2017 Cyprus Country Report by CountryProfiler Cyprus

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CYPRUS

2017

country REPORT

Record-breaking tourism numbers and new large-scale projects

Rising property sales and new landmark projects boost the sector

Top global hub for ship owning and shipmanagement services New round of oil and gas exploration by global energy giants

Economy • Foreign Direct Investment • SECTOR PROFILES • BUSINESS OPERATING ENVIRONMENT • Business Directory

Banking Deposit growth, FDI and ratings upgrades strengthen Cyprus banks

FDI Investor confidence proves strong with new investment in ports and marinas

Headquartering Corporate HQ location on the rise with new incentives for expat executives

Branches in Cyprus: Limassol Nicosia Pafos Branch in Luxembourg: Luxembourg Representative offices: Moscow, Russia London, UK

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LEADING. EVOLVING.

ACHIEVING. SINCE 1963. L Papaphilippou & Co LLC offers legal services to businesses, individuals, public organizations and governments. We have a strong litigation team handling also all forms of commercial dispute resolution and have considerable experience in arbitrations. Furthermore, our Immigration and Citizenship Department is well respected and renowned for leading by example in the field and our high calibre and experienced lawyers ensure first class service and results. In particular, L Papaphilippou & Co LLC is the first law firm in the Republic of Cyprus to have successfully applied, secured and delivered Cypriot (EU) passports to foreign high networth individuals and their family dependents through the new Citizenship by Investment programme introduced by the Government of the Republic of Cyprus. Additionally, being a full service law firm, L Papaphilippou & Co LLC is capable of delivering secure and compliant cross-border legal and wealth management solutions, as well as to co-ordinate international business structures, trusts and private banking matters for our clients.

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CountryProfiler Global Edition 2017 | €10

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CYPRUS

2017

COUNTRY REPORT

The Team

Record-breaking tourism numbers and new large-scale projects

Rising property sales and new landmark projects boost the sector

Top global hub for ship owning and shipmanagement services New round of oil and gas exploration by global energy giants

ECONOMY • FOREIGN DIRECT INVESTMENT • SECTOR PROFILES • BUSINESS OPERATING ENVIRONMENT • BUSINESS DIRECTORY

Banking Deposit growth, FDI and ratings upgrades strengthen Cyprus banks

FDI Investor confidence proves strong with new investment in ports and marinas

Headquartering Corporate HQ location on the rise with new incentives for expat executives

CountryProfiler Ltd is a specialist publisher of country information that assists corporations managing operations across national borders with trade, investment and relocation decisions. CountryProfiler is recognised by senior business executives, government representatives, institutions and global organisations as a leading provider of informative and insightful country intelligence.

Kristina Ernst Regional Director ernst@countryprofiler.com

Heidi Marttinen Editor marttinen@countryprofiler.com

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Research and Contributions

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Publication Date

April 2017

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Country Report CYPRUS 2017

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Villas on Step out of your villa and onto your yacht. Relax at the beach or the spa. Dine and shop in the heart of the most vibrant city in Cyprus. This is what we mean by living on the sea. For information on berths, apartments and villas at Limassol Marina, contact +357 25 020 020 limassolmarina.com

Living on the sea

Contents

Country Report CYPRUS 2017

Cyprus at a Glance Key Facts & Figures

Country Overview Gaining Momentum

Government & Politics A Vision of Unity

Interview: President of the Republic of Cyprus Nicos Anastasiades Determined to Succeed

Economy Strong Growth Prospects

Interview: Minister of Finance Harris Georgiades Back on Track

Foreign Direct Investment FDI Hotspot

Headquartering HQ with a View

Interview: Minister of Energy, Commerce, Industry & Tourism Yiorgos Lakkotrypis Building a Better Future

International Trade Exports on the Rise

Interview: Minister of Transport, Communications & Works Marios Demetriades Connecting Cyprus with the World

www.pwc.com.cy

Expertise Solutions Value

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Contents

Sector Profiles 64

Agriculture & Food Green Growth and Niche Products

Banking Rising to the Challenge

Capital Markets Boutique Services for Niche Markets

Construction & Real Estate The Only Way is Up

Education Ahead of the Learning Curve

Energy & Environment East Med Energy Centre

Health Healthy Prognosis

100 Insurance A Return to Growth 104 International Financial Services Full Suite of Services 110 Investment Funds Emerging EU Fund Jurisdiction 113 Manufacturing & Industry A Culture of Innovation 116 Maritime & Shipping Managing the World’s Fleet 122 Research & Development R&D Boosting ROI 126 Technology & Communications The Right Connections 130 Tourism The Star Performer 136 Transport & Logistics Growing Transport Hub 139 Business Operating Environment Doing Business in Cyprus 150 Travel & Living CountryProfiler’s Expat Guide 160 Who’s Who Cyprus Business Profiles 8

Country Report CYPRUS 2017

Cyprus at a Glance

Cyprus at a Glance Lying at the crossroads of Europe, Asia and Africa, Cyprus has long served as a major Eastern trading post. It is a small country, but the third largest island in the Mediterranean Sea and shares a maritime border with Egypt 300 km to the south, Lebanon 108 km to the east and Turkey 71 km to the north, while Greece lies 800 km to the north-west. With 10,000 years of history, the island’s strategic location has long made it a jewel in the crown of the powers of the day. Cultural influences have come from all directions, with many civilisations leaving their mark on the island, contributing to the development of a rich and diverse cultural heritage.

TOTAL POPULATION 848,300

Cypriot 78.6% Non-Cypriot 21.4%

CURRENCY Euro Time: +2 Hours

Paphos

ahead of GMT

Population: 90,200

Area/Size: OFFICAL LANGUAGES Greek & Turkish

(business generally conducted in English)

9,251km2

(3,355 km2 in the occupied area)

Annual rainfall:

790.1mm Sunshine:

340 days of sunshine/year

Average Temperature:

+13ºC Winter

MEMBERSHIPS EU & Eurozone United Nations Council of Europe Commonwealth World Bank & IMF

Independence Day:

October 1st Median Age:

35.9 years

Country Report CYPRUS 2017

+34ºC Summer

Population density:

124.9

(persons per km2)

Paphos International Airport

Cyprus at a Glance

Famagusta

CAPITAL Nicosia

(Lefkosia) Population: 330,000

(Ammochostos) Population: 46,900

Larnaca International Airport

Larnaca Population: 144,200

Limassol Population: 237,000

Roman Catholic

2.9%

Protestant/Anglican

2.0% Muslim

Religion

1.8% Unknown/Atheist

1.7% Other

Greek Orthodox

89.1%

1.4% Buddhist

1.0% Country Report CYPRUS 2017 11

Cyprus at a Glance

Why Cyprus? u A can-do business environment u Pro-business government u Easy access to decision makers u Highly skilled workforce u A safe and cosmopolitan lifestyle u Excellent infrastructure

International Rankings

u Advantageous tax regime

32nd

Open Markets Index 2015 International Chamber of Commerce (out of 75 countries)

31st

GDP per capita

Global Innovation Index 2016 INSEAD and the World Intellectual Property Organization (out of 128 countries)

42nd

€21,152 (2016 estimate)

GDP GROWTH

2.8%

Economic Freedom Index 2016 Heritage Foundation (out of 178 countries)

(2016) 2.5-3% (2017 estimate)

INFLATION

unemployment

CRIME

CORPORATE TAX RATE

(December 2016)

per 100 persons

(2015)

14.3% 0.90 12.5%

-1.2% (2016)

Agriculture Industry

15.9%

Main Media: Cyprus Mail, Phileletheros, Politis Time to start up a business: 1-3 days Main Trading Partners: Greece, UK, Germany, Italy, Israel, France, China

SOVEREIGN RATINGS (March 2017)

BB+ Standard & Poor’s

BBFitch

B1 Moody’s

Accounting Standard: IFRS

Country Report CYPRUS 2017

5th

Safest Country Worldwide ValuePenguin Safest Countries in the World Study 2015

45th

World Bank’s 2017 Doing Business Report (out of 190 economies)

GDP by Sector

Services

81.7% TOTAL GDP

€17.9 billion (2016 estimate)

2.4%

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Country Overview

Country OVERVIEW

Gaining Momentum The rapid economic turnaround of Cyprus has been hailed a European success story and with growth gaining momentum the country is determined to up its game.

yprus has seen a boost in confidence with foreign investors flocking back to its shores, attracted by the improved economic climate, large scale projects, privatisations and its strong probusiness culture. Located in the Eastern Mediterranean at the crossroads of Europe, the Middle East and Africa, Cyprus’ strategic position has always played a key role in shaping its 10,000-year history and in developing the island into a convenient centre for trade and international business. Despite being a country of only 848,300 people, the Republic of Cyprus has steadily built itself into a thriving business centre over the decades. The EU-compliant domicile has one of the highest educated populations in Europe, a low-cost business environment with a wealth of support services, a sophisticated ICT infrastructure and an investor-friendly tax regime – backed up by an extensive network of double taxation agreements with 60 countries. Not only is Cyprus a developed business hub, but also one of Europe’s favourite holiday destinations, offering a perfect balance between business and leisure. 14

Country Report CYPRUS 2017

Captivating ISLAND

The island enjoys an astounding 340 days of glorious sunshine a year and boasts a beautiful coastline teeming with stretches of golden sand, secluded bays and rocky coves, all surrounded by some of the cleanest beaches and waters in the Mediterranean Sea. The landscape is dotted with the fascinating remains of history, from Neolithic settlements and ancient city-kingdoms to exquisite Byzantine art and magnificent Venetian architecture. People & Culture

While Cyprus is a Greek-speaking nation, English is almost universally spoken and is the language of international business. German, French and Russian speakers are also easily found, thanks to the high number of Cypriots with international degrees, the country’s commercial ties with the global business community, and the island’s popularity as a tourist destination. Cyprus is well known for its hospitality, a fact reflected in the Greek word, xenos, used for both stranger and guest. Life is meant to be enjoyed in Cyprus, which is renowned for its excellent quality of life. Café culture predominates, with both business and social meetings

Country Overview

taking place over a leisurely frappé (iced coffee) in the numerous cafes in every town and city. As with most Mediterranean cultures, food also plays a vital role and the famous Cyprus meze – a large selection of small, delectable dishes – is best enjoyed siga siga (slowly), al fresco and accompanied by excellent local wine. Growing Economy

Cyprus has a resilient economy that has time and time again proven its capacity to adjust to continuously changing conditions and bounce back from external shocks. Before its independence from the UK in 1960, the Cyprus economy was primarily based on agriculture and the export of minerals. However, in the last few decades the country has established itself as a serious international business and service centre for shipping, financial services and commerce, and is classified by the World Bank as a high-income country. The island’s accession to the EU in 2004 with the subsequent adoption of the euro in 2008, was the catalyst for its transformation into a competitive financial and business services hub. Following the country’s financial crisis in 2013, Cyprus undertook a major reform agenda and albeit still facing some economic chal-

lenges, the small EU nation has demonstrated incredible resilience and an ability to bounce back to growth. The year 2015 signalled a sooner-than-expected exit from recession and a return to growth, with the European Commission forecasting the Cyprus economy to grow 2.5% in 2017. The island’s international financial centre did suffer a blow in the wake of the crisis, but with robust restructuring to clean up the banks’ balance sheets and build stronger institutions with better supervision, the country is already reaping the rewards with bank deposits on the rise. Cyprus has certainly retained and strengthened its reputation as an attractive investment gateway to the EU and other highgrowth markets, as well as a secure base to tap into opportunities in the Middle East. Offering a taxefficient EU company domicile, the country is also now emerging as a compelling destination for regional headquarters as well as an attractive location for fund managers and promoters. Emerging Investment Fund Jurisdiction

Ongoing improvement of Cyprus’ regulatory framework on investment funds is expected to substantially contribute to the growth of the sector and the economy. Upgraded legislation for alterCountry Report CYPRUS 2017 15

Country Overview

native investment funds is set to be implemented in 2017 and the number of funds is expected to surge. This sector has the potential to develop into a multi-billion-euro industry, and is emerging as an interesting EU-regulated jurisdiction for the global asset management industry. Today, the majority of alternative investment funds in Cyprus are of a small and medium size and focus on debt and equity securities, real estate and private equity. However, Cyprus has also attracted larger funds including one with assets of €500 million under management. The number of alternative investment funds has tripled in the last five years and foreign UCITS are now widely marketed in Cyprus, including ones promoted by international financial institutions such as JP Morgan, UBS and Julius Baer. Influential Shipping Hub

A major success story for Cyprus has been the maritime sector, which accounts for €1 billion in annual revenue and around 7% of the island’s GDP. Apart from offering shipmanagement and business services to the industry, the Cyprus Registry is classified as the third largest fleet in the European Union and for years has been ranked as one of the top ten largest merchant fleets in the world. The sector has seen growth in the past few years and Cyprus is currently looking at restructuring the commercial shipping sector to strengthen its competitive edge.

Limassol Marina

Country Report CYPRUS 2017

Since introducing an advantageous EU-approved tonnage tax system in 2010, the island has continued to attract increasing numbers of shipping companies from across the world. The country’s maritime capital, Limassol, is home to some of the most influential names in shipping today. Record-Breaking Tourism

For decades, tourism has been a key driving force of the Cypriot economy, and 2016 saw another consecutive year of record-breaking numbers of tourist arrivals. New projects currently underway are set to strengthen and upgrade Cyprus’ tourism product and encourage more year-round visitors, a strategy Cyprus is fully committed to. These projects range from the construction of new golf courses, luxury marina developments and the upgrading of the island’s wellness and medical tourism product. A new and exciting prospect is the development of the Republic’s first-ever luxury casino resort, which attracted investors from across the world. The integrated resort will exceed five-star status, opening a whole new market for niche tourism on the island. Tourism numbers are expected to see yet another boost this year with the coastal town of Paphos, the legendary birthplace of Aphrodite, and UNESCO world heritage site, having won the international competition to become the European Capital of Culture for 2017.

New projects currently underway are set to strengthen and upgrade Cyprus’ tourism product and encourage more year-round visitors.

Country Overview

EU Member since 2004 Eurozone Member since 2008

Regional Energy Player

Apart from the sun and the sea, Cyprus has few natural resources and has been dependent on oil imports to satisfy its energy demands. However, the substantial discovery of natural gas and potential oil deposits in Cyprus’ Exclusive Economic Zone (EEZ) in the Mediterranean Sea is expected to change all this. Drillings by US company Noble Energy confirmed natural gas reserves of 4.54 trillion cubic feet (tcf) – enough to meet Cyprus’ domestic gas demand for over 100 years – and has attracted international energy heavyweights, such as Total, Eni, Kogas and Exxon Mobil, to explore the island’s waters for new discoveries. Real Estate Renaissance

Cyprus is highly attractive to real estate investors and has long been a magnet for international buyers – establishing the real estate and construction sector as an important component of the island’s economy. With new up-market developments, increased foreign investment in top hotels and major infrastructure projects springing up, Cyprus’ attractiveness as a property investment location is set to grow in the coming years. Also the fall in property prices and recently introduced incentives make this an opportune time to invest and buy real estate in Cyprus. Boost in FDI

The improved economic climate has revived interest in Cyprus and its numerous large-scale development projects. Most capital, predominantly coming from Greece, Russia, the US and UK, has been invested in the real estate, banking and wholesale trade sectors, but the 2013 economic crisis opened new opportunities. Privatisations

were of particular interest, with a consortium led by German Eurogate International GmbH – the largest container company in Europe – winning the concession of Limassol Port’s container terminal, generating €44 million in immediate revenues. Luxury marinas have also become a popular investment, with Egyptian billionaire, Naguib Sawiris, investing in the €220 million project to construct the new Ayia Napa marina. A key development in 2016 was the launch of Cyprus’ firstever Science and Technology Park (STP), which provides strategic investors with an interesting opportunity to finance, design, build and manage the landmark project. The planned STP will create facilities tailored for science and technology companies, as well as promote business incubators to expand the range of opportunities for research and development investment. Cyprus’ liberalised Foreign Direct Investment Policy, both for EU citizens and investors from third countries, along with its favourable tax regime makes it one of the most attractive centres for FDI in Europe. A Strong Future

With its economy on an upward trajectory, Cyprus has all the right elements firmly in place to maintain its reputation as an international centre of business excellence in one of Europe’s most interesting investment locations. The country combines numerous advantages as a business base with its EU-approved tax regime, competitive 12.5% corporate tax rate, its pro-business government and highly skilled workforce. Offering a professional yet relaxed atmosphere that makes doing business pleasurable as well as profitable, Cyprus’ Mediterranean lifestyle coexists happily with a cutting-edge international business hub, allowing investors to enjoy the best of both worlds: a safe and secure environment for family life and a sophisticated infrastructure from which to grow and develop business. n Country Report CYPRUS 2017 17

Government & Politics

A Vision of Unity Strengthening the economy, modernising the state and reaching a sustainable solution to unify Cyprus are high on the government agenda for 2017.

Constitution, Institutions and Administration The 1960 constitution provided for power-sharing between the Greek Cypriot and Turkish Cypriot communities. Votes on important issues required separate parliamentary majorities, and the Greek Cypriot president and the Turkish Cypriot vice-president both had the right of veto on important decisions. The system of government is presidential, with the separation of powers between the executive and the legislature. The presidential term lasts five years, with the next presidential election due in 2018. Ministers, who are appointed by the president, cannot hold seats in the House of Representatives. The House of Representatives is elected by proportional representation. Its normal term is five years.

Country Report CYPRUS 2017

Government & Politics

Political Parties Dominant Parties Democratic Rally (DISY), a right-wing party led by Averof Neophytou Progressive Party of the Working People (AKEL), a left-wing party led by Andros Kyprianou Democratic Party (DIKO), a centre-right party led by Nicolas Papadopoulos Movement of Social Democracy (EDEK), a social democratic party led by Marinos Sizopoulos Smaller Parties Citizens’ Alliance, led by Giorgos Lillikas Solidarity Movement, led by Eleni Theocharous Cyprus Green Party, led by Georgios Perdikis ELAM (National Popular Front), led by Christos Christou

icos Anastasiades, the seventh president of the Republic of Cyprus, was elected on 24 February, 2013. The conservative candidate and head of the DISY party won the Cyprus presidency by one of the widest margins in decades, taking 57.48% of the vote. From his very first days in office, President Anastasiades has had to take a strong stance to steer the country back on track from one the most challenging economic times in the island’s history. The division of Cyprus remains a key issue in the political arena, but UN-brokered peace talks between the Greek and Turkish Cypriot leaderships gained significant momentum following the election win of Turkish Cypriot leader Mustafa Akinci in 2015. These renewed negotiations aim at finding a sustainable solution to the ‘Cyprus Problem’, which has led to the de facto division of the island – between the mainly Greek-speaking south and the mainly Turkish-speaking north – for over four decades. Nicos Anastasiades and Mustafa Akinci have been holding direct talks for nearly two years in a bid to reunify the island and have certainly accelerated efforts to reach a sustainable solution, most recently at high-profile talks in Geneva and the Swiss resort Mont Pèlerin. Although the negotiations are tough, both parties have underscored their strong resolve and determination to maintain the current momentum.

Colonised by the ancient Greeks in 1400 BC, Cyprus has had a succession of foreign rulers through the centuries, including the Romans, the Byzantines, the Franks and the Venetians, whose 300-year rule ended in 1571 when the island became part of the Ottoman Empire. After almost 250 years of Ottoman rule, Cyprus was placed under British administration in 1878. The island finally became independent in 1960 after a protracted and violent struggle against the colonial power between 1955 and 1959. After lengthy negotiations, Britain, Greece and Turkey drafted a constitution for the new state, along with Treaties of Guarantee and Alliance. The Republic of Cyprus came into being in August 1960. The constitution and the two accompanying treaties established a complex power-sharing structure between Greek and Turkish Cypriots, which precluded partition of the island, or union with Greece or Turkey. Both countries, along with Britain, were also designated guarantors of the independence, territorial integrity and security of the Republic. The constitution provided for a Greek Cypriot president and a Turkish Cypriot vice president, while the Turkish Cypriot community was granted three ministerial positions out of a total of ten, and fifteen out of the fifty seats in the House of Representatives.

Divided Island

International Relations

In 1960 Cyprus gained independence from Britain and became a unitary state of both Greekand Turkish-Cypriots (respectively 80% and 20% of the population). In July 1974, a right-wing coup backed by the military junta in power in Greece overturned the democratically elected government, forcing the Cypriot President Archbishop Makarios to flee. This prompted Turkey, one of the guarantor powers, to send its troops into the island to support the Turkish Cypriot minority. Fierce fighting followed and the ensuing ceasefire line – known as the Green Line and patrolled by United Nations troops – has effectively partitioned the island ever since. Today, Nicosia is the world’s last divided capital. The population of the southern two-thirds of the island, controlled by the government of the Republic of Cyprus, is almost entirely Greek Cypriot, while the population of the northern third, controlled by the breakaway Turkish Republic of North Cyprus (recognised only by Turkey) comprises Turkish Cypriots, settlers from the Turkish mainland and around 42,000 Turkish troops.

Cyprus joined the EU on 1 May 2004 together with nine other European countries. Under the terms of its accession the entire island is considered technically to be a member of the European Union, despite its continued division and the fact that the government of the republic has no effective authority in the northern part of the island. However, the terms of the acquis communautaire, the EU’s body of laws, have been suspended in the north. Cyprus has historically followed a non-aligned foreign policy, although it increasingly identifies with the West in its cultural affinities and trade patterns, and maintains close relations with Greece. Turkey refuses to recognise the government of the Republic of Cyprus, arguing that the latter – as established by the Constitution of 1960 – ceased to exist when the inter-communal violence that broke out in December 1963 ended Turkish Cypriot participation in government. As a result, Turkey still refuses to allow Cypriot-flagged vessels access to its ports, despite pressure from the European Union. Cyprus is a member of the United Nations and most of its agencies, as well as the Commonwealth of Nations, World Bank, International Monetary Fund and Council of Europe. In addition, the country has signed the General Agreement on Tariffs and Trade (GATT) and the Multilateral Investment Guarantee Agency Agreement (MIGA). n

From Foreign Rule to the Republic of Cyprus

Country Report CYPRUS 2017 19

Government & Politics

Government Structure Nicos Anastasiades

Harris Georgiades

Christoforos Fokaides

Costas Kadis

President of the Republic of Cyprus

Minister of Finance

Minister of Defence

Minister of Education and Culture

Ioannis Kasoulides

Socrates Hasicos

George Pamboridis

Minister of Foreign Affairs

Minister of Interior

Minister of Health

Country Report CYPRUS 2017

Government & Politics

Marios Demetriades

Nicos Kouyialis

Ionas Nicolaou

Minister of Transport, Communications and Works

Minister of Agriculture, Rural Development and Environment

Minister of Justice and Public Order

Constantinos Petrides Under Secretary to the President

Yiorgos Lakkotrypis

Zeta Emilianidou

Nikos Christodoulides

Minister of Energy, Commerce, Industry and Tourism

Minister of Labour, Welfare and Social Insurance

Government Spokesman

Country Report CYPRUS 2017 21

Interview - President of the Republic of Cyprus

Interview President of the Republic of Cyprus Nicos Anastasiades

Determined to

Succeed

Cyprus has seen a rapid bounce back to growth thanks to bold reforms and prudent fiscal management, establishing the small EU economy as a strong contender. Building on this success, Cyprus is now fully focused on sharpening its competitive edge and attracting more strategic partners and international investors to the island, says President Anastasiades.

Country Report CYPRUS 2017

Interview - President of the Republic of Cyprus

Cyprus has made remarkable progress in bringing its economy back to growth. How do you view the progress made so far and what important goals were achieved in 2016?

Cyprus has fought its way back to a prime FDI position, what further opportunities do you see and what kind of investment would boost the country’s growth?

Four years ago, just after my election as President of the Republic of Cyprus, this country was faced with nothing less than economic collapse. Today, the Cypriot economy is emerging stronger and stands ready to face current challenges, utilising its full potential. We have restored the state’s credibility and that of the financial sector through the implementation of bold reforms, with hard work, patience and diligence. The Cypriot people have had to endure important sacrifices, and these have already begun to yield results. Benefits from measures taken will only be multiplying from now on. As early as 2015, the Cyprus economy recorded a positive growth rate of GDP amounting to 1.7%, the highest growth in the last seven years. For 2016, growth is estimated at 2.8%, which is one of the highest growth rates in Europe. This development is expected to boost the efforts to further ease unemployment, one of the most serious challenges we face. Following the successful completion of an ambitious economic adjustment programme last spring, Cyprus has returned to the international markets and gained access to lending with interest rates, which are now at historically low levels as a result of the continuous upgrading of the economy by international rating agencies. However, the banking sector has further challenges to meet, the most serious one being the restructuring of a substantial part of the NPLs. Addressing this issue will improve banks’ ability to provide new credit to the economy. It is encouraging that the upward trend of non-performing loans has begun to reverse after two years, and borrowers’ ability to repay their loans will keep improving while the economy grows.

Attracting foreign investments in the productive sectors of the economy is our most important priority. Foreign investment is one of the key drivers of economic growth during a period of intense international competition and amidst the great challenges facing our country. We focus on attracting those investments from abroad that will stimulate economic activity, create jobs and contribute to the reduction of unemployment. Tourism, port privatisation, telecommunications, shipping, real estate, large-scale development projects, education, health, research and innovation – all these sectors offer growth opportunities. The energy sector is also a promising field. The discovery of natural gas reserves within Cyprus’ Exclusive Economic Zone creates excellent investment prospects in the energy sector and supplementary services. Not surprisingly, the emerging oil and gas industry to be created on the island is expected to provide a significant boost to our economy, creating growth and positively affecting other related sectors as well, including the renewable energy sector.

What key targets have you set to be accomplished in 2017? For Cyprus to continue on its growth path, we need to remain focused on the necessary structural reforms and the implementation of prudent fiscal management. We strive to reinforce the sectors that form our country’s comparative advantage: tourism, shipping, and services. Indicatively, I note the recent licensing of an integrated casino resort, the process for the Larnaca Port and the decisions for the development of more marinas. Our goal is to create a sustainable and a more productive, competitive and open economy.

What do you see as Cyprus’ key strengths and assets in terms of attracting more business? Despite the economic difficulties we have faced, our country’s comparative advantages not only remain intact, but have been further enhanced and expanded, setting them apart from most investment destinations. These include a significant network of 60 Agreements for Avoidance of Double Taxation, a highly qualified and professional workforce, and fully EU-harmonised tax and legal systems. We have one of the lowest and most competitive corporate tax rates in Europe at 12.5%, making Cyprus an attractive investment destination and a highly competitive centre for international business, offering a platform for operations and preferential access to markets like Europe, Middle East, North Africa and Asia. The safe environment Cyprus provides, our traditional hospitality and our all-year-round good weather, have been pinpointed by various studies as comparative advantages, making our country a ‘value for money’ destination for both the occasional visitor and the investor.

Country Report CYPRUS 2017 23

Interview - President of the Republic of Cyprus

What key markets or countries is Cyprus actively targeting and fostering new relationships with, in terms of energy, trade and bilateral agreements? As an efficient and reliable business hub and an ideal investment gateway into Europe, Asia and the Middle East, Cyprus is constantly working to forge new partnerships and enhance our existing ties, with key regional and international markets. We are at present actively targeting countries in the Middle East and Central and Eastern Europe, as well as the USA, Canada, China, India and Iran, for the promotion of Cypriot products and services. The Republic of Cyprus also utilises the Trade Centres that it operates in Greece, the UK, Germany, France, Poland, Austria, the UAE, Lebanon, the USA, Russia, Israel and China. Particularly in the field of energy, Cyprus has excellent relations with its neighbouring countries in the Eastern Mediterranean region, which are maintained through the implementation of cooperation frameworks and constitute an important factor of confidence and growth for the area. Such tripartite cooperation frameworks are currently in effect between Cyprus, Greece, Egypt and Israel, as all countries acknowledge that energy constitutes one of the fundamental pillars of our mutually beneficial partnership and regional prosperity.

Country Report CYPRUS 2017

With Brexit on the horizon, what impact will this development have on Cyprus and its relationship with the UK? Cyprus is one of the countries most exposed to Brexit due to our legal and financial systems and our extended ties with the UK. An internal task force has been established at the Ministry of Foreign Affairs in order to coordinate Cyprus’ position on all issues related to Brexit at a national level. Our aim is to ensure that trade, commerce and investment issues are addressed in a way that does not have a negative impact on Cyprus’ economy, considering the fact that the UK is Cyprus’ second largest trading partner. Given the large numbers of Cypriots living in the UK and of UK citizens residing permanently in Cyprus, we need to ensure the continuation of these citizens’ acquired rights and status, such as residency and work permit status, pension and social security rights and medical care rights. We had the opportunity to have a constructive exchange of views with Chief Negotiator Michel Barnier and we reiterated that we consider it vital to maintain the indivisibility of the four freedoms, especially the freedom of movement and establishment, as thousands of Cypriots live, study and work in the UK.

Interview - President of the Republic of Cyprus

Cyprus has seen important US investment over the last few years. With new President Donald Τrump in the White House, how do you see US-Cyprus relations developing?

With fierce competition from other ΕU jurisdictions, how would you assess Cyprus’ current performance as an international financial and business centre?

Cyprus has proven to be a stable and reliable strategic partner to the US through our mutually beneficial cooperation in an array of fields. We look forward to maintaining and further strengthening the excellent relations with the USA and the new US administration under the leadership of President Trump. Cyprus anticipates the continu-

Cyprus is a business services centre with strong regulation and supervision, with a well-balanced portfolio of quality services provided by high-calibre professionals. Even after the economic crisis in 2013, the business services sector exhibited considerable resilience, contributing significantly to the stabilisation of the economy. Improving the business

As an efficient and reliable business hub and an ideal investment gateway into Europe, Asia and the Middle East, Cyprus is constantly working to forge new partnerships and enhance our existing ties, with key regional and international markets. ation of the US active support to the current negotiating process for the solution of the Cyprus problem. A possible reunification of our island will bring vast benefits to the volatile region of the Middle East. Our desire is to continue exploring the many areas of bilateral cooperation, such as enhancing Cypriot-US security cooperation, including energy security in the Eastern Mediterranean. There is much that can be done to further enhance our bilateral strategic partnership to our mutual benefit. In the economic sphere, there is wide scope to broaden our trade relationship. The stabilisation and recovery of the Cyprus economy is expected to gain pace in the coming years, offering rewarding opportunities for US-based investors to exploit the island’s strategic links to the Middle East, the EU and Europe in general. Furthermore, US interest in Cyprus’ energy prospects has been on the rise during recent years, especially from large US oil and gas companies in securing an offshore exploration license in Cyprus.

environment still remains our top priority. There is a continuing process to modernise and reform the current tax and legal framework as part of our concerted drive to create a friendlier business environment. Efforts are also being made to strengthen the country’s competitiveness and its attractiveness as an international business and investment destination. Decisive structural changes and significant operational cost reductions have been instrumental in deeming Cyprus even more competitive and efficient. In this regard, we are implementing a series of measures, including simplifying procedures for the faster issuing of permits and licensing of investment projects and operation of businesses, as well as the speedier granting of residence permits to foreign investors and entrepreneurs on the basis of specific economic criteria. Other planned reforms include the upgrading and modernisation of our public service, a new investment law to facilitate licensing procedures for big investments, an institutional reform including the establishment of three Country Report CYPRUS 2017 25

Interview - President of the Republic of Cyprus

Deputy Ministries for Tourism, for Shipping, and for Growth and Competitiveness, as well as the introduction of e-government and local government reform. We are also in the final stages of enhancing the legal framework for the investment funds sector, which is expected to enrich the financial services industry in Cyprus and the growth of the economy. Cyprus is closer than ever to reaching a solution to the long-standing ‘Cyprus problem’, are you optimistic that a settlement can be achieved, and what benefits would it bring Cyprus? The recent Conference on Cyprus in Geneva in mid-January was an important and historic step towards our goal, which was and still remains, to achieve a comprehensive, fair and viable solution to the Cyprus problem, in line with UN Security Council Resolutions, international and EU law. During the last 22 months of intensive negotiations in four of the six chapters – governance and power sharing, economy, EU and property – significant progress has been achieved. The submission of maps by both sides for the first time in the history of the negotiations, prior to the Conference on Cyprus, is a positive development, although there is significant distance separating us on these issues. The discussions at the conference on the Chapters of Security & Guarantees are also of high importance and pave the way for further deliberations. Our position is that it is anachronistic for an EU member state to have any third country guaranteeing its security, as EU membership offers the best guarantee. I am obliged to emphasise in the strongest terms the importance of the progress that has been achieved so far, and that what is of significance and utmost importance is to remain concentrated on the continuation of the dialogue to address the remaining differences, rather than on misinterpretations or pretentious exploitation of events that distort our efforts on achieving our end goal of reuniting Cyprus. All interested parties, and in particular Turkey, should show the same degree of commitment, participate constructively, and move forward with concrete and tangible steps, particularly on the Chapter of Security – which will strengthen the prospect of a positive outcome. We are convinced that a reunified Cyprus, a member of the EU, will benefit all Cypriots and the wider region. Reaching a settlement will allow Cyprus to reach its full potential for economic growth and increase the attraction of major foreign investments and multinational companies, providing us with easier access to international finance and unexploited markets worldwide. It will also further stimulate and develop various economic sectors and create new jobs. 26

Country Report CYPRUS 2017

Tourism is anticipated to vastly benefit from reunification through an integrated tourism product able to penetrate previously untapped markets. The major reconstruction and infrastructure developments that will take place will boost the construction industry and attract more foreign investments. In regard to the shipping sector, the benefits from a potential opening of Turkish ports for ships under the Cyprus flag – a long standing obligation by Turkey – cannot be ignored. A solution would also provide positive effects on EU-Turkey relations, and the overall security and energy architecture of the Union. It is in the best interest of Cyprus, which enjoys excellent relations with all its neighbours, to extend its partnerships in our immediate region through forging an alliance with Turkey. In an era of growing regional and global insecurity and asymmetrical threats, a solution would make Cyprus a symbol of hope that even the most intractable problems can be solved peacefully through dialogue. Ηow do you see Cyprus developing in the next two years and what personal message would you like to relay to the international community? Cyprus stands ready to face the challenges ahead and looks to the future with determination. We are ready to work together with our EU partners, to address today’s challenges and build a peaceful and prosperous future for the next generations. The discovery of hydrocarbon reserves in Cyprus and also the important ‘Zohr’ discovery create further synergies and a grid of alliances for broader cooperation in Europe and the Eastern Mediterranean region. There is no doubt that a solution to the Cyprus problem will be the most important reform for the economic development of the country in the coming decades. I wish to reassure of my determination to work tirelessly to reach a successful outcome and achieve a comprehensive settlement that will satisfy the genuine desire of our people, especially of the younger generations, to peacefully co-exist, collaborate and prosper in a European country, which fully respects their fundamental human rights and freedoms. A solution, which, as I have repeatedly stressed, should take into account the legitimate sensitivities and concerns of both communities of Cyprus, leading to a win-win situation. n

· Luxurious residences. · World-class yachting facilities. · Variety of retail boutiques, waterfront fine dining options, recreational and nightlife experiences. · Two iconic towers, over 100 meters tall, in twisting forms. · 190 luxury apartments. · 29 luxury Beach and Marina Villas. · 600 berths, for yachts of up to 60m in length. · Two stunning beaches.

Economy

Strong Growth Prospects Cyprus is back on a growth track and has been ranked as one of the fastest growing EU economies. The country exceeded international expectations by turning its economy around in just three years following a devastating financial crisis. But far from resting on its laurels, the island is determined to maintain a steady pace in boosting efficiency and investor confidence.

Public budget balance

GDP Growth (yoy) 2018 2.3 % 2017 2.5 % 2016 2.8 %

2018

0.4

2017

-0.2 2016

0.0

2015

-1.1

2015 1.7 % European Commission Economic Forecast Winter 2017: Cyprus

Unemployment

Current account balance (% f GDP) 2015

2016

2017

2018

-3.0 -1.6 -2.1 -2.3 2015

15.0%

2016

13.3%

2017

12.0%

2018

11.0%

Inflation 2015

Gross public debt 2016

2017

2018

-1.5% -1.2% 1.2% 1.1%

(% f GDP) 2015

2016

2017

2018

107.5 107.4 103.2 99.6 28

Country Report CYPRUS 2017

Economy

C Cyprus is experiencing a broad-based recovery, with confidence having returned after three years of ambitious reforms to stabilise the financial sector and consolidate public finances. Growth is now driven by strong consumption and a dynamic tourism sector, with unemployment steadily decreasing. The challenge now for Cyprus is to implement further reforms to increase potential growth. The Government’s ‘Action Plan for Growth’ is a significant step in the right direction. To promote investment and lift growth, Cyprus should improve the business environment, strengthen human capital and implement high-quality investment projects, notably with the support of EU funds. Efforts to attract strategic investors in public utilities and increase energy sector competition should be renewed, while reforming the public administration and justice system must remain top priorities. Cyprus has turned a corner: its aim now should be to achieve a more balanced and sustainable growth model. Pierre Moscovici Commissioner for Economic and Financial Affairs, Taxation and Customs European Commission

yprus has shown remarkable resilience following the financial crisis of 2013 and has implemented tough austerity measures to restructure and diversify its economy. The country surpassed all expectations exiting recession in 2015 – a year earlier than first projected – and continuing to grow in 2016. Despite a challenging period for one of the smallest EU member states, the economic adjustment remained on track and progress has been made in all key objectives set out by the country’s international lenders, allowing Cyprus to reclaim its status as a self-determining and thriving economy. History of the Economy

to request a financial assistance package from the European Commission (EC), the European Central Bank (ECB) and the International Monetary Fund (IMF) – collectively known as the Troika. The Cyprus 2013 bailout captured the attention of the world, as it was the first and only bailout worldwide with a condition to impose a bail-in of bank deposits – a measure considered inconceivable until then. Following the country’s €10-billion bailout deal and the controversial bail-in decision by the Eurogroup, restructuring the economy and restoration of credibility in Cyprus’ banks has been a top priority – and true to form, the country’s economic recovery has been faster than many first projected. Successive Ratings Upgrades

Cyprus gained independence from the UK in 1960, became a member of the EU in 2004, adopted the euro as its national currency in 2008 and was listed by the IMF as one of the 31 advanced economies in the world in 2011. Throughout its history the Cyprus economy has experienced external shocks that have been followed by astonishing revival. The Greek-backed coup d’état and subsequent Turkish invasion in 1974 of the northern part of the island led to a sharp real GDP contraction of 16.9% in 1974 and 19% in 1975. But hard work and collective focus led to a rapid bounce back, with growth of 18.2% in 1976 and 15.8% in 1977, followed by an uninterrupted period of strong growth lasting more than 30 years. Since independence, the economy has gone through several transformations: from an exporter of minerals and agricultural products in 1961-73, an exporter of manufactured goods from the late 1970s to the early 1980s, to transforming into an international tourism, business and services centre in the 1980-1990s. Classified by the World Bank as a high income country, today the economy is mainly built upon the services sector, including tourism, financial services and real estate, which accounts for over 80% of the island’s total GDP and around 75% of employment. The island went through yet another transformation in 2013, when at the height of the eurozone sovereign debt crisis Cyprus became the fifth EU member state

Cyprus’ speedy return to international markets was a positive step towards restoring confidence and credibility in the eyes of the international business community. Successful bond issues raising over €3 billion, successive upgrades by international rating agencies and positive bank results have all contributed to stronger investor interest. Cyprus returned to growth from 2015, posting a growth rate of 1.7% in that year, and 2.8% in 2016, according to the Statistical Service. The Cypriot Ministry of Finance predicts a growth rate of 2.5% to 3% for 2017. Recapitalised Banks

A successfully recapitalised banking sector passed rigorous ECB stress tests and found a stable footing after the turmoil of the 2013 bail-in. Liquidity and solvency in the banking system have improved significantly, and deposits grew by more than €3 billion in 2016. In addition, the insolvency and foreclosure legislation led to a reduction of more than €4.3 billion in loans past due more than 90 days between October 2015 and October 2016. Despite the harsh terms of Cyprus’ international lenders, the country has taken full advantage of the tough supervision and reform programme to correct fundamental weaknesses in its financial system.

Country Report CYPRUS 2017 29

Economy

Healthy GDP Growth

Driven by a strong private demand and supported by the euro’s depreciation and low energy prices, the Cyprus economy once again beat estimates and contrary to expectations returned to growth in the first half of 2015 and officially exited recession in the second. Growth is set to gain momentum and reach 2.5% to 3% in 2017 while public finances are expected to remain stable. Falling Unemployment

Unemployment is set to continue its decline, although tackling youth unemployment continues to be a significant challenge. The unemployment rate started to fall in the first half of 2015, averaging 14.9% in that year and dropped to 13.3% in 2016. The European Commission expects it to fall to 12% in 2017 and to 11% in 2018. Trade & Investment

From 2015, investment growth turned positive in Cyprus, driven by new ship registrations, and an upturn in housing investment. More than half of Cyprus’ trade in goods is done with the European Union. After a large rise of more than 20% in 2015, exports declined from a high base by 0.9% in 2016. Cyprus’ main export partners for goods are Greece and the United Kingdom, while Israel has recently started to vie with other countries for third place. The main domestic export commodities are pharmaceutical products, raw and manufactured food products, and scrap products. The three leading import partners are Greece, the United Kingdom and Italy. The island mainly imports hydrocarbons, machinery, chemicals, vehicles, and iron and steel. As a small open economy that is currently dependent on energy imports, Cyprus’ trade balance is traditionally in deficit, while its services balance is normally in surplus. After a recession-driven divestment in 2013-14, foreign direct invest-

ment (FDI) liabilities (reflecting investment into the country) turned positive in 2015, reaching €7 billion, while net FDI (net of assets, or outward investment) was €8.5 billion. In the first three quarters of 2016, net FDI was €1.4 billion. A range of new initiatives underway are attracting more investment and there is renewed investor interest in large scale developments. New Incentives

Recently approved tax measures have further improved the long-established comprehensive and transparent character of the Cypriot tax framework. The new measures, which are fully aligned with EU directives, support the promotion of economic development by encouraging the introduction of new equity capital as an alternative to excessive debt financing – notional interest deduction (NID) regime on equity – and encourage the creation of business substance by offering compelling advantages to individuals from a personal tax perspective. Tax incentives for intellectual property, innovative small and medium-sized enterprises (SMEs) and start-ups were also introduced in late 2016 and early 2017. These incentives will further improve Cyprus’ international competitiveness as a location of choice for multinationals seeking to do business in the EMEA region. Main Economic Activities

Cyprus is a small and adaptable free-market economy with a positive long-term outlook. The island promotes itself as the business gateway between Europe, Asia, the Middle East and Africa, and leverages its highly educated, English-speaking population. Its EU and eurozone memberships, excellent information and communications technology (ICT) infrastructure and business-friendly environment continue to attract international companies and investment – particularly in natural gas exploitation following

CYPRUS’ KEY EXPORT & IMPORT PARTNERS UK Germany Greece other EU

Greece UK Italy other EU Israel China

Cyprus has delivered an impressive turnaround during the past four years. The economy returned to positive growth in 2015 and strengthened further and beyond expectations last year. The banking system is on a more solid footing and workouts of nonperforming loans are accelerating. The fiscal position has been restored to a sustainable path, and public debt is now on a downward trajectory. As a result, Cyprus has regained stable access to international capital markets. It is now a matter of continuing along the same path. Banks must repair their balance sheets addressing NPLs and strengthening operational efficiency to support new lending. Further credible fiscal consolidation is needed to generate more space for productive public investment. Efforts should also focus on eliminating product and labour market distortions and on promoting policies that encourage investment in R&D and foster innovation, to sustain long-term growth. Challenges clearly remain, but the government’s commitment to maintain prudent macroeconomic and fiscal policies and to implement structural reforms is encouraging. Vincenzo Guzzo Resident Representative to Cyprus IMF

Although it will be many years before risks relating to high levels of nonperforming loans and public debt disappear, the Cyprus economy is putting the crisis behind it. Economic indicators point to real GDP growth of around 2.8% again in 2017. The cherry on the cake in this pre-election year will be if parliament passes long overdue reforms to support investors and to introduce performance incentives in the public sector. Fiona Mullen Director - Sapienta Economics

Country Report CYPRUS 2017

Economy

the discovery of significant reserves in Cyprus’ waters. Company formation, tax planning, trusts, foreign exchange trading and fund administration are all strong segments of the business services industry, encouraged by a network of double tax treaties with 60 countries and a legal system based on English Common law. The key instrument of Cyprus holding companies has attracted hundreds of thousands of companies to set up and channel their investments into key markets through the island. Despite the challenging economic climate in 2012-14, the attraction of Cyprus has not faded and the number of applications filed for registrations of new companies has seen a solid increase since 2014. The developing funds industry, which could evolve into a multi-billion business for Cyprus, is also placing the island on the map as an exciting emerging domicile. Professional services continue to be one of the fastest growing sectors, rising by 6% in the first three quarters of 2016, building on its success in 2015 when the sector grew 4.5%, compared with 1.7% for the economy as a whole. Cyprus hosts the largest third-party ship management centre in the EU, underlining the success of the country’s formidable maritime sector. The Cyprus Registry is classified as one of the top merchant fleets in the world and ranks as the third largest fleet in the EU. Flying its flag are some 1,100 oceangoing vessels and 767 non-convention size vessels, totalling a gross tonnage of around 22 million. The tourism sector has shown solid growth in spite of the crisis and 2016 saw a second record year for tourist arrivals. Efforts to upgrade the product could lead to a renaissance of the industry, which currently contributes around 12% to GDP.

