Reforms make Cypriot economy one of the fastest growing in the EU

Oil & gas, privatisation projects, technology, start-ups, investment funds, medical tourism and renewable energy are all generating significant interest among foreign investors in Cyprus. Not that the shipping and tourism sectors are any less stalwarts of the Cypriot economy now than previously. Jo Murray (JM) finds out more from Natasa Pilides (NP), Director General, Cyprus Investment Promotion Agency.

JM Can you please talk me through what Cyprus has to offer in terms of the energy sector and the role foreign companies might play by way of exploration and offshore energy generation?

NP The discovery of hydrocarbons in Cyprus’ Exclusive Economic Zone has already attracted significant interest and investment from international industry leaders, such as Exxon Mobil, Qatar Petroleum, Total, ENI, Delek, Noble Energy and KOGAS. Two of the world’s biggest oilfield services companies, Schlumberger Ltd and Halliburton Co, have made Cyprus their base for operations in the east Mediterranean. Following the first two licensing rounds launched in 2007 and 2012, Cyprus recently completed a third licensing round, awarding research and development contracts to ENI, Total, ExxonMobil and Qatar Petroleum. Explorations are expected to result in significant discoveries, that will render Cyprus a regional hub in the Eastern Mediterranean region. Moreover, our country offers a secure and convenient base for the operation of various services for the oil and gas industry as well as company headquarters to support such activities. An important step in Cyprus’ aspirations to evolve as a regional energy hub is the operation of a €300 million oil storage terminal, designed and constructed by VTTI Energy Partners LP.

JM Are there privatisation projects that might also attract foreign investors?

NP The government’s privatisation programme extends across a wide range of projects such as the Cyprus Telecommunication Authority, the Limassol Port, the Cyprus Stock Exchange, state land in Troodos, the State Lottery as well as the old Larnaca airport facilities. The commercialisation of the Limassol Port, in specific, has already been completed and expected to boost the shipping sector even further, while other projects are in different implementation stages.
In the months to come, we expect to see further interest in this process and we are confident that privatisations can contribute to healthy and sustainable economic growth, when implemented in the framework of a well-formulated plan and under the ideal circumstances.

JM The shipping sector is a given but what role will shipping play in terms of strengthening the economy going forward?

NP Cyprus’ shipping sector has traditionally been a key pillar of our economy, contributing approximately 7% to the country’s GDP. Currently more than 1,000 registered vessels with 21 million gross tonnage are registered under the Cyprus flag, which is internationally recognised for its reliable, safe and high quality brand. Cyprus has the third largest merchant fleet in the EU and the eleventh largest in the world, while it is the world’s second largest Ship Management Centre and the largest in the European Union.
The commercialisation of the Limassol port, regional development such as the expansion of the Suez Canal, as well as the synergy between the two sectors of shipping and energy are expected to create even greater opportunities for Cyprus shipping and the economy as a whole.
In this context, we are stepping up our efforts to attract additional foreign shipping companies with a new incentives package aiming to encourage foreign ship-owners and ship-managers to relocate their businesses to Cyprus.

JM How are you participating in the technology sector and what are you doing to nurture talent in the universities?

NP We see technology as an important driver of productivity, growth and economic performance across all sectors of the Cyprus economy. As a matter of fact, the government considers ICT and innovation as key pillars in its growth strategy, recently introducing new incentives available for investment into innovative companies across all sectors. A Start-up Visa for third country nationals has also recently been introduced. Leading multinational companies such as NCR, Microsoft, IBM and the Israeli multinational IT company, AMDOCS, are already well-established in Cyprus, which has also attracted a growing number of other Israeli IT companies in recent years.
In order to promote applied research and development, innovation, technology and entrepreneurship in Cyprus, the Government is promoting the establishment of its first Science and Technology Park (STP), a high impact project, that will host research centres, business incubators, spin-off innovative enterprises and other local and international companies. This is a significant step towards creating a knowledge-based economy and thus enhancing the conditions in which talents can be nurtured.
Moreover, Cyprus offers excellent quality under- and post-graduate ICT study programmes in its academic institutions, where technology is fully integrated both in terms of the curriculum and as part of an integrative learning method. Many private companies have established Industry-University partnerships with the Cyprus network of Universities and Research Centres which help to integrate talented students into the workforce and entrepreneurial space.
As an EU member state, Cyprus attracts EU research funds for Industry-University partnerships. Invest Cyprus assists new investors to implement advanced infrastructures and leverage on the wealth of human talent available on the island.

JM Are there further niche sectors that overseas companies might be interested in?

NP In addition to start-ups and innovation, investment funds, medical tourism and renewable energy are all niche sectors generating significant interest among foreign investors. The investment funds industry is growing rapidly as funds under management in Cyprus have more than tripled in the last three years. Our agency took the initiative of establishing the Cyprus Investment Funds Association (CIFA) through which several reform initiatives were put forward and introduced. CIFA is a member of EFAMA, which will be hosting its 2018 Annual Meeting in Cyprus. Cyprus has a fully EU-compliant and business-friendly regime that strikes a balance between freedom of operation for the asset manager and protection of the investor. Further changes to the legislation are in the pipeline, aiming to increase competitiveness, while measures are continuously being taken to increase efficiency.
In Renewables, Cyprus ranks first in the world in the use of solar energy for water heating in households, and we plan to continue attracting investment in both solar and wind energy projects. In medical tourism, a number of important projects are in the pipeline, including Dr Zamboglou’s German Oncology Centre due to start its operations in September 2017.

JM What about tourism? What are the opportunities for FDI there?

NP Tourism has traditionally been a major source of income and a driver of economic growth in Cyprus, with a significant contribution to the country’s GDP. Being one of Cyprus’ most resilient economic sectors, tourism has witnessed significant growth, recording a record number of 3+ million tourist arrivals within 2016.
large scale development projects in the tourism and hospitality sector including state-of-the-art marinas, health & wellness resorts, luxury tourism resorts, as well as the EU’s largest integrated casino resort are being financed with foreign capital and are expected to diversify and enhance Cyprus’ offering to visitors and residents.
Another sub-sector under development is health and wellness tourism, which is a fast-developing industry combining medical and wellness treatment with rehabilitation and holiday options. The island is ideally placed to develop this sector further, because of its accessible location, its pleasant Mediterranean climate with more than 300 days of sunshine every year, the existing network of excellent quality hospitals, clinics and luxury resorts and the expertise of internationally educated doctors.
Following a record 2016 for tourism, Cyprus anticipates future growth, and is counting on the further enrichment of its product to maintain its position as a leading tourism destination in the Eastern Mediterranean.

JM Since the financial crisis, has the Republic of Cyprus developed any initiatives to revitalise the economy that make it easier for foreign companies to invest?

NP Following a turbulent period that culminated in the 2013 economic crisis, Cyprus was able to rebuild its economy in a very short period of time. Today, the Cypriot economy is one of the fastest growing economies in the EU, exceeding 3% growth in the first quarter of 2017. In terms of FDI, we have seen a 9.1% rise in 2016, compared to the previous year, which was the second largest increase at EU level.
These results have been achieved through a determined and disciplined series of reforms, which have included incentives for the attraction of new investment and talented people from abroad. Our commitment to the continuous improvement of the regulatory and business environment and the upgrading of our economy’s competitive advantages, are prerequisites in attracting further foreign investment, which, in its turn, is a key element in achieving our ultimate goal: sustainable and long-term economic growth.