The spark returns to one of Europe’s foremost investment centers

Central Bank data shows that in 2016 Cyprus will move out of recession and grow by 1.6%. What are the core reasons behind the surge in economic activity?

The reasons are simple: hard work, tenacity, perseverance, and the Cypriot entrepreneurial spirit. But we are not out of the woods yet.

We need to future-proof our country. It is worth recalling that in March 2013, the economy of Cyprus faced a crisis of unprecedented proportions.

What was traditionally one of the fastest growing economies in Europe was led into a double-dip recession, with a severe banking crisis and, at the same time, with an equally severe fiscal crisis.

Cyprus was made vulnerable following the global financial crisis, the high banking exposure to Greece, and the broader malfunction of the euro area over the last few years.

Inevitably the country was excluded from international markets.

The Cyprus government stepped in immediately and took all the necessary measures to protect, consolidate and reform the economy.

After securing a rescue package from the EU, IMF and the ECB, all efforts were directed towards the successful implementation of the Economic Adjustment Program which was agreed with our lenders and was based on three pillars: the restructuring, recapitalization and enhanced supervision of the banking sector; the fiscal consolidation in order to bring public finances on a corrective course; and the structural reforms regarding the public sector, health care, welfare system, and the privatization of state-owned enterprises.

While the reform program is in progress, Cyprus continues to capitalize on its proven reputation as an international business center of excellence that has the necessary expertise to support the national and regional economy.

None of the above would have been possible without the determination of the people of Cyprus, especially the vulnerable, to rise above financial difficulties after seeing their life savings largely wiped out early in 2013 and their businesses left without access to financing.

All these sacrifices and the hard work are paying off.

The sacrifices are not in vain. Not only did Cyprus return to the international markets confirming the restoration of confidence of the international investment community in its economy, but the country now is very close to an early exit from the bail-out program.

This was described by the Troika as a “remarkable achievement”.

Cyprus

The government has spared no effort in implementing a far-reaching reform package that has served to boost the national economy and reinforce the country’s competitiveness. How is Cyprus better prepared to face more economic shocks?

The country has proven its resiliency and its capacity to adjust to a continuously changing environment.

In the last few decades, Cyprus has established itself as a business and service center for shipping, banking and commerce, with energy a new and promising sector.

The recent economic and banking crisis was a lesson to be learned and by implementing major reform the government managed to build trust again.

In addition to these reforms, measures have already been announced including: favorable tax incentives for existing or new companies doing business in Cyprus; fast-tracking of permits for large projects; and cutting bureaucratic red tape.

These are expected to positively complement efforts to increase Cyprus’ competitiveness and to create a more effective and business-friendly environment.

Cyprus is a highly competitive center for international businesses, offering a platform for operations and preferential access to markets like Europe, Middle East, Russia, China, India and Asia.

With a highly educated workforce and a burgeoning investment climate, Cyprus’ diversified open-market economy offers a host of opportunities for individuals and organizations choosing to reside there.

What is perhaps more important, however, is that the island goes further still in redesigning its economic strategy, by developing additional business sectors with high added value and rich investment potential – such as telecommunications, renewable energy, alternative tourism, health, innovation and technology.

Figures by the European Commission show a gradual recovery in jobs, expected to fall by 1 percentage point between 2015 and 2016. What are the implications of the recovery for the Cypriot people?

There is no doubt that the recession and stagnation in the economy brought high unemployment, pay cuts, low GDP and increasing pressure on government services such as health and education.

All these have definitely affected people’s lives and standard of living, especially the vulnerable.

Confidence and trust were at an all-time low, especially if you take into consideration how many Cypriots lost their savings after the banking crisis through the so-called “bail-in” which many considered as highway robbery.

The level of unemployment and standard of living are obviously the most sensitive of indicators socially and politically.

In 2014, unemployment reached just over 16%. It has now stabilized and in the first quarter of 2015 it showed the first signs of de‐escalation.

We are not at all satisfied because unemployment still remains high, especially for young people; we will continue our efforts more resolutely.

We have also seen encouraging signs regarding the GDP growth, as seasonally adjusted. GDP rose by 1.6% during the first 3 months of 2015, compared to the previous quarter, bringing Cyprus at the top of the performance table with all the EU countries.

We are confident that these are good signs. We are heading towards a full recovery.

We expect that we will soon have a market fuelled with confidence, more jobs and salaries that people deserve.

As the country recovers, international investors are looking back at Cyprus. What are the most appealing sectors for investment?

The country’s established sectors, such as tourism, professional services and shipping, are playing a key role in driving economic growth.

They are enablers and multipliers. What is perhaps more important, however, is that the country goes further still in redesigning its economic strategy, by developing additional business sectors with high added value and rich investment potential – such as telecommunications, renewable energy, alternative tourism, health, innovation and technology.

The emergence of the hydrocarbons sector is also an important development for the country and the region.

It signals a more diverse future for the Cypriot economy and a surge in investment interest.