Country Report CYPRUS 2017

After a long decline, construction has also started to rebound, growing by 8.7% in the first three quarters of 2016. Although traditionally strong, primary sectors such as agriculture and manufacturing – contributing around 2% and 4.5% respectively to GDP – have faced challenges which have led both to follow a similar strategy of creating value-added products targeting niche markets willing to pay a premium for quality. Both sectors of the economy have placed strong focus on innovation and diversification, which has supported the industries’ efforts to increase productivity. Energy will be a significant new source of growth, following the discovery of natural gas reserves in Cyprus’ EEZ. The island has ambitious plans to become a regional energy hub in the Eastern Mediterranean and the successful extraction of natural gas from its waters could allow the island to export to European and East-Asian markets. The already-established involvement of major oil and gas companies in Cyprus, such as French energy giant Total, the Italian-Korean consortium Eni-Kogas, and the UK-Dutch company Royal Dutch Shell, has strengthened the development of these plans coming to fruition. The sector saw a further vote of confidence during the third licensing round in 2016, when Total, Eni and ExxonMobil all made bids and were awarded offshore blocks. Privatisations and New Projects

Cyprus has recently embarked on a privatisation programme with the commercialisation of services at Limassol port. Other potential prospects for privatisation are the State Lottery and

The Cyprus economy is on the right track and its growth prospects are good, especially in tourism, shipping and professional services. The energy scene will become clearer within 2017, as the potential discovery of significant reserves of hydrocarbons crystallises. In parallel, we must continue to implement the necessary structural reforms. A significant multiplying factor will be added to the economic prospects of Cyprus, should there be a solution to the country’s political issue. Phidias Pilides President Cyprus Chamber of Commerce and Industry (CCCI)

Economy

2016 was a turnaround year for the economy of Cyprus with positive GDP growth rates, an expanding economy and decreasing unemployment. Our main priority continues to be the reduction of unemployment, despite the steady and sizeable decrease over the last two and a half years. December 2016 was the 32nd continuous month in which unemployment decreased relative to the previous year. In addition, total employment as well as the active population grew and long-term unemployment shrank. These trends are expected to continue through 2017, as the economy maintains positive growth, and our aim is to facilitate the improvement of the labour market conditions with active labour measures. Zeta Emilianidou Minister of Labour, Welfare and Social Insurance

dominant telecommunications provider Cyprus Telecommunications Authority (Cyta). Several new marinas are also planned in key coastal towns of Cyprus, with luxury marina complex Limassol Marina already attracting record sales. One of the most exciting developments is the licensing of Cyprus’ first-ever integrated luxury casino resort, which was awarded to a consortium including the globally renowned Melco and Hard Rock. Government chiefs expect the project could increase annual tourist numbers by up to 500,000 and create hundreds of job opportunities. Fiscal Performance

The primary balance for the government is estimated to have reached a surplus of 2.6% of GDP in 2016, while the headline deficit was estimated at 0.1% of GDP. The general government primary surplus is to remain high at 2.2% of GDP in 2017, according to the European Commission. Cyprus’ debt-to-GDP ratio peaked in 2015 and is projected to decline to 99.6% in 2018. Structural reforms are expected to put long-term public finances on a more sustainable path at the same time as improving competitiveness. Inflation

The inflation rate in Cyprus was recorded at -1.5% in 2015 and -1.2% in 2016, owing to oil prices and historically high unemployment. It is expected to rise to 1.2% in 2017 and to 1.1% in 2018, according to the European Commission. After four years of decline, wage developments are expected to begin warming up slowly in 2017 and 2018.

Services professional services, including legal, accounting, finance, banking, tourism

Industry food and beverage processing, cement and gypsum production, ship repair and refurbishment, textiles, light chemicals, metal products, wood, paper, stone, and clay products

Economic Challenges

The Cyprus economy has again demonstrated its resilience with an impressive turnaround that was faster and stronger than expected. The key challenges that remain are to further reduce high levels of non-performing loans (NPLs), maintain fiscal discipline in order to bring down public debt and implement structural reforms that will increase the efficiency and effectiveness of the public sector and improve Cyprus’ attractiveness as an investment destination. The legal framework for foreclosures and insolvency, passed at the end of 2015, is already bearing fruit supporting banks with loan restructuring and reviving the economy. Although there is still work to be done before Cyprus can declare that it has put the crisis fully behind it, foreign investors are showing interest in the country. The strong tourism sector, the rapidly developing investment fund sector and the discovery of significant quantities of natural gas in Cypriot waters raise the prospect of a transformation of the Cypriot economy in the medium to long term. A Solution to the Cyprus Problem

Resolving the long-standing issue of the Cyprus problem – the de facto partition of the island – has been highlighted as one of the most significant priorities in attracting more foreign investment, boosting the economy and bringing unemployment figures below double digits. A solution would open up substantial opportunities, especially given the synergies available from regional cooperation on hydrocarbons. UN-led talks on resolving the Cyprus problem have been revived, and many see 2017 as a pivotal year in reaching a solution. There is some trade across the UN-monitored Green Line between Greek and Turkish Cypriots, but the narrow range and small volume underlines the fact that this trade cannot bring the same benefits as a solution. Strong Economic Performance

Cyprus has an open, free-market, service-based economy with a long record of successful economic performance. Despite tackling a major fiscal and banking crisis, the strong business environment, highly educated workforce and favourable tax regime remain in place. Looking ahead, with measures to reform public spending, accelerate initiatives to boost investment, develop the investment fund sector, privatisations and a push forward with natural gas exploitation, Cyprus is returning to the prosperity of the past. n

Country Report CYPRUS 2017 33

Interview - Minister of Finance

Country Report CYPRUS 2017

Interview - Minister of Finance

Interview Minister of Finance Harris Georgiades

Back on TRACK New foreign investment, sound public finances and a stable banking sector, have positioned Cyprus as an economy with one of the highest growth rates in the EU, says Finance Minister Georgiades.

Cyprus has made remarkable progress in bouncing back to growth, how would you describe the current economic situation of the country? I would describe the overall economic situation as one of renewed opportunity and good prospects. Cyprus has achieved a remarkable rebound. It has been steadily edging out of recession and now enjoys one of the highest growth rates in the EU, nearing 3% of GDP. Confidence has been restored and it’s important to note that growth comes from all the key productive sectors of the economy. It is also important to highlight that this is real growth, without being artificially boosted through deficit spending or an excessive credit expansion. What important goals and reforms were achieved in 2016? During 2016, we successfully completed the IMF/ EU support programme. This was done on time, without utilising the full financial envelope and without a need for an extension. More importantly, the exit from the support programme came hand in hand with the strong recovery of the economy. The public finances are sound, and the banking sector is stable. We have also seen significant investment, both through private initiative and government initiatives, such as the privatisation of the Port of Limassol, which was sealed just a few months ago. What key priorities have you set for 2017? The primary objective of economic policy for 2017 is to see a continuation of the recovery and growth of the economy. We are aiming for a growth rate in

the range of 2.5-3% of GDP. In this way, we expect to see a further drop in the unemployment rate. We also expect 2017 to be the 4th consecutive year with an essentially balanced budget. The combination of fiscal discipline with real economic growth has been the hallmark of our economic policy, which has delivered tangible results and shown that the growth versus austerity dilemma can be avoided. And of course, we shall continue to pursue foreign direct investment, for instance with the licencing of the largest integrated casino resort in Europe and to promote further reforms, for instance in sectors like investment funds and pension funds. It’s been almost four years since the devastating banking crisis, how is Cyprus’ financial sector performing today and what goals are yet to be achieved? Today, we have a much smaller, but healthier banking sector. Cyprus banks now operate under a stricter and more credible regulatory and supervisory framework; they are under new management with a significant presence of new foreign shareholders, and obviously with comfortable levels of capital adequacy and solvency. Admittedly, the legacy problem of non-performing loans has not been fully tackled, but the pace of loan restructurings and settlements is satisfactory. On the other hand, we have recently seen the last of the other legacy problem, that of the Emergency Liquidity Assistance drawn by Bank of Cyprus, the biggest lender of the island. This has been fully repaid, in the run-up to the bank’s listing on the London Stock Exchange, a move which I consider as the epitome of the new era of Cyprus banking.

“Cyprus has achieved a remarkable rebound” Country Report CYPRUS 2017 35

Interview - Minister of Finance

What key opportunities do you see in terms of investment and growth and what incentives have been introduced to attract more foreign investment? Cyprus is currently offering excellent investment opportunities across the sectors. I already mentioned the Limassol Port and the integrated casino resort. Other recent major investments include marinas, the pharmaceuticals industry, renewables, retail, hotels and real estate. Cyprus enjoys a restored reputation and this is a result of the determined and combined efforts of government and industry over the last few years. Working together we have established a stable and safe pro-business environment. To give an example, we were very clear and determined to maintain a stable and attractive tax regime. We brought down a budget deficit of almost 6% to practically 0% over a single year, and we have kept it steady ever since without raising a single tax. Instead we significantly reduced public expenditure, which has enabled us to offer significant tax reductions and incentives to both individuals and corporates, and in this way to boost consumer and business confidence. Stability, predictability and a pro-business economic environment is what investors need, and this is exactly what we have established. What major challenges does Cyprus continue to face and what measures are you taking to ensure the country’s future economic wellbeing? We still face some legacy problems. Nonperforming loans is one. This goes back to the unsustainable credit expansion of the previous decade. High public debt is another problem, which also goes back to the times of reckless and loose fiscal policy. Also unemployment is still high, an inevitable consequence of the deep recession we went through. What is encouraging, however, is that on all these fronts we are seeing progress, through the healing process of the banking sector, the fiscal discipline and of course through the strong recovery of the economy. Cyprus and the UK have a long shared history and close economic ties, how will Brexit affect Cyprus? It was a regrettable decision, but one which we fully respect. Our primary objective now is to support a new relationship between the UK and the EU, which will be as strong as possible, assuming that this is what the UK would seek. That said, I have to say that we are not so concerned about any direct

Country Report CYPRUS 2017

negative impact on Cyprus. My primary concern would be about the course and direction of the EU from now on. But I repeat, as far as Cyprus is concerned there may be more opportunities rather than risks. Cyprus has seen much investment from the US into its banks and energy landscape in the last few years, how do you see US-Cyprus relations developing in terms of business? Our relationship with the US is of strategic importance and one of immense potential. I expect USCyprus relations to remain close and strong during the new US administration and we look forward to seeing a widening of economic and commercial ties. You have rightly mentioned the banking and energy sectors, but I would also point out the new casino resort, where the selected consortium includes a major US entertainment group. So I am optimistic that the scope for more investments will continuously expand. Financial and business services account for a significant segment of the country’s economic output, how do you see the future of Cyprus as an international business centre? Our business and financial services sector has demonstrated remarkable resilience and adaptability during the difficult last few years. The sector has been successfully adapting to the new international norms on transparency, and has been highlighting the unique hub of know-how and expertise which exists in our jurisdiction that operates with a restored reputation. The government works very closely with the industry in ensuring that the comparative advantages of the sector are enhanced, for instance through a major initiative in improving our investment funds framework. We are confident that Cyprus can successfully be the new kid on the block when it comes to investment funds. How do you see the overall economy of Cyprus developing in the next five years, and what message would you like to relay to the international community? My message would be that Cyprus is back. It has emerged from a crisis stronger, smarter, safer and more stable. We are confident that Cyprus can be one of the fastest growing economies in the EU, on the condition that we remain firmly on a path of prudent economic policy and we avoid the mistakes of the past. n

“We are confident that Cyprus can be one of the fastest growing economies in the EU, on the condition that we remain firmly on a path of prudent economic policy and we avoid the mistakes of the past”

Foreign Direct Investment

FDI Hotspot

The strong performance of Cyprus is bolstering the island’s status as an FDI hotspot, presenting exciting opportunities for serious investors ready to move in fast and reap the benefits of one of the fastest growing EU economies.

arge-scale projects, tourism infrastructure, privatisations and a burgeoning oil and gas sector are all strengthening Cyprus’ appeal as an interesting investment location, and the island has already enjoyed significant inflows from the US, Asia, Russia and the Middle East. Cyprus has come a long way in the last few years, surpassing all expectations, a fact reflected in a 9.1% increase in foreign direct investment in 2016. The island’s improved credit standing, after consecutive upgrades by international credit rating agencies, the successful recapitalisation of its major banks, bond issues raising over €3 billion in international markets, and numerous large-scale projects, have all contributed to the resurgence of Cyprus as a top foreign direct investment (FDI) location. Recognising this growing investor interest, Cyprus has focused on streamlining processes to boost its economy and attract more investment through modernising legislation, promoting development projects, diversifying tourism, introducing tax incentives and speeding up licencing procedures. Cyprus has been acknowledged for making

Country Report CYPRUS 2017

notable improvements in upgrading its business environment, jumping up two places in the rankings of the World Bank’s 2017 Doing Business Report, after climbing 17 places in 2016. Already known as a popular holiday destination and a safe business hub servicing international companies with multinational operations, the island is growing its investment appeal with more incentives and improvements to its FDI framework – making this a ripe time to invest in the Cypriot market. Large-Scale Projects

Improvements in Cyprus’ macroeconomic and financial environment are reviving international interest in around 30 major development projects on the island, and with the government expecting a healthy 3% growth in 2017, the island’s FDI appeal is on an upward trajectory. Investment opportunities in Cyprus’ large-scale projects span various sectors, including housing and tourist developments, projects with a special focus on golf courses and luxury marinas, as well as education and energy.

Cyprus has retained and enhanced its longestablished reputation and international appeal as an attractive and stable investment destination. A series of growth reforms have either been implemented or are in the process, and more are expected to follow. Recent and upcoming measures include legislation enhancing transparency and compliance, the implementation of e-Government administration and the fasttrack mechanism for major investments. We are confident that the efforts undertaken will further boost investor interest and will consolidate Cyprus’ position as a dynamic business and investment destination. Constantinos Petrides Under Secretary to the President of Cyprus

Foreign Direct Investment

Ayia Napa Marina

Tourism Moving Upmarket

Achieving GDP growth of 2.8% and 9.1% increase in FDI in 2016, Cyprus has attracted foreign funds in various sectors, including tourism and large-scale projects, shipping, financial services, investment funds and ICT. Combining ease of doing business with a highly skilled, multilingual workforce, Cyprus has become the location of choice for regional headquarters of many multinational companies. By enhancing our competitive edge, we intend to reinforce Cyprus’ position as a regional centre of excellence. Natasa Pilides Director General - Invest Cyprus

Tourism has long been a driving force of the Cypriot economy, and arrivals as well as expenditure saw record-breaking numbers in 2016, with projections of international tourist arrivals reaching almost 4 million and generating expenditure of €3.5 billion by 2025. Cyprus has been attracting new interest thanks to its efforts to diversify its offering, by developing nautical, golf and wellness tourism and by extending the tourist season. The construction and investment in multipurpose projects 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 plan to upgrade Cyprus’ tourism product. The casino, awarded to a consortium including the globally renowned Melco and Hard Rock, will have extensive facilities and exceed five-star status. The investment for this mega project is expected to exceed €650 million – making it the first of its size in Europe.

Marina projects in particular have seen a surge of investor interest, following the success of Limassol Marina, and plans are in place to establish new luxury yacht marinas in the country’s major coastal towns of Larnaca, Paphos, and Ayia Napa. The construction of the €220 million luxury marina in Ayia Napa will feature twin skyscrapers and a yacht marina with a capacity for 600 vessels – with provisions for yachts up to 60 metres. With significant Egyptian investment backing the innovative project, the seafront residences are already being marketed to investors worldwide, with a price tag ranging between €500,000 and €5.2 million. Tourism-related real estate and infrastructure continues to be one of the most attractive investment opportunities in Cyprus, evidence of this is the number of foreign investors closing multi-million- euro deals in the last three years. These include the launch of a Radisson Blu Hotel in Larnaca and the €71 million deal on Amathus Beach Hotel in Limassol. More investment has flowed into Limassol with the new Parklane Luxury Collection Resort & Spa replacing the popular Le Meridien. The hotel is undergoing a major luxury renovation, designed by Harrods Design Studio and is estimated to cost €70 million. Also, Ayia Thekla in the Famagusta district has seen significant interest through a €50 million Chinese investment to construct a five-star resort hotel and exclusive beachfront residences, branded the Sun City Spa and Residences. Other major international deals were the acquisition of ‘The Alexander the Great Beach Hotel’ in Paphos and 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. Boost in Real Estate Sales

Property sales in Cyprus also marked a significant increase thanks to foreign buyers. Property purchases completed by overseas buyers increased 63% year-on-year in the first three quarters of 2016, with overseas buyers making up 14% of all real estate transactions. 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– a trend likely to continue throughout 2017. Sales in Larnaca have also been rising rapidly from a low base. Interest in real estate has partly been spurred on by the incentives offered in the country’s permanent residency and citizenship programmes, which require investment in property. According to some reports the schemes are said to have

Country Report CYPRUS 2017 39

Foreign Direct Investment

brought in over €3 billion in revenue over the past two years, with most enquiries coming from Russia and China. Recent studies conducted by global immigration experts rank the Cyprus Citizenship by Investment programme amongst the top ten worldwide, and one of the strongest in the EU. The programme was revised in September 2016, making it even more attractive. The investment required is €2 million and a residential property worth €500,000. If an investor chooses to invest only in residential properties in Cyprus, their investment is limited to €2 million. Investment options include real estate, investment in Cyprus companies, investments in Alternative Investment Funds and bonds issued under the auspices of the Cyprus Securities and Exchange Commission (CySEC), or a combination of the above. Evolving Oil and Gas Sector

Cyprus’ hydrocarbons find has captured the attention of several global energy companies, such as Eni, Kogas, ExxonMobil, Royal Dutch Shell, and Total, who have all secured exploration licences, with further drilling in Cypriot waters expected in 2017. US-company Noble Energy made the initial natural gas discovery in 2011, with estimated reserves of 4.54 trillion cubic feet (tcf) in just one of the 12 offshore blocks. Following deepening cooperation with Egypt, Israel, Jordan, Lebanon, Greece and Italy, Cyprus is positioning itself as a convenient regional energy hub in the Eastern Mediterranean, which also opens up opportunities for more oil and gas related business in joint operating agreements with existing consortia and commercialisation options. As a safe and stable location in a turbulent region, Cyprus also provides an ideal base for ancillary and support services for companies with operations in the region. As the energy landscape develops, another interesting prospect is the potential to develop a petrochemical industry on the island. Renewed Confidence in Banking

Following Cyprus’ financial adjustment programme, the first priority was to restructure the country’s banks – and in less than four years, the sector has been transformed with its largest banks fully recapitalised. Fresh cash injections and positive bank results restored confidence and the restructuring of the industry created opportunities for more foreign participation in the sector. The island’s two biggest lenders, Bank of Cyprus and Hellenic Bank, garnered significant international investor interest, including US billionaire venture capitalist Wilbur Ross. Further good news came from the Bank of Cyprus listing on the London Stock Exchange in January 2017. New York-based 40

Country Report CYPRUS 2017

hedge fund Third Point became a major shareholder in Hellenic Bank in 2013 and strengthened its position by purchasing €7.7 million worth of convertible bonds, with additional cash injections from international online gaming company Wargaming and European Bank for Reconstruction and Development (EBRD). The banking sector has also seen some newcomers such as Swedish Ancoria Bank with an initial capital of €50 million. In addition, strategic new investment into the sector has come 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 plans to inject €40 million of fresh capital into the bank, now renamed AstroBank. These developments have been a vote of confidence in the country’s banking sector – highlighting the attractive economic environment for investment in Cyprus. The sector is providing opportunities for new players to enter into the market and encouraging 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 as well as financing of large infrastructure projects.

2017 marks a new era for Cyprus. Exceeding international expectations, our economy is on a steady path towards growth. Numerous investment opportunities exist in a wide range of both traditional and emerging growth sectors, leading to a significant increase in FDI in 2016 – a trend we expect to continue also in 2017. Our goal is not just to achieve an inflow of foreign capital into the country’s economy, but rather to attract investments of substance, which will create jobs and boost business and investment activity. Christodoulos Angastiniotis Chairman Invest Cyprus

Shipping

The maritime industry has been one of Cyprus’ most successful export services. The island is considered one of the top global hubs for ship owning and shipmanagement services and is home to some of the world’s most influential names in shipping. Today, Cyprus is the largest third party ship management centre in Europe and the largest crew management centre in the world, while the island’s international ship register is the third largest in Europe and the 11th largest in the world. The growth of Cyprus’ resident shipping sector over the past 40 years has also meant the development of a strong maritime cluster that caters to the needs of Cyprus-based companies (including 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. Natural gas finds within Cyprus’ EEZ and efforts to exploit it in cooperation with neighbouring countries are also raising expectations for the island’s already flourishing shipping sector. Education & Research

Cyprus has ambitious plans to develop the island into a regional education centre and knowledge hub. The island has already attracted cooperation and synergies with international universities, most notably the University of Nicosia launching

Cyprus continued to attract more business in 2016, and I believe the energy, research & development and real estate sectors will assist the economy to grow even further this year. The naturalisation schemes and tax incentives have increased demand in properties, which was proven by the number of sales. Investing in a country is a matter of trust and confidence, and we continuously adapt to the needs of the investor, as well as remain focused on maintaining a competitive business environment. Andreas Christofides Managing Director KPMG Cyprus

Foreign Direct Investment

Cyprus is a modern, diverse and transparent business center offering a plethora of opportunities for investment across a wide range of sectors. It provides expert financial, legal, technical, and management services, along with a highly regulated environment. The country is experiencing a solid economic recovery with growth expected to reach 2.5% to 3%. We are confident the interest shown by foreign investors will be implemented in actual investments in 2017. Andreas Demetriades President - Association of Large Investment Projects

The rising demand witnessed by the property market and the stability, which now characterises the Cypriot economy, are both important factors which contribute to the rising value of property, resulting in a positive market outlook for 2017. M.M. Makronisos Marina Ltd is proud to be a part of this change and we are determined that the Ayia Napa Marina will further help transform Cyprus into a destination boasting investments of the highest standard. Stavros Caramondanis CEO M.M. Makronisos Marina

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. Since joining the EU in 2004, the number of foreign students studying in Cyprus has doubled and today 30% of students are foreigners – a figure which highlights the great opportunities that exist in Cyprus for the establishment of new universities, colleges and research institutes. Over the past six years, Cyprus has also harnessed nearly €80 million in EU funding for Cypriot-led research projects. In this regard, opportunities are 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. Cyprus has also launched a new Start-up Visa scheme, aiming to attract more international talent to establish ventures with high growth potential. Science & Technology

Plans to create Cyprus’ first-ever Science and Technology Park (STP) could provide strategic investors with an interesting opportunity to finance, design, build and manage a landmark project. The planned STP will create applied research and development centres, offices and support facilities tailored for science and technology companies, as well as promote business incubators to expand the range of opportunities for research and development investment. The tender notice was published in 2015 and has already garnered international interest. To further entice foreign investors, the project offers various incentives, such as tax breaks, greater flexibility in authorisation procedures and easier application process for residence and employment permits. In addition, investors will have tax breaks for expenditure on acquiring patents or copyrights, buying shares in innovative businesses and start-ups, and additional breaks for the cost of buying fixed assets to be used in innovative operations. Privatisations

Cyprus’ efforts to privatise several state-owned entities present a new opportunity in terms of FDI. A recent success was the commercialisation of the country’s largest port in Limassol, which attracted 14 international bids. It marks a new era for Cyprus as a commercial hub and will prove a major asset for the economy. The successful bidders were Eurogate International GmbH, as the majority participant, along with Interorient Navigation Company Ltd and East Med Holdings SA for the container Terminal, and DP World Limited, as

the majority participant, and G.A.P Vassilopoulos Ltd for both the marine services and the multipurpose terminal. The deal is expected to boost state coffers with €2 billion over the next 25 years, while the new port operators are expected to invest over €100 million in infrastructure. Other targets for privatisation are the dominant telecommunications provider Cyprus Telecommunications Authority (Cyta) and the State Lottery. Expanding Opportunities

Having endured a challenging economic climate, Cyprus is back on the fast track in reclaiming its title as an economic outperformer. To enhance investor interest, the government is making staunch efforts to improve its FDI framework and has vowed to cut through red tape to better facilitate investment. These efforts are beginning to bear fruit, and Cyprus has seen an increase in both bank deposits and in the registration of new companies setting up on the island. Cyprus’ open economy 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. More recently, the investment funds sector has seen more traction and could develop into a multi-billion-euro industry, with funds under management already tripling in the last five years and exceeding €3 billion. A Solid Future

Cyprus’ liberalised Foreign Direct Investment Policy, both for EU citizens and investors from third countries, along with its favourable tax regime makes it one of the most attractive centres for FDI 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 60 countries has strengthened its position as a business gateway as well as a preferred location for corporate head offices for multinational companies from around the world – using the island as a regional base for centralised services. The restructuring of Cyprus’ economy is presenting many opportunities and advantages for serious investors who can move in early. First-in investors can reap the benefits of the efforts made by a pro-business government determined to succeed in regaining the growth of previous years. More work remains to be done, but the remarkable progress made so far, the attractive incentives, as well as the ever-expanding opportunities emerging in the wake of the reforms have certainly been recognised by foreign investors. n

Country Report CYPRUS 2017 41

Foreign Direct Investment

insights

FDI

Country Report CYPRUS 2017

Foreign Direct Investment

Country Report CYPRUS 2017 43

Headquartering

HQ with a View Cyprus is increasingly ranked on the shortlist of decision makers when it comes to choosing the right location to establish international and regional headquarters, thanks to its rapidly growing economy and cost-effective business environment.

Country Report CYPRUS 2017

Headquartering

rowing demands from global regulation are making it increasingly crucial for companies to establish transparency, substance and a physical presence. This trend has also enhanced Cyprus’ appeal as an efficient management and corporate location, where substance is easily created. With a strong pro-business attitude, operational costs substantially lower than in mainland Europe and tax breaks for expat executives, Cyprus offers a conducive business environment providing access to the EU’s market of over 500 million people, as well as a secure base to tap into the evolving markets of the Middle East and Africa. Gateway to Growth Markets

The geostrategic position of Cyprus in the Eastern Mediterranean has long played a pivotal role in influencing the country’s destiny and prosperity, and has led to close cultural and business relationships with countries in the region. A former British colony, Cyprus has a longstanding relationship with the UK, enjoying close business ties as well as a comprehensive, modern and forward-looking legal and regulatory framework based on English Common Law principles. And with Brexit on the horizon, Cyprus may discover further advantages by attracting companies that wish to continue operating in an EU jurisdiction with a familiar UK legal framework. Country Report CYPRUS 2017 45

Headquartering

Cyprus’ entry into the EU in 2004, and the eurozone in 2008, was welcomed by the international business community, who saw it as a new opportunity for foreign companies to use Cyprus as a convenient entry point into the European marketplace through EU passporting rights. Multinationals from a range of different sectors have already chosen Cyprus as the location for their regional headquarters. Giants such as Weatherford, AFP, NCR, BS Shipmanagement, Kardex, Wargaming and AMDOCS are just some of the corporations that have based operational or corporate management functions on the island. Cyprus is also one of the most influential global hubs for ship owning and shipmanagement services. Thanks to its advantageous legislative framework, the island has attracted some of the world’s most influential names in shipping for more than 50 years. Today, Cyprus is the largest third party ship management centre in Europe and the largest crew management centre in the world, while the island’s international ship register is the third largest in Europe and the 11th largest in the world. With around 130 shipping companies based in Cyprus, the success of the sector has also developed clusters and auxiliary services, which is a model that could be successfully replicated in other sectors, such as the budding oil and gas sector. New legislation and operating licenses issued by the Cyprus Securities and Exchange Commission (CySEC) for CIFs, forex and binary companies have thus far proven highly advantageous to Cyprus, enabling the island to attract new business, create more jobs, attract talent and boost the economy.

Corporate EU Location

Cyprus offers a strategic location, a competitive and EU-approved tax environment, a 12.5% corporate tax rate, an educated English-speaking labour force, excellent telecommunications, modern banking and legal infrastructure, and a high quality of life – all of which make it an ideal international management centre and springboard into neighbouring markets. Foreign companies already based in Cyprus comment favourably on their experiences with local employees in terms of productivity and dependability. Doing business in and from Cyprus is easy and straightforward. Home to a major international business and financial services sector, the country is an ideal base for region-wide corporate coordination and central management functions, sales, marketing and customer service. As a probusiness, neutral, cost-effective and politically stable country, Cyprus offers companies a perfect climate to successfully compete in the region. A fiscally efficient tax structure leads the way and is complemented by double tax treaties with 60 countries, facilitating international business and ensuring a smooth trading environment.

In recent years, Cyprus has seen an increase in expat executives from Europe and beyond, relocating to the island for personal and business purposes. The country’s attractive residency and citizenship schemes, EU membership, tax benefits and lifestyle advantages have made it an ideal location from which to access the EU’s market of 500 million and take advantage of interesting investment opportunities in Cyprus. Leandros Papaphilippou Managing Partner L. Papaphilippou & Co LLC

All the Right Connections

In addition to its geographical proximity to major markets, Cyprus also scores high on connectivity. The country is connected by air through its two international airports with major cities in Europe and key destinations in Asia, North Africa and the Middle East. In the last two years, connectivity has

Cyprus is developing as a headquartering centre, a funds jurisdiction and family office base. Services such as wealth management and funds administration are great examples of how Cyprus can serve businesses and individuals, who seek comprehensive solutions for their specific needs. The excellent living conditions, the Cyprus Non-Dom’s and citizenship programmes, the common law framework and our efficient tax environment, make Cyprus an ideal home for high-net-wealth individuals, executives and their families, as well as businesses with regional operations. Evgenios C Evgeniou CEO PwC Cyprus

The Oval

Country Report CYPRUS 2017

Headquartering

Limassol Marina

Non-Doms and High Earners Cyprus has introduced attractive incentives for expatriates and high-networth individuals to adopt non-domiciled (non-dom) tax resident status in Cyprus. Under the non-dom rules, Cyprus tax resident individuals who are not domiciled in Cyprus are completely exempt from Special Contribution for Defence (SDC) on dividends, interest and rental income. The total tax exemption makes the holding of investments in dividends and/or interest earning financial assets, including shares and bonds, in Cyprus and anywhere in the world extremely attractive for non-Cyprus domiciled individuals. The maximum income tax rate on personal income in Cyprus is 35% for income in excess of €60,000. With the recent incentive, 50% of remuneration from any employment exercised in Cyprus by a non-Cyprus resident is exempted for a period of ten years provided the annual income exceeds €100,000. Other tax breaks are available for those earning between €60,000 and €100,000

seen further improvement with new airlines adding Cyprus to their schedules and existing airlines increasing the frequencies of their flights. Thanks to its location, Cyprus enjoys business-friendly time zones, enabling international companies to do business with the East in the morning, Europe throughout the day and with the West in the afternoon. The country also has long-established links with Eastern European countries with many Cypriot professionals having in-depth knowledge of these markets, and often acting as key business introducers.

For companies needing proximity to ministries and government departments, the capital Nicosia is also expanding its stock of state-of-theart offices. For jet-setters, Larnaca – located on the sea and adjacent to the airport – might be the right choice. Cyprus caters for companies of all sizes and smaller organisations or those new to Cyprus, can easily find companies offering serviced office rental on a short-let or permanent basis. Regus, with offices across the world, has locations in both Limassol and Nicosia, and has been joined by numerous local companies offering turn-key spaces.

Cosmopolitan Lifestyle

The Pull Factor

The influx of new companies setting up in Cyprus, on average 1,000 each month, has spurred the development of new luxury multi-use office complexes in Limassol and Nicosia. Over the years, the coastal city of Limassol has steadily grown to become the main international business hub, while the inland capital city Nicosia attracts multinationals that require closer access to government. The majority of international companies choose Limassol, due to the cosmopolitan seaside lifestyle, the large expat community and the short distance to both Larnaca and Paphos international airports. New commercial buildings like ‘The Oval’ have raised the bar for prestigious commercial addresses in Cyprus. The tallest office building in Limassol offers large open air balconies and uninterrupted views across the Mediterranean – an enviable working environment for mixing business with pleasure. A number of other mixed-use landmark buildings are springing up across the city offering residential, commercial and retail space and are changing the skyline of Limassol, offering stunning views and rooftop bars.

Cyprus has established itself as a magnet for foreign-owned companies and is continuously improving its competitive position. A stable business environment and excellent quality of life are just a couple of the many reasons why companies relocate senior decision makers to perform strategic functions from Cyprus. In the long term, the country has great prospects to benefit from growth in the region and become an increasingly popular choice as a location for international and regional headquarters. Boasting the lowest crime rate in the EU, a superb Mediterranean climate, competitive personal tax rates, as well as excellent educational and healthcare systems, Cyprus is an easy sell for expats and in particular to those with families. Professional, but without a hint of the rat race, makes business both pleasurable and profitable – establishing Cyprus as an ideal location to finally achieve the ever-elusive work-life balance. n

Discover more at

www.cyprusprofile.com

Country Report CYPRUS 2017 47

Interview - Minister of Energy, Commerce, Industry and Tourism

Interview Minister of Energy, Commerce, Industry and Tourism Yiorgos Lakkotrypis

Building a Better Future

With a boost in hydrocarbon exploration, new foreign investment pouring into large infrastructure projects and tourism numbers at an all-time high, Cyprus is poised for sustainable growth, according to Minister Lakkotrypis.

What important goals and reforms have been achieved in 2016, and what are your key priorities for 2017? Our Ministry covers a number of important sectors and we have a set of key priorities for 2017. With regard to tourism, we aim to maintain the increased growth accumulated over the past two years, both in terms of arrivals and revenue. For 2016, our all-time record year, tourist arrivals increased by 20%, whilst revenue up to and including October rose by 13%. We also want to promote the large infrastructure projects that we have embarked on, especially the integrated casino resort, which is expected to begin construction in 2017, following a successful licensing procedure that attracted an ambitious proposal by the consortium of Hard Rock, Melco and local CNS Group. Other major projects are the Ayia Napa Marina, which began construction in 2016, as well as the Marinas of Paphos and Paralimni, whose tender procedures are at an advanced stage. In addition, we are very pleased to have received interest from strategic investors through the international tender procedure for the development of the Science and Technology Park (STP) in the Pentakomo area, which will undoubtedly be instrumental 48

Country Report CYPRUS 2017

Interview - Minister of Energy, Commerce, Industry and Tourism

in our efforts to promote innovation and entrepreneurship in Cyprus. Commerce is another sector crucial to our economy. To enhance Cyprus’ status as a major trading hub in the Mediterranean, we are now hard at work to build on the positive momentum we have achieved over the past two years, in terms of exports of services and products, especially those of processed agricultural products. We are actively targeting key markets such as the Middle East, Central and Eastern Europe, the USA, Canada, China and India. Moreover, we are moving forward with the completion of the necessary structural reforms currently underway at the Registrar of Companies and we will be putting out a tender for a turnkey ICT solution to create a more efficient Registrar. Cyprus has potentially significant deposits of natural gas in its Exclusive Economic Zone (EEZ), what is the current strategy for exploiting the reserves and developing an oil and gas industry on the island?

For 2016, our all-time record year, tourist arrivals increased by 20%, whilst revenue up to and including October rose by 13%.

Despite the many challenges faced today by the global oil and gas industry, the Republic of Cyprus remains committed to implementing our strategy of exporting Cypriot gas regionally, which will also enable us to bring it to our shores for electricity production and other uses. An important step towards this end has been the successful farm-in of BG International, later acquired by Shell, with a 35% interest in Block 12 of Cyprus’ EEZ – the other consortium partners are Noble International and Delek Group. Block 12 includes the ‘Aphrodite’ natural gas discovery and this development constitutes an alignment of upstream and midstream interests, as Shell is a company with substantial technical, financial and marketing capacity. In parallel, work is currently being done with regard to finalising the ‘Aphrodite’ field’s development and production plan, the conclusion of the necessary bilateral agreements with Egypt, as well as the various technical studies. In 2017, we also plan on expanding the list of licensees in our EEZ, which at present includes, apart from the Block 12 consortium, Total in Block 11 and the consortium of ENI and KOGAS in Blocks 2, 3 and 9. Specifically, during the first quarter of 2017, the negotiation process of the third licensing round for offshore exploration will be completed, whereby new exploration licenses will be awarded for Blocks 6, 8 and 10. In total, six applications have been submitted by eight companies or consortia, which include ExxonMobil, Qatar Petroleum, Statoil, Eni, Total, Capricorn Oil, Delek Drilling and Avner Exploration. Cyprus has forged many alliances regionally and with major energy companies. Could you outline what kind of international

cooperation has been agreed on, and how do you see these relationships being developed over the next few years? It is becoming increasingly obvious that a new source and potential route of supply is just at the backyard of Europe, here in the Eastern Mediterranean, where around 2,000 bcm of natural gas have already been discovered. Part of those gas reserves is, of course, located in our EEZ and we are convinced that there are still much more to be discovered. Especially following the 2015 discovery of the giant ‘Zohr’ gas field in offshore Egypt, the interest of oil and gas majors in our region has been significant. For Cyprus, 2017 signals the second wave of exploration activities in our EEZ, both by existing and potential new licensees and aiming at more discoveries of natural gas in the near future. Our vision is to develop a new gas route, the East Med Corridor, which will comprise of different infrastructures to export our region’s gas. Based on our country’s geography and many advantages, Cyprus is well positioned to have a central role in the regional energy developments and stands ready to help in facilitating the necessary synergies, joint projects and investments, by making use of the concrete partnerships it has developed with the countries in our region, including Lebanon, Israel, Egypt, Jordan and Greece. What additional investment potential is there in the energy sector of Cyprus? Besides the obvious multi-billion investments relating to gas exploration and exploitation, the finalisation of the master plan of the Energy Centre at Vasilikos area, has also initiated a new era with regard to the development of new energy infrastructure on the island. This includes, amongst others, plans for the future construction of an LNG Plant, as well as the ongoing relocation of the oil and gas reserves infrastructure, which has historically been located in the Larnaca area. What effort is Cyprus making in introducing more renewable energy infrastructure and how is it planning to meet its 2020 energy-savings target? What scope for foreign investment do you see in this area? Cyprus, having achieved around 9.6% of gross final energy consumption by the end of 2015, has already exceeded its intermediate 2015-2016 targets, which were set at 7.45%. To get to our 2020 target of 13%, we are now seeing increased development of renewables in terms of solar energy parks, but more importantly, we are encouraging individuals and businesses to generate their own power through distributed photovoltaic systems. This is a trend we Country Report CYPRUS 2017 49

Interview - Minister of Energy, Commerce, Industry and Tourism

expect will follow an accelerated growth rate with the maturing of energy storage technologies, and to this end we are also working to deploy in Cyprus a full smart meter roll-out. In any case, as we move forward with the introduction of competition in the electricity market in two stages, starting from this year, we anticipate significant investment opportunities for large Renewable Energy Sources (RES) projects. Large-scale RES projects that have been already licensed and are expected to be developed in the following years include photovoltaic parks with a total capacity of 30MW, awarded through a competitive bidding process under a Fit-in-Tariff scheme, as well as two concentrated solar power stations (CSP), with capacity 50MW each.

2017 signals the second wave of exploration activities in our EEZ, both by existing and potential new licensees and aiming at more discoveries of natural gas

Tourism has seen record-breaking numbers over the last two years. How will you keep this momentum going and what areas are showing the best investment potential? The numbers of arrivals to Cyprus were stalled for many years, vis-à-vis international growth trends, primarily because more markets were coming in with the ‘sun and sea’ concept and it became increasingly harder to differentiate our tourism offering. This is why over the past three years we have embarked on an agenda to diversify our offering by promoting special interest tourism, lengthening the tourist season to attract more visitors in winter months, and introducing large tourism infrastructure projects. A highlight will be the integrated casino resort, with the estimated investment for this mega project expected to exceed €650 million. It will be a unique resort in both Europe and in the region, as it will also include rich entertainment and MICE (Meetings, Incentives, Conferences, and Events) facilities. We will also continue developing nautical tourism with our new marina developments, as well as golf tourism with the operation of additional courses. Significant investment potential exists in upgrading both the quantity and the quality of our existing hotel stock. Overall, our top priority is sustaining the increases in numbers we have accumulated over the last two years, of 30% in tourist arrivals and an estimated 18% in revenues. The professional services sector is a key driver of the economy, how is this sector performing and what is the country’s strategy in promoting its expertise internationally? Cyprus has a widely acknowledged reputation of offering value-for-money services of the highest standard in the accountancy, legal and financial fields. Therefore, promoting the services sector is another top priority for us, as we continue to work

Country Report CYPRUS 2017

for the expansion of Cyprus’ network of double tax treaties with other countries, as well as for the implementation of important structural reforms, for example, in the Department of the Registrar of Companies. We continually monitor and look for ways to make the business environment more attractive and efficient, and actively utilise all available mechanisms to promote our country’s expertise and many advantages overseas, including the competent Cyprus investment promotion agency, Invest Cyprus. What other key investment opportunities do you see in Cyprus at the moment? We expect to see more investment in the oil and gas industry, as despite the momentum we have been gaining, the sector is still in a stage of infancy. Cyprus is a strong operating base for companies with activities in the Eastern Mediterranean and we have put in place a transparent and solid legal framework, aligned with EU directives – be it in the up, mid or downstream. Moreover, Cyprus also offers a beneficial base for auxiliary services to this industry and we have already seen much interest from international companies in setting up here. Our island could also become a significant fuel hub in the region, evidence of which is the successful operation of the sophisticated oil storage terminal at the Vasilikos area by Netherlands-based global oil terminal company VTTI. Obviously, in this regard and for trade in general, the widening and deepening of the Suez Canal will increase the traffic in our region and could bring more opportunities to Cyprus. Finally, in conjunction with other major tourism infrastructure projects, we are encouraging the creation of new hotels of all categories. Another important area where we would like to see more investment is in technology, research and innovation projects. How do you see Cyprus developing in the next two years and what message would you like to relay to the international community? Cyprus has managed to complete the adjustment programme in record time, already reporting significant growth rates. We are determined to keep making prudent fiscal decisions, whilst at the same time strengthening our growth potential and further improving our investment framework. We have worked hard during the last three years to ensure that our country’s reputation and comparative advantages not only remain intact, but are also enhanced significantly. The international community is most welcomed and can expect our assistance in exploring available prospects and to take full advantage of the many opportunities offered in all sectors of our economy. n

INTERNATIONAL TRADE

Exports on the Rise Cyprus’ star performers, pharmaceuticals and halloumi, are about to gain a runner-up in mineral fuels exports, which have leapt to a prominent third place in the ranks of the country’s top exports.

trategically situated at the crossroads of three continents, Cyprus is the EU’s key trading hub in the Eastern Mediterranean, providing a point of exchange between Europe, Africa and Asia. This unique location coupled with its advanced transport infrastructure, has seen the island become not only a significant domestic exporter, but also an emerging regional trading hub and transhipment centre, with the combined 2015 total export figures (domestic and re-exports) reaching around €1.74 billion and seeing a 20% rise from 2014. The limited growth potential of the country’s small domestic market means that Cypriot manufacturers have always prized their relationships with their international export partners, and trade has played a crucial role in the development of the economy. Traditionally, around 59% of Cyprus’ trade in goods is with the European Union, with its main export partners being Greece, the United Kingdom, Germany and Italy. For the period January-November 2016, total exports accounted for €1.57 million, 40% of which consisted of exports to EU member states. Exports to Middle Eastern countries came a strong second at €241.9 million. During 2015, total exports accounted for €1.74 million, of which 48% consisted of domestic exports and 52% of re-exports. 52

Country Report CYPRUS 2017

High-End Manufacturing

At 69%, industrial products of manufacturing origin make up the largest share of the country’s total exports, and the largest revenue generator by far within this category are pharmaceutical products – accounting for 49%. Other products include cement at 14%, scrap paper and metal at 7%, and telecommunications equipment at 5%. The high proportion of small-to-medium-sized (SME) manufacturing enterprises means that companies have the flexibility both to respond quickly to changes in customer requirements and to adopt new production techniques. The highly educated Cypriot labour force – the island’s trump card – means that new technical skills can be rapidly assimilated, facilitating fast turnaround times. The adoption of modern technologies has also brought with it quality improvements and longer product shelf-life, while the recent application of more targeted marketing techniques is opening up new customer bases. These factors all contribute to making Cyprus a highly attractive location for international companies seeking to use the island for both production and export purposes.

International Trade

Cyprus Trade Centres Athens, Greece Beirut, Lebanon Berlin, Germany Dubai, United Arab Emirates London, United Kingdom Moscow, Russia New York, United States Paris, France Vienna, Austria Warsaw, Poland Beijing, China Tel Aviv, Israel

A History in Trade Overseas trade and commerce is not just a vital element of the island’s economy, it is practically written into the Cypriot DNA. Deriving its name from the Greek word for copper – once one of the most traded and valuable metals in the world – Cyprus, or Kypros, was an important source of copper and copper products which were exported throughout the region for centuries. While copper mining in Cyprus has become a niche activity nowadays, the importance of trade to the country’s economy has not diminished.

A growing area of export is in mineral fuels and oils, which jumped from zero in 2014 to €98 million in 2015, following the opening of the VTTV oil terminal in Vasilikos in late 2014. The company uses Cyprus as a terminal, blending its raw material and then exporting it to the rest of the world, but mainly to Lebanon (€28.8 million) and Israel (€16.6 million). Cyprus’ strategic location makes it the first terminal of its kind in the Eastern Mediterranean, connecting Europe and the Black Sea with markets in the Middle East and Asia. As a percentage of Cyprus’ GDP, petroleum is only worth 1%, but the industry has tremendous growth prospects with the country’s determination to establish itself as a key energy hub and a bastion of stability and security in the region. Quality Agri-Business

Cyprus’ agriculture sector has been gaining momentum, by offering the international market an ever-expanding range of quintessentially Mediterranean fruits and vegetables. Today, there are more than 30 fresh-produce exporters in Cyprus, the majority of which are also agricultural producers – providing a continuity which helps maintain high standards and effective quality control at every stage of the process. Since EU accession in 2004, both primary and secondary exports have had to comply with stringent European phytosanitary standards and quality thresholds. Agricultural products are an important component of the economy, accounting for some 30% of domestic exports. Potatoes are by far the island’s most important raw export crop, making up 40% of the total raw agricultural products. They are grown in the south-eastern coastal region, which has a mineral rich, red soil and enjoys mild weather, enabling three crops to be grown in the space of a year. The spring harvest is the most important for export purposes, and the different varieties of potatoes are used for direct domestic consumption as well as for the production of crisps. Other fresh produce includes citrus fruit, grapes, melons, vegetables and aromatic herbs, while a number of agrifood products are making headway in the international market, including fruit and vegetable juices, and meat and fish products. Aquaculture products are the third most important produce in Cyprus, in terms of export value. Specifically, these products are sea bass and sea bream and approximately 65% of the total national production is exported to markets in Middle Eastern countries and the USA. The aquaculture sector represents about 75-80% both in terms of volume and value of the total national fisheries production, and the total national aquaculture value for 2015 reached €39.2 million.

