Trade & Investment

FDI Destination

Cyprus has attracted formidable foreign investment over the last five years with billions of euros flowing into multiple sectors. Although the coronavirus pandemic has slowed down the global economy, the country has forged ahead with the launch of new incentives and reforms that continue to offer interesting opportunities to investors with capital and interest in the East Med region.

The growth performance of Cyprus over the last five years has been exceptional and even exceeded international expectations, while successive credit rating upgrades and new incentives have attracted billions in foreign investment since 2015, with significant inflows from the US, Asia, Russia and the Middle East. Cyprus’ return to an investment grade credit rating in 2018 gave both the economy and investor confidence a much-needed boost, and the successful recapitalisation of its major banks and numerous large-scale projects, have all contributed to the resurgence of Cyprus as a top foreign direct investment (FDI) destination. The sectors that have seen the most significant FDI are banking, shipping, retail, tourism, pharmaceuticals and energy, while new luxury and infrastructure developments are underway across the country with significant foreign investor backing. A fast-track system is also encouraging international companies to set up international and regional headquarters on the island, which is becoming an increasingly attractive gateway to both established and emerging growth markets.

WATCH: The Real Return of Investment

Diversified Investment Options 

For the last few years, Cyprus has been a hive of activity with several notable projects already implemented or in the pipeline, strengthening the country’s image and appeal. Foreign investment flows have been significant. In the ten-year period 2010-19, inflows of FDI averaged €24 billion per year, while cumulative net FDI reached €17.3 billion. This investment was driven by equity, with the shipping and real estate sectors playing a significant role.

New large-scale real estate projects, luxury marinas and tourism infrastructure, coupled with exciting opportunities in the energy and shipping sectors have all reinforced Cyprus’ status as an interesting investment location. An added benefit of Cyprus is its secure and stable EU environment in a turbulent region, which provides an ideal base for regional headquarters or ancillary and support services for investors with clients in the wider Eastern Mediterranean region.

Already renowned as a popular holiday destination and a thriving business hub servicing international companies with multinational operations, the island is sharpening its competitive edge by streamlining processes, modernising legislation, introducing incentives and speeding up licensing procedures to better cater to investors. Special schemes and incentives are in place to facilitate headquartering, which covers the sectors of technology, asset management, investment funds, shipping and higher education, ‘Olivewood’ for the international film industry, the Startup Visa for non-EU nationals and a Fast Track Business Activation Mechanism for non-EU nationals approved in September 2020.

Privatisations and Large- Scale Projects 

Cyprus’ FDI appeal has been on an upward trajectory with the economy posting a healthy 3.2% growth in 2019 and following improvements in its macroeconomic and financial environment, factors that have also revived international interest in around 30 major development projects on the island. Investment opportunities in Cyprus’ large-scale projects span various sectors, including high-value tourism and housing developments, projects with a special focus on golf courses and luxury marinas, as well as education, energy and, more lately, the international film sector.

The liberalisation of markets in which state-owned entities used to dominate presents new opportunities in terms of FDI. The 2017 commercialisation of the country’s largest port in Limassol marked a new era for Cyprus as a commercial hub. The privatisation deal with Eurogate International GmbH and DP World Limited is expected to boost state coffers with €2 billion over the next 25 years, while the new port operators are injecting millions in upgrading services and infrastructure. The coming full liberalisation of electricity is also presenting new opportunities in the natural gas and renewables sectors.

RELATED: Invest Cyprus introduces 'Project Bank' inclusive of high value investment projects that align with key government strategies

Perfecting the Tourism Product 

Tourism has long been a driving force of the Cypriot economy and a concerted effort to diversify its offering in recent years has paid off. Ahead of the global pandemic, expansion of capacity as well as quality upgrades saw both arrivals and expenditure break new records for four years running. Cyprus has been attracting new interest by developing conference, sports, health and wellness and by extending the tourist season. The construction and investment in multipurpose projects and mixed-use developments such as luxury marinas, golf courses and more recently the island’s first-ever and only integrated luxury casino resort, are all part of the ongoing strategy to upgrade Cyprus’ tourism product. The temporary casino has started operations and the full integrated casino resort, City of Dreams Mediterranean, will have extensive facilities and five-star status by 2021. The casino resort is Hong Kong-based Melco’s first expansion outside of Asia and will be the biggest casino of its kind in Europe, with the investment for this mega project at €600 million.

