Clear skies ahead for the Cyprus economy

Over the last four years, Cyprus has followed a strategy of determined and disciplined reform through which it has successfully forged its position as one of the EU’s top performing and most resilient economies. Foreign investment has been — and still is — at the heart of the government’s strategy, helping to nudge GDP growth to over 3% in the first quarter of 2017. Committed to offering foreign investors stability, opportunity and flexibility in a well-regulated and business-friendly environment, Cyprus has kept its attractive and competitive EU-approved tax regime.

More than a set of laws and numbers, Cyprus is set apart by its people. With more university graduates per capita than most EU and other developed countries, Cyprus has a competitive edge. There is a constant need to ensure that Cypriot graduates are ready to fill jobs in emerging sectors, hence the government is investing even further in higher education as well as in research and development to diversify skills on offer.

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Recently, Cyprus has seen an increase in the number of companies establishing regional offices or headquarters on the island. An important factor in their decision-making process is the island’s strategic position at the intersection of three continents, allowing investors access to the EU and easy expansion into the Middle East, Asia, and Africa. With an extensive network of over 60 double tax treaties, Cyprus is a stable and safe business center at the heart of the eastern Mediterranean.

Invest Cyprus serves as a first point of contact and partner for businesses and individuals considering investment in the country. Once contacted, the organization provides continuous support, placing a high value on after-care service and helping individuals to establish and grow their business in Cyprus. In fact, Invest Cyprus has recently seen a number of companies in a range of sectors — from technology and innovation to shipping and energy — grow their presence in the country. Attracting both local talent and a range of experts from various parts of the world, these companies and their teams add to the know-how and diversity of the island, which has been a buzzing, multicultural hub since antiquity.

In the last few years, Cyprus has seen growth in traditional sectors such as tourism, shipping, and professional services. With tourist arrivals reaching a record high in 2016, a number of important projects are underway, aiming not just to increase tourist numbers but, more importantly, add to the island’s offering. The EU’s biggest integrated casino resort — with investment exceeding EUR 500 million — has just received government approval to begin construction. At the same time, a number of high-capacity, state-of-the-art marinas are under development along the island’s coastline, while the Limassol Marina has been running since 2014.

In the area of financial services, there is a significant presence of foreign investors in most Cyprus banks, including the island’s largest lender, the Bank of Cyprus, which earlier this year became the first Cypriot bank to achieve a listing on the London Stock Exchange.

In shipping, Cyprus is already the biggest ship management center in Europe and the second largest in the world, with some of the biggest companies in the world headquartering in Limassol. To add to this, operations at Limassol Port were privatized earlier this year. Upgrading the infrastructure and services at the island’s largest port is expected to open up further opportunities in the shipping value chain. As the island’s longest-serving generator of foreign direct investment, shipping is in fact now ideally placed to capitalize on the discovery of large natural gas fields in Cypriot, Egyptian and Israeli waters.

Yet, more than reinforcing the bread and butter of its economy, the government has been proactive in encouraging the development of new sectors, diversifying, and offering further options to foreign investors.

In the budding energy sector, Cyprus completed its third licensing round for three exploration blocks this year, issuing drilling licenses to Italy’s Eni, France’s Total, US firm ExxonMobil, and Qatar Petroleum. Two of the world’s biggest oilfield services companies, Schlumberger Ltd. and Halliburton Co., have made Cyprus their base for operations in the eastern Mediterranean. Another is Noble Energy, the US firm that made Cyprus’ first natural gas discovery offshore in 2011. Eni’s executive vice-president for international relations, Lapo Pistelli, said recently that he is convinced that Cyprus has the potential to become an energy hub for the wider region, as it offers a viable model that combines natural gas with other renewable sources of energy.

New incentives available to innovative companies aim to foster and encourage innovation across all sectors, from fintech — or financial technology — to education, truly cementing its role in Cypriot society not as a mere set of new ideas, but as part of the island’s genetic make-up. Leading multinational companies, such as NCR, Microsoft, IBM Corp. 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.

Investment funds, meanwhile, are one of Cyprus’ newest and fastest-growing industries. Assets under management in Cyprus have tripled in the last three years and the trend is set to continue with many more projects in the pipeline. Driving this impressive performance are reforms that Cyprus has made to its regulatory framework. Cyprus now has a fully EU-compliant and business-friendly regime that strikes a balance between freedom of operation for the asset manager and protection for 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 education, the University of Central Lancashire (Preston, UK) has built its first overseas campus near Larnaca, at a cost of EUR 53 million. Cyprus is also making strides to establish itself as a regional education hub, with growing US, UK and other foreign investment in its tertiary education sector, which boasts eight universities.

There has also been foreign investment in hotels, airlines, the retail sector, and pharmaceuticals. The real estate sector has turned a corner, with prices rising again but still considered attractive. The citizenship-by-investment program is helping to drive growth, with investors often preferring the property sector in Cyprus as the basis of their investment. The program has the acquisition of a permanent home of a minimum of EUR 500,000 as a requirement, which has given the sector a boost. Luxury developments in the coastal cities also cater for this demand.

As a bridge between Europe, the Middle East and beyond, Cyprus provides remarkable distribution opportunities to a wide range of markets. Its modernized and reformed funds sector is ready to play a major supporting role for UK-based investment funds and managers post Brexit if the UK loses its right to passport their services into the EU.

The pain of the crisis of four years ago has also brought gain. Cyprus has dug deep and worked hard on every scale, from individuals to institutions, to improve its position. These efforts are paying dividends. After strengthening its anti-money laundering rules, Cyprus ranked top for transparency in a recent report by Transparency International. This — together with Cyprus’ robust economic recovery — has fully restored confidence in the island as a respected, sophisticated and dynamic investment hub offering diverse opportunities.

The island has always been blessed with abundant sunshine; these days it is good to see that it is not just the weather forecast that is looking positive.

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