Honing the Halloumi Brand

Cyprus’ famous halloumi cheese – made from a blend of goat, sheep and cow’s milk – is perhaps the most internationally renowned of the island’s exports. Distributed to upmarket supermarket chains worldwide, it has unsurprisingly become a runaway success and recently became the second largest export for Cyprus. The name ‘halloumi’ is now registered in the European Union as a Community Collective Trade Mark, meaning that no other product can be marketed within EU borders under this name. It is also registered as a Certification Trade Mark in the UK, US and Jordan, and will soon be registered in other Middle Eastern countries too. The renowned cheese will also be registered as an EU Protected Designation of Origin (PDO), which is set to boost the product and its brand appeal, as well as increase dairy production.

A Tradition of Viticulture

Cypriots know a thing or two about wine – they’ve been in the business since antiquity and boast some of the oldest grape varieties in the world. Recent archaeological excavations revealed that wine was being produced on the island – and probably exported elsewhere in the Mediterranean – as long ago as 4,000BC. The wine industry has seen much development over the last few decades, with vineyards upgrading and hiring talent to perfect their products to meet consumer demand and better compete in this tough sector. After some difficult years, when the small scale of its production base made it difficult to penetrate big overseas markets, the Cypriot wine industry has now successfully repositioned itself in response to international market trends. Today more than 40 small, regional wineries situated in the hillside villages of the grapegrowing regions, produce a variety of characterful wines, many of which are blended with established foreign varieties of grape. The island’s four big wineries – ETKO, KEO, SODAP and LOEL – have also adapted, replanting their vineyards with new international varieties and rediscovering old indigenous ones. Cyprus is now increasingly recognised as an exporter of smaller quantities of a high-quality product for the discerning consumer. Country Report CYPRUS 2017 53

International Trade

A Variety of Classifications

A Partner of Choice

Accession to the EU in 2004, necessitated new legislation to classify the wines produced on the island. Four different wine regions have been designated as producing their own unique wines with controlled appellations of origin. In each case, different proportions of indigenous Cypriot red grapes such as Maratheftiko, Ofthalmo or Mavro, or the white grape Xynisteri, are blended with smaller quantities of specified foreign varieties such as Cabernet Sauvignon, Cabernet Franc, Syrah or Merlot.

The country’s Ministry of Energy, Commerce, Industry and Tourism cooperates closely with the CCCI and the Employers and Industrialists Federation (OEB) in targeting countries considered to have strong potential as export markets. Efforts by the government and the private sector to open new and previously untapped trade markets are also beginning to pay off. Cyprus and China recently initiated a joint protocol for the export of Cypriot dairy products. It established public health and an animal welfare standard in relation to Cypriot milk products – soon to be exported to China – and is likely to spearhead an increase in the export of other Cypriot food products to the People’s Republic of China. Cyprus-based exporters may also be about to benefit from the selective easing by Russia of its embargo on EU imports. Indications are that Moscow is considering a relaxation on trade restrictions for products exported by Cyprus, Hungary and Greece. The Kremlin originally imposed the ban in response to the EU’s imposition of trade sanctions, following Russian action in Ukraine, thereby denying many European food manufacturers access to the vast Russian market. The total volume of Cypriot exports originally affected by the embargo was around €13.5 million, including an estimated €10.7 million of citrus products, along with vegetables, dairy products, fish and fruit.

Exporting the Cypriot Services Sector

The competitive and varied Cypriot services sector is one of the island’s greatest strengths. It ranges from travel and tourism to legal, accounting and business support services, from banking and insurance, to shipping and shipmanagement, from education and healthcare to information technology and software development. The government views the development of this sector, and of the island’s growth potential as an international business centre, as a strategic priority. To this end, the Chamber of Commerce and Industry (CCCI) regularly organises seminars to promote selected elements of the Cypriot services sector to targeted markets. A 21st Century Trading Hub

Transhipment centre

Cyprus’ logistics providers offer a full range of regular and customised services to support the import and export of goods by both Cypriot and foreign companies to and from the EU, as well as internationally. Cypriot exports are further supported by an excellent transport infrastructure. The island is served by over 100 shipping lines, connecting it to all key ports and destinations worldwide. In addition, two international airports guarantee the fast and efficient transport of goods, ensuring Cyprus remains one of the most attractive bases for logistics companies in the region. In addition, Cyprus’ status as a European and regional support hub for firms doing business in the region means that companies can take full advantage of its services, which include warehousing, headquartering, high-tech repair and servicing centres, along with software development and testing facilities. Cyprus-based enterprises also benefit from numerous government-sponsored incentive schemes, including the creation of industrial parks and free industrial zones, designed to encourage the diversification and expansion of manufactured exports.

Cyprus has rapidly established itself as major transhipment centre and is increasingly important to manufacturers seeking to build up European, Middle Eastern and North African export activities. It re-exported €907 million worth of goods in 2015, a jump of 27% on the previous year, primarily to Ireland, Greece, the UK and Egypt. The creation of free-trade zones, exempt from EU tariffs and customs legislation, at the ports of Larnaca and Limassol has undoubtedly contributed to convincing overseas businesses to view the country as a significant transhipment centre. Also, the recent commercialisation of Limassol Port, with major investment into upgrades and efficiency has bolstered the future prospects of Cyprus as a major trading hub. The island’s healthy economic growth – expected to reach around 3% in 2017 – and its unique position along key Mediterranean trade routes, is strengthening Cyprus’ reputation as an enticing location and provider of noteworthy competitive advantages for companies to export their products to international markets. n

Discover more at

Country Report CYPRUS 2017

www.cyprusprofile.com

Cyprus has always been export oriented and trade has traditionally been done with European Union countries. Despite the economic crisis in the last few years, during January-November 2016 domestic exports of goods increased by 4% and, by 12% including petroleum products that were imported, processed by means of blending and exported as domestic goods. The countries that make up of the top five export destinations for Cypriot products have changed in the last two years due to the increased petroleum imports that were processed in Cyprus. In JanNov, 2016 our main export partners were Libya, UK, Israel, Greece and China. Exports of services increased by 2.4% in 2015 in relation to 2014 and by 7.3% during Jan-Sept 2016. In 2015 our main services export destinations were the UK, Russia, Germany, Denmark and USA. Nelly Koulia Director of Trade Service Ministry of Energy, Commerce, Industry and Tourism

Taste of Cyprus

Trade Service Ministry of Energy, Commerce, Industry and Tourism 1421 Nicosia, Cyprus T: +357 22 867 123 • F: +357 22 375 120 E: ts@mcit.gov.cy • W: www.mcit.gov.cy/ts

Interview - Minister of Transport, Communications and Works

Interview Minister of Transport, Communications and Works Marios Demetriades

Connecting

Cyprus with the World

Port and marina development, as well as strengthening shipping activities and air connectivity through incentives are key goals for Cyprus in 2017, says Minister Demetriades. 56

Country Report CYPRUS 2017

Interview - Minister of Transport, Communications and Works

The redevelopment of the Larnaca Port and Marina poses excellent investment opportunities, combining port commercial and passenger activities, with leisure, tourism and real estate development.

What important goals were achieved in 2016? A key goal, completed in 2016, was the commercialisation of Limassol Port. It marked a new era for the port and for Cyprus as a commercial hub, and will be a major asset for our economy in the years to come. The successful bidders were Eurogate International GmbH, as the majority participant, along with Interorient Navigation Company Ltd and East Med Holdings SA for the container Terminal; and DP World Limited, as the majority participant, and G.A.P Vassilopoulos Ltd for both the marine services and the multipurpose terminal. Regarding the telecommunication and satellite communications sectors, we signed a European Cooperation Stage Agreement in July 2016, to cooperate with the European Space Agency (ESA). The overall objective is to associate Cyprus with ESA programmes and activities, and to prepare us for possible future accession to the ESA Convention. As for marine works, we proceeded with the construction of several breakwaters to protect our beaches, and also have a number of other projects, of a total value of â&#x201A;Ź115 million, currently in progress. The Department of Merchant Shipping, in cooperation with the Ministry and the private sector, has begun to implement measures to develop a holistic strategic plan for our shipping industry. Also during 2016, draft legislation was prepared to create a new company called Cyprus Air Navigation Services. The company, expected to begin operations in 2017, will provide a high level of air navigation services for the country. Country Report CYPRUS 2017 57

Interview - Minister of Transport, Communications and Works

What are the key priorities for your ministry for 2017? One of our main priorities for this year is the improvement of the Larnaca Port and Marina. Our aim is to transform the existing port into a functional harbour, which will be in a position to host large cruise ships and yachts. The invitation for expressions of interest was publicised in November 2016 and we look forward to the completion of the selection process before the end of 2017. The redevelopment of the Larnaca Port and Marina poses excellent investment opportunities, combining port commercial and passenger activities, with leisure, tourism and real estate development. The addition of new air routes to and from Cyprus is another key priority for the Ministry of Transport. Under the new strategy to enhance connectivity, we will promote a number of actions that include the modification and improvement of existing aviation agreements and the conclusion of new agreements with Lebanon, Saudi Arabia, Australia and other countries. During the last three years, we have witnessed large growth in tourism, and more developments in the oil and gas industry on the island. We expect these two sectors to create more opportunities for investment, including the use of local infrastructure for supporting regional needs. How would you describe the infrastructure of Cyprus and what is your ministry’s medium and long term strategy? Over the last decades, we have focused on developing a well-functioning and efficient transport and communications infrastructure. The high level of infrastructure in Cyprus is reflected by international reviews like the Global Competitiveness Report 2016–2017 of the World Economic Forum, which ranked Cyprus 54th among 138 countries in Overall Infrastructure Quality. In the special category of Roads Quality, Cyprus is ranked 34th among 138 countries. Our primary vision is to establish Cyprus as a regional centre, providing modern and efficient infrastructure and services. In this respect, we intend to further develop the national transport and communications infrastructure as a prerequisite to convert Cyprus into a regional centre of excellence in both business development and service provision. We are focused on promoting a digital economy, sustaining Cyprus as an international shipping centre and further developing the island as a naval freight transhipment centre in the eastern Mediterranean region.

Country Report CYPRUS 2017

Connectivity is a crucial element in facilitating both international business and tourism. How is Cyprus looking to enhance transport and air links with more countries globally? As an island, a tourist destination and a business centre, Cyprus depends heavily on air connectivity. We maintain a firm policy of open skies, and aim to continue liberalising Air Service Agreements and MOUs that Cyprus has signed with third countries, through ongoing bilateral negotiations. The goal is, wherever possible, to lift any restrictions in terms of the number of designated airlines, frequencies, types of aircraft operated, cargo flights and the operation of charter flights. Cyprus is also willing to offer, on reciprocal basis, 5th freedom traffic rights between third countries and European destinations via Cyprus. The air transport sector within the EU is already fully liberalised and flights between Cyprus and EU countries operate without any restrictions. In addition, the Government, in cooperation with Hermes Airports, has introduced a number of attractive incentive schemes available to all airlines, which reward air carriers for growth, operation on new routes or year-round operations. The Department of Civil Aviation is currently examining applications for Air Operators’ Certificates (AOC) of new, locally registered airlines that can enhance Cyprus’ connectivity even further, provided they fulfil all the regulatory requirements and acquire a commercial license. Two such airlines have already been approved and have commenced operations, whilst two more applications are under examination. Additionally, three air carriers with a European Union license have established here as their operational base. Shipping makes a significant contribution to the economy, how can this sector be further developed to attract more business and regional shipping headquarters to Cyprus? Shipping currently contributes, directly and indirectly, around 7% to our GDP. Cyprus is a fully fledged maritime centre, combining both a sovereign flag and a resident shipping industry, which is renowned for its high quality services and standards of safety. Cyprus shipping offers a wide range of fiscal and economic incentives, including competitive ship registration costs and annual tonnage taxes, ensuring the fleet’s worldwide competitiveness. We strongly believe that this can be further enhanced, which is why we introduced a number of additional horizontal incentives to attract more

We are focused on promoting a digital economy, sustaining Cyprus as an international shipping centre and further developing the island as a naval freight transhipment centre in the eastern Mediterranean region.

Interview - Minister of Transport, Communications and Works

companies to the island. We also intend to introduce a number of measures to improve service to our clients and become more aggressive in promoting the shipping sector worldwide. The successful commercialisation of Limassol Port has been a strong indication of the renewed dynamism of the Cyprus economy, and will not only be a source of revenue, but upgrade Cyprus’ role in the SouthEastern Mediterranean as an important regional centre of maritime commerce.

cable and DSL operators has resulted in offering high-speed broadband access services throughout the island. Our mobile operators offer high speed 3G and 4G broadband mobile access technology and are constantly updating and evolving their networks investing in new technologies.

What role can public-private partnerships (PPPs) play in Cyprus’ infrastructure development?

Public buildings are undergoing energy efficiency upgrades and renovations at a rate of 3% of total area per year, in order to reduce their energy consumption and carbon dioxide footprint. We also introduced soft measures to increase energy efficiency by training and educating public officers, installing smart meters and office automation systems. We have implemented green public procurement in all of our tenders in order to purchase high efficient equipment with less energy consumption and emissions. A good example of this is the recent public procurement for energy performance contracting to install LED lighting fixtures to the Limassol-Paphos motorway. Regarding the transport sector, we are promoting sustainable development in many different aspects, such as installing a fleet management system to the Government fleet to improve maintenance and reduce fuel consumption. We are taking all necessary steps to adopt a National Policy Framework for the development of the market in regard to alternative fuels in the transport sector and the deployment of the relevant infrastructure.

In recent years, the increasing need for the development of infrastructure and budgetary constraints has led Cyprus’ Government to seek new and innovative ways of financing public infrastructure. Cyprus, just like many other countries, has chosen to involve the private sector in developing public infrastructure projects through PPPs. The main political motivation for this path of infrastructure development is to seek out value for money, technical efficiency, postponing costs, acceleration of works, short-term decrease of governmental debt and risk transfer. Through joint ventures with the private sector over the last two decades, we have provided taxpayers with airports, desalination plants, solid waste treatment facilities, an integrated public bus system, a marina, government buildings and many other vital facilities How would you describe the telecommunications infrastructure of Cyprus and what key investments are being made to ensure it is on par with other developed nations? Over the years, Cyprus has managed to exploit its strategic location at the crossroads of Europe, Asia and Africa, and acts as a telecommunication hub between three continents. A state-of-the-art satellite and submarine cable infrastructure, connecting the island with the rest of the world has been developed. The progress of the satellite communications sector is one of our main objectives. We have constructed a simple, flexible and competitive licensing model resulting in one satellite in operation and more satellites are expected to be placed in new orbital positions during the next two years. Investments in the sector reached €300 million in the last five years. In terms of our national telecommunication infrastructure, we have reached our main targets and fixed broadband coverage is provided universally. Competition among various

How is your ministry ensuring sustainable development in terms of protecting the environment?

How do you see Cyprus developing in the next two years and what message would you like to relay to the international community? The growth of the economy accelerated in 2016 reaching levels close to 3%. We expect that this growth rate will continue for at least the next two years and we invite the international community to benefit from investment opportunities on the island. During the last three years we have witnessed large growth in the aviation sector, which we expect to continue as traffic increases and the restructuring of the port sector through the commercialisation of the largest commercial port of the island, which is expected to improve the efficiency of running port operations. We believe that through the structural changes we are introducing as a government, the economy will be boosted over the next few years and for this reason presents a lot of investment opportunities as well as continuous and sustainable growth. n Country Report CYPRUS 2017 59

Sector Profiles

Agriculture & Food Green Growth and Niche Products

Banking Rising to the Challenge

Capital Markets Boutique Services for Niche Markets

Construction & Real Estate The Only Way is Up

104

110

113

116

International Financial Services Full Suite of Services

Country Report CYPRUS 2017

Investment Funds Emerging EU Fund Jurisdiction

Manufacturing & Industry A Culture of Innovation

Maritime & Shipping Managing the Worldâ&#x20AC;&#x2122;s Fleet

Sector Profiles

100

Education Ahead of the Learning Curve

Energy & Environment East Med Energy Centre

Health Healthy Prognosis

Insurance A Return to Growth

122

126

130

136

Research & Development R&D Boosting ROI

Technology & Communications The Right Connections

Tourism The Star Performer

Transport & Logistics Growing Transport Hub

Country Report CYPRUS 2017 63

Agriculture & Food

Green Growth and Niche Products Technological innovation and a focus on developing high-end agricultural products are transforming the agricultural sector of Cyprus.

Investment opportunities Inland Aquaculture: New land facilities and aquaculture units

Waste Management: Landfill upgrades and implementation of waste sorting and recycling systems

Country Report CYPRUS 2017

Emission-Reducing Projects: Projects and initiatives related to low-emission and climate-resilient development

Renewable Energy Projects: Solar and climatesmart agriculture solutions that reduce production cost

Animal Breeding and Milk Production: Further development of dairy sector, with the PDO registration of halloumi, Cyprus must triple production in the next nine years

Development of Troodos Geopark: Registered in the European Geoparks Network, Troodos could be further developed for science, education and geo-tourism

Agriculture & Food

1.7% 4.0%

Agriculture contributes about

to the GDP and employs around

of the workforce

aking a decisive step towards quality, rather than quantity, Cyprus is focusing on identifying niche markets for its high-quality produce. Top priorities for 2017 in the agriculture sector are further reforms, and boosting green growth through the efficient and climate-smart use of resources. These goals fall in line with the country’s longer term strategy, which is to achieve a more resource-efficient economy, and develop competitive and sustainable agriculture and fisheries industries. These will also contribute to the stimulation of the Cyprus economy, with the creation of new employment opportunities and growth in rural and coastal areas – while ensuring high quality of life and the protection of the environment. Resilient Sector

Although abundant with fresh produce and a sunny climate, farming in Cyprus is faced with droughts and environmental challenges, as well as an ongoing struggle for economic relevance. In the early years of Cyprus’ independence, the contribution of the agricultural sector to GDP was about 20%, whereas today it has dropped to around 1.7% and employs 4% of the workforce. However, the sector has tackled these trials and tribulations head-on by adopting new technologies, bringing new products to the market and widening its customer base. Agriculture has shown remarkable resilience and production has remained at stable levels, despite recent macroeconomic challenges – proving there are positive future prospects for the sector if it continues to develop on a more professional, niche and scientific basis. New structural reforms are also set to increase competitiveness and productivity, allowing Cyprus to become more dynamic, export-oriented and most importantly to adopt a mentality of continuous modernisation. Niche Exports

Cyprus’ agricultural share of total domestic exports is around 13.4%, and it is quintessentially Mediterranean, with health-promoting foods such as citrus fruit, vegetables, grapes and potatoes. As for processed agricultural goods, Cyprus’ key exports are halloumi, fruit and vegetable juices, meats and wines. The island’s famous halloumi cheese has become one of the top export products for Cyprus. The country has a rich gastronomical history, and halloumi – with its rich flavour and particular texture – constitutes a cornerstone of Cypriot cuisine. In 2010, the island was exporting 7,690 tonnes of the cheese, bringing in €47.63 million, while in 2015 these numbers increased to 15,250 thousand tonnes and to €103 million respectively. This trend is on a strong upward trajectory with the expected registration of halloumi

as a product of Protected Designation of Origin (PDO). Three international quality logos attest to specific traditions and qualities of food, agricultural products and wines. Two of these – the PDO and the Protected Geographical Indication (PGI) – have a specific link to the region of a product, while the third logo, the Traditional Speciality Guaranteed (TSG), highlights a traditional production process. There is growing interest from Cypriot producers to gain this unique badge of quality, as it brings added value to their products. In addition to halloumi, there are five other products listed on the European registry: Loukoumi Geroskipou and Koufeta Amygdalou Geroskipou, two traditional sweet products produced in Paphos; Glyko Triantafyllo Agrou, a particular spoon sweet produced in Pitsilia area; Pafitiko Loukaniko, a tasty wine-marinated sausage, and the most recently registered product, Kolokasi Sotiras/Kolokasi-Poulles Sotiras, which is a unique vegetable cultivated in Cyprus. In the wine category Cyprus boasts the famous Commandaria, said to be the earliest known PDO wine in the world. In addition, Zivania and Ouzo are alcoholic beverages listed as PGI products since 2004. It is expected that in the next few years the European registry will be enriched with more Cypriot foodstuff denominations. Aquaculture products are the third most important produce in Cyprus, in terms of export value. Specifically, these products are sea bass and sea bream and approximately 65% of the total national production is exported to markets in Middle Eastern countries and the USA. The aquaculture sector represents about 75-80% both in terms of volume and value of the total national fisheries production, and the total national aquaculture value for 2015 reached €39.2 million. The traditional markets for Cypriot citrus products have been Russia and the United Kingdom, both enthusiastic consumers of oranges, tangerines and mandora, a cross between a mandarin and an orange. Agricultural exports to the EU constitute around 64.2%, while other European countries 16.7% and Asia 16.2%. Key Crops

The most important crops produced in Cyprus are: cereals (wheat, barley); melons (watermelons, sweet melons); vegetables (potatoes, carrots, tomatoes, cucumbers); and other fruit and tree crops, such as grapes, oranges, lemons, grapefruit, apples, pears, peaches, cherries, bananas, almonds, olives and carobs. An area of success has been the marketing of the Cyprus potato – one of the most important agricultural export products and easily recognisable by its reddish peel and extraordinary Country Report CYPRUS 2017 65

Agriculture & Food

taste. Thanks to climatic conditions, fresh new Cyprus potatoes intended for export are available to European markets far before the traditional continental season – and have been especially popular in the UK. Innovation has also helped to revitalise traditional minor crops, or ones that were set aside by the advent of high-input and intensity cropping systems. For instance, a current joint effort spearheaded by the University of Cyprus, the Agricultural Research Institute (ARI) and the Central Chemistry Laboratory, is characterising and screening the indigenous carob genetic resources and developing food and medicinal products of high added value. This development is revitalising a crop once vital to the local economy, but gradually abandoned over the decades. Other

examples are the cactus pear – also known as the prickly pear – and pomegranates, which are minor crops well-adapted to the harsh climatic conditions of Cyprus, and gaining popularity. One interesting new area of cultivation is hemp. A new legal framework for hemp cultivation in Cyprus could be another game changer, creating a sub-sector of agricultural production. Foreign investors have already shown interest in setting up operations in Cyprus for hemp cultivation and to sell it as a natural fibre source – in similar fashion to the industries in France, Spain, the UK, the Netherlands and Germany. Boutique Wine Industry

The Wine Products Council (WPC) has also had

Most Potent Olive Oil in the World

Atsas Farm is organically certified and in the process of developing a productive agro ecosystem in one of the most arid regions in Cyprus. French environmental engineer Nicolas Netien and his wife Maria manufacture award-winning organic olive oil with the highest concentrations of oleocanthal and the highest total phenolic compounds ever recorded. Phenolic compounds, or polyphenolics, are pivotal in fighting a variety of medical conditions and diseases thanks to being powerful antioxidants. The Cypriot oil has an astounding 3,760mg/kg of polyphenols, more than fifteen times the 250mg/ kg stipulated by the EU labelling regulation. The couple started out with two hectares and 600 trees, but building on their success they now have 42 hectares at their disposal and have planted 4,500 olive trees with plans for further expansion in 2017.

Country Report CYPRUS 2017

Best Honey in the World

Key Players Government Ministry of Agriculture, Rural Development and Environment www.moa.gov.cy

Cypriot honey, Tziverti, was crowned the best honey in the world at the World Beekeeping Awards in 2013. Produced by Honeymell Z.P. Ltd in Larnaca, the honey is gathered by the 5th generation of beekeepers who passionately continue the tradition in this family-run company, which has won many accolades in European and international competitions in the past years. Wild lavender, rosemary, thyme, eucalyptus and another 1,900 types of plants constitute the country’s flora and make the Cypriot wildflower honey so rich in aroma and flavour. It is harvested in May and August from the Cypriot countryside and Troodos Mountains. Honeymell is active in all stages of production, from the bees to bottling, ensuring the very best quality of their products.

Agriculture & Food

As Cyprus is emerging stronger from the crisis and outperforming all forecasts by a rapid return to growth, so is the agricultural sector. Our long-term strategy is to achieve a more resourceefficient and sustainable industry, contributing to the stimulation of growth in our rural and coastal areas, while ensuring the quality of life and the protection of the environment. Cyprus is fully committed to enhancing competitiveness and achieving both green and blue growth through the implementation of a series of measures to support sustainable development, such as climate-smart agriculture and creating attractive valueadded PDO products. We are optimistic about the sector and the new opportunities opening up for investment. Nicos Kouyialis Minister of Agriculture, Rural Development and Environment

considerable success in transforming the Cypriot wine industry, which until recently had an indifferent reputation overseas. The WPC has introduced financial incentives for the cultivation of grape strains more suitable for the export market and has actively sought experienced international winemakers to invest in high-quality wineries. Today, there are over 40 local boutique wineries producing high quality and award-winning wines. To showcase the rich viticulture of the island, the Cyprus Tourism Organisation (CTO) has created a wine trail project, offering six different organised routes for wine lovers to tour the island’s wine-producing regions and wineries. The reputation of the annual Limassol Wine Festival, launched in 1961, has also spread beyond the country’s borders and attracts over 100,000 visitors every year to the city’s municipal gardens to discover the wine portfolios of both the smaller independent producers and the four big wine cooperatives – KEO, SODAP, ETKO and LOEL. Going Organic

Organic farming has shown steady growth in Cyprus. From 45 organic farmers with 1,665ha of cultivated land in 2002, the country saw an increase to 1,032 farmers in 2015 with 46,980ha, constituting around 3.6% of total cultivated agricultural land. This is an impressive development from a small country when compared to larger EU member states, where the total organic cultivated land is around 5.4%. Also retail shops selling fresh and local organic products have increased significantly. Cyprus also provides various financing opportunities for farmers through the 2014-2020 Rural Development Programme to stimulate the development of the sector, ranging from support in the conversion from conventional farming to organic, for investments into quality systems and practices, promotional aid, cooperation with the food industry to create short supply chains, and helping young farmers to get started. New Opportunities

In the last few years, Cyprus has witnessed a rise in targeting specific market groups, such as the vegetarian/vegan community, which has driven increased demand for protein sources and the use of herbal medicinal products and supplements as an alternative to synthetic medicines. Due to its special climatic conditions, Cyprus has the ability to become a major production country for these products and attract further investment in the agricultural sector, thus facilitating the creation of new small businesses, more jobs and reinvigorating rural life.

Challenges

The structure of agricultural holdings shows that entrepreneurship is high in Cyprus, as from around 40,000 holdings 99% are individual companies. However, the small holding sizes cause challenges in the equitable and efficient management of agricultural investments, and land consolidation needs are high in all sectors, except for citrus and potato farming. In addition, there is a strong need for the modernisation of the sector in technological processes to meet consumer needs. The fact that only 2.6% of farm managers are under 35 years old continues to pose a hindrance in implementing more innovation in the sector, which in turn has slowed down the competitiveness of the agricultural economy. In terms of automation and remote sensing technologies, Cyprus is lagging behind compared to other OECD countries, making it essential for the country to promote more innovation in precision agriculture tech through the participation in EU-funded research programmes. The flipside of its wonderful warm climate is that water scarcity has been one of the most serious problems faced by Cyprus through the centuries. Droughts are common and it is estimated that climate change in the Mediterranean basin will lead to further reductions in annual and seasonal water availability. However, thanks to the latest water desalination and recycling technology, the impacts of drought will be mitigated and provide water security to satisfy the water needs for domestic, agricultural, industrial, environmental and other uses. New state-of-the-art desalination plants mean Cyprus will be self-sufficient in its domestic water needs and will contribute to the preservation and development of agriculture. A Fertile Future

While challenges remain for agriculture, Cyprus has demonstrated that it is adaptable, resilient and capable of responding to adversity with creativity and vision. Cyprus agriculture may not be able to compete in quantities and prices in the mass production model, but with its supreme produce the real opportunity and key ingredient for success is to invest in quality. Creating more registered PDO products will strengthen regional development through the creation of new small businesses and thus new jobs. A focus on innovation and sustainability will be the key objectives to gradually drive the transition of Cyprus to a low-carbon and resource-efficient economy, influencing market demand, and creating new investment and employment opportunities. n Discover more at

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Country Report CYPRUS 2017 67

Banking

BANKING

Rising to the Challenge Beating all expectations, Cyprus banks have bounced back into profitability after a tough few years. Significant foreign investment, growing deposits and continuous credit rating upgrades have all boosted market and investor confidence. 68

Country Report CYPRUS 2017

Banking

he strong performance of the Cyprus banking sector has been hailed impressive internationally and has been achieved in parallel with the steady economic growth of the country, following staunch reforms and restructuring efforts. The successful and sooner-than-expected completion of the financial assistance programme in 2016 and successful bond issues raising over €3 billion, have put the country on a firm path of stability and growth. The European Commission expects the Cypriot economy to grow 2.7% in 2017, while the country’s Finance Ministry projects a more optimistic 3% growth. Banks in Cyprus currently maintain healthy capital adequacy ratios, and ratings agency Moody’s has also retained its positive outlook for the sector. The ratings agency also noted that the key driver for the accelerated economic recovery has been the growth of the business services sector and tourism, as well as increased consumer spending – all of which have been crucial in generating new business for banks. Stable and Recapitalised

Today, the Cyprus banking sector stands strong thanks to successful recapitalisations and robust reforms that have significantly improved the liquidity and solvency of the system. Since the banking crisis of 2013, all core banks have passed successive and rigorous European Central Bank (ECB) stress tests and found solid foundations to move toward sustainable development. In October 2016, the liquidity shortfall narrowed to €5.5 billion, the lowest value since February 2013, the month before the bail-in. Capital adequacy ratios have been attained and exceed minimum regulatory requirements, and the current banking sector has shrunk to two-thirds of its pre-crisis size, having shed 20% of its employees and 25% of branches. Exposure to foreign economies has also been significantly reduced. According to the Central Bank of Cyprus, deposits saw a €3 billion increase in 2016, in spite of interest rates being at their lowest ever, with total deposits in Cyprus banks reaching €49 billion in January 2017. The insolvency and foreclosure legislation has also led to a reduction of more than €4.3 billion in loans past due more than 90 days between October 2015 and October 2016. Net lending from Cyprus banks is expected to rise during 1Q2017, according to the January 2017 Bank Lending Survey of the Central Bank of Cyprus, which covers approximately 85% of the lending market. According to the survey, the net demand for loans also increased during the 4Q2016 due to the reduction in interest rates, the need to increase movement of stocks and capital and the need for corporate and debt restructuring. Despite the harsh terms that were imposed on Cyprus by its international lenders, the country has

In Brief: The 2013 Crisis At the height of the eurozone sovereign debt crunch – triggered by the US subprime mortgage crisis – Cyprus became the fifth EU member state to request a financial assistance package from the European Commission, the European Central Bank (ECB) and the International Monetary Fund (IMF) – collectively known as the Troika. The infamous 2013 Cyprus bailout captured worldwide attention, as it was the first-ever and only bailout globally with a condition to impose a bail-in on bank deposits – a move considered inconceivable until then. As part of the terms, Cyprus was bound by a Eurogroup decision to set the controversial eurozone precedent of imposing losses on shareholders and large depositors in two of its major banks, Bank of Cyprus (BoC) and Laiki Bank. It is no secret that risky expansion strategies, imprudent lending and weak bank governance all contributed to the downfall of the two Cyprus banks. However, the most significant internal cause was the failure on a national policy level to recognise potential shocks and the risk of running a large banking industry with loose supervision. The collapse of the Greek economy and Cyprus’ significant exposure to Greek government bonds was the last straw for the sector. Following the events of March 2013, there were widespread predictions of the obliteration of Cyprus’ financial sector. However, out of more than 40 banks operating in the country only two local banks were directly affected. The EU-imposed measures were severe, yet unlike other EU countries undergoing bailout programmes, Cyprus did not see a run on the banks or social unrest, but a defiant show of resilience and a rapid return to growth. There is no doubt the local banking sector has faced major challenges over the last few years, but they are on a steady recovery path, providing exciting prospects for innovative financial instruments and new players to enter the market.

taken full advantage of the tough supervision and reform programme to correct fundamental weaknesses in its financial structure. Substantial foreign and private sector investment has also boosted the banks, a fact that has certainly stimulated the rapid recovery. Sector Structure and Regulation

Cyprus’ banking sector is comprised of two tiers: domestically-oriented banks and international banks. International banks have long been attracted to the island for its fiscal regime and to use the country as a launch pad into high-growth markets. The list of banks of foreign origin in Cyprus consists of around 30 institutions, which mainly carry out international banking business and have limited interaction with the domestic economy. Banking in Cyprus is regulated by the Central Bank of Cyprus and is fully harmonised with EU legislation and directives, while commercial banking arrangements and practices follow the British model. However, changes introduced by the EU’s Single Supervisory Mechanism (SSM) saw the transfer of supervision of all the eurozone’s largest banks to the European Central Bank (ECB) in November 2014, harmonising the landscape for all big banks in Europe. For Cyprus, this meant that Bank of Cyprus, the Cooperative Central Bank, Hellenic Bank and RCB Bank are currently under the supervision of the ECB. Key Players

Key players in the Cyprus banking landscape are Bank of Cyprus (BoC), the Cooperative Credit Sector, Hellenic Bank and RCB Bank, with the rest of the market made up of smaller banks and foreign subsidiaries. The country’s largest lender, BoC, has come a long way since the 2013 events, posting positive results, raising well over €1 billion in fresh capital, and fully repaying €11.4 billion of emergency liquidity assistance from the country’s central bank – a move which will help restore and normalise BoC’s funding profile. The Cypriot lender has surpassed expectations and for the second year in a row won the ‘Best Bank for Private Banking 2017’ award by international magazine Euromoney. It also recently listed on the London Stock Exchange (LSE), which is expected to increase the liquidity and visibility of BoC shares and expose the bank to a broader base of institutional and other informed investors. The dual listing is also set to draw attention to Cyprus’ well performing economy and the opportunities offered by the Cyprus Stock Exchange. Dynamic Irish CEO John Hourican is largely credited for the fast turnaround of BoC and for attracting big-league shareholders, including billionaire venture capitalist Wilbur Country Report CYPRUS 2017 69

Banking

Ross, who pumped €400 million into the bank in 2014. However, Ross’ recent confirmation as the US Secretary of Commerce will see him resign as vicechair of BoC, but the company WL Ross & Co will continue to be invested in the bank. BoC also saw a welcome cash injection from the European Bank for Reconstruction and Development (EBRD), which has plans to expand support for Cyprus’ banks, SMEs, as well as infrastructure projects and the energy sector. The London-based bank, which pledged to inject up to €700 million into the Cypriot economy, has already made available €220 million of the earmarked funds and now owns 5% of Bank of Cyprus and a 5.4% stake in Hellenic Bank. Hellenic Bank has also seen healthy growth and has been branded one of the most liquid banks in Europe. The lender successfully recapitalised through private funds, with New York based hedge fund Third Point LLC, international online gaming developer Wargaming, and local investment house Demetra taking 75% of the share capital, and EBRD securing a minority stake in the bank. The Central Bank of Cyprus has called for banks to set up common non-performing exposures (NPEs) management units, and in 2017 Hellenic Bank led the way in becoming the first financial institution to join forces with asset management company APS Holdings. The agreement with the Czech debt-servicing specialist, whose clients include Merrill Lynch, Bank of America, Unicredit, Fortis Bank, Banco Populari and Deutsche Bank, is of strategic importance for Hellenic Bank and is part of the group’s strategy of reorganising and transforming its business model. The Cooperative Central Bank (CCB) has also progressed with its restructuring plans. Since 2013, the CCB has received a recapitalising cash injection of around €1.7 billion of taxpayer money. It also completed a merger with 18 separate cooperative saving banks in a bid to modernise procedures and transfer assets and staff to the CCB – which has increased its value and improved corporate governance. The bank is now looking at completing a Cyprus Stock Exchange listing in 2017 to attract more private equity and to gradually reduce the government’s stake to 25%. Ranked by Global Finance Magazine as the ‘2016 Safest Bank in Cyprus’, RCB Bank has gone

€49bn Bank Deposits (Central Bank of Cyprus, January 2017)

from strength to strength. The bank has had operations in Cyprus for over 20 years, and in 2016 joined forces with the European Investment Bank (EIB) and the Cypriot government, to inject a further €40 million into the Cypriot economy and to support SMEs through competitive lending solutions. RCB also signed a €10 million loan agreement with the European Investment Fund, the first agreement of its kind to be signed in Cyprus in the context of the European Fund for Strategic Investments, a basic pillar of the Investment Plan for Europe. The banking sector has also seen some newcomers such as Swedish Ancoria Bank, which with an initial capital of €50 million, offers a range of personal and business banking products from its two branches in Nicosia and Limassol. In addition, strategic new investment into the sector has come from the sale of the majority stake of the Cyprus subsidiary of Greece’s largest lender Piraeus Bank, to Lebanese Holding M. Sehnaoui SAL. Sehnaoui has injected €40 million of fresh capital and described his investment in the bank, now renamed AstroBank, as a vote of confidence in the country’s economy, highlighting the attractive economic environment and investment opportunities in Cyprus.

Country Report CYPRUS 2017

Michael Kammas Director General Association of Cyprus Banks (ACB)

Overcoming Challenges

Although Cyprus banking has weathered the storm better than anyone expected, there still remain challenges – the most severe being the burden of non-performing loans (NPLs) on the balance sheet. However, the creditworthiness of Cypriot banks, which reported a 47.8% ratio of non-performing loans in December 2016, is set to improve over the next 12 to 18 months. Moody’s Investors Service also maintains its positive outlook for 2017 thanks to expected improvements in the banks’ funding and asset quality, and projects the NPL ratio will drop to 42% by the end of the year. Although Cyprus still has one of the highest levels of nonperforming debt in Europe, it must be noted that it is not alone in this fight, with many other eurozone credit institutions also battling NPLs. Both the banks and the Cyprus government are determined to boost their efforts in tackling this issue, and have already covered much ground. In contrast to the recent past, Cypriot banks are well-stocked in

16.1% Core Tier One ratio

for the Cyprus Banking Sector (Central Bank of Cyprus, December 2016)

Local banks have adjusted to a new legal, supervisory and regulatory framework. Most importantly, banks have successfully been restructured and recapitalised, and have attracted significant foreign investors. The gradual recovery of deposits signals a return of confidence in the banking sector. As for future opportunities, sectors like shipping, education, health, tourism and even the dynamic area of start-ups, are becoming industries that can boost Cyprus’ economy in the upcoming years, and the banking sector stands ready to support relevant initiatives.

Following Cyprus’ smooth exit from the financial adjustment programme in March 2016 and the higher than expected growth in GDP, the economic recovery in Cyprus continues. The improved market confidence, the gradual recovery of the real estate market, the growing services sector, particularly, tourism and professional services, are expected to be the main drivers for growth during 2017. Following the deleveraging process already underway, the banking sector is also expected to contribute positively to growth. GDP is expected to increase by around 2.8% in 2017. The health of the banking sector continues to improve as evidenced by the return to modest profitability, growth in deposits, a gradual decrease in the level of nonperforming loans and the upward trend in new lending. Many challenges remain, however, and the Central Bank of Cyprus will continue, with its efforts to fully strengthen the banking sector and the economy as a whole Chrystalla Georghadji Governor Central Bank of Cyprus

Banking

capital and well above the supervisory capital adequacy requirements. Also, the creation of more restructuring units in banks and the improvement of the macroeconomic environment are expected to gradually ease the problem. A Future of Opportunity

Cyprus has received much praise from its international lenders for taking firm steps to rebuild its financial institutions and has received a clean bill of health through rigorous independent audits, which have time and again discredited floating accusations of a weak anti-money laundering (AML) system. While all jurisdictions have room for improvement, assessments have proved Cyprus has a high level of compliance across the banking sector, with some statutory requirements even more demanding than in other EU member states. A recent report by Transparency International said that Cyprus disclosed the most complete set of AML data among 12 analysed countries, which included the US and the UK. To reduce its bank dependence, Cyprus has already turned its interest to alternative sources of finance such as debt sale on bond markets and investment funds, which could develop into a multi-billion-euro industry. Strong focus has also been placed on going digital and bringing more innovation to services and activities. Creating more bespoke banking solutions and integrated products will strengthen the industry and its competitiveness, and bring many opportunities in its wake to support sustainable development in an era of tough competition. Investment opportunities that could be tapped into are mergers and acquisitions, private equity and venture capital projects, as well as financing of infrastructure projects, such as resort development and oil and gas projects. As for geopolitics, a looming Brexit is reshuffling European dynamics, and Cyprus’ shared history and close cooperation with the UK may see an evolution. The country’s exposure to the UK is limited, with a trade surplus of 2.6%, and rather than drawbacks the country may discover further advantages by attracting companies that wish to continue operating in an EU jurisdiction with a familiar UK legal framework. Negotiations to reach a political solution to the long-standing ‘Cyprus Problem’ – the de facto division of the island – have also gained momentum and a settlement would bring significant opportunities to the island and its banking sector. Cyprus has already demonstrated resilience in the face of adversity and most industry professionals believe the current transformation and increased European supervision has produced a more sound and agile banking sector for the future. n Discover more at

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Country Report CYPRUS 2017

History of Cyprus Banking Cyprus has been hailed an ‘economic miracle’ once before during its long history. Enjoying decades of uninterrupted growth before the global financial crisis, the country was branded an economic wonder after rebounding its economy through strict austerity measures after the 1974 Turkish invasion and subsequent division of the island. The island’s reputation as a financial centre was boosted during the Lebanese civil war in 1975-1990, when wealthy Middle Easterners abandoned Beirut for the safety of Nicosia. After the collapse of the Soviet Union and the fall of the Berlin Wall, Russian and Eastern European businesses also began moving to Cyprus, attracted by the country’s advantageous tax regime, its legal system based on British law and the fact that Cyprus was the first country to enable visa-free access to Russian and CIS travellers. Greek banks, as well as Russian, Eastern European and Lebanese banks began to officially set up shop in Cyprus to better service their clients, as funds and personnel flowed from their countries to the island. These events played a significant role in the development of the banking sector and the transformation of the country into both a thriving business and financial centre. Cyprus’ accession to the EU in 2004 and subsequent adoption of the euro, established it as a transparent and EU-regulated business hub, removing the country from the list of global offshore jurisdictions. Cyprus’ status as a competitive investment gateway to Europe began to attract increasing business from Asian, Eastern European and Middle Eastern investors looking to expand and break into EU markets. Over the decades, Cyprus’ appeal for the set-up of holding and finance companies, as well as foreign trading companies and regional headquarters, substantially increased the demand for banking services. Today, due to growing global regulatory demands to establish business substance and transparency, Cyprus’ appeal as a cost-effective headquartering location for multinationals is on the rise – a trend sure to continue and further spur the evolution of the banking sector.

Credit Institutions in Cyprus (Central Bank of Cyprus, April 2017)

Banks

cooperative credit institutions

3 2

EU non-EU subsidiaries subsidiaries

EU branches

15 2 non-EU branches

respresentative offices

Banking

insights

Banking

Country Report CYPRUS 2017

Banking

Country Report CYPRUS 2017 75

Country Overview

everything

you need to do business in CYPRUS

Country Report CYPRUS 2017

Country Overview

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Capital Markets

CAPITAL MARKETS

Boutique Services for Niche Markets A specialisation in niche markets is boosting the Cyprus Stock Exchange’s (CSE) status as an interesting regional player, a move also noted by international investors and issuers who are increasingly recognising the CSE as a competitive European listing location.

he Cyprus Stock Exchange (CSE) has set its sights on becoming the region’s leading specialist securities exchange and gateway to the EU capital market for small cap and non-European issuers. With a strong focus on niche markets the CSE is steadily making a name for itself as an enticing and credible EU listing jurisdiction and provider of high-quality ancillary services. With Cyprus’ economy experiencing a return to healthy growth rates and with projects in energy, tourism, real estate, and investment funds, the country is attracting serious international investor interest.

Country Report CYPRUS 2017

Emerging Regional Player

A key strategy of the Cyprus Stock Exchange is one of regional growth and collaboration with neighbouring stock exchanges. The signing of memorandums with other exchanges has provided the opportunity to collaborate on a wide spectrum of reciprocal issues of interest. These collaborations also contribute to creating more comparative advantages, while also increasing awareness of smaller regional exchanges to large international institutional investors in a bid to attract investments.

Capital Markets

Tailored Services and Easy Access

Cyprus has an open economy and an ideal geographical position at the crossroad of three continents – Europe, Africa and Asia. Cyprus Stock Exchange (CSE) is a fully recognised Exchange and an efficient institution which is continuously developing according to its strategic plan by offering new products, services and markets. It has an advanced legal and regulatory framework that complies with all EU Directives and internationally accepted securities practices, as well as an effective and competitive pricing policy to satisfy its market participants. Nondas Cl. Metaxas Director General – CEO Cyprus Stock Exchange

CSE MoUs Athens Exchange

and more recently, the Exchange also introduced a Regulatory Framework for the operation of the Depository Interests (DIs) to facilitate the cross-border trades between Cyprus and the UK for dually listed interested companies.