Following the success of Limassol Marina, there has been a swell of interest in these types of projects. The €300 million luxury Ayia Napa Marina – which is transforming the area – has graduated to its second phase, with berthing facilities now fully operational. The marina offers capacity for 600 yachts of up to 60 metres, a shipyard, and a range of luxury villas and facilities. With significant Egyptian investment backing the innovative project, the seafront residences, which will be completed by 2023, are already being marketed to investors worldwide. In addition, the €110 million Paralimni Marina project is well under way, with additional development incentives approved by the government in 2020. The tender for Larnaca Marina received approval in August 2020 and is expected to attract €1.2 billion in construction and real estate development, while plans are in place for a luxury marina in Paphos.

The number of foreign investors closing multimillion-euro deals in the last few years underlines the fact that tourism-related real estate and infrastructure continues to be one of the most attractive investment opportunities in Cyprus. With solid and continuous interest in the tourism sector, the country’s investment promotion agency Invest Cyprus has set up a dedicated and specialised unit, TourInvest, to promote investment opportunities in the tourism and hospitality sector. In cooperation with the Deputy Ministry of Tourism and other stakeholders, the unit focuses on attracting investment into largescale infrastructure projects that exist in diversified thematic areas.

Worthwhile investments have already been made in the hospitality industry with acquisitions and the construction of new luxury hotels of well-known hotel management chains. These include the prestigious Sun City Spa and Residences by Chinese group Jim Chang Global with an initial investment of €100 million to construct a five-star resort hotel and exclusive beachfront residences in cooperation with the Giovani Group. The Radisson Hotel Group, one of the largest and most dynamic hotel groups in the world, has big plans to grow its existing portfolio in the country to six hotels and almost 1,000 rooms by 2025.

In 2019, the Luxury Collection, part of Marriott International, opened the Parklane Luxury Collection Resort & Spa resort in Limassol. Owned and operated by Parklane Hotels Limited, the property marks Marriott International’s entry into Cyprus. Another major international deal in recent years was South African Atterbury acquiring two of the country’s flagship Nicosia retail outlets, the Mall of Cyprus and the Mall of Engomi, for €200 million.

In July 2020, Hyatt Hotels Corporation announced a management agreement with Anolia Holdings Limited for the launch of the first Hyatt hotel in Cyprus. The 300-room luxury resort Grand Hyatt Limassol is expected to open in 2025. The new beachfront resort will also be a key element of Zaria Resort, a mixed-use luxury development, comprised of residential apartments and private villas totalling more than 80,000 square meters. The announcement of Grand Hyatt Limassol follows a significant expansion in Hyatt’s brand footprint in Europe over the last year, and Cyprus has proven to attract travellers from Hyatt’s key strategic markets including the UK, Russia, Greece, Germany and the Middle East.

Expanding Property Market 

Cyprus continues to be on the top of the list for investors, holiday-home seekers, expats and retirees, with the traditionally popular areas of Paphos and Limassol leading the way. One of the latest projects is the Sofitel Resort & Spa, a joint venture between Singapore-headquartered Oxley Holdings and Planetvision on the Limassol beachfront. The project will be the first Sofitel Resort with branded residences in Europe and is expected to be completed by 2022.

Health and wellness developments are increasingly popular, and a prime example of this is the Eden Seniors Resort in Larnaca which opened its doors in 2018. The project, developed by the Cypriot-Lebanese joint venture Eveningfall Investments Ltd, is a wellness and rehabilitation centre, with spa and relaxation facilities for the elderly. In 2021, Paphos is due to see the first dedicated retirement village in Cyprus – a segment that has much potential in Cyprus along with rehabilitation related projects. The €16 million retirement village, branded Lazaris Mill, will consist of 82 individual apartments, ranging from studios to larger flats and a small 24-room hotel, and provide both necessary and bespoke facilities. Until now, no retirement villages were available on the island and whilst common in many other countries, this project is a first for Cyprus.

The high-end residential property segment accounted for 20% of the total transaction value of real estate in Cyprus during the first half of 2019, with a keen interest from foreigners. For the whole of 2019, 66% of properties were acquired by non-EU buyers.

Growing Energy Sector 

Since US company Noble Energy made the first natural gas discovery in 2011 with estimated resources of 4.5 trillion cubic feet (tcf) in the Aphrodite field, Cyprus’ hydrocarbons discoveries have captured the attention of several global energy giants. ENI, Kogas, ExxonMobil, Royal Dutch Shell, and Total have all secured exploration licences and conducted exploratory drilling while US giant Chevron will be taking a stake in Block 12 after announcing its intention in July 2020 to buy out Noble Energy Inc. ExxonMobil announced the discovery of an estimated 5 to 8 tcf in Block 10 in early 2019 and ENI announced a promising discovery in Block 6 in early 2018. More drilling is expected in the next few years and in 2019 Cyprus agreed to build a subsea pipeline connecting Aphrodite to Egypt’s liquefaction plants and concluded a production-sharing deal with Noble Energy and its partners over the Aphrodite gas reservoir.

