the importance of tech education for future generations, TechIsland actively supports initiatives like KidIT Cyprus, which aims to transform children from passive tech users to active tech innovators.

What are your expectations for the sector in 2024, and what major technological shifts or trends do you expect to see over the next decade?

For the tech sector in 2024 and beyond, we anticipate significant growth and transformation, aligning with global technological trends and advancements in AI. This evolution is and will continue reshaping the work and business environment. As technology continues to be at the core of the evolving future of work, emerging professions in cybersecurity, data science, and AI are set to become fundamental to the job market. In this context the emphasis on tech education and skills development becomes increasingly important.

Cyprus, with its strategic transformation into a tech hub, is well-positioned to leverage these changes. For Cypriots, this transition represents a unique opportunity to engage in innovative and exciting careers within Cyprus, as these high-demand roles gain prominence in our economy. The growth of a local tech ecosystem translates into enhanced employability in the global job market, ensuring that the workforce remains relevant and competitive in an increasingly tech-driven world.

Looking at the broader picture, Cyprus in general has an unparalleled opportunity to establish itself as a leader in the dynamic global business landscape. By embracing and investing in the tech sector, the country is positioning itself at the forefront of innovation and economic resilience. This strategic focus not only elevates Cyprus’ global standing but also ensures a prosperous future for its citizens.

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