Bucharest Stock The CSE offers fully computerised online trading, clearing and Exchange (Romania) settlement, as well as access to The Egyptian Exchange the Athens Exchange through OJSC VTB Bank (Russia) its Common Trading Platform. Tehran Stock Exchange Through the same platform, Greek Market Participants A Boost in Trading Volume Corporation (Iran) (Brokerage and Custodians) Malta Stock Exchange are able to have access to the The total volume of trading on MICEX Group (Russia) Cyprus Securities Market. The the CSE has seen solid growth CSE launched a new service, in the last three years, with the RTS Stock Exchange (Russia) whereby non-listed companies total increasing from €75 million Damascus Securities Exchange can submit their registries for in 2014, to €150 million in 2015 Tel-Aviv Stock Exchange (Israel) handling to the Cyprus Central and 2016 reaching around €307 Depository and Central Registry million. However, total market Mongolian Stock Exchange – a service already successfully capitalisation, including the Qatar Exchange used by a number of Market Bonds Market, reached €3.9 Amman Stock Exchange (Jordan) Participants. billion in December 2016, comSIBEX (Sibiu Stock Exchange A Regulatory Framework pared to €5.7 billion at the end has also been prepared for the inof 2015, showing a decrease of S.A. – Romania) troduction of Global Depository 31.5%. The financial sector was Receipts (GDRs). These certifithe largest group, as far as market cates are traded in international and developing capitalisation of the equity market, with 69.53%, folstock exchanges and represent the ownership stake lowed by consumer services with 12.54%. The total in a company which can be converted to shares at number of securities traded in 2016 reached 830.6 any time. This also provides an opportunity for million. Shares traded contributed around 30.5% of family businesses to enable members to divest the total volume, while Corporate and Government without disrupting the company set-up and to in- Bonds contributed 69.4% of the total turnover. crease liquidity by opening up the investor base. Investors primarily focused their interest on the Another innovative CSE initiative has been the shares of Bank of Cyprus Public Company Ltd and introduction of a system for the electronic online also on shares of Hellenic Bank Public Company submission of applications for listing by the issuers Ltd, with 25.19% and 1.11% of the total value revia the CSE’S website (online Application Portal), spectively.

Country Report CYPRUS 2017 79

Capital Markets

Strong Growth Attracting New Investment

The benefits of the improving economic climate and the increase of business activities in Cyprus have also filtered into the CSE. Growth in specific sectors of the economy, such as banking – which has seen significant foreign investment from the private sector – has instilled strong confidence in the market and created new opportunities for the future. Other sectors, such as tourism, real estate and the implementation of large-scale projects, have gradually begun to recover with increasing investor interest. Another significant prospect for Cyprus is the oil and gas sector, where in the medium term a number of international energy giants are expected to launch more exploration and commercial activities thanks to the hydrocarbons deposits in Cyprus’ Exclusive Economic Zone (EEZ). These promising sectors could enable foreign investors to geographically diversify their investments and operations. Similarly, new business and investment opportunities would certainly arise as a result of a possible settlement to the political problem of Cyprus.

and the OASIS Trading System, with the aim of creating two new markets in the Emerging Companies Markets: a Shares Market for issuers whose Registry is not kept with the Central Depository/ Registry and a Bonds Market for issuers, whose Registry is not kept with the Central Depository/ Registry. In 2016, the CSE introduced a new service tailored for the issuance of Legal Entity Identifier Codes (LEI). For interested legal entities, the CSE provides the ability to acquire a LEI code with the Assisted Registration process. This service is provided by the CSE in cooperation with the London Stock Exchange (LSE)/ Unavista, and the issuance of LEI codes is done through the Unavista platform. The CSE also continues to successfully provide the ISIN and CFI codes to interested market participants as the authorised ANNAs National Number Agency Representative for Cyprus. Building a Strong Fund Profile

A CSE listing provides a number of advantages for fund managers and investors. The CSE is an EU-regulated and recognised exchange, which provides a better fund profile and credibility to New Market Initiatives investors. It has fast and simple listing procedures with minimum bureaucracy, advanced technolIn 2015, the CSE brought significant changes to the ogy, infrastructure, flexibility and effectiveness categorisation and structure of its markets, with at a low cost. There is great potential for listing the aim of aligning itself with relevant internation- Collective Investment Schemes, and both UCITS al trends and the economic and market conditions and Alternative Funds (AIFs) on the CSE, allowin Cyprus. The new segments on the Regulated ing fund promoters to attract greater interest from Markets are the Main Market, the Alternative institutional investors. The CSE’s top priorities Market, the Market of Bonds (Corporate), the include the development of an Exchange Traded Market of Government Bonds and the Market for Funds (ETFs) Market. This, together with its other Funds. advantages such as Cyprus’ 12.5% corporate tax In addition, the Emerging Companies Market and access to European and other regional capital (ECM) of the Cyprus Stock Exchange offers sim- markets, could significantly help to further raise plified listing criteria at a lower cost and is suc- the CSE’s profile. The listing of UCITS units or cessfully attracting companies both locally and shares and various other types of units of collecinternationally. The boutique size allows the tive non-private investment schemes on the CSE Exchange to provide a more personalised service became possible in 2012, following a relevant at very competitive fees, particularly to compa- amendment of the Cyprus Stock Exchange Law. nies too small to list on a larger exchange or who The CSE amended its regulatory decisions to wish to gain initial experience cover the listing process of these with EU capital markets. The investment schemes (with or Key Players ECM Market is comprised of the without trading) in December Supervising Body Equities Segment and the Bonds 2013. Cyprus Securities and Segment, and has proved resilIn regard to Alternative Exchange Commission ient and successful in the last Investment Funds, Cyprus’ new www.cysec.gov.cy years, despite the adverse ecofund framework allows the linomic climate. censing of AIFs marketed to Government With staunch efforts to conretail investors. Following an Ministry of Finance www.mof.gov.cy tinuously improve its service initiative taken by the CSE, an to the market and broaden the amendment to the legislation Exchange range of products and services, was brought into effect to also Cyprus Stock Exchange the CSE has also amended the provide for the listing of AIFs on www.cse.com.cy Council’s Regulatory Decisions the CSE. 80

Country Report CYPRUS 2017

5 Top Shares:

Capital Markets Consumer services

12.54% Total volume of trading

€307 million

Other

Breakdown of Total Turnover

(2016)

(€150 million in 2015)

17.93%

Market Capitalisation of the Equity Market

Total market capitalisation, including Bonds Market

€3.9 billion

Shares traded

(2016)

Securities traded in

31%

€830.6 million (2016)

Corporate and Government Bonds

Financial Sector

69.53%

69%

The CSE has a competitive pricing policy for both market participants and investors, with the potential to increase a fund’s investor base. Funds that obtain a listing can be more effectively marketed to investors and can therefore be considered as an eligible investment proposition for particular institutional investors, overcoming specific restrictions from investing in non-listed securities, or in investments that are not listed on a recognised exchange. A CSE listing also provides visibility and transparency to investors with the prices of

Cost-Effective Listing To list in the Tradable Collective Investment Schemes Market, the key requirements are to obtain a license from the competent Authorities of the country of origin, assets of at least €200,000 and the appointment of at least one Market Maker on a continuous basis, for the purpose of sufficient trading. Also, a submission of the registry of unit holders or shareholders to the central depository of the CSE is required. In the case of an Exchange Traded Fund (ETF), the index provider must have granted the ETF issuer a license to legally use an underlying index in the name of the ETF and that it has the license to offer its units to investors in Cyprus. The key listing requirements for the Non-Tradable Collective Investment Schemes market are to have a license from the competent authorities of the country of origin and the Common Fund’s assets, or the variable capital investment company’s assets, must be at least €200,000. The CSE’s listing fees in regard to Collective Investment Schemes are considered very competitive, when compared to larger exchanges across Europe. The listing fee or application fee for the Tradable Collective Investment Schemes is €1,000 and for Non-Tradable Collective Investment Schemes €500. In addition to the application fee, there is an annual subscription fee of €1,000 for single Funds and €1,000 for umbrella Funds plus €400 per class or Sub-Fund. Key Benefits of CSE Listing • EU-regulated and recognised exchange • Access to a fast growing fund centre in Europe • Improved fund profile and credibility to investors • Fast and simple listing procedures with minimum bureaucracy • Competitive pricing policy for investors and market participants • Potential to increase investor base • A high level of visibility and transparency to investors • Skilled and professional staff with a personal approach due to small market size

Listed Funds posted on the CSE’s website and disseminated to the market through the Exchange by major data vendors. Adequate price mechanism is provided, either through net asset value (NAV) postings or market prices, if traded. This parameter is important for fund managers who require a publicly quoted securities exchange price for their investments. The Cyprus Stock Exchange has already accepted listings for 17 non-negotiated Collective Investment Funds – more specifically, two single scheme UCITS funds and 16 sub-funds of one UCITS umbrella scheme – bringing the total assets under management of these Listed Funds to €66.5 million. With the sector gaining momentum, more funds are expected to follow. Since 2014, Cyprus has received numerous enquiries from fund managers interested in listing their funds on the Exchange, following the amendment of CSE’s Regulatory decisions covering the listing process of investment schemes (with or without trading). A Bright Future

Cyprus is creating a new regional market and is one of the fastest growing fund centres in Europe. The small yet dynamic Cyprus Stock Exchange is continuously diversifying its activities and services, and is committed to enhancing the competitiveness and accessibility of Cyprus for foreign investors. The CSE is establishing itself as an integral part of the country’s growth strategy, supporting efforts to strengthen Cyprus’ role as both a regional business hub and a financial centre. n

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Country Report CYPRUS 2017 81

Construction & Real Estate

The Only Way is

The property market of Cyprus has enjoyed a resurrection in the past year, with sales rising by a remarkable 43%, spurred on by landmark projects, incentives and an influx of foreign investment.

Ayia Napa Marina

Top 10 reasons 1 to live in Cyprus

Member of the European Union

Country Report CYPRUS 2017

English speaking population

High quality of life and low crime rates

Temperate climate with 340 days of sunshine

Uncongested and unpolluted environment

Construction & Real Estate

igh quality of life, year-round sunshine, and a convenient location between three continents, has made Cyprus a longstanding magnet for international investors, expats and retirees. Despite the uncertainty of fluctuating global economic cycles, these factors have continued to contribute to the enduring appeal of the island. Incentives coupled with a fall in real estate prices triggered new interest in the middle and lower end of the market, while sales of luxury developments have surpassed expectations. Recovering Market

After a series of declines over the previous six years, market prices are stabilising, competitively priced properties are attracting buyers, and both residential and commercial investments are on the cusp of a significant era of growth. This across-the-board improvement is mirrored in the broader economy, which is predicted to expand by almost 3% in 2017. Demand is strongest in Limassol, where the number of sales increased by 59% in 2016. Islandwide, the prices for flats and houses rose by 0.6% and 0.9% during the third quarter of 2016, according to the Royal Institute of Chartered Surveyors, with significant increases in Larnaca. There was a corresponding upward trend also in rental returns during this period, with average gross yields for apartments at 4%, houses 2% and shops at 5.4%. Growing Foreign Investment

Crystal clear seas and clean beaches

Fresh locally grown produce

Excellent healthcare

High standard of education

Convenient airline connections and good telecoms

Contrary to expectations, the financial challenges of 2013 have not had a long-term impact on the islandâ&#x20AC;&#x2122;s popularity amongst overseas buyers. The pull factors of a relatively low cost of living combined with an attractive climate, its status as the 5th safest country worldwide, and a good quality of life have all proved to be more enduring than any short-term fluctuations in the economic climate. Recent changes to the law relating to title deeds have ramped up protection and peace of mind for prospective buyers, with additional legal safeguards streamlining processes and efficiency. These developments have had a positive effect on sales, and the second quarter of 2016 was marked by a significant revival of overseas interest in Cypriot real estate. Traditional markets such as the UK and Europe have expanded, and the number of investors from China and the Middle East has also grown. Property purchases completed by overseas buyers increased 63% year-on-year in the first three quarters of 2016, with overseas buyers making up 14% of all real estate transactions. This surge in interest was also reflected in the latest figures for foreign direct investment in Cypriot real estate, which exceeded â&#x201A;Ź2 billion in 2015.

Country Report CYPRUS 2017 83

Construction & Real Estate

Minthis Hills

Enticing Incentives

Traditionally, Cyprus has mainly been on the radar of British buyers, due to the countries’ historical ties, strong tourist market and attractive tax treatment – particularly for expats and retirees who pay just 5% tax on pensions. Today, the sector is pursuing a more innovative strategy, targeting top-end clients with a range of exclusive villas in five-star complexes, golf course and seafront developments as well as boutique townhouses. The challenges faced by the banking sector in 2013, prompted the government to introduce tax reforms designed to kick start the Cypriot property market and benefit existing and prospective buyers. The Immovable Property Tax (IPT), which was significantly reduced in 2016, has now been abolished, while temporary reductions in property transfer fees introduced in 2015 have been made permanent. Purchases that include VAT incur no property transfer fees, while VAT-exempt purchases incur only 50% of the previous fees. One of the most innovative government measures that has helped the Cypriot construction sector bounce back has been the naturalisation scheme. Recent studies conducted by global immigration experts rank the Cyprus Citizenship by Investment programme amongst the top ten worldwide. The scheme was introduced by the government to attract more high-net-worth individuals, investors and entrepreneurs with the benefits available to a Cyprus and EU national. The programme offers individuals the opportunity to reside indefinitely in Cyprus if they acquire a permanent residence worth €500,000 and invest a minimum of €2 million in a business venture. If an investor chooses to invest only in residential properties in Cyprus, their investment is limited to €2 million. Investment options include real estate, investment in Cyprus companies and in investment funds and bonds, or a combination of the above. Approximately 1,000 properties were purchased by non-EU nationals in 2015 in connection with the scheme, which has so far resulted in an additional €3 billion of investments in the island. 84

Country Report CYPRUS 2017

Ayia Napa Marina

The naturalisation initiative has been particularly popular amongst Chinese nationals, whose investment is credited by the Chamber of Commerce with helping in the economic revival of the construction industry. Chinese investment is also behind a large-scale construction project at Ayia Thekla in the Famagusta District, branded the Sun City Spa and Residences. The €50 million project will include a five-star resort hotel and exclusive beachfront residences that will put Ayia Thekla’s pristine stretch of coastline on the map.

Akamas Bay Villas

Key Players Industry Association The Cyprus Land and Building Developers Association (LBDA) www.lbda.com.cy

Construction & Real Estate

The real estate sector is an economic driver and all the conditions are met for growth and good results. In the past year, we have seen steadfast commitment from our target markets, despite challenging developments, and witnessed the emergence of secondary markets where investors show a growing interest in our projects. Above all, we can say that today, whoever is seeking a luxury Mediterranean lifestyle will find unique value in Cybarco Properties. Michalis Hadjipanayiotou CEO Cybarco Development Limited

The real estate sector in Cyprus has witnessed remarkable growth, with pioneering new luxury property developments placing the island on the international real estate map and attracting a new calibre of clients. With pioneering projects like ONE and Minthis Hills Golf Resort on offer, the current environment in Cyprus is ripe for investment, and we expect to build on the momentum with another year of growth. We at Pafilia will continue to focus on innovation setting the groundwork for unique landmark developments.

Limassol Del Mar

A New Limassol Skyline

An exciting race is on amongst property developers in 2017, as they compete over imaginative and ambitious projects, such as the largest marina or the tallest luxury residential tower on the island’s coast. The Limassol skyline is undergoing a multi-million-euro transformation, with the construction of luxury high-rises. Two of these, The Oval and the recently launched Lanitis Towers, are the brainchild of the Lanitis Group. The 75m Oval, overseen by Lanitis subsidiary Cybarco Development, is an innovative and high-end office complex, with an iconic oval structure. With an exclusive address on the Limassol seafront, the landmark design has configured its space so all offices can maximise their Mediterranean Sea views. The venture, with an estimated price tag of €30 million, has already paid dividends. Approximately 93% of its office space has been snapped up – irrefutable proof that confidence in the Cypriot economy is strong. Work on another monumental Limassol structure is underway, and at 170m it promises to not only be the tallest in Cyprus, but the tallest residential seafront building in Europe. Branded The One, the €77 million construction is a joint project with Pafilia, J&P and ACC, and is set to redefine the Limassol skyline in a spectacular and daring

way. The building has 37 floors, all of which enjoy uninterrupted sea views, and so far sales to foreign investors have been brisk, with 55% of the properties already sold. The flagship project has also been commended as an outstanding example of residential high-rise development at the prestigious European Property Awards 2016-2017 in London. The new wave of innovative architecture sweeping through the island is also evident further along the Limassol coastline in the spectacular Del Mar development. The first phase of the residential complex will be completed in the summer of 2019. Del Mar has an ambitious curvilinear design that enables each of its 168 luxury apartments to benefit from breath-taking sea views. The complex combines all the benefits of the relaxed Cyprus lifestyle with the convenience of five-star services, and to date 40% of the apartments have been sold. Extending over 34,000 square metres, the Del Mar has been financed entirely by Cypriot companies. Limassol has also been chosen to host the country’s first-ever and only integrated casino resort complex, awarded to a consortium including the globally renowned Melco and Hard Rock. The estimated investment for this mega project is expected to exceed €650 million and will be the first of its size in Europe.

Limassol Marina

Evangelia Eliadou Executive Director Pafilia Property Developers

Country Report CYPRUS 2017 85

Construction & Real Estate

Strategic Asset Management

Cyprus ranks as the fifth best place in the world to relocate, in the 2013 Knight Frank Global Lifestyle Review, establishing the island as the only European location alongside Switzerland to make it into the top five – ahead of London, Madrid and Monaco.

Ayia Napa Skyscrapers

The pace of change in Limassol may be frenetic, but further along the east coast in Ayia Napa, residents will soon be able to boast of their own skyscrapers. The €220 million residential properties will form part of the development of Ayia Napa marina and will rise to 26 floors, in a bid to bring a feel of the extravagant Dubai skyline to the Mediterranean. With significant Egyptian investment, the marina properties are already being marketed to investors in the United Arab Emirates, with a price tag ranging between €500,000 and €5.2 million. The yacht marina will have a capacity for around 450 vessels up to 60 metres, with moorings out at sea for another 150 yachts. The project also includes villas, apartments, restaurants, bars, shops, cafés and boutiques, as well as event facilities, and is set to spark more interest in the Ayia Napa region. Larnaca Renaissance

Not to be outdone, the towns of Paphos and Larnaca are also launching their own marina projects. The redevelopment of the Larnaca port and marina poses excellent investment opportunities, combining port commercial and passenger activities, with leisure, tourism and real estate development. Millions of euros have also been earmarked by Larnaca municipality for the regeneration of various districts and breakwaters are being erected to stop coastal erosion. The ever-popular Mackenzie beach to the west of the city and close to the international airport, is about to undergo an epic transformation as part of the luxury Castle Project, funded by Lebanese investment. It will involve the construction of a €7 million seafood restaurant, a five-star hotel over 13 floors, and a beach bar and jacuzzi for 100 people. A unique feature of the project will be the construction of a small island in the shape of Cyprus.

At the end of 2015, industry professionals expressed concern that the island’s property sector would be the next victim of the 2013 banking collapse. It was feared that real estate acquisitions made by the leading lenders, as part of their efforts to reduce their portfolios of non-performing loans, would lead to significant market distortions. However, the loan restructuring programme has not had the detrimental impact many projected, largely due to the benchmark set by the Bank of Cyprus’ Real Estate Management Unit (BoC REMU). Thanks to the strategic planning of asset disposal by lenders, the market has not been flooded by compulsory repossessions and real estate remains a viable investment option. The combined value of the sellable real estate assets held by banks in Cyprus is estimated to be €1 billion. BoC and Hellenic Bank hold around €370 million, while the Cooperative Central bank retains assets worth €600 million through its Property Management Directorate (PMD). BoC disposed of assets worth €92 million in the first half of 2016, and while sales are expected to accelerate, the average time to liquidate a real estate asset is between five and six years, according to Hellenic Bank. The commercial banks continue to be rigorous in their lending criteria. As a result, the resurgence of interest in real estate investment in Cyprus today derives primarily from institutional investors and wealthy non-Europeans seeking to acquire Cypriot citizenship through the government’s naturalisation programme.

Country Report CYPRUS 2017

Pantelis Leptos Chairman Cyprus Land & Building Developers Association

Building the Future

New investments in tourism infrastructure and hotels have given the formerly ailing real estate sector a revitalising boost. Projects with a special focus on golf courses and marinas have spurred new interest in large-scale projects in Cyprus, and the country has seen a surge of investors looking into the acquisition of entire complexes and into projects that are both in the planning stages and already under construction. Cyprus’ ongoing process of establishing its first-ever luxury casino resort, is also set to boost tourism and fuel demand for holiday rentals. Construction is booming, from the very top of the range downwards, with the projects due for completion in the period 2016-2018 alone worth over €300 million. This is just the beginning of the post-financial crisis rebirth of the sector, and will be the driving force behind the construction industry for years to come. n

Discover more at

2017 will be a year of dynamic growth for the Cypriot real estate sector. Unemployment in construction is continuing to fall, whilst the rise in the value of building permits clearly indicates the positive forecast for the sector. Cyprus remains an attractive EU destination for foreign buyers, combining a secure strategic location, high quality of life, good weather, low crime rate and a cosmopolitan lifestyle. These factors are further reinforced by significant tax, immigration and other incentives – and by the prospects of a Cyprus settlement and exploitation of our natural gas reserves.

www.cyprusprofile.com

Demand for luxury waterfront homes in prime locations continues to rise, so property sales on the higher end of the market are doing well. We have sold all our completed apartments and more than 65% of our villas at Limassol Marina. We are now preparing to launch our final residential phase. These upcoming apartments, surrounded by water, are one of a kind so we are confident 2017 will be another good year for us. Andreas Christodoulides CEO Limassol Marina

Invest in Cyprus Cyprus is a modern, cosmopolitan, transparent business centre offering opportunities for investment across a wide range of sectors. In Cyprus, laws and regulations, systems and infrastructures, are all continuously enhanced to ensure we remain one step ahead. Cyprus is committed to offering a high-quality service that is duly regulated in order to ensure the best possible experience for investors and business people worldwide.

Strategic Location

With its ideal geographical position at the crossroads of three continents - Europe, Africa and Asia - Cyprus plays a key role in the region of the Eastern Mediterranean. As a safe, transparent, modern business centre, the island is an ideal investment gateway to the European Union as well as a portal for investment outside the EU.

Tax System

Cyprus offers an attractive and transparent tax regime, fully compliant with EU, OECD and international laws and regulations. Its main features are: • One of the lowest corporate tax rates in the EU at 12.5% • Dividend participation exemption • Exemption on disposal of securities • No withholding taxes and no succession taxes • Attractive IP regime • Tonnage tax system for shipping companies • Notional interest deduction for new investments • Personal tax exemptions for new residents and non-domiciles

EU Member State and Member of the European Monetary Union

As a member of the European Union since 2004 and the European Monetary Union since 2008, Cyprus is committed to quality, efficiency and transparency in transactions. Its EU membership ensures safety and stability for investors, also offering them market access to 500+ million EU citizens.

Legal and Regulatory Framework

Based on English Common Law principles, Cyprus’ comprehensive and robust legal and regulatory framework is widely recognised as a business-friendly and effective system that ensures transparency and reliability in business practices.

Offering foreign businesses a familiar and reliable framework within which to operate, Cyprus’ legal system is also fully compliant with the EU, the Financial Action Task Force on Money Laundering (FATF), OECD, FATCA, the Financial Stability Forum laws and regulations and EU AML directives.

Human Talent & Level of Services

Human talent, complemented by a broad range of high quality professional services, is one of Cyprus’ most compelling advantages. Cyprus offers an abundance of highly educated, multilingual individuals, ready to meet the needs of any business.

Advanced Infrastructure

Cyprus benefits from advanced and modern infrastructure, as well as an extensive telecommunications network, ideally suited for business people with demanding schedules. Thanks to its sophisticated road system, bustling port facilities and two international airports, travel and transport in and beyond Cyprus is fast, efficient and cost effective.

High Quality of Life

Cyprus residents enjoy an enviable lifestyle in a safe, clean and healthy environment with high living standards and a sunny climate all year round. Low crime levels, centuries of art and culture, and excellent gastronomy all contribute to a high quality of life. The island is ranked the safest small country in Value Penguin’s Safest Countries in the world (2015) and 5th globally.

About Invest Cyprus

Businesses and individuals considering investment into Cyprus have a partner on the ground at all stages of the investment cycle. Invest Cyprus is a non-profit national body, which, in close collaboration with the public and the private sector, takes the lead in attracting foreign direct investment in key economic sectors. Dedicated to continuously improving the business and regulatory environment, Invest Cyprus advocates reform while also providing investor support and aftercare services. Working with the investor, for the investor, Invest Cyprus is the investor’s single point of contact.

Cyprus Investment Promotion Agency T +357 22 441133, F +357 22 441134 E info@investcyprus.org.cy www.investcyprus.org.cy

Education

EDUCATION

Ahead of the

Learning Curve With renewed emphasis on cultivating a knowledgebased economy, Cyprus’ education sector is expanding and diversifying to meet market demands.

ypriots have always valued education and learning, and while prizing their own languages and culture, they have also long had a realistic understanding of the importance of English in today’s globalised markets. The island has a highly educated English-speaking workforce, with over half of all 30 to 34 year-olds educated to degree level. The country’s five private universities maintain consistently high academic standards, and are acutely aware of the need to keep ahead of the curve by offering English-language teaching of vocationally relevant courses that reflect the changing commercial climate.

Country Report CYPRUS 2017

Responding to Market Trends

The recent discovery of offshore oil and gas in Cypriot territorial waters prompted the University of Nicosia to offer the island’s first BSc programme in energy, oil and gas management, as part of an attempt to educate the industry executives of the future to assume roles in the emerging oil and gas sector in Cyprus. Others have followed this trend, such as the European University of Cyprus, which has also placed strong focus on revising its courses in response to changes in the business climate and in student demand. One of its latest offers is

Key Players Government Ministry of Education and Culture www.moec.gov.cy Cyprus Higher Education (Ministry of Education and Culture) www.highereducation.ac.cy

Education

30% of the island’s students are foreign students

English, French and Russian private primary and secondary schools

More than half of all 30-34-year-olds are educated to degree level

a masters degree in civil and environmental engineering, a course which incorporates the study of the impact of climate change and earthquake risk on construction. Frederick University, based in Nicosia and Limassol, is also attempting to maximise the potential of Cyprus’ natural geographical advantages. Its existing course in maritime studies will soon be complemented by an LLB in maritime and shipping law. As part of their efforts to anticipate market demand and provide vocationally relevant courses, higher education institutions in Cyprus have always been particularly responsive to international collaborations and partnerships. The first British university to be established on the island, The University of Central Lancashire Cyprus, (UCLAN - Cyprus) offers a degree in the rapidly expanding field of cyber security. The University also offers courses in business, law and the sciences and provides students with a unique opportunity to study in both Cyprus and the UK. The University of Nicosia adopted a slightly different collaborative model in 2011, when it formed a partnership with London University and its leading teaching hospital, St Georges. This led to the establishment of the island’s first medical school which now offers six year undergraduate entry and four year graduate entry medical degree programmes. The state-funded University of Cyprus, which teaches mainly in Greek, soon followed and is now in the process of establishing its own medical school. Also under the umbrella of the University of Nicosia, is the recently launched Cyprus Maritime Academy. The institution provides students with valuable insight through close collaboration with renowned shipping companies, and supports the local industry by providing qualified crew for a continuously evolving and technologically advancing sector. The University of Cyprus, which is the only academic institution in Cyprus to rank in the top 1,000 universities in the world, has also raised the bar in academia. During the past 18 months, the university increased its world ranking by an astounding 134 places, according to Webometrics rankings, which assess more than 20,000 universities worldwide. Attracting Students Worldwide

Since Cyprus joined the EU in 2004, the number of foreign students studying on the island has doubled. There is undoubtedly great potential for further international academic collaboration as well as investment opportunities in the higher education sector, with both the government and the private sector setting out ambitious plans to develop the island into a regional education centre. Today 30% of the island’s students, around

8,000, are foreigners, and it’s easy to see why. The widespread use of English, the application of EU standards, a first-class infrastructure, a safe environment and good weather, all make the island an ideal place for foreign students seeking a rigorous, value-for-money education. Perhaps the strongest testaments to the Cypriot respect for education is the success of the government-funded Open University (OU), which was founded in 2002, as the island’s second, statefunded institute of higher education. The Cyprus OU continues to offer flexible, modular learning programmes that provide career and personal development opportunities for students already in the workplace, part of the state’s commitment to life-long learning. Educating Future Leaders

It is important to note the island’s rapidly diversifying primary and secondary education sectors. Although all government-funded schools teach primarily through the medium of Greek, there is a long-standing tradition dating from colonial times, of providing English-language education to equip the next generation for the jobs market. The English School was established in 1900 to provide English speaking clerical staff for the British administration. It is now one of a growing number of international schools, including Falcon, The American Academy, The Junior and Senior Schools of Nicosia, and the Terra Santa School, to name only a few, that teach to a British, American, or French curriculum and where students generally work towards either ‘A’ levels, or the International Baccalaureate. The American Academy also has flourishing branches in Nicosia, Larnaca and Limassol. Recent years have seen the establishment of Russian schools in Nicosia and Limassol in an effort to keep pace with growing demand from a large Eastern European expat community. A Growing Education Hub

A combination of rigorous educational standards, combined with Cypriot entrepreneurship and informality, make Cyprus a highly desirable place both to study and to recruit a skilled, well-qualified workforce. The country's geographic position and EU membership also provide opportunities for students originating from third countries to acquire qualifications recognised by the EU. With Cyprus’ standing as one of the top growing economies in Europe, it is certain to attract more talent and bolster its efforts to develop the island as a major educational hub in the Eastern Mediterranean. n Discover more at

www.cyprusprofile.com

Country Report CYPRUS 2017 91

Energy & Environment

ENERGY & ENVIRONMENT

East Med Energy Centre Energy is the new boom industry in Cyprus, attracting worldwide attention and serious international investment in both hydrocarbons and renewables – cementing the island’s status as a key player in the Eastern Mediterranean.

yprus’ energy profile has evolved significantly following the discovery of vast natural gas reserves in both its Exclusive Economic Zone (EEZ) and in its immediate neighbourhood. These developments have established the country’s budding oil and gas sector as one of the biggest opportunities for foreign investment. Another area gaining momentum in the energy sphere is renewable energy, with international companies flocking to the island’s shores to harness its wind and 340 days of sunshine. Hydrocarbon Hype

In 2011, US firm Noble Energy, who is developing Israel’s giant Tamar and Leviathan gas fields in the Eastern Mediterranean Sea, announced a world-class discovery of natural gas in Cyprus’ offshore EEZ block 12 – known as Aphrodite. Two years later, Noble carried out appraisal drillings in block 12 and the results confirmed natural gas reserves of 4.54 trillion cubic feet (tcf) – enough to meet Cyprus’ domestic gas demand for over 100 years. Noble Energy’s success story in block 12 rapidly caught the attention of energy companies worldwide and created a surge of interest, with more players entering the market hoping to make further significant discoveries.

Country Report CYPRUS 2017

Exploration Race

Cyprus’ licensing rounds have garnered strong interest from foreign investors, especially following Egypt’s colossal find – branded ‘Zohr’ – located just 6.5km from its territorial waters. The Egyptian find, operated by Italian company Eni, holds an estimated 30 trillion cubic feet (tcf), equivalent to 5.5 billion barrels of oil, and resembles closely Cyprus’ block 10, according to industry experts. Cyprus recently completed its third licensing round, awarding blocks to consortia including Eni, Total, ExxonMobil and Qatar Petroleum – and has now signed contracts that are expected to yield faster drilling in a bid to explore the potential of exporting its gas to European and East-Asian markets. Global energy giants such as French Total, a consortium of Eni and South Korean Kogas, and the UK-Dutch company Royal Dutch Shell, have already secured exploration rights in Cypriot waters and 2017 will be a pivotal year in a new wave of exploration activities. In preparation for the upcoming increase in offshore drilling, a new support base is also being set up in Limassol, in addition to support services in Larnaca.

Cyprus is forging ahead with its strategy to exploit its natural gas reserves domestically and to export Aphrodite gas regionally. We expect to make progress with our commercial agreements and to see more exploration and discoveries in our EEZ in 2017. Cyprus could also become a significant fuel hub, with the widening of the Suez Canal increasing traffic in our region. Our excellent relationships with neighbours establish solid foundations for further energy cooperation in the EU and Eastern Mediterranean. Yiorgos Lakkotrypis Minister of Energy, Commerce, Industry and Tourism

Energy & Environment

Biomass

Photovoltaic Parks

10%

26% RES Production in kWh

(Jan-Sept 2016)

Wind farms

64% Source: Cyprus Energy Regulatory Authority

The East Mediterranean is undergoing some of the world's most accelerated exploration and development programmes. Total's exploration program in 2017 in Cyprus’ EEZ will rebuild momentum, followed by ENI's exploration and Noble's development plans. The midstream sector in Cyprus has many opportunities for profitable growth. It is of great importance that the exploration companies have a permanent logistics support base for their regional operations. We believe that new hydrocarbons findings and the new mega players that entered the Cypriot blocs, such as Exxon Mobil, will regenerate significant investment interest and Cyprus will be at the forefront of regional developments. Andy Varoshiotis President Cyprus Oil & Gas Association (COGA)

Cyprus has high hopes that the oil and gas sector is set to become a key driver of growth, due to revenues from its natural gas; and the alreadyestablished involvement of major oil and gas companies has strengthened the country’s efforts to become a key regional energy hub. Cyprus has plans to also set up a national investment fund to manage its potential hydrocarbons wealth. It is hoped that Cyprus will receive an annual multimillion cash injection from gas revenues just from the exploitation of the Aphrodite field, where production is expected to start in 2023. Subsea Connections

In 2016, Cyprus signed a deal in a bid to transfer natural gas via subsea pipeline to Egypt once extraction from Aphrodite begins – a move welcomed by Noble Energy who said it would help boost projects in the region. The country is also in discussions with Greece, Italy and Israel about the potential of transporting gas from the Eastern Mediterranean to Europe, via Greece and Italy. This €5.5 billion project, if taken up and given the green light, would constitute the largest underwater pipeline in the world – stretching over 1,300 km. However, most industry professionals do not see the costly and challenging project as a viable way forward.

Another key connection is the EuroAsia Interconnector, which will link the power grids of Cyprus with Greece and Israel via an undersea cable. The 2,000 Megawatt interconnector is one of the seven selected electricity projects that have received funding, and the only North-South electricity interconnection in the Central Eastern and South Eastern Europe Priority Corridor. The EU has agreed to finance the final detailed studies ahead of the implementation of the project with €14.5 million, as it will contribute to achieving the Energy Union’s goals of connecting European energy networks, increasing security of energy supply, and contributing to sustainable development by integrating renewable energy sources across the EU. If it goes ahead, pre-construction works could commence as early as 2017. An Expanding Fuel Hub

A strong momentum has also been seen in developing Cyprus into a significant regional fuel hub for Europe, Asia and Africa, thanks mainly to the successful operation of the sophisticated oil storage terminal in Cyprus by Netherlands-based global oil terminal company VTTI. In 2015, the company’s Cyprus subsidiary VTTV announced expansion plans to also take advantage of the regional natural gas opportunities. The €300 million project in Country Report CYPRUS 2017 93

Energy & Environment

Key Players Rising Renewables Vasilikos was the biggest infrastructure project constructed Government As Cyprus looks forward in Cyprus in recent years, and Ministry of Energy, Commerce, to a day when its power plants has put the island on the global Industry and Tourism can be run on more cost-effienergy map, as well as considerwww.mcit.gov.cy cient gas, rather than expensive ably strengthened Cyprus’ efforts imported liquid fuels, it is unRegulator to return to economic growth. Cyprus Energy Regulatory dertaking other initiatives to Around €9 million go to state Authority (CERA) achieve its national energy and coffers from port fees and opwww.cera.org.cy climate targets. Due to its isolaerating permits every year, and tion from the trans-European it has also resulted in around €2 Public Organisation electricity networks, Cyprus is million savings for Cyprus from Cyprus Energy Agency targeting to have only 13% of lower storage costs for its stratewww.cea.org.cy its energy consumption coming gic reserves. The Vasilikos area is from renewables (EU Target also set to get another boost with the Cyprus Ports Authority, in cooperation with the 20%) by 2020. This is set to be generated by wind EU, set to invest up to €50 million to develop the farms, photovoltaic (PV) systems, solar thermal plants and biomass and biogas utilisation plants. port area for the benefit of oil and gas companies. Latest data show that Renewable Energy The VTTV terminal has also given birth to a new export product for Cyprus in mineral fuels and Sources (RES) accounted for 9.8% of electricoils, which jumped from zero in 2014 to €98 million ity production in 2015. RES power production in 2015. The company uses Cyprus as a terminal, rose 3.4% in 2016, compared to 2015, mainly on blending its raw material and then exporting it to increased output generated by private photovolthe rest of the world, but mainly to Lebanon (€28.8 taic systems. Wind farms generated almost two million) and Israel (€16.6 million). Cyprus’ strate- thirds of electricity from RES in 2016, increasing gic location makes it the first terminal of its kind in 2.2%, and the output of private-owned photovolthe Eastern Mediterranean, connecting Europe and taic systems rose by 8.8%. However, the output of the Black Sea with markets in the Middle East and biomass power generators and photovoltaic units Asia. As a percentage of Cyprus GDP, petroleum installed on public building, schools and at army is only worth 1%, but the industry has tremendous barracks dropped 2.1% and 1.7% in 2016. Cyprus’ energy policy has created financial growth prospects with the country’s determination to establish itself as a key energy hub and a strong- support for RES projects, and a special fund was created aiming to support RES and energy saving hold of stability in the region. The oil retail sector saw another coup after investments in Cyprus, with revenue derived from Greek company Motor Oil struck a €10 million consumers paying a ‘green tax’ levied on electricity deal to buy out all 31 Lukoil gas stations – consti- bills (currently at €1 per kWh). tuting 10.8% of all gas stations in Cyprus – which will soon be branded with the Shell logo. These developments are expected to intensify competition and create a more competitive market in fuel retail.

Fossil Fuel Dependency

A key challenge for Cyprus will be to mitigate its high dependency on fossil fuels for energy – the biggest share within the EU in fact, which makes it crucial for the country to develop both its hydrocarbon and renewable energy sources. Cyprus is reliant on fossil fuel imports for its electricity needs, and spends over 8% of its GDP to cover the costs. The island also saw the biggest increase in energy demand among the EU28, growing 41% since 1990 from 1.6 million tonnes of oil equivalent (Mtoe) to 2.3 Mtoe in 2015. These figures may be low when compared with its larger EU partners, but a more accurate comparison would be Malta where consumption was only 0.8 Mtoe in 2015. However, Cyprus is determined to find a cleaner solution until it can exploit its own reserves. 94

Country Report CYPRUS 2017

4.54tcf confirmed natural gas reserves

VTTV is planning to expand its oil terminal, diversify customers’ portfolio, and evaluate regional opportunities in both oil and natural gas. In November 2016, we completed a milestone of two years of successful operation, where more than 200 vessels have been serviced and the volume moved through the terminal is around 5.9 million cubic meters. Important factors are the terminal’s strategic location and its proximity to the Suez Canal, which make it the first of its kind in the Eastern Mediterranean, connecting Europe and the Black Sea with markets in the Middle East and Asia. The terminal itself is the result of four years of development, with planning starting in 2010 and involving preparation, design, tenders, contracts, construction and finally the serving of oil traders and oil marketers. This shows that Cyprus was the right choice for VTTI. George Papanastasiou Managing Director VTTV

Energy & Environment

Our aim is to make Cyprus even more attractive for foreign investment. As the economy continues to grow, it’s drawing more international attention from investors, developers and funds. Indicative of the positive climate, despite the difficult times the banking sector has been through, is that foreign investors are showing confidence in Cyprus by investing significant capital. Also on the rise is Cyprus’ energy sector, with international players relocating to Cyprus and hiring qualified staff from the domestic market. These efforts have the potential to transform the island into a regional energy hub. Stavros Pantzaris Country Managing Partner EY Cyprus

The island has also three projects that have won significant funding from ‘NER300’ – a financing instrument managed jointly by the European Commission, European Investment Bank and Member States. The Helios Power Project, EOS Green Energy Project and the Green+ SmartGrid Project have garnered a combined €117.8 million to develop innovative renewable ventures in Cyprus. However, the country’s national grid system has certain intrinsic and technical limitations affecting RES penetration and reliability of the energy system – such as the lack of interconnections to the trans-European electricity networks, a limitation to the amount of intermittent renewable energy that can be connected to the electricity system, and a lack of RES installations with storage capability. To tackle these problems the country is exploring ways to introduce smart grids in the national network and is on the look-out for projects that could facilitate energy storage, and ventures that have production on a 24-hour basis. Also the EuroAsia Interconnector could bring more solutions in its wake. The island is already one of the highest users per capita in the world of solar water heaters in households, with over 90% of households equipped with solar water heaters and over 50% of hotels using large systems of this kind. With almost year-round

Existing RES Projects Total Installed Capacity Annual Production (Jan-Sept 2016) Projects connected to the grid Source: Deloitte 2016

Wind Farms

Photovoltaic

Biomass / Biogas

157,5MW

50,5MW

9,7MW

179.195,2 MWh

74.002,4 MWh

27.548 MWh

1.918

sunshine, Cyprus certainly has plenty of energy to harness, but competitive energy storing capabilities are crucial in order to fully tap into its solar potential and facilitate better RES penetration. There is still much ground to cover in terms of renewable energy production, but international interest in developing the sector in Cyprus has been on the rise. In this respect, the production of renewable energy is expected to experience considerable growth in coming years, and significant investment is required for Cyprus to achieve its targets – opening the field for companies with expertise in renewables. Liberalising the Market

The Cyprus Energy Regulatory Authority (CERA) has worked towards the full opening up of the energy market and granting consumers the right to choose their own supplier – with expectations of a full liberalisation by May 2019. CERA’s proposition is a ‘net pool’ model, where the operations of the state power company, EAC, are unbundled and the production and supply operations separated. EAC production would then enter into bilateral agreements with suppliers for the sale of energy at regulated prices. However, these plans have experienced some resistance from unions, as they are seen as moves which could put pressure to privatise the state power company. Exciting Future Prospects

Cyprus’ energy developments have certainly placed the country centre stage with the unfolding discoveries in the Eastern Mediterranean. Offering a stable and secure base in an increasingly turbulent region, Cyprus is also a convenient location to set up operations for various auxiliary services to the energy industry and for company headquarters to support activities in the EMEA region. Utilising its own resources, Cyprus could also have a unique opportunity to develop the downstream petroleum industry, such as petrochemicals, according to industry professionals, who have been calling for the national framework to include the formation of a comprehensive operational strategy for the sector. Furthermore, the country’s excellent infrastructure and business environment, coupled with an advantageous tax and legal framework, establishes it as a competitive and efficient location for multinationals. The developing oil and gas sector and the still relatively untapped potential in renewable energy offer expanding opportunities, and Cyprus will need investors and partners to fulfil its ambition to become a regional energy hub. n Discover more at

www.cyprusprofile.com

Country Report CYPRUS 2017 95

Health

HEALTH

Healthy Prognosis With internationally trained health professionals and world-class medical research, Cyprus can legitimately claim to be a top destination for wellbeing.

he health sector in Cyprus is at an exciting turning point, with final moves to roll out a new national health scheme (NHS) â&#x20AC;&#x201C; a process that will see the complete overhaul of the sector through a comprehensive modernisation of care and services. The restructuring, which is set to be fully completed by 2020, will bring with it substantial upgrades and automation. However, outside its borders, Cyprus is perhaps better known for its world-class medical research and top-notch health professionals, which is also paving the way for the island to become a popular destination for medical tourists. Most professionals in Cyprus are educated at reputable universities in the UK,

Country Report CYPRUS 2017

Greece, Western Europe, the US and Russia, an influential factor in the strong development of the countryâ&#x20AC;&#x2122;s private sector. In Cyprus, healthcare is provided by both the state and the private sector, with an impressive 74 private hospitals and clinics. The presence of numerous prestigious private healthcare facilities significantly enhances the islandâ&#x20AC;&#x2122;s reputation as a centre for medical excellence and highlights the opportunities available to foreign investors. The island has also opened more opportunities for foreign doctors to carry out procedures in the country, a move that is fostering more cooperation in the international medical field.

MEDICAL TOURISM Popular treatments in Cyprus: check-ups & diagnostic tests elective surgery dentistry cosmetic & plastic surgery fertility treatments eye surgery rehabilitation

Health

infrastructure, hospitals, laboratories and other diagnostic Government The public sector is highly cencentres. Services are relatively Ministry of Health tralised and most planning, oraffordable and easily accessiwww.moh.gov.cy ganisation, administration and ble. These aspects coupled with regulation is under the responsiits large pool of highly eduAssociation bility of the Ministry of Health. cated healthcare professionals The Cyprus Health Service It is exclusively financed by the and expert services, are rapidly Promotion Board www.cyhealthservices.com state budget, with services proestablishing the island into a vided through a network of hoscentre for medical tourism in pitals and health centres directly the Mediterranean region and controlled by the Ministry. Substantial investment beyond. The country’s ideal climatic conditions in the state sector has meant that procedures such throughout the year make it an attractive destinaas kidney transplants and open heart surgery, tion, where patients can combine treatment with a which once necessitated a journey overseas, are holiday and recovery with relaxation. The majority now routinely carried out within Cyprus. The of medical tourists come from the UK, Germany, private system is financed mostly by out-of-pocket the Netherlands, Russia and the Middle East and payments and to some degree by voluntary health most seek either dental or cosmetic procedures. insurance (VHI). It largely consists of independent However, increasing numbers now visit Cyprus providers, and facilities are often physician-owned for fertility treatment, while the island is gaining or private companies in which doctors are usually a reputation for other specialist procedures such as shareholders. cancer surgery, minimally invasive spinal surgery and facial reconstruction. Healthcare Excellence

Cyprus is in the process of implementing a new National Health System (NHS), upgrading facilities and providing better healthcare at lower cost by implementing e-Health applications. The establishment of medical schools in Cyprus is a decisive step in the ongoing process of improving the sector and proving a catalyst to boost the economy as well as research and innovation. With our highly skilled medical staff, excellent clinics, well-structured private healthcare sector and wide range of treatments, Cyprus has the potential of becoming a strong player in medical tourism in the region. Cyprus is as competitive as ever and back in business. George Pamborides Minister of Health

Cyprus offers highly educated healthcare professionals, world-class awarded wellness centers, state-of-the-art private hospitals and clinics, cost-effective procedures and an ideal yearround climate for recuperation/ rehabilitation. Investments in the construction of rehabilitation centers and medical/health holiday resorts are also areas of great opportunity. Major projects are currently underway, worth more than €8 billion. We see 2017 as a landmark as we will put into practice our newly developed strategy aiming to promote specific treatments at targeted destinations. Polis Georghiades President Cyprus Health Services Promotion Board

Key Players

Building an Efficient NHS

Attracting Foreign Talent

Plans to roll out the much-anticipated and needed NHS are in the pipeline, with aims to bring longoverdue streamlining to public healthcare services. Cyprus has been working overtime in a bid to reform the sector and create a system that provides affordable care by reducing the cost of quality healthcare to all. A top priority for the government and the Ministry of Health in 2017 is to make healthcare more patient-oriented, reliable and accessible. In the short term, steps have been taken to reduce patient waiting time through the introduction of minor injuries units and an automated bed availability system, and, in a separate development, the Ministry of Health has embarked on an ambitious programme to computerise medical provision and develop an integrated e-Health monitoring system. This will involve the introduction of digitised health records, the expansion of medical services to remote areas via telemedicine and robotics, and access to international medical data banks. In this context, an investment opportunity that could be tapped into is e-Health solutions, which will be the cornerstone for the new NHS.