New opportunities are being created for a range of energy investments, including gas imports for power generation, the expected liberalisation of the electricity market by 2021, the growing share of renewables, the EuroAsia Interconnector project to connect Cyprus, Israel and Greece via submarine electricity cable, the related EuroAfrica Interconnector to connect Egypt, and the potential for the world’s longest gas pipeline from Israel via Cyprus to Italy. The discoveries have boosted the development of a new energy industry in the country, which is also well positioned to offer a multitude of auxiliary services to companies operating in the wider region. A floating storage and regasification unit (FSRU) terminal in Vassilikos, which will transform domestic power production, attracted finance in 2020 from the European Investment Bank (EIB) and the European Bank for Reconstruction and Development (EBRD).

A Leaner Banking Sector 

Cyprus banks maintain high levels of capital adequacy and liquidity. The gradual restructuring of the banking sector after 2013 has attracted important institutional investors and fresh foreign capital, and encouraged accelerated sales of nonperforming loans. These developments have substantially reduced risk and enabled the financial system to operate on a more sound basis. The island’s biggest lender, Bank of Cyprus, secured €1 billion of investment from world-renowned investors in 2014 and issued another €220 million in Additional Tier 1 (AT1) capital in December 2018. The bank listed on the London Stock Exchange in January 2017, which has substantially opened up access to large foreign investors, such as Morgan Stanley.

Hellenic Bank completed a capital increase of €150 million in March 2019 to support its acquisition of mainly performing loans from the former Cyprus Cooperative Bank. The acquisition boosted the bank’s assets to €16 billion and raised market share for loans to 30%. The capital raise brought in new international investors, such as US-based Poppy Sarl (PIMCO), with the other major shareholders being Demetra Investments Ltd, Wargaming, Third Point and investment fund 7Q Financial Services Ltd.

Mergers and acquisitions in the past few years have transformed the landscape somewhat with strategic new investment entering the sector from the sale of the majority stake of the Cyprus subsidiary of Greece’s largest lender Piraeus Bank, to Lebanese Holding M. Sehnaoui SAL – which injected €40 million in fresh capital into the bank in 2017, now renamed AstroBank. In January 2019, AstroBank went on to acquire the locally based USB Bank for €40 million and agreed to buy NBG Cyprus in late 2019. The deals are expected to contribute to the further consolidation of the Cyprus banking sector and highlight potential investment opportunities in Cyprus.

The banking sector has seen more activity and investment in recent years, providing opportunities for new players to enter into the market to encourage healthy competition and a wider scope of services. Investment opportunities that could be tapped into by international banks and financial groups are mergers and acquisitions, private equity and venture capital projects via the budding funds sector, as well as financing of large infrastructure projects.

World-Class Shipping Hub 

One of Cyprus’ most successful export services has been the maritime industry, which now has its own dedicated deputy ministry. The growth of Cyprus’ resident shipping sector over the past 50 years has helped develop a strong maritime cluster that includes Cyprus-based banking, professional services, insurance and IT. The cluster has gone from strength to strength over the years and is consistently attracting more quality tonnage and shipping-related companies to its shores.

The decision in July 2018 by leading London ship insurer P&I Club to open a post-Brexit EU subsidiary in Cyprus, reaffirmed the island’s position as one of the top global hubs for shipping. Another coup came in early 2019, when British shipping firm P&O Ferries decided to register its English Channel operating fleet under the Cyprus flag to take advantage of the benefits and security it provides.

Two of the industry’s most highly respected privately-owned shipmanagement companies, Columbia Shipmanagement and Marlow Navigation – both based in Cyprus – merged in 2017 to form Columbia Marlow, creating one of the world’s largest ship and crew-management companies. Another transaction constituting FDI was the 2018 buyout of Limassol-based Songa Offshore SE by Transocean Ltd, the world’s largest offshore drilling contractor for oil and gas wells, in a deal worth US$3.4 billion.