Cyprus also offers significant tax incentives. For one, the country’s EU and OECD-approved tax system offers one of the lowest corporate tax rates in Europe at 12.5%.

The country’s individual tax rate, at between 5 and 35%, is among the continent’s most competitive, again underlining Cyprus’ accommodating business climate.

In keeping with the island’s tax advantages, there is a highly successful professional services sector, including accounting, auditing, consultancy, taxation and legal services, founded on the country’s well-educated and multi-lingual workforce.

The country’s untapped potential also extends to financial services, given that the island stands at the gateway between European and Middle East North Africa (MENA) financial markets.

The sector consists of a number of insurance and financial intermediation companies specializing in various fields such as investment funds, international trusts and fiduciary, as well as companies offering advisory services and their expertise in special-license businesses.

Cyprus is fast becoming one of Europe’s foremost investment centers, with an accommodating legislative and regulatory environment to suit all manner of investment firms.

What is the current status of the peace talks in Cyprus? What would be the most positive outcome in the near future?

The status quo in Cyprus is anachronistic and unacceptable. The situation is lose-lose first and foremost for all the people of Cyprus.

This anomaly must end. It has no place in today’s Europe. There is a clear agreed framework for the solution of the problem, which aims to end the de facto partition and restore human rights under a federal roof.

Shamelessly, Nicosia remains the only divided capital in the world. The selection of Mustafa Akıncı as the leader of the Turkish Cypriot community augurs well for substantial progress in the intercommunal talks.

He has a good track record on rapprochement. Core issues that have, however, eluded agreement in the past, have to be addressed; and for this to happen Ankara must also step-up to the plate and make some hard decisions.

The UK and Cyprus share a common past that has linked the two countries in a good, well established relationship. How can the relationship be described today?

Indeed Cyprus and the UK have what I call an umbilical relationship.

This was reinforced in a tangible way after the signing of the joint communiqué during President Nicos Anastasiades’ landmark visit to London in January 2014.

Cyprus and the UK are partners in the EU and also in the Commonwealth. We share similar approaches on various issues, such as a common vision of a more competitive, flexible, democratic and effective EU.

We also share a decisive commitment in addressing security threats and tackling regional challenges. We are, in many ways, in the same strategic boat.

The UK is an important economic partner of Cyprus, its second largest foreign investor. How can this relationship be enhanced?

The benefits of the partnership between the two countries were most aptly demonstrated following the bail-in, through, among others, the swift assistance and sharing of best practices provided by the UK in the banking system and in restructuring the public sector.

Cyprus and the UK entered a phase of renewal, as we focus on investing in areas of pragmatic value which include energy cooperation, tourism and leisure, education and training and entrepreneurial initiatives.

Therefore, it is vital to provide open channels for sharing business culture, best practices, knowledge and expertise among the business communities of the two countries.

We have done that through a variety of activities such as seminars, presentations, bilateral visits and workshops and participation in trade fairs/exhibitions.

Such events are organized at this end by the Cyprus Trade Center, which is the Commercial Section of the Cyprus High Commission in London.

The office operates under the Cyprus Ministry of Energy, Commerce, Industry & Tourism; it is one of the 11 export promotion missions abroad.

Its main objective is to assist Cypriot enterprises in their endeavor to establish new and develop existing business links in the UK with a particular focus on exporting capabilities, as well as to promote Cyprus’ services sector and encourage foreign investment in the island.

I should also highlight the important role of the Cyprus Chamber of Commerce & Industry (CCCI) and the Cyprus Investment Promotion Agency (CIPA) in the development of trade in goods and services between British and Cypriot companies as well as the promotion of Cyprus as an international business and investment center.

Last year, some 870,000 British tourists visited Cyprus, a 20.7% increase over 2010. As the main source of visitors to Cyprus, how is your country marketing Cyprus in the UK?

In fact our records show that last year approximately 872,000 British tourists visited Cyprus; this year we expect an 8-10% increase.

The UK market has consistently been the highest source of tourists to Cyprus, representing just under 40% of total tourists.

This is attributed to the quality of the Cyprus tourism product, its excellent hotels, pristine beaches (57 of which have a Blue Flag), high quality of service, variety of scenery and rich history.

We also speak English and drive on the “correct” side of the road, i.e., left.

These elements we project in a systematic manner by utilizing the following tools: our head office runs an advertising campaign early in the year to promote summer holidays and in the autumn to promote winter holidays.

The CTO London office complements these efforts through an intensive PR campaign which involves numerous visits of travel journalists to Cyprus, tour operator and travel agency staff educational and various events both in the UK and in Cyprus, aimed at a variety market segments, with a high yield.

Due to the abundance of fresh, locally cultivated produce, gastronomy experiences have taken center stage as have the increasing variety of quality, award-winning wines.

We also participate in many public and travel trade exhibitions throughout the year.

Over time, Cyprus has developed a competitive advantage in quality tourism, weddings and honeymoons. At present, we are cultivating off-season activity holidays such as golf, cycling and walking.