The Cyprus government took a decisive step to promote medical tourism as well as cross-border medical cooperation in 2013, by welcoming doctors worldwide to also conduct procedures in Cyprus. Doctors from Israel, the United States and other non-EU member states are now allowed to provide services in Cyprus, under certain conditions, with procedures overcoming bureaucracy and delays. This decision not only promotes medical tourism and generates income mainly for private hospitals, but also promotes further training and knowledge exchange for Cypriot doctors, with a number of hospitals becoming centres of excellence for the Eastern Mediterranean region, the Middle East and Europe. Cyprus is also gaining a reputation for other specialist procedures. A vast array of quality medical treatments for patients from all over the world are offered in Cyprus, from basic check-ups and diagnostic tests to major surgery, kidney haemodialysis, transplants and cardiothoracic surgery procedures, orthopaedic, musculoskeletal surgery and many more.

Growing Medical Tourism

Innovative Education and Research

On a global scale, the world medical tourism industry is worth as much as US$40 billion and accounts for approximately 2.5% of international tourism revenue – with positive future growth prospects. Medical tourism is a highly viable sector to develop in Cyprus, as it has excellent medical

Cyprus has a great number of recognised researchers, with tremendous contribution to medical science. More recently, the establishment of medical schools on the island has been a strategic move in the ongoing process of improving the sector, as well as fostering international research Country Report CYPRUS 2017 97

Health

One of top 3 countries in terms of MRIs (19.9) and CT scanners (32.8) per million population

and innovation. Over the last five years, three medical schools, one public and two private, have been established in Cyprus – all affiliated with hospitals throughout Cyprus. The country’s development as a centre for medical excellence received a significant boost with the launch of a four-year postgraduate Bachelor of Medicine and Bachelor of Surgery (MBBS) course at the University of Nicosia (launched autumn 2011). The qualification combines the convenience of training within Cyprus, with all the benefits involved in accessing international expertise. It arose from a unique collaboration between the University of Nicosia and St George’s Hospital (University of London) and it is expected that in time its graduates will make a significant contribution to medical research on the island. Over the past 25 years, Cyprus has made highly commendable achievements in the fields of medical research and innovation. Pioneering research work has been undertaken at the Cyprus Institute of Neurology and Genetics, which has developed a ground-breaking, non-invasive prenatal test for Down Syndrome. Research in the biomedical field has had a tremendous increase, especially in the field of genetic diseases, hereditary cancer and biotechnology. These ambitious research projects, funded by both local and foreign sources, mostly through the EU, resulted in data and new knowledge benefitting both the local and international community. The top-quality academic work in Cyprus is evidenced by important European funding, including 10 European Research Council

(ERC) grants, hundreds of high-impact publications in international peer-reviewed journals and invitations to present their work at major medical conferences around the world. New Opportunity: Medical Cannabis

Another recent interesting initiative, is a plan by the Health Ministry to introduce legislation for the cultivation and trade of medical cannabis. Apart from the benefits it would bring patients – a number-one priority – it would also bring a boost to the economic development of the island, as well as attract significant foreign investment for the entire production chain.

Cyprus is fast becoming the preferred medical tourism destination and is developing into a world class medical hub, demonstrated by the enormity of foreign investment in the health sector, particularly surgical and rehabilitation services. At Salus, we contribute to this boost by hosting international academic programmes with our leading surgeons, which serve as a platform to promote surgical excellence and innovation in our region, capably providing excellent healthcare to patients. Claire Makrides Director Business Development Salus Medical Solutions

Healthy Vital Signs

The calibre of healthcare in Cyprus is truly remarkable. The combination of internationally experienced personnel, advanced technological capabilities, and cost-effective, world class medical services mean that this sector will continue to flourish and expand. The worldwide health workforce shortage challenge may emerge as an opportunity for this growing educational industry in Cyprus. The country’s geographic position and EU membership provide opportunities for well-trained students, originating from third countries, to acquire qualifications recognised by the EU. Cyprus has the potential of developing the sector even further and establishing itself as a strong player in the health and medical fields in the wider region. n

We believe health and education go hand in hand. Applying our philosophy of promoting creativity and education in medicine during 2017, we are focusing on serving regional surgical demands. By hosting a series of specialist medical conferences, we are creating a surgical training ground for international specialists and their patients. We shall continue achieving recognition for our diversity, fast becoming the leading specialised MIS surgical facility, locally and internationally. Notis Zannetos General Manager Mediterranean Hospital of Cyprus

Hospital Beds

Practicing physicians

Practicing nurses

(1525 in the public sector and 1413 in the private sector)

3.4 physicians per 1000 population (OECD average: 3.3)

5.0 nurses per 1000 population (OECD average: 8.8)

2,938 2,907 4,304 Discover more at

Country Report CYPRUS 2017

Infant Mortality Rate

1.6/1000 living births (2012) (EU28: 3.9)

www.cyprusprofile.com

Insurance

INSURANCE

A Return to

Growth The Cyprus insurance industry saw improving growth rates across the board in 2016, with the next two years expected to continue on an upward trajectory. A number of renowned foreign insurers successfully operate on the island through their branches and subsidiaries, and with more market consolidation coming into play, large insurance firms with high capital are set to reap the benefits.

s an EU member state, Cyprus offers insurance and reinsurance companies a straightforward and transparent framework in which to offer cost-effective services in both the domestic and international markets. With over 30 insurance companies operating on the island today and several hundred EU insurers registered to carry out business in Cyprus, competition is fierce in the local market. However, opportunities do exist, par100

Country Report CYPRUS 2017

ticularly in creating innovative services and products, as well as in developing new synergies and using the country as an advantageous gateway to expand business into new markets. EU passporting rights have long attracted international industry players to the country, and Cyprus is positioning itself to play a key role serving the markets of the Eastern Mediterranean, Middle East, Russia and the CIS region.

33 Insurance Companies

Insurance

The Cyprus economic recovery gained steam in 2016, with GDP forecasted to grow by 2.8%. This was driven mainly by the tourism and services sectors. Tourist arrivals reached the record level of 3.2m for the year. Even though the economy is expected to continue to grow at healthy levels similar to 2016, non-performing loans and private and public debt remain the primary challenges. The insurance industry has stabilised further in 2016 and small growth is expected in premiums. Increased regulations and the persistent low-yield environment remain the primary challenges. Artemis Pantelidou Vice Chairperson Insurance Associaion of Cyprus (IAC)

The Cyprus insurance sector remains one of the largest institutional investors, managing assets worth around

€2.35 billion

International Influence

Rising Premiums

As a former British colony, insurance in Cyprus was mainly provided by the large UK insurance houses, represented by agents in Cyprus. The companies themselves were registered in England under the English Insurance Law. It was not until the late 1960s that the country passed the Insurance Companies Law, allowing the establishment of local insurance firms, which led to several agencies transforming into fully-fledged independent companies. Developments since then have seen both the number of insurers and the volume of business increase considerably. The introduction of the modern risk-based EU regulatory system, known as Solvency II, as well as a migration to more technologically advanced systems, along with a broader offering of top-quality products, have all helped transform the Cypriot insurance sector. Today, the domestic insurance sector is considered to be highly competitive due to the large number of insurance suppliers on the island in relation to the size of the population. There are 33 insurance companies operating in the domestic market, all regulated by the Superintendent of Insurance at the Ministry of Finance, while the Insurance Companies Control Service (ICCS) assists in the supervision of the insurance companies.

Over the years the industry has developed impressively, and the Cyprus insurance sector remains one of the largest institutional investors, managing assets worth around €2.35 billion. Although the international financial crisis and subsequent 2013 Cyprus banking crisis took its toll, the insurance industry has finally started to see a return to growth. During 2016, the industry saw a boost in all classes of business, with total written premiums increasing by 2.6% compared to 2015, and reaching €764 million. This is a significant rise when compared to 2015, which saw only a marginal growth rate of 0.7%. Also non-life business grew by an impressive 4%, compared to a modest 0.4% in 2015. The key contributors to this growth were the strong 15% rise in health insurance business and a 2.9% increase in motor class business. The life business has also kept on a steady growth path, although registering only a marginal increase of 0.7% in 2016, but the Insurance Association of Cyprus (IAC) is optimistic about the industry achieving better results in 2017 and 2018. As for claims and benefits in 2016, the sector paid an average of €1.3 million a day, bringing total payments to €472.5 million – representing an increase of 3.6% over the previous year.

Market Leaders

Robust Regulation

Some of the largest insurance companies operating within Cyprus are subsidiaries or affiliates of banks, although following current international trends, many are making efforts to break away and form new companies independent of the banks. Currently, around 470 EU insurance companies are exercising their right to provide cross-border services in Cyprus. Insurance experts estimate that this type of business will see further expansion in the coming years, and although small compared to its European peers, Cyprus’ insurance sector has solid foundations, a proven track record of withstanding both external and internal shocks, and has optimistic long-term growth prospects. Industry leaders believe that the coming years will also see a major shift in attitude and a corresponding increase in underwriting in Cyprus, where the penetration rate for insurance policies has historically been lower than in other countries, particularly in Western Europe – demonstrating there is potential for growth. Currently the contribution of the domestic industry to the island’s GDP is around 4.2%, compared to an EU average of 6.9%.

The European insurance landscape is experiencing a wave of new and extensive regulatory requirements, mostly coming from EU directives. Overregulation has become a new reality and poses a real challenge for all European insurers, and especially for small markets like Cyprus. However, despite its size, the country has a large pool of professionals who are well prepared to face the continuously growing regulatory burden. Following the challenges of transposing and implementing Solvency II – the largest-ever change to European insurance solvency regulations – the industry is now tackling a number of new and important legislative instruments. A game changer and at the top of the agenda for 2017, is the new EU Directive on Insurance Distribution, together with numerous accompanying implementing measures. Also the EU’s Packaged Retail and Insurance-based Investment Products (PRIIPs) regulation is of paramount importance, as it introduces new requirements to pre-contractual information of investment-linked insurance products – which should be successfully implemented as it comes into force by the end of 2017.

Country Report CYPRUS 2017 101

Insurance

Cyprus could serve as an insurance hub. Its strategic location and EU membership, as well as the large pool of insurance professionals, low taxation and multicultural society are certainly positive factors to be considered. Insurance and reinsurance companies from the Middle East, Africa, Asia and CIS region can either be headquartered in or operate through Cyprus to serve EU and vice versa. Christos Christodoulou CEO - Trust Insurance

€764 mn

total written premiums (2016)

rise in non-life business (2016)

0.7%

rise in life business (2016)

15%

rise in health insurance business (2016)

2.9%

rise in motor class business (2016)

The Cyprus insurance industry is also closely monitoring changes emanating from the new EU Data Protection Regulation, and is preparing a phased implementation by gradually adjusting to the new rules to be ready to hit the ground running when the regulation comes into effect in May 2018.

Key Players Government Ministry of Finance www.mof.gov.cy RegulatorS Office of the Superintendent of Insurance (Ministry of Finance) www.mof.gov.cy

ers doing business in the Middle East and Africa, Cyprus is especially advantageous, due to its close proximity and excellent relations with these countries. Mergers and Acquisitions

Increasing global regulatory changes and intensifying competition could also give impetus Industry Association to more mergers and acquisiOpportunities from Insurance Association tions in Cyprus over the next few Pensions Reform of Cyprus (IAC) years. Given the high number www.iac.org.cy of companies competing in As Cyprus tackles the chalthe sector, more consolidation lenge of an ageing population, is expected in the near future, pension reform is high on the agenda, and presents an opportunity for insurers thereby reducing the number of current players to broaden their horizons and become active in a in favour of larger sized insurance firms with high field that has remained off-limits due to legal and capital. tax barriers. 2016 marked an important shift, with barriers lifted in regard to the provision of occupa- Going Global tional pension schemes, enabling insurance companies to offer more product choices to both em- Cyprus’ insurance landscape is an interesting ployers and employees. The move has underlined area of the island’s diversified financial services the government’s recognition of the important role industry, being equally attractive to both EU and private insurance can play in ensuring sustainable non-EU based insurance companies and managand sufficient pensions. With a legal framework ers. The country aims to become a centre for infully compliant with EU directives and employ- surance management and reinsurance activities, ing best practices, Cyprus is now promoting itself encouraging companies to choose Cyprus as their as an international hub in the investment pension regional headquarters. As many Cyprus-based market, which could also enhance current efforts companies already attest, having a business base on to market Cyprus as an emerging funds jurisdic- the island offers the benefit of easy market access, tion. the services of a large pool of highly qualified insurance and finance professionals, and a competitive operating environment in an established interSophisticated Products national business centre. Among the most attractive aspects is Cyprus’ Cyprus offers a wide scope of insurance products, ranging from the more traditional third party tax system. The strong network of double tax motor insurance – the biggest class of the sector – agreements, the absence of tax on capital gains, and to more niche products such as cyber insurance. the participation exemption for dividends – both However, new opportunities to expand its product receivable and payable – without onerous condioffering exist in developing the aforementioned tions and without any thin capitalisation rules, occupational retirement provision, as well as in have already made Cyprus a location of choice for looking at ways to grow captive insurance and other group insurance operations. While Cyprus’ domestic market remains small niche business. As a cost-effective EU jurisdiction, Cyprus already has all the necessary features in by international comparison, the island’s insurplace to attract more captive business, but industry ance industry believes the reservoir of experichiefs say the country needs a more government- ence of its qualified professionals gives it an edge led approach to promote the island internation- when seeking to attract international insurance ally as a captive business destination. For foreign management and reinsurance operations to the insurers in particular, compelling reasons include island. Cyprus’ EU membership and strategic lothe ease of operating in Cyprus’ business-friendly cation offer great potential for companies seeking environment, the Solvency II framework and its to expand into the EU and surrounding markets European-based legislation, EU passporting rights, of the Mediterranean region, while simultaneously and the country’s beneficial tax regime. For insur- enjoying a host of fiscal advantages. n

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Country Report CYPRUS 2017

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International Financial Services

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International Financial Services

C Cyprus’ financial market continues to attract increasing international interest from investors and entrepreneurs looking to set up companies for the provision of investment services. The growth prospects of the financial sector are undeniable, particularly in the area of collective investment funds and asset management, one of our top priorities. At the same time, we actively embrace new financial technology infrastructure projects, products and services, with emphasis on those which can finance startups that offer innovative products. Demetra Kalogerou Chairperson Cyprus Securities and Exchange Commission (CySEC)

yprus has spent decades building an economy based on the provision of top-quality professional services, and is recognised internationally as a leading provider of corporate structuring, international tax planning and other financial services. It has certainly proven its relevance as it continues to be one of the fastest growing sectors, rising by 6% in the first three quarters of 2016, building on its success in 2015, when it grew 4.5% compared with 1.7% of the economy as a whole. Since gaining EU and eurozone memberships, in 2004 and 2008 respectively, Cyprus has constantly enhanced its appeal and transformed from an outpost into a key services hub in the Eastern Mediterranean, serving as a business bridge between Europe, the Middle East, Africa and Asia. The country’s efforts to streamline its business environment have seen success. The added convenience of English as the business language and the internationally-trained service providers – mostly educated in the UK or the US – have created a global outlook in the local industry to best serve their clients worldwide. As a stable and neutral country, coupled with an EU and OECD-approved tax system and one of the lowest corporate tax rates (12.5%) in Europe, Cyprus has become one of the most attractive international business centres in the region. At Your Service

Cyprus offers practical and effective solutions for both international corporations and private clients focused on wealth creation and management, tax compliance and straight-forward profit extraction. Non-doms legislation introduced in 2015 has made Cyprus even more attractive for HNWI and ultrahigh-net-worth individuals, while lifestyle advantages and other tax incentives, for corporates and highearning expats, are compelling more and more companies to set up regional offices on the island. Nicolas Theocharides Board Member Invest Cyprus

With over 80% of the economy based on services, Cyprus has a wide range of expertise and experience to cater to the needs of international business. For companies and individuals requiring an ideal location to structure their investments into Europe, the Middle East and Africa, as well as Russia and Eastern Europe, Cyprus offers unique benefits that have already attracted thousands of companies. Key activities include international business structures such as holding and finance companies, shipping companies, forex and investment firms, trusts and investment funds. The most dominant activities include using Cyprus as a holding and finance company jurisdiction, thanks to the numerous tax benefits provided under Cypriot law. Cyprus has proven itself a resilient and dynamic business centre, and although it is one of the smallest EU member states it has one of the fastest growing economies in the European Union. The country continues to offer one of the most pro-business,

international and cost-effective environments in Europe and with hydrocarbons exploration in its waters gaining momentum and drawing significant foreign investment, Cyprus’ energy knowhow and service base are also set to expand further. Solid Foundations

Cyprus’ geographical location and thousands of years of trading with its neighbours has shaped the country into the strong contender it is today. Since gaining independence from Britain in 1960, Cyprus focused on laying the groundwork to establish a services-based economy. Over the years, its favourable regulatory regime, experienced law firms, accountants – including the long-standing presence of the ‘Big Four’ audit firms – and professional services providers have further strengthened the country’s position as a key corporate location. International companies have been quick to identify the opportunities of setting up corporate structures in Cyprus and using the country as a launch pad to manage their investments. As a jurisdiction, Cyprus has various unique characteristics. It has one of the most advantageous EU tax frameworks and its legal system is based on English Common Law. Cyprus follows the International Financial Reporting Standards (IFRS), and its legal system is fully compliant with the EU, the Financial Action Task Force on Money Laundering (FATF), OECD, FATCA, the Financial Stability Forum laws and regulations and EU AML directives. The island is part of the EU, the eurozone and the Commonwealth and has the advantage of being positioned strategically between three continents – Europe, Africa and Asia. Cyprus already hosts hundreds of thousands of registered companies from across the world, and today registers over 1,000 companies per month. Foreign businesses have long been attracted to the jurisdiction for its world-class business services and preferential access to highgrowth markets, its highly educated and multilingual workforce, as well as its advanced telecoms and Double Tax Treaties (DTTs) with 60 countries. An added benefit for foreign business will be the launch of a One Stop Shop and efforts by the Registrar of Companies to reduce the time to set up a company to one day, which will make the process of doing business in Cyprus even more efficient. Country Report CYPRUS 2017 105

International Financial Services

Holding & Trading Companies

Cyprus continues to be one of the leading jurisdictions used by blue-chip corporations and corporate planners to establish holding, trading and investment companies to channel investments into key markets worldwide. The current double tax treaties include most major Western ‘high-tax’ countries, Russia, the majority of Central and Eastern European states, China, Iran and India. The popularity of the Cyprus Company has seen the jurisdiction grow to be one of the largest single foreign investors in Russia, Ukraine and India, and is uniquely used by local and foreign investors as a key pillar in their investment planning and tax strategies. Regional Headquarters

In addition to maintaining its pole position as a top holding and trading company jurisdiction, Cyprus’ comparative advantages have also strengthened the country’s status as an attractive headquartering location – especially with the global changes in regulation and the increasing demand for companies to create business substance. An added benefit to the country’s offering is the launch of new legislation and tax incentives for high-net-worth individuals and high-earning expat executives, providing a 50% exemption on personal income tax for those earning more than €100,000. Many multinationals already use Cyprus as an administration, sales and marketing centre to manage and launch their products or services into regional markets. Companies such as NCR, Kardex, Weatherford, AMDOCS, BS Shipmanagement and Wargaming have all established headquarters on the island. Evidence of Cyprus’ appeal as an HQ location is also the thriving forex industry and the strong shipping sector. The success of shipping, an industry which contributes approximately €1 billion each year to the economy, has also developed clusters and auxiliary services – a model that could be successfully replicated for the budding oil and gas sector. Banking

Cypriot banks have demonstrated their resilience in the wake of the financial crisis and most industry professionals believe the overhaul of the industry and its institutions has produced a more efficient banking sector. Successful recapitalisations, credit rating upgrades and positive bank results have marked a new beginning for the sector, which is opening up to expanding opportunities and attracting significant foreign investment. Cyprus’ banking sector is comprised of two tiers: domestically-oriented banks and international banks. The main domestic credit institutions include Bank of Cyprus, Cooperative Central Bank, Hellenic Bank 106

Country Report CYPRUS 2017

and RCB Bank. The list of banks of foreign origin in Cyprus consists of around 30 institutions, which mainly carry out international banking business and have limited interaction with the domestic Cypriot economy. Banking in Cyprus is regulated by the Central Bank of Cyprus and the European Central Bank, and is fully harmonised with EU legislation and directives, while commercial banking arrangements and practices follow the British model. Favourable Trust Regime

With an industry valued at more than €1 trillion globally, the importance of trusts in financial planning is undeniable. Cyprus has one of the most modern and favourable trust regimes in Europe and with an updated legal framework, the Cyprus trust has become an instrument of choice for many wealth advisors. The Cyprus Trust can be used in a range of international structures, because it is flexible enough to accommodate the objectives of the most demanding client. These include: discretionary trusts, fixed trusts, trading trusts and purpose trusts. The main uses for Cyprus Trusts include asset protection, estate and tax planning, charitable/purpose, confidentiality, wealth management/ investment, share ownership/pension fund, insurance and protection against exchange control. Cyprus has a liberal tax system, under which the income of an international trust is tax exempt as long as it is earned outside of Cyprus. Refined Wealth Solutions

An increasing number of high-net-worth individuals are discovering Cyprus as the ideal place to live and work, through a number of flexible and competitively priced structures combining investment flexibility with tax advantages. Cyprus is also attracting wealthy individuals wishing to relocate to the island and take advantage of favourable citizenship and residency schemes. With an extensive banking network and the availability of a variety of investment vehicles, Cyprus is a natural hub for wealth management and family offices. Intellectual Property

As one of the most valuable assets for businesses, choosing the right Intellectual Property (IP) regime is becoming increasingly vital. With an effective tax rate of 2.5%, Cyprus offers one of the most attractive IP locations in the EU. The IP Box Scheme is a package of incentives and tax exemptions for income from intellectual property rights, intended to encourage investment in research and development. The Cyprus corporate income tax rate at 12.5% would normally apply to 100% of net

Investing in Cyprus goes beyond the direct benefits. It offers the possibility to use fiscal and legal tools of proven efficiency and collaborate with professionals of the highest standards. From arbitration to the IP regime, Cyprus has continuously refined its offering and attractiveness to foreign markets and is set to become a hub for a wide range of activities, with remarkable prospects in medical tourism and health technology. Yiannos Georgiades Advocate & Legal Consultant Y. Georgiades & Associates LLC

Cyprus’ economy is experiencing significant positive growth rates in the last quarters, indicating that confidence is gradually being regained. The professional services, shipping and tourism sectors have proved extremely resilient and continue to positively contribute to GDP. The number of companies registered in 2016 increased by more than 20%, demonstrating the dynamics of the professional services sector. Cyprus is also updating legislation for mutual and alternative investment funds, which will establish our country as an attractive European fund jurisdiction. Angelos Gregoriades Chairman KPMG Cyprus

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International Financial Services

profits produced. However, following the applicable tax exemptions, only 20% of the profits will be taxed. Cyprus’ efficient IP tax regime coupled with the protection offered by EU and all major IP treaties and protocols to which Cyprus is signatory, establishes the country as a highly attractive jurisdiction for the acquisition or development of IP assets.

reaching around €3 billion, and foreign UCITS are widely marketed in Cyprus, including ones promoted by international financial institutions such as JP Morgan, UBS and Julius Baer. Insurance

Cyprus has numerous big-name insurance companies offering a wide range of services and products for both individuals and international busiCyprus’ investment fund sector is poised for ness. Although this sector has traditionally been growth with the modernisation of its regulatory more focused on the local market, the industry framework and updated legislation set to come is increasingly looking at expanding cross-border business and synergies to estabinto play in 2017. The number Key Players lish Cyprus as a gateway into of funds is expected to surge neighbouring markets. Deposits and the sector has the potential RegulatorS maintained by insurance busito develop into a multi-billionCyprus Securities and nesses and pension funds reeuro industry. The island is curExchange Commission mained at similar levels in 2016 rently emerging as an interesting www.cysec.gov.cy and 2015, at €1.94 billion and EU-regulated jurisdiction for Cyprus Bar Association €1.96 billion respectively. There the global asset management www.cyprusbarassociation.org is room for growth in the sector industry. Today, the majority and the potential for Cyprus to of alternative investment funds The Institute of Certified Public develop into an insurance hub in Cyprus are of a small and Accountants of Cyprus (ICPAC) and a convenient regional headmedium size and focus on debt www.icpac.org.cy quartering location for interand equity securities, real estate Associations national insurance companies. and private equity. However, Cyprus Fiduciary Association Cyprus has also made pension Cyprus has also attracted larger www.cfa.org.cy reform a key aspect of its nationfunds including one with assets al structural reform programme of €500 million under manageAssociation of Cyprus in a bid to streamline benefits, ment. The number of funds International Investment Firms address weaknesses and to boost under management has already www.aciif.org competitiveness and growth. tripled in the last five years, Investment Funds

As the tax environment changes, it is important for fiduciary service providers in Cyprus to support business needs and focus on substance services. There are many opportunities in diversifying into additional niche services such as yacht registration, fund services and making Cyprus an even more attractive jurisdiction for HNWIs. The economy, and in particular the financial sector, will continue to recover and grow its appeal to foreign investors that seek safety of capital. Gerard Jan van Spall Managing Director Vistra Cyprus

I expect further improvement in Cyprus’ economic climate in 2017, but the Automatic Exchange of Information for Tax Purposes, FATCA, CRS, and the OECD BEPs project are our immediate challenges. This will mean fewer clients for all, but we’ll need to provide more complex advice and turn our focus to other fields, such as expanding our services to the fund industry. Cyprus is fully transparent and compliant with international regulations, directives and agreements, which help the financial services sector to expand. Yiannis Demetriades Chairman STEP Cyprus

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International Financial Services

Cyprus is well positioned to maintain its status as a reputable, attractive business centre. It has an excellent tax regime, backed by an EU-compliant legislation and bilateral and international treaties. International enterprises find that Cyprus is one of the best places to set up activities, be it headquarters, shared services hubs, sales and marketing operations, or other functions. This is a growth area, together with the strong drive to make Cyprus’ advantages known to the global funds industry, where the island aspires to become a strong regional player. Demetris Vakis President Institute of Certified Public Accountants (ICPAC)

As the priorities of the international investors change, new opportunities are created around enhanced substance requirements and value-added M&A support and other services, which Cyprus can certainly meet through our competitive advantage of high-quality and cost-effective professional and financial services. With more foreign direct investment reaching Cyprus, structures like local funds can support FDI in Cyprus and the professional services sector can expand its scope and build expertise as well as reputation to attract more business in this high-value and growth industry. Christos Michael Managing Director First Names

Foreign Exchange

For more than 20 years, Cyprus has been the jurisdiction of choice for Foreign Exchange (Forex) brokers and the country hosts a thriving industry and headquarters for many global giants such as FXTM and FXPro. The last decade has seen particular growth in the number of retail forex brokers locating their operations to Cyprus, thanks to low corporate tax rates and the country’s excellent infrastructure. Another key advantage is Cyprus’ efficient regulatory framework under the supervision of the Cyprus Securities and Exchange Commission (CySEC), which is fully aligned with European MiFID regulations. Cyprus was the first in the EU to regulate the foreign exchange market and CySEC is credited for attracting foreign investors to set up Cyprus Investment Firms (CIFs). CySEC-regulated CIFs have multiplied from just 18 in 2003 to over 200 in 2016, while also expanding in size and types of investment services. The total volume of CIFs transactions at the end of 2014 amounted to more than €7 trillion and their total assets topped €21 trillion, which demonstrates the scale and growth of the sector. As a result, the contribution of CIFs to the Cyprus economy is substantial, providing valuable employment opportunities and enhancing local expertise in the provision of investment and ancillary services. With years of expertise and advanced infrastructure in electronic platforms, which have also contributed to the building of a successful binary options business, Cyprus offers strategic advantages that have positioned it among the most attractive destinations for international forex business. Binary Options

Cyprus is the world’s top regulator of binary options with some of the best brokers in the business operating from the country and licenced by the Cyprus Securities and Exchanges Commission (CySEC). The key to the country’s success in attracting binary options brokers to locate to Cyprus

can be attributed to the fact that CySEC was the first financial regulator to include binary options in the MiFID definition of financial instruments and as a result regulate the investment firms offering this product. Today, Cyprus’ binary options laws and brokers are some of the best in the world, and the jurisdiction continues to upgrade regulation and attract increasing numbers of firms seeking a CySEC license. As part of its continuous effort to enhance information disclosure, investor awareness and to improve supervision, CySEC has decided to formally bring binary options under its supervision, with the purpose of ensuring the maximum possible degree of investor protection. The Complete Package

Companies have long been attracted to Cyprus for a number of factors, and not all are tax-related. Cyprus has a high-quality of life, excellent infrastructure and the lowest crime rate in Europe. Fees are competitive and the quality of service is internationally recognised. Thanks to its location, Cyprus also enjoys business-friendly time zones, enabling international companies to do business with the East in the morning, Europe throughout the day and with the West in the afternoon. The country has a fully digital national network and a reliable, high-speed connectivity to other jurisdictions via satellite and fibre optic submarine cable systems. Its modern road network, extensive port facilities and two international airports, make travel and transport in and beyond Cyprus fast and economical. Cyprus’ offering of specialised and internationally recognised services, unrivalled access to key markets along with rewarding business opportunities has proven attractive for decades and continues to cater to the diverse needs of international companies and individuals – solidifying Cyprus’ reputation as an international centre of business excellence. n

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Country Report CYPRUS 2017 109

Investment Funds

INVESTMENT FUNDS

Emerging EU Fund Jurisdiction Cyprus is rapidly developing into a strong contender in the European investment fund landscape, and with assets under management tripling since 2013 the sector is poised for further growth.

he European asset management industry has seen formidable growth in the last few years. Net sales of European investment funds rose to an all-time high of €725 billion in 2015, and assets under management broke through the €12 trillion mark. This upswing has also been evident in Cyprus, where the local funds sector has been gaining momentum and boosting its prospects of becoming a multi-million-euro industry. The consistent efforts to modernise its regulatory environment for investment funds, has created a legal framework bearing hallmarks of the regimes in Luxembourg and Ireland, and has strengthened 110

Country Report CYPRUS 2017

Cyprus’ profile as an emerging European funds and asset management domicile. Assets under management have tripled since 2013 reaching almost €3 billion, and the country has seen a surge of interest and appetite from investors and fund service providers looking for new and interesting EU-regulated jurisdictions. The island offers both EU-regulated Undertakings of Collective Investment in Transferable Securities (UCITS) and Alternative Investment Funds (AIFs), and is confident that it will make significant progress in attracting more fund managers in the foreseeable future.

Key Players Regulator Cyprus Securities and Exchange Commission (CySEC) www.cysec.gov.cy AssociationS Cyprus Investment Fund Association (CIFA) www.cifacyprus.org

Investment Funds

Strong EU Legislation

The high level of net inflows in Europe into UCITS and AIFs in 2016, confirm the strong confidence investors have in European investment funds. In Cyprus, 2017 will see growth levels especially in the establishment of alternative investment funds and assets under management, due to various upcoming reforms aiming to optimise our regulatory, legal and tax structures. Cyprus is determined to create a solid investment fund framework that offers both confidence and legal certainty to investors. Angelos Gregoriades President Cyprus Investment Funds Association (CIFA)

The asset management industry is gaining important momentum in building a truly integrated Capital Markets Union in Europe. Asset managers have significant potential in providing new sources of funding for companies, stimulating long-term investment and strengthening Europe’s economy. For such potential to be further ‘unlocked’, regulatory stability, minimising of barriers to crossborder distribution and appropriate incentives for different investor groups are necessary. For Cyprus, a jurisdiction with a long tradition in the provision of professional services and a growing market for funds and management companies, all the right conditions are in place to meet the challenges of this changing landscape for the financial markets in Europe and worldwide. Agathi Pafili Senior Regulatory Policy Advisor European Fund and Asset Management Association (EFAMA)

The Cypriot regulatory authorities have worked persistently to bring the funds and asset management framework on par with other international jurisdictions. These efforts include the enactment of the Alternative Investment Funds (AIF) Law in July 2014, which replaced in its entirety the ICIS Law. ICIS wishing to continue operations in Cyprus under the new law converted to AIFs. The 2014 AIF law is set to see another upgrade in 2017, which will introduce new aspects to enhance the attractiveness of the existing framework – such as the introduction of a Limited Partnership (LP) with legal personality to allow for internally managed LPs, the introduction of a de minimis asset management regime for managers below AIFM thresholds and an unregulated AIFs regime under strict conditions. These improvements will create all the necessary preconditions for growing the collective investment sector, which is expected to contribute significantly to the economy and spark a surge in the number of funds. Cyprus also transposed the UCITS IV Directive in 2012, UCITS V in 2016, and the Alternative Investment Funds Managers Directive (AIFMD) in 2013, becoming the third country in Europe to transpose the latter. The island offers a European passport to the fund management industry, providing exceptional possibilities for cross-border and global fund distribution. This should bring more business to the country and attract both EU and non-EU firms keen to gain the badge of an ‘EU-compliant’ manager and access to European Union investors. Beneficial Framework

Many industry experts believe that UCITS will remain more of a niche market, while AIFs will continue to dominate the fund business in Cyprus. The country’s AIF laws provide for a framework that is as competitive as those of Europe’s main investment fund hubs like Luxembourg, Ireland and Malta. The new legislation increases Cyprus’ competitive offering by modernising the existing legal framework and opening the market to the registration of new types of funds. The AIF law also provides for the establishment of funds marketed to professional and retail investors, as well

as for the introduction of umbrella funds with segregated investment compartments. It has also expanded the scope of legal forms by introducing the Common Fund together with the existing legal forms of Variable Capital Companies, Fixed Capital Companies, and Limited Partnerships. Cyprus remains an excellent base for international business, with a skilled workforce and wide network of double-tax treaties. In the area of taxation, the jurisdiction offers one of the most attractive fund tax regimes in Europe – both at the level of the fund manager and investors, as well as at the fund. Single Regulator

The Cyprus Securities and Exchange Commission (CySEC) is taking steps to increase Cyprus’ appeal as a fund domicile. Regulatory power was previously shared between CySEC and the Central Bank of Cyprus, but with the implementation of the recent AIF framework, all regulation was brought under the aegis of CySEC, which has resulted in more streamlined procedures further enhancing Cyprus’ attractiveness as a jurisdiction. CySEC now regulates AIFs, UCITS funds, AIFMs and UCITS Management Companies, as well as MiFID regulated investment firms. Comprehensive Services

There is already a number of recognised fund service providers established in Cyprus, ranging from global names to local independent operators servicing all types of funds at very competitive rates. Set-up costs for a fund in Cyprus are significantly lower than in the more mature fund centres, essentially providing City of London services for a fraction of the price. In addition, the ‘Big Four’ accounting firms have a presence on the island, while a number of law firms are members of international networks, instilling confidence that Cyprus has the capacity and expertise to help the fund industry expand. Despite having a versatile industry cluster, Cyprus seeks to attract more service providers to the island in order to gain critical mass and to win a bigger share of the global funds business, and has introduced incentives and tax benefits for high-earning managers and high-net-worth individuals.

Why Cyprus? EU Member: Single market directives apply

Cost-effective jurisdiction

Established connections to diverse investor markets

Professional acumen in international structuring

Solid legal, regulatory and professional foundations

Tax breaks for high-earners and HNWIs

Country Report CYPRUS 2017 111

Investment Funds

CIS

400+

million people

Cyprus assets under management

€2.9m

500+

(June 2016)

million people

MENA

300+

million people

Target Markets

A Future in Funds

Cyprus has set its sights on establishing itself as a world-class fund jurisdiction, and with its upgraded legislation and increasing inflows of foreign investments, the country is well on its way. Adding to its appeal, the island’s economy is expected to grow by around 3% this year, positioning Cyprus as one of the fastest growing economies in the EU. The country’s lower cost structure and distribution opportunities to a wide range of markets, including the EU, MENA, CIS and Russia, have rendered it a convenient and secure investment launch pad offering a multitude of advantages for business. Determined to build up this sector, the industry is also increasing its marketing efforts. The Cyprus Investment Funds Association (CIFA) was set up to raise awareness of what Cyprus has to offer among international managers, administrators and investors. An important milestone for CIFA was achieved in June 2016, when the National Association of the European Fund and Asset Management Association (EFAMA), the representative association of the European invest112

Country Report CYPRUS 2017

ment management industry, approved its full and formal membership. CIFA’s full EFAMA membership also provides a vote of confidence in Cyprus as an important European fund centre. The local fund industry is also a strong supporter of the Capital Markets Union (CMU) and welcomes the view of the European Commission to acknowledge the industry has a key role to play in this action plan, which includes lowering the regulatory costs of setting up funds and facilitating the cross-border operation of investment funds – and to make the European passport system function better for all types of investment funds. Cyprus operates within a regulated fund environment that is in tune with the requirements of the modern fund industry, and the continuous upgrading of its framework is expected to attract more players into the market. This type of growth will not happen overnight, but the fact that fund managers are increasingly moving to Cyprus demonstrates the rapid development of the sector. n Discover more at

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2017 will see Cyprus consolidating its remarkable recovery with solid growth in all business sectors. The resilient services sector is expected to continue growing based on traditional services, but also on new, the most important of which are services to the funds industry, where Cyprus is now competing for its deserved share. The exceptional quality of professional services and the ease of doing business under a common law jurisdiction is the guarantee for the success of Cyprus in the years to come. Christis M. Christoforou CEO Deloitte Cyprus

Manufacturing & Industry

MANUFACTURING & INDUSTRY

A Culture of

Innovation Advanced high-tech products are a top priority for Cyprus, with expectations that niche value-added manufacturing activities could facilitate a renaissance in productivity and innovation.

Country Report CYPRUS 2017 113

Manufacturing & Industry

yprus is the perfect base for the small-to-medium-sized manufacturer seeking access to both the European Union market of 500 million and the burgeoning markets of the Middle East, North Africa and Asia. Its strategic location, coupled with its sophisticated transport and logistics infrastructure, offers considerable advantages to the producer looking to expand into new markets. Companies forming links with Cyprus are able to benefit from the country’s EU and eurozone memberships and from numerous tax advantages. Businesses located in Cyprus are superbly placed to supply new and existing markets in the region, while benefiting from the island’s well-developed infrastructure and highly skilled labour force. Focus on High-Tech

Cyprus is radically restructuring its manufacturing base and actively seeking to attract new high-tech and knowledge-based industries. Regrettably, the sector has been hit hard by the economic recession of recent years. Prior to the 2013 bailout, Cypriot manufacturers were slowly emerging from a lean period when they were squeezed between highwage producers in the west using cost-efficient modern production techniques, and low-wage mass producers in South-East Asia. They responded by repositioning themselves to focus on higher-value niche production, more appropriate to Cyprus’ modern-day economy and its highly educated workforce.

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Key Products

From being traditionally agricultural, Cyprus embraced industrial development in the 1960s and today specialises in the manufacture of medium and high-technology products and semi-customised small-batch products. Main growth industries have been in ICT sector manufacturing parts, instruments and electronics, as well as consumer products such as food and cosmetics. Cyprus’ key industrial products are pharmaceuticals, food, beverages, chemicals, mineral products, machinery and equipment. Of these, only pharmaceuticals and non-metallic minerals have experienced growth in recent years. Today, manufacturing contributes approximately 5% of GDP and accounts for 9% of people in employment. The main destination for Cypriot manufactured exports is the European Union, which constitutes over 50% of the market, while exports to the Middle East make up around 15%.

Key Players AssociationS Cyprus Employers and Industrialists Federation (OEB) www.oeb.org.cy The Cyprus Association of Research and Development Pharmaceutical Companies (KEFEA) www.kefea.org.cy Cyprus Chamber of Commerce and Industry www.ccci.org.cy

Supporting SMEs

The majority of manufacturers are small and medium-sized enterprises (SMEs), which employ less than 10 workers. This makes the sector flexible and open to innovation. The government is seeking to improve SMEs’ access to finance and overseas markets, and to maximise the commercial potential of local research and development in order to open up untapped areas of productivity. The adoption of modern production technol-

Manufacturing

contributes approximately

of Cyprus’ GDP

Manufacturing & Industry

The industrial sector has the stamina, ability and potential to rebound and offer added value for employment, productivity, exports and most importantly to contribute significantly towards the improvement of the competitiveness of the Cyprus economy. For 2017, promising industrial sectors such as pharmaceuticals, food and beverages, chemicals, mineral products, industrial products of agricultural origin, should begin their gradual transformation from the traditional industry form to the digital one by using sustainable and new advanced technologies and methods. Christos Michaelides Chairman Cyprus Employers and Industrialists Federation (OEB)

ogies has already created new opportunities for traditional enterprises to compete globally and the sector is attempting to secure its future by establishing itself afresh in specific niche markets. The pharmaceutical and non-metallic mineral sectors have already succeeded in making this transition towards the provision of value-added products for a specialist market. Since 1999, both areas have shown consistent growth. In a bid to support SMEs, Cyprus also offers opportunities to make use of 10-year tax breaks for new exportorientated companies, access to training grants and soft loans, as well as funding opportunities for small start-up companies. Pioneering Pharma

Demonstrating consistent excellence and conformance to internationally approved quality standards, consumers are using and trusting Cypriot-made pharmaceuticals in over seventy countries worldwide. Cyprus is in a unique position to exploit its position in Europe with respect to the manufacture and distribution of pharmaceuticals. Cypriot pharmaceutical products can be found from the EU to Australia, Costa Rica, the Gulf and Middle East, Africa and all across Asia and the Pacific, establishing ‘Made in Cyprus, Made in EU’ synonymous with quality.

Success Stories

One such niche success story is leading Cypriot pharmaceutical company Medochemie Ltd, which develops, manufactures and distributes generic pharmaceuticals. It has nine plants in Cyprus, one in the Netherlands, and expanded still further, opening its eleventh plant in Vietnam. Copper mining and metallurgical production in Cyprus commenced 5,000 years ago, and although due to the size of the island there is limited scope for a big mining industry, a few players have been successful in Cyprus. Hellenic Copper Mines have the only active mine in Cyprus, constituting the world’s longest continuously producing copper mine with over 4,000 years of history. Due to the technical challenges of operating in a small market, the company places strong emphasis on innovation – an indicator Cyprus ranks well on – and was the first to introduce hydrometallurgy in Europe. Other areas of potential interest include the preliminary surveys done by mineral exploration company BMG, which is in the process of identifying sites for high impact exploratory drilling in the Kalavassos district of the Troodos Mountains. Food and beverage manufacturers are also attempting to grow and develop specialist markets for their products and are marketing halloumi cheese, olive oil, fruit and vegetable juices and wine to a more specialist customer base. Growth from Innovation

To continue to meet the rigours of the global market, Cypriot manufacturers are constantly following developments and technological advances in their field of activity, while the government continues to encourage manufacturing by improving the infrastructure and creating industrial parks and free industrial zones. Innovation is the pivotal driving force in this sector and could bring new opportunities and open new niche areas of industry. Also, due to the high cost of electricity production in Cyprus, the use and development of renewable energy is seeing a boost, with manufacturers striving to become self-sufficient and add value to the production process. However, the recent discovery of natural gas is expected to further facilitate innovation and growth within the manufacturing sector, with prospects of using the island’s own energy supply to lower the cost of production in the future. n

Hellenic Copper Mines

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Country Report CYPRUS 2017 115

Maritime & Shipping

Managing the

Worldâ&#x20AC;&#x2122;s Fleet An international maritime centre since antiquity, the strength, breadth and experience of Cyprusâ&#x20AC;&#x2122; shipping sector is attracting quality tonnage and increasing numbers of first-rate shipping companies from around the world.