In the past six years there has been an increase of more than 65% in the number of shipping companies that have registered with Cyprus’ specialised shipping taxation system, boosting the sector’s revenue by around 25%. In addition, natural gas finds within Cyprus’ EEZ and efforts to exploit it in cooperation with neighbouring countries have expanded opportunities for the island’s already thriving shipping sector.

Excelling in Education 

Cyprus has seen a rapid expansion of tertiary education in the past few years, and is well on its way to develop the island into a regional education centre and knowledge hub. Cyprus has already attracted cooperation and synergies with international universities, most notably the University of Nicosia launching the island’s first degree programme in medicine in collaboration with St George’s Medical School at the University of London, and University of Central Lancashire – Cyprus (UCLan), being the first British university to establish a campus on the island. The number of foreign students choosing Cyprus for their studies has almost tripled in the last five years, representing over 60 different countries and supporting the growth of Cyprus into a true global educational centre. This fact underlines the great opportunities that exist in Cyprus for the establishment of new universities, colleges and research institutes.

Focus on Innovation 

A new Deputy Ministry of Research, Innovation and Digital Policy was established in March 2020 to leverage Cyprus’ potential for innovation and to support digitisation in the economy, which has accelerated during the Covid-19 pandemic. In addition, a range of initiatives are under way to support start-ups, including a Startup Visa scheme to attract more international talent to establish ventures with high growth potential. Opportunities are therefore opening up for business angels and venture capitalists looking for innovative start-ups, and to invest risk capital in exchange for equity in promising business ideas and products. Recent changes to taxation on intellectual property (IP) also supports innovative research.

The technology and communications sector in Cyprus has become fiercely competitive, with a number of players deploying cutting edge solutions to both increase their local market share and generate growth through the launch of new technology and products. The sector saw new investment in July 2018, with South Africa’s telecom MTN Group – which entered the Cypriot market 11 years ago and has around one-third of the market – selling its Cyprus operations to Monaco Telecom S.A. in a €260 million deal. In 2019, the company was rebranded Epic, and the group announced strategic cooperation with China’s Huawei on developing a 5G network in Cyprus.

Capitalising on Opportunities 

Time and again, Cyprus has proven its resilience as an economy and FDI location. Having endured a challenging economic climate earlier this decade, and now tackling the effects of the global coronavirus pandemic, Cyprus has nevertheless exceeded expectations and the transformation its economy is going through today, presents many opportunities for serious investors.

To further enhance investor interest, the government is making staunch efforts to improve its FDI framework and has vowed to cut through red tape. Reforms accelerated in 2020 include a specialised commercial court and upgrades to the judicial system, as well as targeted incentives to better facilitate investment. These efforts have been recognised, with Cyprus seeing an increase in FDI and the registration of new companies setting up on the island.

Cyprus’ open economy, European Union status and established role as a regional business hub between three continents continue to appeal to investors. The island also hosts a thriving forex industry with many global giants basing their operational headquarters in Cyprus. In addition, the investment funds sector has grown exponentially in the last few years with continuous upgrades to the regulatory framework. Assets under management have more than tripled from €2.1 billion in 2012 to €7.97 billion in the second quarter of 2020, recording a 5.3% increase over the first quarter of the year. If recent growth rates are sustained, industry experts predict assets under management could reach €20 billion in the next five years.

Cyprus’ liberalised FDI Policy, both for EU citizens and investors from third countries, along with its favourable tax regime makes it one of the most attractive investment targets in Europe. At 12.5% Cyprus’ corporate tax rate is one of the most competitive in the EU, and its extensive network of double taxation treaties with 65 countries have strengthened its position as a business gateway and a preferred location for corporate headquarters. The country’s skilled talent, low cost of doing business, top-tier professional services, and high quality of life renders Cyprus not only a wise business choice but also a great relocation destination. As work progresses on implementing structural reforms to bolster the business environment, the attractive incentives and the ever-expanding opportunities will continue to attract foreign investors.

→ For more information, contact Cyprus' investment promotion agency, Invest Cyprus. 

All rights reserved. The material on this site may not be reproduced, distributed, transmitted, cached, or otherwise used, except with the prior written permission of CountryProfiler. 

December 2020

Cooperation Partners
  • Logo for Ministry of Energy, Commerce, Industry and Tourism
  • Logo for CYFA Cyprus
  • Logo for Cyprus Chamber of Commerce and Industry
  • Logo for Cyprus Shipping Chamber
  • Logo for Association of Cyprus Banks
  • Logo for Invest Cyprus
  • Logo for Cyprus Investment Funds Association
  • Logo for Cyprus International Businesses Association
  • Logo for Cyprus In Your Heart