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Maritime & Shipping

1st

130+

third-party shipmanagement centre in the EU

international shipping companies

shipmanagement companies

3rd

11th

largest ship register in Europe

22+

million gross tonnage

60+ largest fleet worldwide

25%

of worldâ&#x20AC;&#x2122;s fleet managed from Cyprus

of EU fleet

Country Report CYPRUS 2017 117

Maritime & Shipping

he maritime industry is one of Cyprus’ most successful export services, and with over 130 shipping companies, the island is considered one of the top global hubs for ship owning and shipmanagement services. The country’s maritime capital, Limassol, is home to some of the world’s most influential names in shipping. Today, Cyprus is the largest third-party shipmanagement centre in Europe and the largest crew management centre in the world, while the island’s international ship register is the third largest in Europe and the 11th largest in the world. Strong Maritime History

proximately €1 billion each year to the economy, accounting Government for over 7% of GDP (including Ministry of Communications auxiliary services) and directly & Works employing 4,000 shore-based www.mcw.gov.cy personnel and 55,000 seafarers from around the world. Cyprus Department of Merchant has built up an exceptional mariShipping (DMS) www.shipping.gov.cy time infrastructure and a high level of expertise, particularly in Associations the fields of surveying, ship-broCyprus Shipping Chamber kering and maritime insurance, www.csc-cy.org while the country’s legal, accounting, tax and IT professionCyprus Union of Shipowners als offer high-quality support www.cus.com.cy services to the sector. In addition, Cyprus’ low corporation tax of 12.5% and its extensive network of Double Tax Treaties (DTTs) with 60 countries, make it a tax-efficient business location. Key Players

Merchant shipping has long been of great importance to the island. A seafaring nation since antiquity and located along important trade routes, Cyprus has actively developed its shipping sector for decades. The international maritime industry began flocking to its shores in the early 1960s, when Cyprus introduced legislation providing ship managers and owners with a more tax-efficient business environment. This paved the way for the expansion of an industry that now contributes ap-

Shipping accounts for

of Cyprus’ GDP

(including auxiliary services)

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A Flag of Progress

The Cyprus flag is considered one of the highest quality EU flags available today, and ranks at the top of various Port State Control Agreement ‘white lists’ – including the Paris and Tokyo MOUs. An important factor in the development of the industry has been the support and lobbying efforts of the Cyprus Shipping Chamber (CSC) – essentially the voice of the resident industry – and the efficiency

Shipping is a formidable sector in Cyprus offering a number of advantages to companies worldwide. Cyprus is implementing various measures in cooperation with the private sector, to improve service to our clients and to become more effective in promoting its shipping worldwide. Additionally, in recent months we have introduced further horizontal incentives to attract more companies to the island, enhancing the Maritime cluster. Marios Demetriades Minister of Transport, Communications and Works

Maritime & Shipping

The fast approval by Parliament for the creation of an independent Deputy Ministry of Shipping, will undoubtedly convey a clear message of political support for shipping as one of the most productive sectors of the economy. Such unanimous state support will also serve as a convincing leverage for attracting additional quality shipowners and shipping companies to Cyprus, with a positive chain effect on reducing unemployment and strengthening the maritime cluster. Thomas A. Kazakos Director General Cyprus Shipping Chamber

of the Department of Merchant Shipping (DMS). Through continuous evaluation of the opportunities and challenges facing the sector, the DMS is determined to establish Cyprus as a five-star flag and to modernise its operations to better cater to shipping companies. Offering 24/7 support services and rapidly reacting to emergencies, while moving towards more sophisticated electronic and mobile communications as well as reinforcing its staff and supervisory ships in international ports, are all part of the DMS’ efforts to maintain Cyprus’ position as a key shipping hub. In order to combat the growing international threat of piracy, Cyprus also led the way as one of the first countries to approve detailed legislation allowing armed guards aboard Cypriot-flagged vessels. Through its attractive legislative and operational shipping infrastructure, Cyprus has the relevant advantages to develop into an even greater pole of attraction for top shipping companies, both from countries within and outside the EU. One of only two ‘Open Registries’ in the EU, Cyprus provides considerable advantages in terms of the legal framework surrounding ship operations, such as crew recruitment, training and safety of seafarers and environmental protection policies – advantages that have direct implications for shipmanagement operations. Cyprus’ low company set-up and operating costs and its advantageous tax framework continue to be a pull-factor for shipping companies. In a de-

termined effort to ensure the industry’s competitiveness, the government introduced an upgraded, EU-approved, tonnage tax (TT) system in 2010, which enhanced the island’s reputation as a top location for ship managers, owners and charterers. A key benefit of the TT regime is the certainty it provides on the amount of annual payable tax. In addition, the regime covers a wide range of qualifying activities and vessels, and crew members of qualifying Cyprus-flagged ships (including parallel in registration) are exempt from income tax. Largest Crew Management Centre

Cyprus has a flourishing shipmanagement sector, with more than 130 shipowning, shipmanagement and shipping-related companies conducting their international operations and activities from Cyprus. It is estimated that approximately 5% of the world’s fleet and around 25% of global thirdparty shipmanagement activities are controlled from Cyprus. From the companies established in Cyprus, around 87% are controlled by EU interests, including Cypriot. Cyprus has also become more attractive to Greek shipping professionals, with Greek shipowners and shipmanagement companies seeking to transfer part of their operations to Cyprus amid the uncertainty in the Greek economy. The share of revenue from Greece increased to 6% in the first half of 2015, from 2% the year before. Greek and

Tonnage Tax (TT) Regime Benefits of Cyprus ›

Ship owners of community flag ships and foreign flag ships may opt to be taxed under the tonnage system

›

Ship managers who provide crew and/or technical ship management services eligible for the TT system (must satisfy certain criteria)

›

Certainty on the amount of annual payable tax

›

Wide range of qualifying activities and vessels

›

Crew members of qualifying Cyprus flagged (including parallel in registration) ships are exempt from income tax

›

Submission of TT returns can be effected electronically

›

TT Regime can be easily used alongside income tax if both qualifying and nonqualifying activities are conducted

Country Report CYPRUS 2017 119

Maritime & Shipping

Cypriot shipowners account for about 17% of the world tonnage, making the island a natural place to domicile much of this fleet and to build longterm business of substance. Brexit may also expand opportunities for Cyprus to attract companies looking to relocate to another European country, with UK-regulated ship insurers preparing plans to open new outposts in EU jurisdictions. Several Greek ship-owners have already moved operations out of Britain, anticipating changes that could remove their favourable ‘non-domicile’ tax status.

mined to ramp up the promotion of this formidable sector. A pivotal element of these efforts is the biennial conference ‘Maritime Cyprus’, which was launched in 1989, and attracts around 800 shipping executives from around the globe every year. The event has grown into one of the world’s most significant shipping conferences, placing Cyprus in a prominent position to offer international shipping executives a platform to influence international policy and global shipping trends. Smooth Seas AHEAD

Crewing Up

An important benefit for shipping companies based in Cyprus is the ease with which they can source highly educated personnel. Shipping continues to be one of the highest paid industries in the country, providing a great opportunity to retain a highly trained workforce in a country still facing economic challenges and high numbers of unemployment. In its efforts to tackle domestic unemployment, as well as to improve its shipping cluster, Cyprus launched the Cyprus Maritime Academy in 2016. Providing collective input from the private sector and renowned industry players, the Academy supports the Cyprus shipping industry by providing qualified junior officers on-board their vessels. The institution, which is under the umbrella of the University of Nicosia, has an aim to become an international training centre of excellence – educating top-notch crew for a continuously evolving and technologically advancing industry. These efforts are expected to also help curtail the prospective global shortfall of seafarers by 2025, and place Cyprus firmly on the maritime map of the future. An added boost has come from new legislation providing tax incentives for highearning expats, establishing Cyprus as a top location for foreign shipping executives – thus importing more expertise to the sector.

There is no question that global shipping was severely hit by the international financial crisis, but the fact remains that almost 90% of world trade is transported by the international shipping industry – and with the recovery of economies worldwide, prospects for the industry is set to grow further. Today, Cyprus has a robust shipping sector offering a solid tax framework and one of the widest scopes of coverage for shipping activities in Europe, through clear-cut separate inclusions of shipowning, shipmanagement and chartering. However, the key challenge for the industry remains the Turkish embargo on Cyprusflagged vessels entering its ports. There are hopes that ongoing political dialogue will lead to a settlement in 2017, which would give renewed impetus to the sector. There is also tremendous potential for positive developments in the shipping industry due to the discovery of hydrocarbons in Cyprus’ EEZ as well as the wider Eastern Mediterranean region. Through its attractive shipping infrastructure, Cyprus has all the key advantages to attract more quality tonnage and increasing numbers of first-rate shipping companies from around the world in the years to come. n

A Global Contender

Signatory to numerous international maritime conventions and with bilateral cooperation agreements with 23 countries, including major labour supplying countries, Cyprus is a strong global contender. The island’s active participation in various shipping related fora, such as The International Maritime Organization (IMO), the International Labour Organization (ILO) and the European Commission, ensure that the resident industry’s voice is heard internationally. The government has a continued commitment to the sector and fosters strong ties with industry associations, such as the Cyprus Shipping Chamber and Cyprus Union of Shipowners, and is deter120

Country Report CYPRUS 2017

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The strategic location of Cyprus at the crossroads of Europe, Africa and Asia, enables it to be a natural business hub for shipping companies. Cyprus offers a wide range of fiscal and economic incentives for cross-border business, and with the DMS continuously developing and expanding its services, as well as moving into a more digital environment, the island’s status as a global shipping hub is certain to grow. Ioannis Efstratiou Acting Director Department of Merchant Shipping

Country Overview

Country Report CYPRUS 2017 121

Research & Development

R&D Boosting ROI When it comes to science and technology, Cyprus punches way above its weight. Worldclass research and innovative start-ups are firmly placing Cyprus on the global R&D map.

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Research & Development

n recent years, Cyprus-based scientists have been responsible for some of the world’s most innovative experimental work – whether it is tackling the push factors behind mass migration, harnessing state-of-the-art technology to understand ancient civilisations, or pioneering techniques for the storage of renewable energy. Historically, research and development (R&D) in Cyprus has been minimal compared with the rest of Europe, but the trend has seen a complete reversal with the country’s renewed efforts to generate new models of economic development and foster know-how, innovation and start-ups. Pioneering Scientific Research

The prestigious Cyprus Institute (CyI), the island’s leading science and technology research and educational institution, is at the forefront of much of today’s R&D coups. CyI’s longstanding collaboration with Massachusetts Institute of Technology (MIT) on the development of solar power and on monitoring climate change is well documented. Less widely known, is its pioneering work in the relatively new field of heritage sciences. The institute’s Science and Technology for Archaeology Research Centre (STARC), brings together researchers from a broad subject spectrum including art history and archaeology, computer science, chemistry and physics, to preserve and understand cultural heritage. More specifically, STARC employs bio-chemical-physical techniques to analyse works of art, ancient artefacts and archaeological discoveries. It has also led the way in the 3D documentation of heritage assets and the development of digital libraries. STARC’s contribution to this field was recognised recently with its designa-

tion as a regional partner in the newly established European Research Infrastructure for Heritage Sciences (E-RIHS). Ending Water Poverty

Cyprus is about to take a leading role in an innovative EU-backed research project into water poverty and its impact on declining agricultural productivity. The €400 million Partnership for Research and Innovation in the Mediterranean Area (PRIMA), seeks to develop sustainable systems of water management and food production in the Eastern Mediterranean – a region where around 180 million people are classed as ‘water poor’. The aim of the project is to find potential solutions to these problems, which may also help to resolve some of the resulting social issues, such as unemployment, rural poverty and mass migration. Tapping into EU Funds

The Cyprus government has underlined its commitment to maximise the commercial potential of research and innovation, and for Cypriot enterprises to benefit from the knowledge transfer opportunities provided by EU-funded research initiatives. Today, there is a renewed impetus towards the development of such opportunities, and employers’ organisations and research consultancies are collaborating in efforts to capture more EU research funds. Over the past six years, Cyprus has spent nearly €80 million in EU funding for Cypriot-led research projects, but there is scope for this figure to increase if funding bids are further simplified and coordinated.

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Research & Development

Harnessing Renewable Power

Landmark R&D Project

Cyprus R&D is also behind some particularly innovative work into the capture of renewable energy. The University of Cyprus’ FOSS Research Centre for Sustainable Energy recently secured a significant funding of €840,000 to further develop its remit in high-impact research ventures. Its first programme, called Generalized Operational FLEXibility for Integrating Renewables in the Distribution Grid (GOFLEX), will innovate, integrate, and further develop electricity smart-grid technologies. Its aim is to enable the cost-effective use of demand response in distribution grids, increasing the available adaptation capacity of the grid and safely supporting an increasing share of renewable electricity generation. The University of Cyprus researchers had another scientific coup in 2016, when they identified an enzyme that controls ageing. The results are expected to be used to develop specialised medicines to slow down ageing and increase a healthy life expectancy.

Plans to launch Cyprus’ long-awaited Science and Technology Park (STP) in Limassol are gaining momentum. Under the terms of the public-private partnership, the government will cover the cost of installing €3.5 million of basic infrastructure, while investors will lease, develop and operate the park (ca 328,000 square metres) over a 50-year period. The aim of the project is to bring together foreign and domestic technology and communications companies, start-ups as well as science and technology departments of universities under one roof. The planned STP will create applied research and development centres as well as office and support facilities, and promote business incubators to expand the range of opportunities for research and development investment. The tender notice was published in 2015 and has already garnered international interest. Cyprus also offers various incentives, such as tax breaks, greater flexibility in authorisation procedures, and easier application

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€80m

in EU funding for Cypriot-led research projects in six years

Research & Development

Cooperation Agreements

European Space Agency (ESA)

European Organization for Nuclear Research (CERN)

Massachusetts Institute of Technology (MIT)

process for residence and employment permits. In addition, investors into the STP will have taxbreaks for expenditure on acquiring patents or copyrights, buying shares in innovative businesses and start-ups, and additional breaks for the cost of buying fixed assets to be used in innovative operations. Strong Entrepreneurial Spirit

Cyprus is fully aware of the importance of establishing creative partnerships between government, commerce and academic scientific research. Key players from each of these sectors are planning the establishment of a new kind of research centre branded RISE – short for Research into Interactive Media, Smart Systems and Emerging Technologies. The project involves academics from three public universities and the municipality of Nicosia, along with two international partners: the Max Planck Institute for Informatics in Saarbrücken Germany, and University College in London. RISE will contribute to the fostering of a strong entrepreneurial culture, one that encourages students and academics to develop their research in a user-focused direction, and harnessing innovation to solve realworld problems. The centre will be an incubator and accelerator for both established companies and start-ups, located within the old city of Nicosia. RISE is expected to be supported by a budget of around €40 million, with €15 million coming from the EU, another €15 million from the Cyprus government and the rest from other sources. Top-Notch Nuclear and Space Tech

In further recognition of the island’s science and technology sector, two major European technology initiatives have partnered with Cypriot scientists. Cyprus is now an associated member of the European Organization for Nuclear Research (CERN), enabling its physicists to participate in meetings with CERN officials responsible for knowledge transfer and procurement. The island’s exceptionally dry climate provides the perfect conditions for space observation. As part of its efforts to develop the fields of ICT and space technology into regional economic drivers, the communication ministry recently signed a landmark agreement with the European Space Agency (ESA), enabling Cypriot scientists to bid for agency funds worth €1.2 million for the development of innovative space technology services. Start-Up Evolution

Although still in its infancy compared to neighbours like Israel, the Cyprus start-up landscape is rapidly developing and garnering accolades. The

past few years have seen a leap in the provision of funding, support and mentoring opportunities to aspiring entrepreneurs and innovators. Start-up accelerators such as the Cyprus Business Angels Network, Cypriot Enterprise Link, Chrysalis Leap and Repower Cyprus have all boosted the environment, along with events such as Hack Cyprus Hackathons, the CleanLaunchpad Competition, as well as Startup Weekend and Startup Live. The ‘Big Four’ audit firms, such a PwC and KPMG, have also taken an active role in Cyprus to help build an ecosystem conducive for start-ups. Despite the country’s rapid bounce back to economic growth, youth unemployment continues to be a serious challenge following the 2013 financial crisis. However, the silver lining is that it has also spurred more innovation in the ranks of the young. Home-grown talent and a burgeoning tech landscape have already launched some inspirational success stories to boost the sector. Clean tech is a rising theme amongst the younger generation of entrepreneurs, and Chrysalis Leap in particular has made its primary focus on fostering new products and services that ultimately help fight climate change. Incentives for Innovators

In addition to Cyprus’ advantageous and costeffective business operating environment, the country has also launched specific incentives for start-ups – with the rise of business angels and venture capitalists looking to invest risk capital in exchange for equity, in promising business ideas and products. Cyprus launched a new Start-Up Visa scheme, aiming to attract more international talent to establish innovative ventures with high growth potential. There is still much progress to be made in establishing Cyprus as a veritable start-up hub, but with firm support from both government and the private sector, coupled with an expanding range of incentives, the country is taking firm steps in the right direction. Investing in Knowledge

Renewed emphasis on research and development has resulted in the production of innovative research across a range of disciplines in Cyprus. Government and private sector investment, combined with careful strategic planning, has already produced impressive results in bolstering the island’s role as an ever-expanding knowledge hub. n

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Technology & Communications

The Right Connections Promoting a digital economy and developing secure and efficient global communication networks to support international business are high on the agenda for Cyprus.

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Technology & Communications

The Cyprus market is a relatively small market. This is particularly important for investment-heavy sectors, like telecoms. With an ultra-competitive market with four major operators, operating margins are being constantly squeezed. There is thus a lot of scope for synergies and mergers between operators; only operators that own or can invest in next generation networks and systems will be able to deliver the quality services demanded by subscribers at cost-effective prices. Nicolas Shacolas CEO Cablenet Communication Systems Ltd

NCR’s headquarters for the Middle East and Africa (MEA) Region are based in Cyprus. In addition to supporting the MEA region, executives from the NCR office in Cyprus have responsibilities for the growing markets of Asia, Australia and New Zealand. NCR’s plan is to continue investing in the emerging economies while growing the customer base across all the countries. Cyprus provides us with the ideal base to achieve these goals. The favourable business climate, the excellent telecommunications infrastructure, the well-educated and skilled human resources, favourable tax rates and the island’s proximity to the Middle East and Africa markets were among the key factors that motivated NCR Corporation to establish its regional offices in Cyprus. George Flouros Vice President NCR Middle East/Africa Region

yprus has successfully exploited its strategic location at the crossroads of Europe, Asia and Africa – establishing it as a thriving international business centre with global connections. This success could not have been achieved without the support of an advanced communications infrastructure. Creating more efficient e-solutions across all sectors is a key goal for Cyprus to also achieve its aim to attract more tech business, as well as foreign investment into Information and Communications Technology (ICT) projects. Cyprus already hosts a number of ICT companies from the US, Europe, Russia, Australia and many other countries, all running their regional headquarters from the island and servicing clients in Europe, the Middle East and North Africa, and beyond. Innovative start-ups have also started springing up and Cyprus is certainly being noticed outside its borders. With its rapidly growing economy and efforts to improve its telecoms landscape, it is no wonder that TransferWire recently included Cyprus in a list of eight emerging global technology hubs in the world. Connecting with the World

Cyprus has a fully digital network with reliable high-speed international connectivity via eight fibre optic submarine cables, including the world’s longest optical submarine telecommunications cable, SEA-MEWE-3, which links directly with South East Asia, the Middle East and the rest of Western Europe. Fixed broadband coverage is provided universally, and competition among various

cable and DSL operators has resulted in a good offering of high-speed and cost-effective broadband access services throughout the island. Mobile operators in Cyprus offer high-speed 4G broadband mobile access technology and are constantly updating and evolving their networks, as well as investing in new technologies. Cyprus also boasts some of the most cost-effective call rates within the EU. State-owned operator Cyprus Telecommunication Authority (Cyta) continues to dominate the market offering a full range of telecommunications services. Other key players with a prominent role in the telecoms landscape are MTN, Primetel and Cablenet. During 2016, the island authorised additional frequency bands (800/2600 MHz), which will allow mobile operators to further enhance their networks in terms of speed, capacity and quality of 4G service. In addition, Cyprus has secured a significant amount from EU structural funds for the deployment of step-change technology, for the roll-out of FibreTo-The Home (FTTH) networks. By 2020, FTTH networks are expected to extend to every private residence. The developing satellite communications is another key objective, and investments of companies in the sector have reached €300 million in the last five years. To build up the industry further, Cyprus has constructed a simple, flexible and competitive licensing model resulting in one satellite already in operation and more expected to be placed in new orbital positions during the next two years – providing cutting-edge telecommunication services for niche technologies. Country Report CYPRUS 2017 127

Technology & Communications

years have seen a boost in the provision of funding, support Regulator Increasing numbers of techand mentoring opportunities to The Office of the nology companies are choosaspiring entrepreneurs and inCommissioner for Electronic ing to locate their operations in novators. Start-up accelerators Communications and Cyprus, attracted by the island’s such as the Cyprus Business Postal Regulation cost-effective services, favourAngels Network, Cypriot www.ocecpr.org.cy able tax and business environEnterprise Link, Chrysalis Leap Government ment, and its skilled workforce. and Repower Cyprus have Ministry of Transport, The local universities provide all boosted the environment, Communications and Works excellent bachelor and masters along with events such as Hack www.mcw.gov.cy programmes in computer sciCyprus Hackathons, the Clean ences, consistently producing Launchpad Competition, as well tech-savvy candidates to join the as Start-up Weekend and Startranks of some of the world’s leading ICT compa- up Live. Home-grown talent and a burgeoning nies. tech landscape have already launched some inspiThe country’s status as a solid international rational success stories. business centre, coupled with its competitive IP-Box Tax Regime, which is fully in line with the Landmark Science and Tech Park 2016 international amendments on IP tax policies, is another advantage for companies, as protecting A key development in support of Cyprus’ digital intellectual property rights is a cornerstone of tech strategy is the creation of the country’s first-ever business. Science and Technology Park (STP) in Pentakomo, The island’s capital, Nicosia, has been iden- near Limassol. The project is a welcome move tified as the future centre for ICT and research and will create applied research and development and development. Many multinationals already centres as well as office and support facilities taihave established regional headquarters in Cyprus, lored for science and technology companies. A using it as a convenient hub for software develop- primary objective is also to promote business inment, system integration, testing services, disaster cubators in a bid to expand the range of opporturecovery, research and development, as well as nities for research and development. The planned marketing and sales activities. Companies such STP provides strategic investors with an interesting as NCR, AMDOCS, AVG, 3CX, Wargaming and opportunity to finance, design, build and manage a TSYS are just some of the leading names present landmark project. The tender notice was published on the island today. Also international giants such in 2015 and has already attracted international as Microsoft, Oracle, SAP and IBM have been on interest, and offers various incentives, such as tax the ground, supporting Cyprus’ tech evolution for breaks, greater flexibility in authorisation procemany years, but there is room for further develop- dures and easier application process for residence ment and growth in the sector. and employment permits. In addition, investors will have tax breaks for expenditure on acquiring Fostering a Start-up Ecosystem patents or copyrights, buying shares in innovative businesses and start-ups, and additional breaks for In addition to catering to the giants of the global the cost of buying fixed assets to be used in innovaICT sector, the government also offers financial tive operations. incentives for innovative small and medium-sized enterprises (SMEs) setting up in Cyprus – and in particular for start-ups. With the rise of business angels and venture capitalists looking to invest risk capital in exchange for equity in promising ideas and products with high market potential, Cyprus has created a new Start-Up Visa scheme to attract more international talent to launch innovative ventures in Cyprus. These are all moves in the right direction to develop a more dynamic tech landscape, but there is still a long way to go to establish Cyprus as a mature start-up hub, like some of its European counterparts or neighbouring Israel. However, there is increasing backing from both government and the private sector, and the past few Attracting Tech Business

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Key Players

As Cyprus continues to recover from its recent financial crisis, local telecom providers are focusing on providing reliable and affordable high-quality data and voice services, on growing smartphone penetration and on further investing in ICT and streaming services. Our strategy for 2017 will bring MTN Cyprus closer to its target: not only to become the number one choice, but also to turn Cyprus into a regional ICT hub. Philip Van Dalsen CEO MTN Cyprus

Technology & Communications

Taking advantage of our strategic geographical position, we have developed an extensive submarine fibre optic cable network connecting Cyprus with the rest of the world. We also operate an impressive satellite network, providing connectivity with major satellite systems. New technologies are continuously upgrading the telecoms infrastructure, capacities and capabilities in Cyprus. Also new services are emerging, with telecoms and IT converging. This results in immense competition among carriers and operators, and continuous improvement of the product offering and pricing. Christos Limnatitis Manager – National & International Wholesale Market Cyta

100% broadband coverage

€300 million investments into satellite communications

FTTH networks to every home by

2020

Adapting to Global Trends

Global demand for bandwidth is growing at an incredible 40% per year, with key drivers being the increase in cloud computing, data transfer and storage, as well as the Internet of Things (IoT). As more data and applications are allocated to the cloud, global cloud IP traffic is expected to quadruple by 2019, according to Cisco’s ‘Global Cloud Index: Forecast and Methodology, 2014-2019’. Also global data centre IP traffic is set to grow threefold over the next five years, as more companies begin utilising data centres to cut costs and streamline workflows. This in turn will increase the demand on networks to ensure seamless and secure transfers between data centres and business locations. The more connected devices that hit the market, the greater the need for bandwidth. A recent report from McKinsey revealed that IoT could have a potential annual economic impact between US$4 and $US11 trillion in 2025 for factories, large retail operations and cities. As an international services hub it is crucial for Cyprus to stay ahead of the game and keep up with cutting-edge technology to support its thriving business environment. To meet the demands of the market and to ensure seamless connections, the country’s main telecoms provider Cyta launched new Tier 3 data centres in Nicosia and Limassol in 2017. More current and sophisticated tech solutions are consistently being introduced in Cyprus, with growing interest from abroad for call centres, colocation, hosting and disaster recovery services. Digital Cyprus

Recognising that the ICT industry is a catalyst to increase productivity and economic growth, Cyprus launched its ‘Digital Strategy’ in 2012, which is in line with the Digital Agenda for Europe and promotes the use of ICT in all sectors of the economy.

The strategy outlines a series of key objectives, which include connecting Cyprus with high-speed networks and promotes competition to create a more sophisticated infrastructure and cost-effective services. Modernising public administration through electronic services is a top priority, and in 2016 Cyprus signed a memorandum with Estonia in the field of e-Governance and ICT. Cyprus will benefit from Estonia’s extensive knowledge and pioneering know-how in e-Governance, which could result in annual savings of 2% of GDP. Digital entrepreneurship is an objective that goes hand in hand with this, and is a move by the government to help businesses increase their productivity and become more competitive in domestic and international markets. Evolution in Progress

With its strategic geographical location and established framework for technology and research initiatives, Cyprus is perfectly placed to realise the European vision of a digitally democratised society and to see substantial growth in the coming years. Both the Cyprus University of Technology and the University of Cyprus are providing increasing numbers of highly qualified graduates to meet the sector’s growing demand, while the Cyprus Institute – a world class research establishment – is engaged in several ground-breaking and technologically innovative projects. As the safest destination in the region, Cyprus provides an ideal and secure location to store data and host digital services, and with so much untapped potential the island provides interesting opportunities for techsavvy investors and innovators. n

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Tourism

TOURISM

The Star Performer A new tourism strategy aims to double visitor arrivals, triple tourist revenue and attract â&#x201A;¬20bn in new investment to Cyprus by 2030.

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Tourism

C Cyprus tourism saw a boost in 2016 and we are committed to maintaining this momentum in 2017 and beyond. We are diversifying our offering by promoting special interest tourism, lengthening the tourist season, and introducing large tourism infrastructure projects – a highlight of which will be the integrated casino resort. New marina developments are promoting further nautical tourism and golf tourism is rising with the implementation of more courses in Cyprus. Yiorgos Lakkotrypis Minister of Energy, Commerce, Industry and Tourism

The key area of opportunity and growth for our tourism industry lies in the continuation of last year’s success in extending the tourist season, March to November inclusive, so to gradually mitigate seasonality, which constitutes our biggest challenge. Our expectations for Cyprus in 2017 suggest that all the key indicators of our industry shall register further growth as compared to the respective record performances achieved in 2016. Haris Loizides President Cyprus Hotel Association

yprus tourism is experiencing nothing short of a revolution. Ambitious luxury marina and hotel developments are springing up in all coastal towns, plans to build the island’s first and only integrated casino resort – by global heavyweights Melco and Hard Rock – are in the pipeline, and foreign direct investment into the sector is at an all-time high. Tourism has proved to be the most resilient of Cyprus’ commercial sectors, generating 12% of the country’s GDP in 2016 – a year which defied expectations and was record-breaking in visitor numbers, which reached 3.18 million. This marks a significant increase to the island’s previous record of 2,696,700 in 2001. The sector is undergoing the most comprehensive restructuring since 1960, and new markets are being opened up. Also, the longstanding problem of seasonality is being energetically tackled through the introduction of various niche areas, such as rural, health and wellbeing, nautical, religious, conference, sports and wedding tourism. A Vision for the Future

Cyprus has embarked on an ambitious new strategy with the aim to further boost both visitor arrivals and tourism revenue, and create 47,000 better-paying jobs by 2030. In the same time frame, the country has set its sights on attracting €20 billion in new investment, and doubling the share of tourism in Cyprus’ economy. As part of this process, the government recently commissioned a comprehensive study by Spanish company THR Innovative Advisors, to assess the future of tourism on the island. The findings determined that the sector has the potential to contribute up to 30% of GDP by 2030, if the sector is developed responsibly and strategically. To reach these demanding targets, Cyprus would need to attract at least 4.8 million foreign tourists, of which 40% would be during the traditionally dormant winter months between November and April to ensure the sector’s future competitiveness. Developing the

island into an established year-round destination is an arduous task, but considering the growth the sector has already witnessed in the last two years – despite a recent financial crisis – there is strong reason to believe it can achieve its goals. Moving Upmarket

Cyprus’ new strategy envisages redefining the island as a premium holiday destination, capable of attracting tourists with greater spending powers, who have an average per capita expenditure of between €250-500 a day, as opposed to the tourist of today, who spends on average €78 a day. To attract the high-spending visitor, it is crucial for Cyprus to undergo a comprehensive upgrading and refinement of the existing tourism product – a move that would aid in attracting the €20 billion in private investment over the next 14 years. It is expected that this type of investment would be matched by a corresponding increase of around 15% in state funding of the industry, which would be used to provide a richer holiday experience, and one that emphasises culture, indigenous heritage and natural environmental features – all underpinned by a high-quality hospitality industry. While Cyprus is certainly not turning its back on the traditional ‘sun and sea’ model, it is definitely moving to reposition itself in the holiday market to provide a more enriched, diversified and ultimately more sustainable product. Best Beaches in Europe

The island may be moving towards a more sophisticated offering, but a key aspect of its winning package remains its ideal weather of 340 days of sunshine and its pristine beaches – one of its core natural attractions. Cyprus’ coastline has been recognised internationally, with its beaches ranked as some of the best in Europe. The EU’s annual bathing water report recently listed Cyprus as having the

3.18 million tourists visited Cyprus in 2016

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Tourism

Tourism accounts for

12%

340 days of sunshine 75 airlines operate in and out of Cyprus of the country’s GDP

greatest number of ‘excellent’ beaches for swimming amongst all the 28 member states. According to the report, around 99.1% of bathing water sites in Cyprus in 2015 had ‘excellent water quality’. The report was published as another famous Cyprus beach, Fig Tree Bay in Protaras, was awarded a coveted Blue Flag – an award which brings the number of Blue Flag beaches on the island up to 59. Cyprus by Yacht

Nautical tourism is expanding in leaps and bounds, with every coastal town on the island already boasting or now developing its own marina – a strategic part of bolstering year-round tourism. Following the success of Limassol Marina, a new luxury marina project has broken ground in Ayia Napa, and plans for marinas both in Paphos and Larnaca are also underway. The Ayia Napa development – backed by Egyptian business magnate Naguib Sawiris – will feature two bespoke residential high-rises, beach front villas and world-class yacht facilities for up to 600 vessels. The €220 million project will bring a taste of Dubai’s skyline to the eastern shores of Cyprus, and is certain to boost both tourism and property sales.

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The development of Larnaca’s marina is still in a nascent stage, with foreign investment being sought, but there should be a ready market for the facility once completed. For the past seven years, Larnaca has hosted the annual Cyprus-Israel regatta, where yachts compete in a series of races off the Cyprus coast, culminating in an exhilarating race from Larnaca to Tel Aviv, about 25 sailing hours away. The number of Israeli boats mooring at Larnaca has increased in recent years, and the town is keen to further develop its potential as a key holiday destination for Israelis. Larnaca – a former capital city – is undergoing an extensive transformation. International hotel group Rezidor, which is already developing a hotel in the centre of the city, is planning to launch the island’s first Radisson Blu airport hotel and conference centre in 2019. It will be primarily a business hotel, complementing the island’s traditional leisure segment. Although tourists are spoilt for choice in terms of accommodation ranging from budget priced two and three-star hotels to a growing range of upmarket hotels with four and five-star status, a key growth segment is also rural tourism – which has flourished in Cyprus and offers a range of great options from boutique country retreats to rustic village houses, giving travellers a unique way to experience authentic island life.

2016 was a record year for both tourist arrivals and revenue attracting 3.2 million visitors and a 12% increase in direct revenue. Following a 27% increase in winter tourism, the CTO continues to focus on expanding the season by promoting the island as a year-round destination. Cyprus’ warm shoulder months and mild winters make it the perfect getaway for sports, culture, gastronomy and religious tourism, as well as activities like golf, hiking, cycling and diving. Angelos Loizou Chairman Cyprus Tourism Organisation (CTO)

Tourism

We promote the island’s unique and lucrative alternative tourism attractions, and believe that Cyprus’ aim should be to diversify and upgrade the tourist product. What is needed is a targeted marketing approach and imaginative investment in this growing sector, which will upgrade our image and meet the expectations of quality tourists. 2017 will bring more arrivals, but we must focus on more demanding tourists ready to appreciate our attractions off season. George Chr. Michaelides President Cyprus Association of Cultural and Special Interest Tourism

Cruising the Med

Tying the Knot

Maritime tourism is expected to receive a further boost from the new architecturally innovative passenger terminal in Limassol. It brings to an end decades of chaotic quayside scenes, where passengers were obliged to disembark and board amongst freight crates and other cargo. Perhaps more importantly, the new facility will significantly enhance Limassol’s credibility as a destination for cruise ships in the Mediterranean. The volume of cruises in the Eastern Med has been declining sharply in recent years, and the region now attracts less than 15% of all Mediterranean cruises. It is hoped that a new collaborative venture with Egypt to develop a regional forum will encourage the more effective promotion of the Eastern Med as an attractive cruise line destination.

Wedding tourism has continued to expand in Cyprus, with 2016 bringing in €120 million. Around 50% of wedding tourists come from the UK, but increasing numbers of couples from Lebanon, Israel and Russia are choosing to tie the knot on the famous island of Aphrodite, the goddess of love. Much of the growing appeal of this form of tourism is due to the availability of civil marriages in Cyprus. Across much of the Arab world – and Israel – a marriage ceremony has to be conducted within the context of a religious ceremony if it is to be legally recognised. This makes Cyprus an attractive wedding destination for mixed-faith and secular couples, and also for Israel and its 350,000 Jews from the former Soviet Union, who are not recognised as Jewish by the country’s Orthodox Chief Rabbinate.

Betting on Success

Sports Tourism

Legislation has now been passed enabling the operation of a single luxury casino resort on the island – along with four ‘satellites’. Three of these will feature only gaming machines, while the fourth will also boast gaming tables. The €600 million bid for this unique integrated project – the first of its kind in Europe – was won by global casino industry heavyweights Hong Kong-based Melco and US Hard Rock, and is set to bring millions of euros of revenue to the country. Expected to be operational by 2018, the opulent resort will include 500 hotel rooms, 100 gaming tables and at least 1,000 gaming machines – in addition to conference, leisure and event facilities.

The island also has a reputation as a popular winter practice venue for international sports groups and athletes, a field with considerable growth potential. Diving tourism is another area where growth is confidently predicted. An estimated 50,000 divers visit the island each year, many attracted by the opportunity to explore one of the top five dive sites in the world, the Swedish cargo vessel Zenobia, which sank off the coast of Larnaca in 1980. The CTO acquired four ships in 2015 in order to create more artificial diving reefs for tourists. Golf tourism is also expanding rapidly, with four 18-hole international standard courses and plans to construct an additional seven to establish the island as a yearround destination for golfers.

Key Players Government Ministry of Energy, Commerce, Industry and Tourism www.mcit.gov.cy NATIONAL Tourism Board Cyprus Tourism Organisation (CTO) www.visitcyprus.com Associations: Cyprus Hotel Association (CHA) www.cyprushotelassociation.org The Cyprus Association for Culture and Special Interest Tourism www.specialcyprus.org

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Tourism

Medical and Wellness Tourism

Growth from Diversification

Medical tourism is experiencing unprecedented growth, due to Cyprus’ world-class reputation for high-quality private healthcare in a technologically advanced environment. Cosmetic surgery, diagnostic tests and fertility treatment top the list as the most popular procedures for medical tourists from the UK, Germany, the Netherlands, Middle East and Russia. Health and wellbeing holidays are also on the rise, with the recent creation of several exclusive spa hotels to pamper the visitor, as well as a number of large-scale projects open for investment in the fields of rehabilitation and other wellness services.

Cyprus is actively targeting new markets and reassessing existing ones, but what has been evident is that tourist numbers are on the rise. Arrivals from the United Kingdom, traditionally the island’s biggest tourist market, reached 1.15 million in 2016, an increase of 11.2% on the previous year. Meanwhile, the second largest market, Russia, generated 781,634 arrivals, an increase of 49%. While these figures are encouraging in themselves they serve to highlight the sector’s dependence on these two specific markets. Although the island certainly cannot afford to ignore these crucial markets that supply much-needed low-season tourists seeking winter sun, Cyprus has begun to accelerate the process of diversification into other nontraditional markets. Germans made up only 3% of arrivals on the island in 2016, but are strategically important because of their potential contribution to winter tourism. Hopes for continued visitor growth have been raised further by the decision of German charter airline Germania to begin new services between Paphos and Hamburg, Nuremberg, Munich, Berlin, Stuttgart, Dresden and Dusseldorf. As part of Cyprus’ new strategy, tourist officials are increasingly thinking outside the box in a bid to target non-traditional markets. To this end, and in order to facilitate the visa process for Chinese visitors, the government has also established five authorised centres for visa applications in China and plan to create another 10 in the future. Tourism is often described by those in the business as the engine that drives the Cyprus economy. If that is the case, then there are certainly some big changes going on in the engine room. They may be unnoticed by the average visitor, but they are profound and far-reaching, and if successfully implemented, will keep the sector on a growth course for the next decades. n

European Capital of Culture

Out of all the island’s seaside towns, Paphos in particular is enjoying a tourism boost with hotels enjoying occupancy rates of 63.7% between January and September 2016 – a 3% increase on the previous year. Along with the Danish city of Aarhus, it has been designated Europe’s capital of culture for 2017 and will provide a showcase for the very best of European culture, linking tradition with modernity, and providing a bridge between east and west. The coastal town has been heavily promoted in Poland, Ukraine, the Baltic States, Finland and Israel – with the number of Polish and Ukrainian visitors increasing by 49% and 23% respectively over the past twelve months. Most of these markets also already enjoy direct flights to Paphos, and have the potential to provide more low-season winter tourists, keen to experience the diversity the popular coastal region has to offer.

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Key Markets: UK Russia Germany Scandinavia Ukraine Greece Israel

First-ever luxury casino resort coming into play

New marinas planned for Larnaca, Ayia Napa and Paphos

8,000+ international weddings in Cyprus

50,000+ divers and world-famous wreck dive site

Transport & Logistics

TRANSPORT & LOGISTICS

Growing Transport Hub Cyprus is all about leveraging its strategic location, and with more airlines jetting in and multi-million investments in ports, the island is making a name as a key regional transport hub.

2 international airports with a combined capacity of 10+ million passengers

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75 airlines

operating to more than 110 destinations in 40 countries

â&#x201A;Ź2 bn expected revenue from Limassol Port over the next 25 years

Transport & Logistics

C With the pace of growth in the economy rapidly picking up, Cyprus presents many opportunities for investments in transport and infrastructure. Prime examples are the joint development of Larnaca port and marina, as well as the science and technology park. Our primary vision is to establish Cyprus as a regional centre, providing modern and efficient infrastructure and services. We intend to further develop the national transport and communications infrastructure as a prerequisite to convert Cyprus as a regional centre of excellence in business development and service provision. Marios Demetriades Minister of Transport, Communications and Works

yprus’ strategic location has been a major factor in shaping its history throughout centuries and has established it as an attractive hub for inter-regional maritime traffic. Following the country’s accession to the European Union in 2004, Cyprus was transformed into a key EU outpost in the Eastern Mediterranean. A natural transhipment centre for Europe-Far East trade, and conveniently located along the routes to the Levant, North Adriatic and Black Sea, Cyprus is easily accessed with minimum diversion from the main arterial routes. The country’s sophisticated infrastructure has already made a significant contribution to economic development and is the driving force behind its emergence as a regional hub for cost-effective cargo transport and processing. In 2014, around 7.84 million metric tonnes of cargo passed through Cypriot ports and terminals, representing an increase of 12% on the previous year. The ports and airports of Cyprus provide international business with efficient sea and air logistics solutions – and with the recent commercialisation of Limassol Port, the island is set to see a competitive boost with the deal filling state coffers with around €2 billion over the next 25 years, and planned infrastructure investment of €100 million by the new port operators. Multipurpose Ports

Through foreign investment, Cyprus has successfully commercialised the port of Limassol and is now focused on attracting investment for the development of Larnaca port. Our priority is now on upgrading the port of Vasilikos with funds of approximately €30-50 million from the EU and the CPA. We also need to create better facilities for to the oil and gas sector, support the country’s small ports, which will help tourism, and create a strong regulatory department within the Authority. Lefteris Hadjizacharias Chairman Cyprus Ports Authority (CPA)

The importance of the East Mediterranean in world shipping continues to increase as a result of enhanced trade, regional port expansions and the discovery of significant hydrocarbons deposits in its waters. The widening and deepening of the Suez Canal – currently handling 7% of global maritime trade – could also significantly increase traffic in the region, and bring more transhipment companies to Cyprus. Responding to increasing interest from major shipping lines to choose hub ports in the region, Cyprus has consistently raised the bar and adapted its port systems to better cater to the demands of international trade. The island’s two deep-sea ports of Limassol and Larnaca have been extended three times since their construction in the mid-1970s. Over the years, Cyprus has transformed from being a small traditional break bulk handler exclusively serving domestic imports and exports, to a fully-fledged container and cruise port hub for international trade, shipping and passenger services. The Cyprus Ports Authority has focused its efforts on establishing ports as efficient transit centres and upgrading its services in terms of security and safety, as well as invested in information technology applications to reduce the time that ships berth in its ports – resulting in less cost for shipowners.

Over the last decades, Cyprus has invested in developing an efficient transport and communications infrastructure in order to support all sectors of the Cyprus economy. The Global Competitiveness Report 2016–2017 of the World Economic Forum ranks Cyprus 50th among 138 countries in Overall Infrastructure Quality. The island’s position as a bridge between the EU and the Middle East markets was further strengthened with one of Cyprus’ leading logistics services companies, Eurofreight Logistics, signing a major agreement with UAE-based Al-Futtaim Logistics for supply-chain services and processing of European goods heading to the Middle East. Both Limassol and Larnaca handle passenger and freight cargo. Limassol Port handles around 3,000 vessels per year and has an annual capacity of 600,000 twenty-foot equivalent units (TEUs). In addition to being one of the major container transhipment centres in the Eastern Mediterranean, Limassol is also a significant cruise liner hub for mini-excursions in the region and has become a key stopover point for international liners that include Cyprus in their regular schedules. Larnaca Port, with an annual capacity of 250,000 TEUs, has undergone significant improvements in recent years. Plans have also been drawn up to expand and redevelop the Larnaca port and marina area, with the aim to transform the existing port into a functional harbour, which will be in a position to host large cruise ships and yachts. Although with a main focus on tourism, the project presents an excellent investment opportunity, combining commercial port and passenger activities, with leisure, tourism and real estate development. In addition to the two main ports, there are also specialised oil terminals at Larnaca, Dhekelia and Moni, as well as the industrial port of Vasilikos – which hosts VTTV’s €300 million oil and gas terminal. The Cyprus Ports Authority plans to upgrade the port of Vasilikos, with funds of approximately €30-50 million, the majority of which will come from the EU. The aim is to expand the port and create better facilities for to the burgeoning oil and gas sector. Privatisation of Limassol Port

2016 marked the successful privatisation of Limassol Port, launching a new era for the port as a commercial hub. The tender attracted big-name operators from around the world, with the winning bids going to German Eurogate International GmbH, as the majority participant, along with Interorient Navigation Company Ltd and East Med Holdings SA for the container terminal, and Country Report CYPRUS 2017 137

Transport & Logistics

Key Priorities

Dubai’s DP World Limited, as launching and expanding existthe majority participant, and ing routes. The country’s two G.A.P Vassilopoulos Ltd for airports, Larnaca and Paphos, Further development of both the marine services and the received a €650 million upgrade aviation and restructuring of multi-purpose terminal. in 2009 and 2008 respectively, Civil Aviation Department The deal was a strong indicaresulting in a combined capacUpgrading road infrastructure tion of the renewed dynamism of ity of more than 10 million and supporting sustainable the Cyprus economy and the repassengers. The two airports urban mobility covery of investor confidence in are currently served by 75 airthe island. Not only is the multilines, operating to more than Further development of million agreement a source of 110 destinations in 40 counCyprus as a naval freight much-needed revenue, but it will tries. Opportunities from both transhipment centre also upgrade Cyprus’ role in the tourism expansion and geopoSouth-Eastern Mediterranean litical developments in the area – promoting it as a key regional centre of mari- are expected to increase the operations of carriers time commerce in the area. Compared to regional and attract new ones to enter the market. rivals, such as Piraeus and Haifa, Limassol Port has Cyprus is also improving existing aviation lagged behind in recent years. However, these new agreements and concluding new ones, for example developments are sure to attract more business and with Lebanon, Saudi Arabia, Australia and many international expertise, bringing the island on par others. In 2016, the country launched a new with its counterparts in the region. company called Cyprus Air Navigation Services, whose operations are expected to begin in 2017 and provide a high-level of air navigation services. Hydrocarbons Exploration Race The Department of Civil Aviation is currently Following the 2011 discovery of significant natural examining applications of new locally registered gas deposits in Cypriot waters, the country’s ports airlines that can enhance Cyprus’ connectivity have also managed to attract a number of com- further. Two such airlines – Colbalt Air and TUS panies offering regional services to the hydrocar- Airways – have already been approved and have bon industry. The development process of both commenced operations, whilst two more applicaLimassol and Larnaca Ports will further improve tions are under review. the level of service offered and significantly expand activities. With Cyprus’ plans of developing into a An Emerging Hub regional energy hub, the country can capitalise on its geographical position and offer specialised ser- With significant investment in infrastructure, privices to its regional neighbours – such as storage, vatisations and a range of qualified service proservicing supply vessels, repair and maintenance. viders meeting the needs of international trade, As an established and secure international busi- Cyprus has a promising future as an international ness centre with an attractive fiscal regime, Cyprus transport and logistics hub. Its importance in can also provide good administration, banking and world shipping can only increase, as the countries legal services to the sector. surrounding the Mediterranean basin continue to develop economically, and amidst hopes of a solution to the longstanding Cyprus problem – the Global Air Links de facto division of the island. The country’s proAir connectivity is crucial for the island economy, business government is committed in its quest to particularly because it relies heavily on interna- enhance Cyprus’ role as an international shipping tional trade, global business and tourism. In 2014, centre and further develop naval freight transhipCyprus adopted an Open Skies aero-political strat- ment services. Already one of the most important egy, with the aim to lift any restrictions in terms stopping points for goods travelling between East of the number of designated airlines, frequencies, and West, and with easy access to Egypt’s Suez types of aircraft, cargo flights and charter flights. Canal – the fastest crossing between the Atlantic In addition, the government in cooperation with and Indian Oceans – Cyprus is well placed to act Hermes, the management company of its two as a central distribution point and transhipment international airports, has created a number of centre for markets in Europe, the Middle East, and incentive schemes to reward airlines for growth, North Africa. n operation of new routes or year-round operations. 2016 saw record-breaking numbers of arrivals, constituting an annual increase of 18%. International airlines have been quick to recogDiscover more at www.cyprusprofile.com nise the growth potential of Cyprus – with many 138

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With an annual contribution of €500 million to the economy of Cyprus (3% of the Cyprus GDP), the state-of-the-art Larnaka and Pafos Airports are considered to be among the major drivers of economic growth in the country; and it doesn’t stop here. An attractive package of incentives offered to the airlines and a pioneering tourism strategy that turns Cyprus into a year-round destination is expected to re-boost Cyprus tourism even further. Eleni Kaloyirou CEO Hermes Airports

Limassol Container Terminal is an ideal strategic addition to the Eurogate Group network. With Tangier in the West, Gioia Tauro and Cagliari in the central and Limassol in the Eastern Mediterranean, Eurogate is now present throughout the Mediterranean region. The container terminal will be integrated into the network of Europe’s largest shipping lineindependent container terminal group under the name Eurogate Container Terminal Limassol Ltd. Thomas Eckelmann Chairman of Management Board Eurogate Group

Business Operating Environment

illustrations by Moira Scicluna Zahra

Business Operating Environment Cyprusâ&#x20AC;&#x2122; business-friendly infrastructure and can-do attitude has brought it worldwide recognition as an international business centre. The country offers a winning package for both international entrepreneurs and investors with its sophisticated business environment, highly skilled work force and cost-effective, yet high quality of life. Country Report CYPRUS 2017 139

Business Operating Environment

Business Culture

Telecommunications Costs

Respect, hospitality and personal trust are the cornerstones of the Cypriot business environment. An island nation that has long experience dealing with foreign traders and businesses, Cypriot businesspeople are international in their outlook and astute and knowledgeable in their negotiations. Punctuality is expected, business dress is formal for both men and women, especially at the beginning of a business relationship, and even in warm weather. Most Cypriots prefer face-to-face meetings to telephone conferences or written communications, which are regarded as too impersonal, and place great importance on building personal relationships with business partners or connections. Trust is the key to successful business dealings in Cyprus.

Telecommunications costs are also one of the lowest in the European Union. According to Eurostat (2010), consumers were charged €0.18 for a 10-minute local call in Cyprus and €0.65 for an overseas call, with the EU average being €0.41 and €1.71 respectively. The slight increase in current rates has not kept Cyprus from maintaining a position in the lower half in terms of costs EU-wide, and the removal of roaming charges in June 2017 will create even more attractive telecommunication services on the island.

Language

Greek and Turkish are the official languages of Cyprus. However, English, the legacy of the British who ruled Cyprus from 1878 to 1960, is widely spoken and is the language for business. Many Cypriots speak also French, German or Russian. Business Hours

Office hours are generally 8.30am to 1.00pm and 2.00pm to 5.30pm, Monday to Friday. Although in summer some offices take a longer lunch break or finish early. Business Costs

An EU base within the eurozone, Cyprus remains one of the few international financial centres offering low operational costs and a high standard of living. Office space and residential property in Nicosia, the capital and major business centre, is relatively inexpensive when compared to other European capitals. In terms of cost of living, Cyprus remains one of the most advantageous places to live, with cost of living lower than in most Western European countries. At the same time, residents of Cyprus enjoy a high standard of living and exceptional quality of life, as the balmy climate and low crime rate offer both comfort and peace of mind. Labour Costs

Cyprus offers a well-educated and multilingual workforce at significantly lower costs compared to Western European countries. According to Eurostat figures for 2015, labour costs per hour in the business sector were estimated at €15.60, with the EU28 average being €25.00.

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Electricity Costs

Electricity tariffs are similar to those in other Western European economies. According to Eurostat (2015), the cost for electricity in Cyprus is €0.184/kWh (households) and €0.141/kWh (industry) compared to €0.211/kWh (households) and €0.119/kWh (industry) in the EU28. Business Incentives

The government has introduced a variety of incentives aimed at attracting investment in industries that will enhance the development and reconstruction of the economy. These incentives are intended to: encourage the development of new high-tech industries and skill-intensive products, reconstruct Cyprus’ traditional economic sectors, improve productivity and labour skills, and attract capital intensive foreign investment. The following incentives are available: • low taxation at 12.5% with zero tax on certain types of income • industrial free zone and exemption from customs and excise charges for operations in the industrial free zone • industrial training schemes and subsidised industrial estates • grants and other financial assistance to investors, particularly in the areas of energy, the environment, industrial development, technology, research and innovation, trade and services Contact Agency

Cyprus’ investment promotion agency, InvestCyprus, is responsible for attracting foreign direct investment to Cyprus, and supporting investors through the entire process. The agency has direct access to ministries, government departments and stakeholders, with the ability to influence fast-tracking set-up requirements and to provide investor aftercare services. The government provides grants and other forms of financial

Business Operating Environment

assistance to encourage the growth of highervalue sectors, such as energy and environment, research and development, technology and trade and services. www.investcyprus.org.cy

Exporting to Cyprus

As a European Union member state, Cyprus applies European Union Customs Procedures to imported goods, and EU trade policy such as anti-dumping and anti-subsidy measures are followed as well as the EU import regime, which is fairly liberal, though some goods or products, including farm products, may still require import licences. Import prohibitions include narcotics, counterfeit goods, nuclear, chemical or toxic weapons, firearms and weapons, lottery tickets, gambling machines and imitation foodstuffs amongst others, as well as any goods shipped or originating in any country under embargo from the United Nations Security Council and the European Union. Restrictions are also applied to a number of other products that may require an import licence, police permit or other official permission from the relevant authorities. Import Taxes

For products and goods coming from other European Union countries, there are no customs duties, though Value Added Tax (VAT), which is applied throughout the Union in the country of consumption, will likely apply. For goods from third countries, Cyprus has adopted the EUâ&#x20AC;&#x2122;s Common External Tariff, and customs duties are calculated as a percentage of the CIF value of the

goods, in accordance with the Common Customs Tariff. Customs duties for goods from non-European countries are relatively low, especially for manufactured goods, which are subject to an average general rate of around 4.25%, though some goods, such as textiles, clothing and processed food products, may still be subject to protective measures. Full details of import prohibitions and import restrictions can be found on the website of the Cyprus Department of Customs and Excise. www.mof.gov.cy/mof/customs/customs.nsf

Financial Support Services

Cyprus has a sophisticated and advanced financial services sector, which is expanding year on year. Banking is the largest component of the sector, and is regulated by the Central Bank of Cyprus. The banking system is fully harmonised with EU legislation and directives. Commercial banking arrangements and practices follow the British model and there are currently over 40 Cypriot and international banks operating in Cyprus. All banks maintain correspondent networks around the world and are able to carry out both traditional and specialised financial transactions. Short and long-term borrowing is available from the Cyprus banking system and from the other financial institutions. Companies locating to Cyprus typically find that the financial institutions offer a tailored package drawn from a wide range of basic financing products. For eligible companies, capital funding can also be raised through the Cyprus Stock Exchange (CSE). There are no restrictions on foreign investorsâ&#x20AC;&#x2122; access to financing in Cyprus and borrowing from foreign sources is not restricted. www.centralbank.gov.cy www.cse.com.cy

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Business Operating Environment

Human Resources

Well-trained and versatile, the Cypriot workforce is one of the island’s most valuable resources, offering high standards of productivity, technical expertise and professional excellence at reasonable costs to businesses. The island’s labour force numbers some 427,489 persons in the Republic of Cyprus, with some 80.1% working in the services sector, 16% in industry and only 3.9% in agriculture. Since Cyprus’ accession to the EU, the European Union’s legislation framework regarding labour regulations has been adopted. The Cypriot labour market has a tradition of social dialogue and a well-developed institution of free collective bargaining. Terms and conditions of employment are negotiated either directly between the employer and the employee or through collective bargaining between trade unions and employers’ organisations. Approximately 65 to 70% of the labour force is unionised and/or is covered by collective agreements. Collective agreements regulate employment conditions such as remuneration, working hours, health and safety, annual holidays and contributions to the national retirement fund (provident fund). Various branches of industry are represented by registered employers’ associations, the purpose of which is to promote and safeguard the interests of their members. Most of these associations belong to the Cyprus Employers and Industrialists Federation (OEB), a body established to provide information to its members on labour, collective bargaining, and social and economic problems, as well as representing members and their viewpoints to the government, the trade unions and the public. www.oeb.org.cy

Cyprus Job Positions: Annual Base Salary (€) Low (€) Mid (€) High (€) Management CEO 70,000 100,000 150,000 CFO 50,000 80,000 120,000 Finance Department Financial Controller 50,000 65,000 70,000 Finance Manager 40,000 45,000 50,000 Accountant (Qualified) 30,000 38,000 45,000 Accountant (Part Qualified or QBE) 20,000 25,000 30,000 Account Assistant 12,000 15,000 18,000 HR Department Head of HR/Group HRM 60,000 80,000 100,000 HR Manager 35,000 50,000 65,000 HR Executive 15,000 20,000 24,000 Legal Department Head of Legal/ Group Legal Head 50,000 80,000 120,000 Legal Manager 60,000 65,000 70,000 Legal Assistant 12,000 15,000 18,000 IT Department Head of IT 50,000 55,000 60,000 IT Manager 35,000 48,000 50,000 IT Supervisor 20,000 25,000 30,000 IT Technician 12,000 15,000 18,000 Marketing Department Head of Marketing 40,000 50,000 60,000 Head of Sales 40,000 50,000 60,000 Marketing Officer 24,000 28,000 35,000 Marketing Executive 12,000 15,000 20,000 Accounts Manager 18,000 20,000 24,000 Accounts Executive 12,000 14,400 18,000 Engineering Department Engineer 35,000 50,000 65,000 Technical Officer 30,000 38,000 45,000 Procurement / Warehouse Officer 20,000 25,000 30,000 Technician 12,000 15,000 18,000 Note: The above statistics are based on permanent job placements made by GRS in Cyprus. These statistics do not necessarily reflect a complete overview of the Cyprus recruitment and labour market.

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Business Operating Environment

Expat Employees and Immigration

Cypriot laws on immigration have been amended to conform to the European Union’s acquis communautaire and thus visa obligations for foreign nationals reflect EU regulations and obligations. While Cyprus is a signatory to the Schengen agreement, it has not implemented the agreement yet and is not expected to do so before the Cyprus problem has been resolved. EU-Nationals: EU-Nationals are free to live in Cyprus. They can enter the Republic without a work contract and search for work for a period of three months. However, EU citizens planning to stay in Cyprus for longer than three months or beginning employment must apply for a registration certificate, as soon as they secure employment and in any case within a period of four months from the date of entry to Cyprus. The relevant application form (MEU1) is available at the Civil Registry and Migration Department of the Ministry of Interior and at the District Aliens and Immigration Branch of the Police. Non-EU Nationals: Non-EU nationals wishing to work in Cyprus require an employment visa, issued by the Immigration Office. Non-EU nationals employed at the top level of management by international companies with operations in Cyprus are generally granted employment visas with no problems, however professional and clerical staff are only granted employment visas if no suitably qualified Cypriot candidate is available. . In the case of executive directors, middle management staff and other key personnel, the applications (Form M61 and M64) are submitted to the Civil Registry and Migration Department, while in the case of supporting staff the application (M61 and M64) is submitted to the District Aliens and Immigration Branch of the Police. In the latter case, the application must be accompanied by a contract of employment stamped by the Labour Office. Companies may approach private employment agencies for recruiting suitable staff. In addition, local unemployed staff may be found through the Department of Labour while EU staff may be found through the European Job Mobility Portal. Relevant forms and details of procedures for all categories of employees can be found on the website of the Civil Registry and Migration Department. www.cyprus.gov.cy www.moi.gov.cy

Renewal of Permits

Residence and employment permits are granted mainly on a temporary basis and for a specified position. In case of Business Companies (BCs),

The Civil Registry and Migration Department is the authority responsible for the first issue and subsequent renewal of residence permits granted to all non-Cypriots employed by BCs in Cyprus. The Civil Registry and Migration Department acts in consultation with other competent authorities such as the Registrar of Companies, the Labour Department and the Cyprus Police. EU citizens may enter the Republic without a work contract and search for work for a period of three months before applying for a residence permit. ICT and Communications

Cyprus has invested heavily in state-of-the-art systems to serve the needs of international business. The country has a fully digital national network, along with reliable, high-speed connectivity to other modern economies via satellite and fibre optic submarine cable systems. With its advanced telecoms network and excellent regional and global connectivity, Cyprus is fast being recognised as a leading telecommunications hub in the Eastern Mediterranean. Professional Services

With around 80% of Cyprus’ economy based on the provision of services, this sector is one of the most important in the country. Professional services are a cornerstone of the economy, and continue to show strong growth year on year. Manned by an experienced and highly qualified contingent of professionals, this sector underpins many of the most rapidly growing areas of Cypriot business, from company registration, to finance, insurance, investment funds, ship management and others. The expertise of the country’s lawyers, accountants, auditors and other specialists, often European or US trained, offer full and efficient services in all aspects of company law and tax planning, and the world’s leading accountancy and consultancy firms are all present on the island, as are all the leading insurance, ship management and trust companies. While professional services costs are generally lower than in other Western European locations, the level and quality of service is not. According to Eurostat figures for 2015, labour costs per hour in the business sector were estimated at €15.90 on the island, with the EU28 average being €25.60. Cyprus’ reputation as an international centre of excellence for the provision of professional services has also been strengthened by the decision of two of the world’s leading accountancy organisations, the Institute of Chartered Accountants in England and Wales (ICAEW) and the Chartered Institute of Management Accountants (CIMA), who chose the island as the first country in the world outside the UK to train ICAEW and CIMA accountants. Country Report CYPRUS 2017 143

Business Operating Environment

Market Access

As an EU member state within the eurozone, Cyprus offers instant access to both the EU’s internal market of over 500 million people and the key markets of Russia and the former CIS countries, the Middle East and Asia, as well as the emerging markets of Africa and beyond. Following Cyprus’ accession to the European Union, Cypriot companies are able to establish their business or provide their services in any of the other EEA states through the European Single Passport. The island’s pivotal position as the eastern-most country of the EU means it is naturally placed as a gateway between East and West, and it is rapidly emerging as one of the most important business centres in the region. Cyprus also has a vast network of almost 60 double taxation treaties, which offers attractive tax planning opportunities for a number of markets. The country also lies in a convenient time zone for doing business across the world, two hours ahead of GMT, meaning office hours coincide with Asia in the morning, Europe throughout the day and

Cyprus’ legal framework is particularly strong, due in part to mandatory compliance with European Union regulations.

the US in the afternoon. Cyprus’ ability to bridge the cultural and business divide between North Africa, the Middle East and Europe is helping to pave the way for the country’s future prosperity. The island has now become a key trading post for the EU in the Eastern Mediterranean, acting as the ideal hub for goods and services exchange between Europe, Africa and Asia. A growing transshipment centre, Cyprus has become a key distribution point for goods travelling into and out of the EU. Legal and Regulatory Framework

Cyprus’ legal framework is particularly strong, due in part to mandatory compliance with European Union regulations. The legislation governing Cyprus’ financial services sector underpins the island’s ambition to become a leading international financial centre. As a former British colony, Cyprus law is based on English Common Law and was amended in recent years to meet European Union requirements. Offering foreign business a familiar and reliable framework within which to operate, the island’s legal and regulatory system is considered to be one of the most favourable in Europe, whilst at the same time being fully compliant with the EU, the Financial Action Task Force on Money Laundering (FATF), the Organization for Economic Co-operation and Development (OECD) and the Financial Stability Forum. Regulators and Authorities

Financial institutions are regulated and supervised by three authorities in Cyprus: the Central Bank of Cyprus (CBC), which is responsible for the supervision of commercial banks and the cooperative credit institutions; the Superintendent for Insurance Control (SI); and the Cyprus Securities and Exchange Commission (CySEC). However, changes introduced by the EU’s Single Supervisory Mechanism (SSM) in 2014, saw the transfer of supervision of all the eurozone’s largest banks to the European Central Bank (ECB). For Cyprus, this meant that Bank of Cyprus, the Cooperative Central Bank, Hellenic Bank and RCB Bank were transferred from the supervision of the CBC to the ECB. Anti-Money Laundering

Cyprus has put in place all necessary mechanisms for the prevention and suppression of money laundering and terrorist financing activities. In 2007 the House of Representatives enacted ‘The Prevention and Suppression of Money Laundering Activities Law’ by which the former Laws on the Prevention and Suppression of Money Laundering Activities of 1996-2004 were consolidated, revised 144

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Business Operating Environment

and repealed. Under the current Law, which came into force on 1 January 2008, the Cyprus legislation has been harmonised with the Third European Union Directive on the prevention of the use of the financial system for the purpose of money laundering and terrorist financing. The law obliges all individuals and legal entities that perform financial and other business activities, to protect themselves, their companies and the financial system of Cyprus from money laundering, by setting standard procedures. These procedures aim at identifying and reporting suspicious transactions, as well as applying the ‘know-your-client’ principle which requires the entire industry to adhere to strict procedures for maintaining records. Transport and Logistics

Cyprus is well connected to the rest of the world through air and sea links. With two international airports, Larnaca and Paphos, served by over 75 international airlines, a wide network of air routes connects Cyprus with continental Europe, Africa, the Middle East and Asia. The island is an established international transit station for commercial air transportation with excellent connection with the entire region. Cyprus is also one of the leading maritime centres of the world. Three main ports, the multi-purpose ports of Limassol and Larnaca and the industrial port of Vassiliko, as well as three specialised oil terminals situated at Larnaca, Dhekelia and Moni, ensure that Cyprus is well connected via sea links to all five continents. Thousands of ships call at Cypriot ports every year, which are served by some 70 shipping lines. The country’s road network is also well maintained and sophisticated, making it easy to get around the island and ensuring commuting distances are relatively short and stress-free compared to mainland Europe. Commercial and Residential Property

Cyprus offers a full range of properties for both commercial and residential use situated in key locations across the island. While the exclusive, toplevel market is currently the most sought after, the island has a good stock of properties available, from townhouses and apartments, to villas and sea-side bungalows in five-star gated developments. Nicosia and Limassol are the main business centres. Office space is available in purpose-built office blocks, in converted houses or flats. A number of business centres also offer ready-tomove into offices. They usually include fully equipped offices that are available on demand with flexible terms, meeting rooms and a receptionist service. Overall, rentals are around two-thirds of those charged for comparable commercial spaces in continental Europe, and offices, retail or other commercial space is widely

available for purchase or for rent. Since joining the European Union in 2004, restrictions on buying property have been lifted. Citizens of EU member states who are permanent residents of the Republic of Cyprus are permitted to acquire any amount of immovable property in Cyprus without restriction and without needing permission. Transfer of ownership from vendor to buyer is processed by the Cyprus Land Registry Office and in order to ensure the buyer’s rights to the property are safeguarded, it is advised that the contract of sale is registered at the district land registry office within two months of the contract date. The title deed is subsequently issued and registered in the name of the purchaser and recorded in the Registry archives. There are no restrictions on reselling or disposing of the property later, provided the owner has a valid contract. More recently, Cyprus has introduced additional incentives to buy property, with real estate purchased by the 31 December 2016 being exempt from capital gains tax and a 50% discount in transfer fees. Utilities

The Electricity Authority of Cyprus (EAC) owns and operates three power stations with a total installed capacity of 1478 MW. The three power stations are Vasilikos Power Station (868 MW), Dhekelia Power Station (460 MW), and Moni Power Station (150 MW). The government has also approved the construction of a new gas-powered station in the Vasiliko Area. Two licences have been given to Power Energy Cyprus Ltd (PEC) to build and run a 230 Megawatt Gas Turbine Power station. Cyprus has six wind farms with a total of 92 turbines generating 153,900 kW. Electricity tariffs are similar to those in other Western European economies. According to Eurostat (2015), the cost for electricity in Cyprus is €0.184/kWh (households) and €0.141/kWh (industry) compared to €0.211/kWh (households) and €0.119/kWh (industry) in the EU28. Nevertheless, the discovery of natural gas is expected to bring down costs in the long term. Cyprus makes use of the BS 1363, British 3-pin, 13A, 240V, 50Hz earthed and fused plug. The BS 1363 plug, also known as a ‘13 amp plug’, is a large plug that has 3 rectangular prongs forming a triangle. Live and neutral are 4Χ6Χ18mm spaced 22mm apart. 9mm of insulation over the base of the pins prevents people from touching a bare connector while the plug is partly inserted. Earth is 4Χ8Χ23mm. On plugs for Class II appliances that do not require an earth, the pin is often plastic. Water is provided by the Water Authority of Cyprus, and charged quarterly at rates set by the individual municipalities. Cyprus currently operates six desalination plants. www.eac.com.cy

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Business Operating Environment

Taxation Cyprus offers one of the most attractive tax regimes in Europe. A member of the European Union since 2004, Cyprus’ regulatory regime is in full compliance with the requirements of the EU and OECD. Cyprus has one of the lowest EU corporate tax rates at 12.5%. The island’s advantageous tax rate coupled with an extensive list of double tax treaties places it high on the list of preferred jurisdictions for international tax planners.

Insurance companies

Profits of insurance companies are liable to corporation tax similar to all other companies except in the case where the corporation tax payable on taxable profit of life insurance business is less than 1.5% of the gross premium. In this case the difference is paid as additional corporation tax. Administration and Compliance

Corporation Tax

Corporation Tax Rate: 12.5% Basis of taxation

All companies that are tax residents of Cyprus are taxed on their income accrued or derived from all sources in Cyprus and abroad. A non-Cyprus tax resident company is taxed on income accrued or derived from a business activity which is carried out through a permanent establishment in Cyprus and on certain income arising from sources in Cyprus. A company is resident of Cyprus if it is managed and controlled in Cyprus.

Special Types of Companies Shipping companies

The Merchant Shipping Legislation, fully approved by the EU, provides for exemption from all direct taxes and taxation under tonnage tax regime of qualifying shipowners, charterers and shipmanagers, from the operation of qualifying community ships (ships flying a flag of an EU member state or of a country in the European Economic Area) and foreign (non community) ships (under conditions), in qualifying activities. The legislation allows non community vessels to enter the tonnage tax regime provided the fleet is composed by at least 60% community vessels. If this requirement is not met, then non community vessels can still qualify if certain criteria are met. The legislation includes an “all or nothing” rule, meaning that if a shipowner/ charterer/ shipmanager of a group elects to be taxed under the tonnage tax regime, all shipowners/ charterers/ shipmanagers of the group should elect the same. Exemption is also given in relation to the salaries of officers and crew aboard a Cyprus ship. 146

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The tax year is the calendar year. The accounts of a company may be closed on a date different from 31st of December, in which case taxable profits are apportioned on a time basis relevant to the tax years.

Tax Year:

Taxation on a consolidated basis is not permitted and each company is required to submit a separate return. A setoff of group losses is possible provided there is a 75% parent subsidiary relationship, including subsidiaries under 75% control of a common parent company. Group loss relief is available only between resident companies , and EU-based companies on the proviso that they have exhausted all options to utilize the losses in their country of residence.

Consolidated Returns:

Filing Requirements: Tax returns must be filed electronically by 31st of March, 15 months after the tax year end. following the accounting year end. Companies are required to pay provisional tax in two equal instalments on 1st August, 30th September and 31st December. Any underpayment payable is due by 1st August of the following year. If the income declared for the payment of the provisional tax is lower than 75% of the income as finally determined, an additional amount equal to 10% of the difference between the final and provisional tax is payable.

Personal Income Tax Basis of taxation

All Cyprus tax residents are taxed on all income accrued or derived from all sources in Cyprus and abroad. Individuals who are not tax residents of Cyprus are taxed on income accrued or derived from sources in Cyprus. An individual is tax resident in Cyprus if he spends more than 183 days in any one calendar year in Cyprus.

Business Operating Environment

Key Features of the Cyprus Tax System u OECD approved / EU compliant tax system u One of the lowest tax rates in the European Union at 12.5%. The effective tax rate can be reduced further due to specific exemptions provided by the tax legislation u Wide network of favourable tax treaties with almost 60 countries u Reasonable tax administration u Tonnage Tax (TT) regime attractive to ship owners, managers and charters. u Possibility to obtain tax rulings in advance by the tax authorities provides flexibility and minimisation of tax risk u IP Box regime: effective tax rate of 2.5% on profits from the use and sale of qualifying intangible assets (restrictions may apply) u No taxes on entry, reorganisations and exits. Company reorganisation rules ensuring tax neutrality for group restructuring transactions u Low transaction taxes u No thin-capitalisation rules or Debt/Equity ratios u No withholding taxes on payments to non-residents (apart from royalties paid for IP economically utilised in Cyprus) u No wealth taxes and only minimal stamp and local taxes u No exchange controls u No detailed transfer pricing rules (arm’s length principle only) u Most international transactions free of VAT u Foreign source income generally tax exempt u Profits on transactions in shares tax exempt u Unilateral credit relief for foreign taxes u No CFC legislation u Capital Gains Tax only on gains from sale of real estate situated in Cyprus or sale of shares owning real estate situated in Cyprus • Exemption applies if shares are listed on recognized stock exchange • Exemption from Capital Gains Tax on Immovable Property acquired between 16th July 2015 and 31st December 2016 u Tax incentives for expatriate employees taking up employment in Cyprus • 50% exception of remuneration from any office or employment exercised in Cyprus that exceeds €100,000 per annum by an individual who was not tax resident of Cyprus prior to the commencement of employment (applicable for 10 years) • 20% exception with a maximum of €8,550 of remuneration from any office or employment exercised in Cyprus by an individual who was resident outside Cyprus before the commencement of his employment (applicable for 3 years - for employment which commenced during 2012 or after 2012 this exemption applies for 5 years with the last year for which the exemption will be available being 2020) u ‘Non-dom’ rules for Cyprus tax resident not domiciled in Cyprus. Any interest, rents or dividends (whether actual or deemed) regardless of whether such income is derived from sources within Cyprus and regardless of whether such income is remitted to a bank account or economically used in Cyprus, is exempt from special defence contribution. u One of the most attractive Yacht and Aircraft Leasing Scheme in Europe u Acquisition of private dwelling can be exempt or reduced rated subject to conditions.

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Business Operating Environment

Personal tax rates

The following income tax rates apply to individuals: Taxable Income (€) Tax Tax Cumulative Rate (%) (€) Tax (€) 0-19,500 0 0 0 19,501- 28,000 20 1,700 1,700 28,001-36,300 25 2,075 3,775 36,301-60,000 30 7,110 10,885 60,001 and over 35 *Foreign pension is taxed at the rate of 5%. An annual exemption of €3,417 is granted.

Value Added Tax

Imposition of Value Added Tax (VAT) is imposed on the supply of all goods and services in Cyprus, on the acquisition of goods from other Member States and on the importation of goods from third countries. The standard rate of 19% applies to the supplies of all goods and services in Cyprus which are not subject to the zero rate, the reduced rates (5% and 9%) or are not exempt. Cyprus has one of the most attractive Yacht and Aircraft Leasing Schemes in Europe which can result in reducing the VAT cost as low as 3%. Special contribution for defence

Special contribution for defence is imposed on income earned by Cyprus-domiciled tax residents. Non-tax Non Cypriot-domiciled residents are exempt from special contribution for defence. Submission of tax returns

The tax year is the calendar year. Tax on employment income is withheld by the employer under the PAYE system and remitted to the tax authorities. Self-employed individuals pay tax through the provisional and self-assessment systems. Tax returns must be filed by 30th of April following the tax year for employees, 30th June for self-employed persons who are not required to file audited accounts and 31st of December for self-employed persons whose returns are accompanied by audited accounts – these deadlines are extended by three months in case of electronic submission. Sole proprietors with an annual turnover more than €70,000 are obliged to prepare audited financial statements.

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Business Operating Environment

Cyprus has concluded double taxation treaties with 60 countries which provide important tax advantages. gium Bel • s laru c • Be ubli ijan a Rep b h r c e e z Cz •A ina • tria nd • Ch Aus a • d Finla a a eni Can ypt • g • m E r a • i A ar iopia Bulg eland • Eth nd • Ir nia • onia t s E Bos • Icela • y r k a r g a n e • Hu Denm Greec yzstan any • m r e ait • Kyrg e•G n • Κuw a Ir Franc • ia d Ιtaly • In of Guernsey ta • The States al M • Lebanon Moldova • Montenegro Kingdom of Bahrain • Mauritius • Norway • Poland • Portugal • Qata r • Romania • Russia San Marino • Serb ia • Seychelles • Singapore • Slova kia Slovenia • South Afr ic a • Spain Tajik • Sweden • istan Unit Syria • Th ed S ailan tate Uni d•U s•U ted krai zbe Ara ne • kist bE Unit an • mir ed K S aud ate ingd i Ar s• om abia Geo • Lit rgia hua • Sw nia iss Con fed era tion

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Travel & Living

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Travel & Living

CountryProfiler Essential Expat Guide A relaxed lifestyle in a Mediterranean atmosphere has established Cyprus as not only a popular tourist destination, but as one of Europeâ&#x20AC;&#x2122;s top spots for expats, business professionals and retirees.

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Travel & Living

Country Located in the Eastern Mediterranean at the crossroads of Europe, the Middle East, Asia and Africa, Cyprus’ strategic position has played a key role in shaping its history and in developing the island into a centre for trade and international business. Cyprus enjoys around 340 days of glorious sunshine a year and boasts a coastline teeming with endless stretches of golden sands, secluded bays and rocky coves. Surrounded by the crystal clear waters of the Mediterranean Sea, the island is dotted with the fascinating remains of history from Neolithic settlements and ancient city-kingdoms to exquisite Byzantine art and magnificent Venetian architecture.

History Cyprus has been coveted, conquered and colonised numerous times during its 10,000-year history. The island attracted the interest of a succession of dominant powers in the region, which battled for it through the millennia. The first of these are believed to have been the Achaean Greeks who arrived in around 1200 BC introducing their language, religion and customs to the island. Cyprus was subsequently colonised by the Phoenicians, the Assyrians, the Egyptians and the Persians. In the 4th century BC Alexander the Great claimed the island, which remained part of the Greek-Egyptian kingdom until 30 BC, when the Romans arrived and Cyprus became a senatorial province. It was during this period that Saint Paul was said to have visited the island and converted the Roman governor to Christianity. Cyprus remained a Roman possession until the empire began to disintegrate in 330AD, when it became part of the Eastern Roman or Byzantine Empire. In 1191, Cyprus was conquered by the English king, Richard the Lionheart, while on his way to take part in the Third Crusade. He later sold the island to the Knights Templar, who consequently sold it on to the Franks or Lusignans, a dynasty which went on to rule Cyprus for almost 300 years, until the last of the Lusignans ceded the island to Venice in 1489. Despite building heavy fortifications around the island’s major cities of Famagusta and Nicosia, the Venetians were not able to withstand the invading Ottoman troops who conquered the island in 1571. Cyprus remained under Ottoman rule until the arrival of the British in 1878. The island’s long history offers visitors a journey of discovery paved with ancient archaeological treasures. The ancient city-kingdoms of Kourion and Amathus, and the Mosaics of Paphos, are considered among the finest mosaic floors in the Eastern Mediterranean. Other must-see historic sites include the Neolithic settlements of Choirokoitia and Kalavasos-Tenta, the Tombs of the Kings and the famous Sanctuary of Aphrodite, the Goddess of Love, who legend claims was born on this island. In more recent times, Cyprus gained independence from Britain in 1960, however a Greek sponsored coup d’état in 1974 was swiftly followed by an invasion of Turkish forces which occupied the northern one-third of the island. Despite numerous efforts over the intervening decades, the island remains de facto divided, and the self-declared Turkish Republic of Northern Cyprus (TRNC) remains unrecognised by the international community. The Greek Cypriot and Turkish Cypriot leaders continue to look for a solution to end the division of the island, but while negotiations have been slow, some progress is being made. The capital city, Nicosia, is still split between the two sides, though visitors can access either side from checkpoints at Ledra Palace and Ledra Street, and today Nicosia is the last remaining divided capital city in the world. 152

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Travel & Living

Climate Cyprus enjoys a Mediterranean climate, with long, warm, dry summers from May to October and mild winters with occasional rain, lasting from December to February. Summer and winter in Cyprus are separated by short autumn and spring seasons. The average daytime temperatures during summer range from +21ºC to +34ºC, although in high summer temperatures can reach as high as +40ºC. During the cooler months, temperatures can range between +7ºC and +15ºC although even during the height of winter there are generally six hours of bright sunshine during the day.

Language Cypriots are highly educated and multilingual. The official languages of Cyprus are Greek and Turkish, however English is widely spoken and written and is the language of international business. German, French and Russian are also widely spoken in commerce, due both to the number of Cypriot graduates from overseas universities, and the island’s commercial ties with the global business community.

Filoxenía

hospitality Cyprus is well known for its hospitality, a fact reflected in the Greek word, ‘xenos’, used for both stranger and guest, and an indication of the warm welcome that awaits visitors to the island. Life is meant to be enjoyed in Cyprus, which is renowned for its excellent quality of life, with the emphasis on working to live, as opposed to living to work. Cafe culture predominates, with both business and social meetings taking place over a leisurely frappé (iced coffee) in the numerous cafes in every town and city.

Getting There Popular since the early 1980s with British and other European holidaymakers, Cyprus is well connected to Europe’s main cities, as well as to Asia and the Middle East. Flights from mainland Europe are quick, frequent and increasingly low cost. By air, Cyprus is 1.5hrs away from Athens, 4hrs from Frankfurt, 3.5hrs from Dubai and 5hrs from London.

Hotels / Accommodation When it comes to a place to stay, Cyprus offers every conceivable type of accommodation, from budgetpriced two and three-star hotels to a large range of upmarket and boutique hotels with four and five-star status. Agro-tourism houses are available for rent all over the island, often in the most picturesque villages, and give the traveller a unique opportunity to experience authentic Cyprus village life.

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Travel & Living

Culture & Entertainment More than a place just for lounging in the sun, there are lots of things happening in Cyprus all year round. From music concerts and cultural performances with big name stars, sports events, religious festivals with all the pomp and circumstance of the Greek Orthodox Church, to informative conferences where you can meet like minds. The Cyprus Rally has been held every year since 1970 and forms part of the World Rally Championship and the FIA Middle East Rally Championship, and attracts hordes of car enthusiasts, while the annual Historic Cyprus Rally draws crowds of vintage car enthusiasts. Cultural events such as the Kypria International Festival, which comprises music, dance and performance arts, and the Thalassa International Festival, which includes photographic exhibitions, movie screenings and music performances, ensure thereâ&#x20AC;&#x2122;s something to interest everyone on the annual calendar of events. The Pharos Arts Foundation has established a world-wide reputation for its commitment to excellence and for promoting classical music in Cyprus, having presented more than 500 concerts over the past 15 years. Outstanding musicians are hosted in the Pharos Arts Foundation's Concert Series and the annual International Chamber Music Festival, with programmes ranging from ancient to contemporary. The Pharos Centre for Contemporary Art (PCCA) presents the work of major international artists. A variety of contemporary art forms are included in the Centre's programme - visual, performance, photography, video - as well as lectures and discussions. Exhibitions are in many cases individually curated by internationally recognised curators from all over Europe. 2017 also brings with it an additional programme of top-tier cultural events in the coastal town of Paphos, the legendary birthplace of Aphrodite and UNESCO world heritage site, following the townâ&#x20AC;&#x2122;s win for the bid of the European Capital of Culture this year. www.pafos2017.eu www.pharosartsfoundation.org

Shopping In Cyprus you can shop till you drop. The island is supplied with stores catering for all tastes and requirements. Most major British and European chains are represented on the island and there is a plethora of fashionable boutiques and big malls in Nicosia, Limassol and Paphos, selling designer brands including Louis Vuitton, Chanel, Dolce & Gabbana, Gucci, Roberto Cavalli, Calvin Klein, Kenzo, Gianfranco FerrĂŠ and many more. 154

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Sports & Outdoor Activities Cyprus offers a host of energetic pursuits to engage the visitor. Becoming increasingly popular as a destination for golfers, Cyprus offers first-class facilities with four professional courses on magnificent locations, and the development of several new courses in the pipeline. Spectacular pine-clad mountains in the centre of the island offer walkers and cyclists welcome respite from the heat. Breathe in the bracing pine scented air, whilst admiring the series of Venetian stone bridges and waterfalls that pepper various hiking trails in scenery that looks as if it has been lifted from a book of fairy tales. In winter months, skiers can test the slopes on Troodos whilst the rest of the island wear short sleeves and bask in winter sun. The island provides excellent opportunities for water sports, such as windsurfing and kitesurfing. There are also excellent dive sites and facilities, with one of the best wreck dives in the world, the Zenobia, situated off Larnaca. Other popular dive sites include Ayia Napa, Paphos and the Akamas Peninsula, where divers are often able to see artefacts such as Roman pottery on the seabed.

Travel & Living

Cuisine

Typical Cypriot Dishes Halloumi: the quintessential Cypriot cheese made from a mixture of sheep’s and goat’s milk, usually served grilled Afelia: a delicious slowcooked pork casserole Moussaka: the famous dish of layered meat, potatoes and aubergine topped with creamy béchamel sauce Pastichio: similar to moussaka but with pasta instead of aubergine and potato Ofto Kleftiko: a hearty dish of lamb baked in an outdoor oven in its own juices until it is so tender that it falls off the bone

It is of course impossible to talk about Cyprus without mentioning the food. As with most Mediterranean countries food plays an important role and is to be enjoyed at a leisurely pace with friends and family. One of the first Greek phrases to learn in Cyprus is ‘siga siga’ which means ‘slowly’, and is a mantra one will hear almost daily. The fabulous Cypriot food is to be savoured unhurriedly, usually al fresco with friends and family. Even a cup of coffee can be a two hour past time. Cypriot food bears a distinct resemblance to Greek cooking, but also has Turkish and Lebanese influences. As in other Mediterranean countries, eating is an activity to be savoured and enjoyed and is certainly not to be rushed in any way. Which is a good job as a traditional Cypriot meze – a meal of small plates similar to tapas – can consist of up to 30 dishes. Cypriot cuisine features lots of fresh fish, meat, beans, pulses and vegetables flavoured with lemon, fresh herbs and spices. Cyprus is also one of the world’s oldest grape-growing and winemaking regions, with its fruits of the grape ranging from delicate whites and full-bodied reds to the rich sweet amber-coloured dessert nectar known as Commandaria. This is one of the oldest wines in the world, representing an ancient wine style documented in Cyprus back to 800 BC and has the distinction of being the world’s oldest named wine still in production, with the name Commandaria dating back to the crusades in the 12th century.

Public Transport Within urban areas, buses run on fixed routes roughly every half hour, with services ending in the evenings at about 18:00 Monday to Friday and earlier on Saturdays. Some routes have no service on Sundays. Hours are extended until midnight during the tourist season and some urban routes now offer a night bus service on Fridays and Saturdays. Timetables are available from tourist offices or directly from the bus companies. Rural buses connect towns and villages and make frequent stops. The service is infrequent with schedules limited to one or two routes per day. These buses can often be smaller mini-buses. There are also buses providing a service linking all major towns. These are generally very regular and all buses are modern and comply with European standards. A private company, Kapnos, provides a regular daily airport shuttle service between Nicosia and both of the island’s airports. There are no trains in Cyprus. www.cyprusbybus.com www.kapnosairportshuttle.com

Car Hire & Taxis Car and motorcycle rental firms have offices in all towns, as well as at Larnaca and Paphos International Airports. Their rates vary according to the rental period, season of the year and extras. They usually offer unlimited mileage and their cars can be delivered and collected at the airports by prior arrangement. Rental cars and bikes are usually delivered to the customer with a full tank of fuel paid for by the customer. When the car is returned, the customer receives a refund for any remaining fuel, unless stated otherwise in the contract. Drivers under 25 years of age holding a driving license for less than three years must inform the car rental company so special insurance cover can be provided. Foreign visitors are strongly advised to read the rental agreement carefully and demand fulfilment of all their rights. Taxis are also very common, but before setting off on your journey discuss the pricing with the driver and ensure the meter is functioning. TravelExpress is another good option, as a private company, which provides a shared taxi service between cities in Cyprus. www.travelexpress.com.cy

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Driving Roads are well maintained in and between the main towns, and there are four-lane motorways connecting Nicosia with Limassol and Larnaca. Driving is on the left in Cyprus and the maximum speed limit on motorways is 100 kph (60 mph). Cyprus accepts the driving licences of all EU Member States and any person with a valid licence may drive legally in Cyprus. According to EU rulings, driving licences issued before 1996 do not have to be exchanged for the new Community Model and remain valid until their expiration. Non-EU citizens may drive on valid foreign licences for a certain period (for those with a US licence the period is six months). Relevant Consular authorities can provide further information.

Office hours are generally 8:30am-1:00pm and 2:00pm-5:30pm, though in summer some offices take a long lunch break or finish early. Government offices are generally open from 7:30am-2:30pm, from Mondays to Fridays and until 6pm on Thursdays. Banks typically open at 8:30am and close at 1:30pm. International banks are open from 8:30am to 5:30pm. Shops are generally open from Mondays to Saturdays from 9am7pm, with larger supermarkets, malls and tourist areas open all day on Sundays as well.

Cyprus offers a full range of properties for both commercial and residential use, situated in key locations across the island. While the exclusive, top-level market is currently the most sought after, the island has a good stock of properties available, from townhouses and apartments, to villas and sea-side bungalows in five-star developments. Nicosia and Limassol are the main business centres. Office space is available in purpose-built office blocks, in converted houses or flats. A number of business centres also offer ready-tomove into serviced offices. They usually include fully-equipped offices that are available on demand with flexible terms, meeting rooms and a receptionist service. Overall, rentals are around two-thirds of those charged for comparable commercial spaces in continental Europe, and offices, retail or other commercial space is widely available for purchase or for rent. Famagusta

Larnaca

Limassol

Nicosia

Paphos

287.18

346.51

494.29

420.00

286.25

Apartment (1 bedroom) Outside of Centre

204.72

290.41

411.43

325.00

235.00

Apartment (3 bedrooms) in City Centre

409.42

505.70

769.23

652.50

455.56

Apartment (3 bedrooms) Outside of Centre

326.89

433.10

591.67

482.00

368.89

Famagusta

Larnaca

Limassol

Nicosia

Paphos

Price per m2 to Buy Apartment in City Centre

674.53

1,161.67

1,668.75

1,514.29

1,300.00

Price per m2 to Buy Apartment Outside of Centre

455.68

950.00

1,168.75

1,206.25

943.33

Buy Apartment Price (€/sqm)

Source: Numbeo

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+357

International Airports – both Larnaca and Paphos:

Ambulance & Emergency

199 or 112

Directory Enquiries - local

11892

outside Cyprus

11894

Buying & Renting Property

Average Rent Per Month (€)

Direct Dialling Code (Cyprus)

77 778 833

Business Hours

Apartment (1 bedroom) in City Centre

Important Numbers

Doctors on call

90 901 432 Emergency Air and Sea Rescue

1441

Travel & Living

Education There is a wealth of excellent private schools on the island, the majority of which are English speaking, but there are also French, Russian and Greek-speaking private schools. Fees are generally less than for the equivalent education in the UK. Public schools are free, and teaching is conducted in Greek. Tertiary education is provided by the six universities in Cyprus as well as several other colleges that offer a variety of vocational and academic courses.

Healthcare Ranked by the World Health Organisation as one of the healthiest countries in the Mediterranean, Cyprus has an excellent healthcare system provided through both the private and public sector. The public health service is funded through the social security payments of those who work on the island, whether Cypriots or foreign residents. The system provides free or low cost healthcare for those who contribute to social security, plus their families and retirees, as well as emergency treatment for everyone. However, the full public health service isnâ&#x20AC;&#x2122;t available to foreign visitors, who require private health insurance unless they wish to pay high medical bills. EU citizens who are visiting Cyprus can receive free outpatient or inpatient treatment with a European Health Card, an EHIC (the old E111), which is issued by the health authority in their home country. However, this covers only essential treatment and not routine treatment. Non-EU visitors must pay for healthcare. There are a number of private clinics throughout the island that specialise in all fields of healthcare and their fees are low compared to most European countries.

Religion Religious freedom is written into the Cypriot constitution and Greek Orthodox, Muslims, Catholics, Jews, Armenians and Maronites coexist peacefully on the island. However, the overwhelming majority of Cypriots are members of the Greek Orthodox Church, an institution that plays an important role in both personal and public life on the island.

Pets Cyprus is a member of the Pet Travel Scheme which allows pets from any of the countries covered by the scheme to enter Cyprus without quarantine provided they meet specified anti-rabies, blood sampling and anti-worm/anti-tick hygiene requirements. The pet must be micro-chipped, vaccinated against rabies and blood tested, and can be brought into Cyprus only after six months have elapsed following a satisfactory blood test.

Communications

Media and TV

Cyprus has an efficient and reliable postal service as well as an excellent telecommunications network. Telecommunications costs are among the cheapest in Europe. Cyta, remains the main provider, offering a full range of telecommunications services. Other main providers are MTN, Primetel and Cablenet. Cyprusâ&#x20AC;&#x2122; network boasts 100% broadband coverage.

A number of daily and weekly newspapers are published in Cyprus, some of which are in the English language, including the Cyprus Mail and the Cyprus Weekly. Many UK, European, Russian and Arabic newspapers can be bought in Cyprus a day or two after publication. Several terrestrial TV stations in Cyprus broadcasting locally produced programmes as well as international films, dramas and TV series. Cable and satellite television is widely available.

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Travel & Living

Useful Greek Phrases Hello

yassas

Pleasure to meet you

andio kalimera kalispera kalinihta parakalo efharisto ne ohi sighnomi Ti kanete? kala efharisto pos sas lene me lene ...

Goodbye

Good morning Good evening Good night Please

Thank you Yes

Taxation Cyprus offers one of the most attractive tax regimes in Europe. A member of the European Union since 2004, Cyprus’ regulatory regime is in full compliance with the requirements of the EU and OECD. Cyprus has one of the lowest corporate tax rates in the European Union at 12.5%, while the maximum personal tax rate is 35%, those earning less than €19,500 are tax exempt.

Sorry

How are you?

I’m well thanks

What’s your name? My name is…

Personal Financial Services Cyprus has a well-developed banking system modelled on the British banking system. The Central Bank of Cyprus has the responsibility for monetary and credit policy. There are currently a number of domestic banks operating in Cyprus, including commercial banks and specialised financial institutions. Standard branch opening hours are usually from 8:30am-1:30pm Mondays to Fridays and from 3:15pm to 4:45pm on Monday afternoons only. International banks are open from 8:30am to 5:30pm.

Home Help Many expatriates find they can afford domestic help that they could not have afforded at home and often choose to employ a helper for cleaning, cooking, general household chores and child minding.

Utilities Electricity = 240V 50Hz, 5 amp or 13 amp square three-pin British-style plugs. Electricity is provided by the Electricity Authority of Cyprus (EAC) and water is provided by the water board of the nearest main town. Many properties have solar water heating systems. Cyprus has no piped gas, but bottled gas is widely available in supermarkets.

Crime Cyprus is the 5th safest country in the world, according to recent statistics, and one of the safest countries in the EU – and crime is virtually non-existent. It is safe to walk around all towns and villages whether day or night. Few locations in the world can offer the same level of security and stability that Cyprus does.

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harika

Travel & Living

Visas & Embassies As a member of the EU, under community laws EU nationals have the right to enter the country with an identity card or valid passport and to seek work. For non-EU nationals, employment permits have to be obtained before entering Cyprus. The nationals of many non-EU countries do not require a visa to enter Cyprus for a stay not exceeding three months. Details of visa-exempt countries and visa application procedures are available on the Ministry of Foreign Affairs website. www.mfa.gov.cy

Visiting the Occupied Area Following the Turkish occupation of the north of the island in 1974, the island has been divided. In 2003 checkpoints opened for the first time allowing both sides to cross over with a passport or valid ID. It is perfectly safe to visit and explore the area. If travelling by car, insurance has to be purchased at the checkpoint. Various policies are available covering vehicles from three days to a full year. Cigarettes and alcohol cannot be taken from the north to the Republic of Cyprus and there are restrictions on certain foodstuffs, such as meat and dairy produce. There is a maximum limit of â&#x201A;Ź260 of goods per person allowed to be brought across the UN-controlled buffer zone.

Standard of Living Other factors that contribute to the enviable lifestyle of Cyprus include a superb road system with signs in both Greek and English, a reliable and efficient postal service, a large choice of schools, clubs, restaurants, gyms, theatres, cinemas, museums and art galleries. The local infrastructure is ideally suited for business people who need to get things done. Thanks to its modern road network, extensive port facilities and two international airports, travel and transport in and beyond Cyprus is fast, efficient and economical.

Large Expat Community A notable British presence remains to this day and Cyprus has become home to a large expat community. Today, Cyprus has the second highest percentage of foreign citizens in the European Union, with around 12.9% of the total population from other EU member states, and 6.6% from non-EU countries according to a survey of the EUâ&#x20AC;&#x2122;s statistical office published in December 2015. The biggest group of expats living in Cyprus consists of British nationals, but there are also large communities of Americans, Russians and other Eastern European nationals

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Who’s Who - Cyprus Business Profiles

WHO’S WHO

Cyprus Business Profiles

Accounting & Auditing Deloitte Cyprus.................................................................... 166 EY Cyprus............................................................................. 167 HLB Cyprus Limited............................................................ 169 Joannides + Co. Ltd............................................................. 169 K. Treppides & Co Ltd.......................................................... 169 KPMG.................................................................................... 170 Nexia Poyiadjis Chartered Accountants............................. 171 PwC Cyprus.......................................................................... 172 ServPro Accountants & Consultants.................................. 174 Automated Storage & Retrieval Systems Kardex Systems Ltd............................................................. 169 Banking Bank of Cyprus PLC............................................................. 162 Cdbbank ............................................................................... 162 Cooperative Central Bank .................................................. 163 EFG Bank (Luxembourg) S.A. Cyprus Branch................... 167 Eurobank Cyprus Ltd........................................................... 167 Hellenic Bank....................................................................... 168 RCB Bank Ltd....................................................................... 172 Saxo Bank A/S...................................................................... 173 USB Bank PLC..................................................................... 175 Consulting E-CNHC – E-C Natural Hydrocarbons Company Ltd........ 167

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Corporate & Fiduciary Services Bizserve Consultants Limited............................................. 162 First Names (Cyprus) Limited............................................. 168 Vistra Cyprus Ltd................................................................. 175 Economic Analysis MEES.................................................................................... 171 Sapienta Economics Ltd...................................................... 173 Financial Advisory MAP S.Platis......................................................................... 171 Fund Administration BDO Fund Services.............................................................. 162 InvestCor Corporate Ltd...................................................... 169 Fund Management GMM Global Money Managers Ltd..................................... 168 RMG Holding Limited.......................................................... 172 Government Organisations Cyprus Investment Promotion Agency .............................. 165 Cyprus Tourism Organisation ............................................ 166 Department of Merchant Shipping..................................... 166 HR & Recruitment GRS Professional Recruitment Services Ltd..................... 168

Whoâ&#x20AC;&#x2122;s Who - Cyprus Business Profiles

Insurance Royal Crown Insurance Co Ltd............................................ 173 Trust Cyprus Insurance....................................................... 175 Investment Services CISCO.................................................................................... 163 Law Firms Chryssafinis & Polyviou LLC............................................... 163 Costas Indianos & Co.......................................................... 163 L Papaphilippou & Co LLC.................................................. 170 M. Eliades & Partners LLC................................................. 170 Patrikios Pavlou & Associates LLC..................................... 172 Scordis, Papapetrou & Co LLC............................................ 174 Stelios Americanos & Co LLC............................................. 174 Y. Georgiades & Associates LLC......................................... 175 Medical Services Mediterranean Hospital of Cyprus..................................... 171 Salus Medical Solutions...................................................... 173 Postal & Courier Service DHL ...................................................................................... 167 Professional Bodies & Industry Associations Association of Cyprus Banks.............................................. 162 Cyprus Bar Association....................................................... 164 Cyprus Chamber of Commerce and Industry.................... 164

Cyprus Employers and Industrialists Federation.............. 164 Cyprus Fiduciary Association.............................................. 164 Cyprus Health Services Promotion Board......................... 165 Cyprus International Business Association ...................... 165 Cyprus Investment Funds Association .............................. 165 Cyprus Oil & Gas Association ............................................. 165 Cyprus Shipping Chamber ................................................. 166 Society of Trust and Estate Practitioners (STEP) .............. 174 The Institute of Certified Public Accountants of Cyprus... 175 Real Estate & Property Cybarco Development Ltd................................................... 164 Limassol Marina Ltd............................................................ 170 M.M. Makronisos Marina Ltd.............................................. 170 Pafilia Property Developers Ltd.......................................... 172 Ship Management Columbia Shipmanagement .............................................. 163 Telecoms & Internet Cytaglobal............................................................................. 166 MTN Cyprus......................................................................... 171 RSS (Rapid Software Systems) Cyprus Ltd........................ 173 Transport & Logistics Hermes Airports.................................................................. 168 Skylink Services Ltd............................................................ 174

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Who’s Who - Cyprus Business Profiles

DIRECTOR GENERAL

ASSOCIATION OF CYPRUS BANKS The Association of Cyprus Banks (ACB) is a non-profit organization that represents and promotes the interests of its member banks on banking business and practices. The ACB puts forward its members’ views when local legislative and governmental policies are determined. Common positions are formulated on several banking and financial issues, especially in compliance with EU regulations and guidelines. In communicating the industry’s views, the ACB cooperates closely with the Central Bank of Cyprus, the House of Representatives and various Ministries as well as other private and public bodies. The Association also has a close relationship with media representatives, the European Banking Federation (of which it is a member), national banking associations and global organizations.

JOHN HOURICAN

BANK OF CYPRUS Established in 1899, Bank of Cyprus is currently the largest banking and financial services group in Cyprus. The Group operates 127 branches, of which 122 are located in Cyprus, one in Romania, and four in the United Kingdom, and has representative offices in Russia, Ukraine and China. Since September 2014, its shareholders have come to include high-quality institutional investors, and as of January 2017 the shares of Bank of Cyprus Holdings PLC began to be traded on the London Stock Exchange. The LSE listing marks yet another milestone in the fulfilment of the Group’s strategic objectives, as the Group aims to become an ever more robust financial institution, able to create value for its shareholders.

DR. MICHAEL KAMMAS

CEO

BDO FUND SERVICES BDO’s Fund Services provides fund advisory, administration and support services. Our team of experts helps clients set up their AIFs and UCITS and provides the full range of fund administration services ensuring the proper administration of your funds affairs. We advise on AIFM licensing applications also providing advisory and compliance support. Our assurance team provides both internal audit and statutory audit services to funds and fund managers. BDO International is the fifth largest accountancy network in the world operating in over 150 countries and territories employing over 64,000 highly trained partners and staff working out more than 1,400 offices all over the world. KARLOS ZANGOULOS MANAGING PARTNER

BIZSERVE CONSULTANTS LIMITED Bizserve Consultants is a leading Administrative Service Provider regulated by the Cyprus Securities & Exchange Commission under license number 66/196. Our main line of business focuses on incorporating and managing corporate structures. At the same time we provide nominee and trustee services in Cyprus and in other jurisdictions, as well as the opportunity to create fully-fledged offices and enhance the tax residency of Companies under our administration. Our management team consists of individuals with over 20 years of experience in servicing international clients, composing a strong team able to operate in any business environment ready to give bespoke solutions in any inquiry. CHRIS KOUTOUROUSHIS MANAGING DIRECTOR

THE CYPRUS DEVELOPMENT BANK PUBLIC COMPANY LTD Cdbbank (The Cyprus Development Bank Public Company Ltd) was founded in 1963 by the Government of Cyprus and was privatised in 2008. With a contemporary organisational structure and corporate identity, being a small and flexible institution, cdbbank is able to adapt and provide specific financing solutions by offering specialised products and services to its corporate clients. It also offers a full range of competitive deposit products and services to sophisticated investors and institutional clients as well as to domestic and international clients. GEORGE SPYRIDES ACTING CEO

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15 Demetriou Karatasou Str, Office 401, P.O. Box 16113, 2086 Nicosia - Cyprus T: (+357) 22 664 293 Contact: Dr. Michael Kammas - Director General E: info@acb.com.cy W: www.acb.com.cy

51 Stassinou, 2002 Strovolos, Nicosia - Cyprus T: (+357) 22 121 801 E: wealth@bankofcyprus.com W: www.bankofcyprus.com

236 Strovolos Avenue, Strovolos 2048, Nicosia - Cyprus Contact: Karlos Zangoulos - Managing Partner T: (+357) 22 495 707 E: kzangoulos@bdo.com.cy W: www.bdo.com.cy

32 Georgiou Griva Digeni Ave., 1066 Nicosia - Cyprus T: (+357) 22 375 504 Contact: Chris Koutouroushis - Managing Director E: info@bizserve.eu W: www.bizserve.eu

P.O. Box 21415, 1508 Nicosia - Cyprus T: (+357) 22 846 500 Contact: Liza Philippou - Network Business and Communication Manager E: marketing@cdb.com.cy W: www.cdb.com.cy

Who’s Who - Cyprus Business Profiles

STELLA KAMMITSI

CHRYSSAFINIS & POLYVIOU LLC Chryssafinis and Polyviou LLC was established in 1903, it operates in Nicosia, Cyprus and its clients include mainly banks, investment and insurance companies, utilities and public enterprises, airlines, petroleum companies and others. The firm currently employs over 65 people, 25 of whom are highly qualified lawyers in their own fields – Banking Law, Company Law, Insurance Law, Competition Law, Business Law, Employment Law, Aviation Law, Media Law, Arbitration Law, Taxation and other. The Firm’s extensive and powerful network of correspondent law firms, which includes some of the world’s leading firms, allows it to provide an effective and efficient response to the needs of its clients worldwide.

HEAD OF THE INTERNATIONAL CORPORATE DEPARTMENT

DR. CLEANTHIS CHANDRIOTIS

CISCO Founded 35 years ago, The Cyprus Investment and Securities Corporation Limited (“CISCO”) is the oldest and one of the leading providers of investment services in Cyprus. It is regulated by CySEC (CIF License No. (003/03). CISCO is a wholly-owned subsidiary of Bank of Cyprus, the largest and oldest banking group in Cyprus. CISCO is a member of CSE and remote member of ASE. With professionalism and complete dedication to providing excellent customer service, it offers a wide range of financial services including brokerage on the world’s biggest stock exchanges, asset management services for institutional and professional investors and investment banking services including capital raising and arranging, M&A advisory, project finance advisory, valuations, and fund structuring services.

GENERAL MANAGER

ANDREAS HADJIPETROU MANAGING DIRECTOR

NICHOLAS HADJIYIANNIS

COLUMBIA SHIPMANAGEMENT Columbia Shipmanagement was established in Limassol, Cyprus, in 1978. With over three decades of experience in managing all types of vessels, CSM has become a leading force in its field. With more than 380 vessels under full and crew management, Columbia is today one of the largest independent ship managers world-wide. Columbia’s core ship management offices are located in Cyprus, Germany, Singapore and China, with two affiliated offices located in Greece and Germany and representative offices in Japan and Korea. Through its strategic network of owned crewing agencies located in Europe, Russia and Asia, Columbia has direct access to experienced sea-going personnel. Our 14,500+ employees form the foundation upon which we have built our range of services from technical, crew and commercial management, to new building supervision, consulting and cruise vessel services.

COOPERATIVE CENTRAL BANK Cooperative Central Bank (CCB) is one of the largest credit institutions in Cyprus. Based on the latest financial results (September 2016), CCB’s capital ratio was at 16.50%, total equity was €1,33bn and total assets amounted to €14,13bn. CCB respecting the cooperative values and principles, aims to support every household, business and local community to safeguard Cyprus prosperous society and to enhance the long term value of the sector for the benefit of its customers by offering them accessible, affordable and competitively priced services and products. CCB operates the largest branch network and number of ATMs in Cyprus and is a market leader in domestic deposits. It currently employees 2,700 people.

CEO

COSTAS INDIANOS & CO Costas Indianos & Co Advocates & Legal Consultants was established in 1924. The firm has acquired over the years a local and international client base comprising business men, international corporations, ship-owners and ship owning companies, commercial banks, consulting firms, real estate investors etc. Our law firm provides a custom made service with focus on quality, professionalism and time efficiency and maintains a wide network of business cooperation with firms across the EU, Russia and further. Areas of practice: Corporate Law; Taxation & Tax Planning; Shipping law; Cyprus Citizenship; Building Substance; Relocation to Cyprus; Real Estate; Litigation; Inheritance Law; Family Law; Intellectual Property ANTHONY INDIANOS MANAGING DIRECTOR/LAWYER

37 Metochiou Street, Agios Andreas CY 1101, Nicosia - Cyprus T: (+357) 22 361 100 Contact: Stella Kammitsi - Head of the International Corporate Department E: skammitsi@cplaw.com.cy W: www.cplaw.com.cy

154, Lemesou Ave. 2025 Nicosia - Cyprus T: (+357) 22 12 1700 Contact: Dr. Cleanthis Chandriotis - General Manager E: Athos.Chandriotis@bankofcyprus.com W: www.cisco-online.com.cy

Columbia House, 21 Spyrou Kyprianou Avenue, Yermasoyia, 4042 Limassol - Cyprus T: (+357) 25 843 100 Contact: Andreas Hadjipetrou - Managing Director E: marketing@csmcy.com W: www.columbia-shipmanagement.com

8 Gregori Afxentiou Str, 1096 Nicosia -Cyprus T: (+357) 22 743 000 Contact: Yiannos Stavrinides Manager of Strategy and Transformation E: pressoffice@ccb.coop.com.cy W: www.ccb.coop.com.cy

4, Diagorou street, Kermia Building, 6th Floor, Office 601, 1097 Nicosia - Cyprus T: (+357) 22 675 231 Contact: Anthony Indianos Managing Director/Lawyer E: Anthony.indianos@indianos.com.cy W: www.indianos.com.cy

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Who’s Who - Cyprus Business Profiles

CYBARCO DEVELOPMENT LTD Cybarco is Cyprus’ leading luxury property developer. Established in 1945 and part of the prestigious Lanitis Group of Companies, Cybarco has earned its reputation for outstanding quality and customer satisfaction delivered to the highest standards. The company is behind many of the island’s landmark projects including Akamas Bay Villas, Sea Gallery Villas, The Oval - the tallest commercial building in Cyprus - and Limassol Marina, the country’s first residential marina development.

MICHALIS HADJIPANAYIOTOU CEO

CYPRUS BAR ASSOCIATION The Cyprus Bar Association (CBA) is the regulatory and professional body for over 3000 registered practicing advocates in Cyprus and was first established under Advocates’ Law Cap.2 in 1960. Its major objective is the representation of the interests and the assistance of its members. The CBA is a full member of the Council and Bars of the European Union representing over 700,000 practicing lawyers. CBA is also a member of the International Bar Association and the Commonwealth Lawyers Association, Mediterranean Bar Association, and the Union of the Balkan Bar Associations. KOULIA VAKIS CHIEF EXECUTIVE OFFICER

PHIDIAS PILIDES PRESIDENT

CYPRUS CHAMBER OF COMMERCE AND INDUSTRY The Cyprus Chamber of Commerce and Industry (CCCI) membership exceeds 8500 enterprises representing over 95% of the local business community. More than 140 Professional Associations are affiliated to the CCCI including 36 Bilateral Associations. Its wide range of services include advisory, provision of business information, foreign trade exhibitions, trade missions & business fora abroad, business training courses & seminars, advice on European Union issues, labour relations matters, issue of Certificates of Origin and ATA-CARNETS and participation in EU programmes. CCCI is a full member of Eurochambers, the International Chamber of Commerce, the European Association of Craft, Small and Medium Sized Enterprises, Eurocommerce, GS1 and many other international organisations.

CYPRUS EMPLOYERS AND INDUSTRIALISTS FEDERATION (OEB) The Cyprus Employers and Industrialists Federation (OEB) was founded in 1960 by 19 pioneering entrepreneurs. Today, its members are active in all sectors of the economy and employ more than 60% of the private sector’s workforce. OEB is a pancyprian independent organisation comprising of 64 of the main professional/ sectoral Associations as well as hundreds of companies from the Manufacturing, Services, Commercial, Construction and Agricultural Sectors. In total, OEB has more than 5.000 Member/Enterprises. OEB is established as a dynamic force in Cyprus’ socio-economic development and welfare and acts as the main advocate and representative of the entrepreneurial community. CHRISTOS MICHAELIDES CHAIRMAN

CHRISTOS MICHAEL

CYPRUS FIDUCIARY ASSOCIATION The Cyprus Fiduciary Association was established in November 2011 by the initiative of leading Fiduciary Firms in Cyprus providing fiduciary, management and administration services to companies engaged in international business activities. The following are the main goals and objectives of our Association: To protect, support and promote the common interests of our members; To raise the standard of quality of services provided; To act as a contact point for all international clients requiring information on the Cyprus jurisdiction; To educate our members on topics related to our sector; To liaise with all related authorities for the development of the fiduciary sector in Cyprus; To promote Cyprus as a reputable business and financial centre.

PRESIDENT

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10 Tefkrou Anthia Street, Dali Industrial Zone, 2540 Nicosia - Cyprus T: (+357) 22 741 300 Contact: Michalis Hadjipanayiotou - CEO E: info@cybarco.com W: www.cybarco.com

11 Florinis str., City Forum, Off.101, 1St Floor, 1065, Nicosia - Cyprus T: (+357) 22 873 300 Contact: Koulia Vakis - Chief Executive Officer E: cybar@cytanet.com.cy W: www.cyprusbarassociation.org

38, Grivas Digenis Ave. & 3 Deligiorgis Str. Chamber Building - Cyprus T: (+357) 22 660 066 Contact: Marios Tsiakkis, Secretary General E: secgen@ccci.org.cy W: www.ccci.org.cy

2, Acropoleos Ave. & Glafkou, Strovolos, 2000 Nicosia / P.O.Box 21657, 1511 Nicosia - Cyprus T: (+357) 22 665 102 Contact: Costas Christofides Deputy Director General E: info@oeb.org.cy W: www.oeb.org.cy

115 Griva Digeni Avenue, PO Box 58184 3731 Limassol - Cyprus T: (+357) 22 122 100 Contact: George Ioulianos - General Manager E: info@cfa.org.cy W: www.cfa.org.cy

Who’s Who - Cyprus Business Profiles

POLYS GEORGHIADES

CYPRUS HEALTH SERVICES PROMOTION BOARD The Cyprus Health Service Promotion Board (CHSPB) is a non-profit organization that was founded in November 2006 after an initiative taken by the Cyprus Chamber of Commerce and Industry (CCCI) aiming to develop and promote Cyprus as a Health Tourism destination. The CHSPB currently has more than 60 members who are actively involved in the Cyprus Health Tourism Industry. These vary from state of the art hospitals and clinics to specialized travel agencies and consulting firms. Most of the largest and best equipped hospitals are members of the CHSPB and they are all licensed by the Cyprus Government and comply with EU regulations. Some of them have moved a step ahead towards gaining international accreditations.

PRESIDENT

FRIXOS SAVVIDES

CYPRUS INTERNATIONAL BUSINESSES ASSOCIATION CIBA is a non-governmental, fully independent association, financed by membership fees only. Its activities and initiatives are organised and carried out by its General Secretary and an Executive Committee of (max.) 12 persons. CIBA represents and safeguards the interests of the international businesses, their shareholders, managers and staff. The authorities recognize that CIBA represents the whole of the international business community in Cyprus and that it is instrumental in finding compromises between the required EU-driven legislation and international business requirements. CIBA annually awards the prestigious CIBA Excellence award to a member company that fulfils the specific criteria as set out by the Association.

PRESIDENT

ANGELOS GREGORIADES

CYPRUS INVESTMENT FUNDS ASSOCIATION (CIFA) CIFA is the Association of professionals, businesses and organizations offering services and being involved in the Investment Funds Sector in Cyprus. CIFA focuses on enhancing the high level of sophistication of the Investments Funds Industry and addresses the broad range of needs and issues faced by service providers and businesses involved in the sector. The Mission of CIFA is to: Help its members capitalize on industry trends; Shape regulation; Enhance professionalism, integrity and quality and Promote the Cyprus Investments Fund Industry. The first Board of CIFA is comprised of highly reputable industry professionals experienced in all aspects of the industry, including fund management, advisory, banking, audit and legal.

PRESIDENT

CHRISTODOULOS E. ANGASTINIOTIS CHAIRMAN

CYPRUS INVESTMENT PROMOTION AGENCY Businesses and individuals considering investment into Cyprus have a partner on the ground at all stages of the investment cycle. Invest Cyprus is a nonprofit national body and the government’s dedicated partner responsible for the facilitation of investments into Cyprus. In close collaboration with all government authorities, public institutions as well as the private sector and international experts, Invest Cyprus is the investor’s single point of contact. Invest Cyprus takes the lead in attracting and facilitating Foreign Direct Investment in key economic sectors, working with the investor, for the investor. Dedicated to continuously improving the business and regulatory environment, Invest Cyprus advocates reform while providing continuous investor support and aftercare services. Invest Cyprus is a member of the World Association of Investment Promotion Agencies (WAIPA) and the Mediterranean Investment Network, ANIMA.

CYPRUS OIL AND GAS ASSOCIATION (COGA) The Cyprus Oil and Gas Association (COGA) was founded by a group of professionals under the auspices of the Cyprus Chamber of Commerce and Industry, with the aim of serving the interests of the companies and professionals in the oil and gas industry within the Cyprus Exclusive Economic Zone. Main Objectives: To protect and promote the interests of its members; to provide a forum for discussion on issues of common interests; to promote co-operation among members and create investment opportunities; to promote the use and development of local resources in the oil, gas and petrochemical industries. ANDY VAROSHIOTIS PRESIDENT

38 Grivas Dighenis & 3 Deligiorgis Street, Nicosia - Cyprus T: (+357) 22 889 744 Cpntact: Polis Peratikos - Executive Secretary E: cyprushealth@ccci.org.cy W: www.cyhealthservices.com

8 John Kennedy Street, Iris House 8th Floor Office 840A, 3106 Limassol - Cyprus T: (+357) 25 583 400 Contact: Margarita Alexandrou Assistant General Secretary E: ciba@ciba-cy.org W: www.ciba-cy.org

Severis Building, 9 Makarios III Ave., 4th Floor, Lefkosia 1065 - Cyprus T: (+357) 22 441 133 Contact: Marios Tannousis Board Member & Secretary E: info@cifacyprus.org W: www.cifacyprus.org

9 Makariou III Avenue, 4th Floor, 1065 Nicosia - Cyprus T: (+357) 22 441 133 E: info@investcyprus.org.cy W: www.investcyprus.org.cy

38, Grivas Dhigenis Ave. & 3, Deligiorgis Street - Cyprus T: (+357) 22 889 744 Contact: Polis Peratikos - Officer E: polis@ccci.org.cy W: www.cyoilgas.org

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Who’s Who - Cyprus Business Profiles

THOMAS A. KAZAKOS

CYPRUS SHIPPING CHAMBER The Cyprus Shipping Chamber is the trade association of the Shipping Industry in Cyprus. The main purpose of the Chamber is to promote the interests of Cyprus Shipping and to further the reputation of the Cyprus flag. The Chamber also acts as a lobbying group for the promotion and safeguard of the legitimate interests of its Member-companies, at national and international level. On the local front, the Chamber co-operates very closely with the Government in all shipping related matters. Moreover, the Chamber operates as a roving ambassador of Cyprus Shipping through its membership and active participation at the International Chamber of Shipping (ICS) and the European Community Shipowners’ Associations (ECSA).

DIRECTOR GENERAL

CYPRUS TOURISM ORGANISATION The Cyprus Tourism Organisation is a semi-governmental organisation, which promotes and supports tourism in Cyprus, either via developing, regulatory or marketing activities. The Organisation was founded in 1969 and currently maintains offices in Cyprus (its Head Offices being in Nicosia) as well as in numerous European countries. The Organisation works closely with the tourism industry in Cyprus as well as partners abroad to make recommendations for the improvement of the Cyprus tourist product, to attract interest and raise demand in source markets, to improve accessibility to the destination and to address issues of seasonality. ANGELOS LOIZOU CHAIRMAN OF THE BOARD

CHRISTOS LIMNATITIS MANAGER – NATIONAL & INTERNATIONAL

CYTAGLOBAL Cyta, the primary telecommunications provider in Cyprus, covers the whole spectrum of electronic communications ranging from fixed and mobile voice and data communications, internet, IPTV and broadband services. Taking advantage of the island’s strategic geographical position, Cytaglobal, a strategic business unit of Cyta, has developed an extensive subsea fibre optic cable network, which connects Cyprus with its neighbouring countries and thereafter with the rest of the world. Cytaglobal also operates an extensive satellite network with two teleport sites, providing connectivity with major satellite systems. Through its global network, Cytaglobal provides a wide range of international telecommunications products, services and total solutions, making Cyprus a major telecommunications hub in the Eastern Mediterranean and an excellent international electronic communications centre.

WHOLESALE MARKET

CHRISTIS M. CHRISTOFOROU

DELOITTE CYPRUS Deloitte, with nearly 650 professionals locally, is one of the largest and fastestgrowing professional services organisations in Cyprus. Its services include audit, tax, consulting, financial advisory, wealth advisory and an integrated services offering addressed primarily to the international business community, focusing on accounting and payroll, tax compliance and the formation and administration of companies, partnerships and trusts. As part of the Deloitte global network, with more than 245,000 people in over 150 countries, it has the advantage of a global sharing of knowledge with a local adaptation and personal approach, built on the solid foundations of more than 55 years of successful operation on the island. For more information about Deloitte Cyprus visit www.deloitte.com/cy

CEO

DEPARTMENT OF MERCHANT SHIPPING Cyprus Department of Merchant Shipping is responsible for the development of maritime activities which include: registration of ships, administration and enforcement of the Merchant Shipping Laws, administration of the tonnage tax system, control of shipping and enforcement of international conventions ratified by the Government of Cyprus, Vessel traffic monitoring around Cyprus, resolving labour disputes on board Cyprus ships and training and certification of seafarers. Cyprus is one of the largest third-party ship management centres in the world. Cyprus Registry ranks in tonnage terms as one of the largest in the world with a merchant fleet exceeding 22 million gross tons. IOANNIS EFSTRATIOU ACTING DIRECTOR

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City Chambers, 6 Regas Fereos Str. P.O.Box 56607, 3309, Limassol - Cyprus T: (+357) 25 360 717 Contact: Thomas A. Kazakos – Director General E: csc@csc-cy.org W: www.csc-cy.org

19 Leoforos Lemesou, P.O.Box 24535, 1390 Nicosia - Cyprus T: (+357) 22691100 Contact: Sophia Charalambous - Tourism Officer E: cytour@visitcyprus.com W: www.visitcyprus.com

Telecommunications Str, PO Box 24929, 1396 Nicosia - Cyprus T: (+357) 22 701 488 Contact: Christos Limnatitis, Manager National & International Wholesale Market E: global@cyta.com.cy W: www.cytaglobal.com

24 Spyrou Kyprianou Avenue, CY 1075 Nicosia - Cyprus Other offices in Limassol and Larnaca T: (+357) 22 360 300 Contact: Lakis Koutsokoumnis Director | Marketing & Communications E: lkoutsokoumnis@deloitte.com W: www.deloitte.com/cy

Kyllinis Street, Mesa Geitonia, 4007 Limassol - Cyprus T: (+357) 25 848 100 Contact: Ioannis Efstratiou - Acting Director E: maritimeadmin@dms.mcw.gov.cy W: www.shipping.gov.cy

Who’s Who - Cyprus Business Profiles

DHL DHL is the leading global brand in the logistics industry that offers an unrivalled portfolio ranging from parcel delivery, international express, road, air and ocean transport to industrial supply chain management. DHL Express was the first international courier, setting up business in Cyprus in 1980. DHL is the market leader on the island with a share of around half the express courier market. DHL offers an unparalleled service to its customers and has established a reputation as a socially responsible organization that strives to improve its offerings to its customers, its people and the environment it works in. VALENTINOS PIRIPITSIS COUNTRY MANAGER

PO Box 22002, 1515 Nicosia - Cyprus T: (+357) 22 799 000 Contact: Valentinos Piripitsis - Country Manager E: valentinos.piripitsis@dhl.com W: www.dhl.com.cy

E-CNHC – E-C NATURAL HYDROCARBONS COMPANY LTD The company provides advisory, project management and consultancy services in the oil & gas and energy sectors and aims to contribute to the successful development of these Sectors for the future of Cyprus. The CEO has over 35-years international experience in promoting and developing oil & gas business and projects spanning Europe, Asia and Africa. We can assist our clients in developing their business in Cyprus, evaluating opportunities and providing in depth professional advice and support. 11 Tyrtaiou Street, 1087 Nicosia - Cyprus T: (+357) 97 705 060 Contact: Dr Charles Ellinas - CEO E: Charles.ellinas@yahoo.com W: www.e-cnhc.com

CHARLES ELLINAS CEO

COSTAS STYLIANOU

EFG BANK (LUXEMBOURG) S.A. EFG International is a global private banking and asset management group headquartered in Zurich, Switzerland, and has operations in around 40 locations worldwide. EFG International’s registered shares (EFGN) were listed on the SIX Swiss Exchange on 7 October 2005 (4th biggest listing) and it is currently rated by Moody’s with an A3 rating and by Fitch with an A rating. Our Cyprus based office is the gateway that will provide you access to all jurisdictions where EFG has presence amongst others Zurich, London, Luxemburg, Monaco, Singapore, Hong Kong etc. EFG Bank (Luxembourg) S.A - Cyprus Branch through the Fund Services team in Luxembourg is offering AIFMD compliant Depositary services to Cyprus Alternative Investment Funds.

DIRECTOR BUSINESS DEVELOPMENT & BRANCH MANAGER EFG BANK (LUXEMBOURG) S.A. CYPRUS BRANCH

EUROBANK CYPRUS LTD Eurobank Cyprus, has been operating in Cyprus for the past ten years. Focusing on the wholesale side of business, specifically in the areas of Corporate and Investment Banking, Wealth Management, International Business Banking and Treasury Sales its operating model is distinct from the rest of the banking industry in Cyprus. Its strong capital base, substantial liquidity, and solid financial results allow Eurobank Cyprus to continue its dynamic growth and its ongoing support of the Cyprus economy. Eurobank Cyprus Ltd is a Cyprus registered company founded in 2007, operates autonomously and is subject to all laws and regulations of the Republic of Cyprus. MICHALIS LOUIS CEO

EY CYPRUS EY is a global leader in assurance, tax, transaction and advisory services with more than 231,000 people in 152 countries around the world. The insights and quality services we deliver help build trust and confidence in the capital markets and in economies the world over. We develop outstanding leaders who team to deliver on our promises to all of our stakeholders. In so doing, we play a critical role in building a better working world for our people, for our clients and for our communities. EY Cyprus’ origins date back to the 1930s, maintaining an excellent reputation amongst the local business community as a high quality provider of professional services. STAVROS PANTZARIS COUNTRY MANAGING PARTNER

Cyprus Branch - 23 Kennedy Avenue Globe House, 1075 Nicosia - Cyprus T: (+357) 22 025 900 Contact: Costas Stylianou - Director Business Development & Branch Manager E: cyprusbranch@efgbank.com W: www.efginternational.com

41, Arch. Makarios Avenue, 1065 Nicosia - Cyprus T: (+357) 22 208 000 E: info@eurobank.com.cy W: www.eurobank.com.cy

6 Stasinou Avenue, P.O.Box 21656, 1511, Nicosia - Cyprus T: (+357) 22 209 999 Contact: Stavros Pantzaris - Country Managing Partner, Head of Assurance E: Stavros.Pantzaris@cy.ey.com W: www.ey.com/cy

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Who’s Who - Cyprus Business Profiles

FIRST NAMES (CYPRUS) LIMITED First Names Group may be a new name in the global trust and corporate services sector but we’ve been around for more than 30 years. Our experienced and well qualified teams of in house professionals provide advice on the day to day management of simple and complex structures established for both private and corporate clients. Often, these structures are established for the purposes of the mitigation of tax and the protection of wealth within a secure environment. The uses of such structures are broad and almost limitless and a bespoke approach and interpretation is required in order to ensure that client objectives are met. CHRISTOS MICHAEL MANAGING DIRECTOR

ALEXIOS KARTALIS GENERAL MANAGER

GMM GLOBAL MONEY MANAGERS LTD GMM Global Money Managers Ltd is the first Cyprus-based Fund Management Company, holding UCITS Manager License No.2/13. It operates in the financial sector, setting up, running and managing UCITS Mutual Funds as well as Alternative Investment Funds (AIFs) in line with the most recent EU directives. The Company through an extensive range of potential investment options, is seeking to provide effective geographical coverage and achieve diversification of investment risk in international money and capital markets. GMM’s management team and associates are well reputed with many years of experience and their primary aim is to safeguard invested capital and generate optimal yields for the small, medium and large portfolios of both private individuals and institutional investors.

GRS PROFESSIONAL RECRUITMENT SERVICES LTD GRS Global Recruitment Solutions is the leading international Recruitment and Payroll Consultancy specialising in the provision of human capital resourcing solutions. As Cyprus’ largest and most successful recruitment agency, GRS has more than 10 years of experience recruiting for jobs in Cyprus and Malta. The GRS team, possess in-depth knowledge and expertise of the market, as well as the networking skills required to source the most talented candidates. GRS, is renowned island-wide for its professional, precise recruitment and payroll services that deliver exceptional results. STEVE SLOCOMBE & DONNA STEPHENSON FOUNDERS

IRENA A. GEORGIADOU

HELLENIC BANK Hellenic Bank is a systemic Cyprus bank, listed on the Cyprus stock exchange and supervised by the SSM of the European Central Bank. Hellenic Bank is currently at the forefront of financing the recovery and transformation of the island’s most important industries and is regarded as Cyprus’s key agent capitalizing on its high liquidity levels. With an enhanced international shareholder base, a renewed Board of Directors and Executive Management, Hellenic Bank’s 40 year old heritage and about 1500 strong professional workforce is focused on addressing the key challenges faced by the financial sector in Cyprus, including the financing of the growing economy, while simultaneously jumping the innovation queue and leading the way in technological transformation and banking digitalization.

CHAIRWOMAN OF THE BOARD OF DIRECTORS

ELENI KALOYIROU

HERMES AIRPORTS Hermes Airports comprises of an international consortium of nine shareholders, managing and operating Larnaka and Pafos airports since 2006 under a 25-year BOT Concession Agreement with the Republic of Cyprus. Hermes Airports Ltd significantly contributes to the country’s tourism growth, through an active air service development strategy consisting of incentive schemes provision and joint marketing activities with airlines, as well as collaboration with the Government and tourism stakeholders for the expansion of tourism related opportunities. The company contributes 3% to the country’s GDP, whereas 12,700 jobs are sustained by its operation. 2016 ended with a historical record in traffic, recording 8.9m passengers.

CEO

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20 Spyrou Kyprianou avenue, Chapo Central 3rd floor, 1075 Nicosia - Cyprus T: (+357) 22 749 000 Contact: Christos Michael – Managing Director E: christos.michael@firstnames.com W: www.firstnames.com

36 Stasinou Str., Strovolos 2003 Nicosia - Cyprus T: (+357) 22 205 858 Contact: Alexios Kartalis - General Manager E: info@global-mm.com W: www.global-mm.com

GLOBAL

RECRUITMENT

S O L U T I O N S

Head office: Agathangelou Business Centre, 101 Gladstonos Street, Limassol, 3032 - Cyprus T: (+357) 25 342 720 Contact: Steve Slocombe - Director Donna Stephenson - Director E: jobs@grsrecruitment.com W: www.grsrecruitment.com

Corner Limassol & Athalassa Avenue 200, Strovolos - Cyprus T: (+357) 22 500 500 E: serviceline@hellenicbank.com W: www.hellenicbank.com

P.O. Box 43027, 6650 Larnaka International Airport - Cyprus T: (+357) 24 742 174 Contact: Panicos Tsolias - Senior Business Development Officer, Marketing Department E: panicos.tsolias@hermesairports.com W: www.hermesairports.com

Who’s Who - Cyprus Business Profiles

HLB CYPRUS LIMITED HLB Cyprus is among the largest accounting and financial consulting firms in Cyprus with specialized departments providing services in audit & assurance, accounting, financial advisory, transaction services, tax compliance and planning to a wide range of businesses from the small owner-managed business to multinational groups and listed companies. Our firm provides services to a diversity of clients in a wide range of operations, both locally and internationally. No matter the size of our client’s business, our professional staff provides the guidance needed for successful and well-considered decisions. COSTAS AFXENTIOU CEO

GEORGE GIANNOULAKIS

INVESTCOR CORPORATE LTD InvestCor Corporate Ltd is an ASP regulated by CySEC. InvestCor’s expertise is in Regulatory Advisory to the Alternative Investment Fund industry and other Regulated Institutions. Feel free to visit our website at www.investcor. eu. InvestCor’s practical hands-on industry experience augmented by legal & accounting background provides, inter alia, the following Services: Fund administration; AIF and AIFM Licensing; Compliance; Internal auditing; Risk management ; Regulatory and transactional reporting (EMIR); Regulatory, operational and set up advisory; Marketing, sourcing and distribution channels on cross border basis. We strive to ensure that Your Success is Our Best Investment.

CHIEF EXECUTIVE OFFICER

LEFKIOS JOANNIDES

JOANNIDES + CO. LTD Joannides + Co. Ltd is a leading firm of accountants and management consultants established in Cyprus for over 30 years providing audit and assurance, taxation, business support services and management consulting to international companies and private clients. The firm has offices in Nicosia, Limassol and Larnaca and is a member of AGN International Ltd, a worldwide association of independent accounting and consulting firms operating in 88 countries. Joannides + Co. Ltd is an approved training centre of the professional accounting institutes ICAEW and ACCA and in 2010 was awarded the quality award certification from the Institute of Certified Public Accountants of Cyprus.The firm’s stated objective is to add significant value to its clients’ business performance.

MANAGING DIRECTOR

MARIOS A. COSMA

K.TREPPIDES & CO LTD Actively in business since 1985, K. Treppides & Co Ltd has become an established global service provider for international business ventures with presence in Nicosia, Limassol, Malta and London. Our service lines include: Audit &Assurance - Statutory Audit for multiple jurisdictions; Audit Reports; Consolidated Financial Statements; Forensic Reporting. Direct and Indirect Tax Services - International Tax Planning; Complex Group Structuring; Obtaining Tax and VAT rulings; Personal Taxation. Financial Reporting Services - Accounting Services; Financial Statements preparation; IFRS Advice Desk. Financial and Regulation Advisory Services – Licensing; Internal Audit; Compliance and AML Services; Risk Management; Advisory & Corporate Finance; Insolvency; Liquidation; Investment Funds.

MANAGING PARTNER

DEMETRIS KOULOUNDIS REGIONAL SALES DIRECTOR

KARDEX SYSTEMS LTD KARDEX REMSTAR is one of the market leaders in Automated Storage / Retrieval Systems, Document Management and in Materials Handling Systems with manufacturing facilities in Germany, USA and Australia. KARDEX REMSTAR is an operating division of KARDEX AG which is based in Zurich, Switzerland, is listed on the Swiss SIX Stock Exchange since 1987 and employs around 2,200 people in more than 30 countries worldwide. KARDEX SYSTEMS LIMITED, a wholly owned subsidiary of the Group, is based in Cyprus and is the Kardex Remstar company responsible for sales, marketing and technical support for the entire product portfolio in the Middle East, Gulf, Africa, Balkans and Central Asia.

Palaceview House, Corner of Prodromos & Zinonos Kitieos 2, CY-2064 Nicosia - Cyprus T: (+357) 22 002 700 Contact: Costas Afxentiou – CEO E: nicosia@hlb.com.cy W: www.hlb.com.cy

61 Omirou Street, Joanna Court 2nd Floor, Office 203 Mesa Geitonia, Limassol 3096 - Cyprus T: (+357) 25 000 333 Contact: George Giannoulakis - Chief Executive Officer E: george@investcor.eu W: www.investcor.eu

Head Office Address: 13, Agiou Prokopiou Str., 2406 Egkomi, Nicosia - Cyprus T: (+357) 22 556 556 Contact: Lefkios Joannides – Managing Director E: cy@joannides.com.cy W: www.joannides.com.cy

9 Kafkasou Street, Aglantzia, CY 2112, Nicosia - Cyprus T: (+357) 22 678 944 Contact: Marios A. Cosma - Managing Partner E: info@treppides.com W: www.treppides.com

Hyper Tower, Apostolou Andrea 11, 2nd Floor, Office 202, 4007 Limassol P. O. Box 53133, CY 3300, Limassol - Cyprus T: (+357) 25 875 600 Contact: Demetris Kouloundis - Regional Sales Director E: info.remstar.cy@kardex.com W: www.kardex.com

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Who’s Who - Cyprus Business Profiles

KPMG KPMG is a global network of independent firms employing over 189.000 qualified professionals in 152 countries, offering value through its audit, tax and advisory services. We have a clear vision about the goals that we want to achieve as a network. We always take important steps in order to ensure that KPMG offers a wide range of excellent professional services, aligned with the changing needs of our clients and markets. 14 Esperidon Street, 1087, Nicosia - Cyprus T: (+357) 22 209 000 Contact: Demetris S. Vakis - Board Member, Head of Sales and Markets E: demetris.vakis@kpmg.com.cy W: www.kpmg.com.cy

ANDREAS K. CHRISTOFIDES MANAGING DIRECTOR

L PAPAPHILIPPOU & CO LLC L Papaphilippou & Co LLC was founded in 1963. Through constant and consistent work, it is now one of the leading and most respectable law firms in Cyprus. The firm quickly established strong presence in the fields of corporate and shipping law, litigation, banking and finance, wealth management, immigration and citizenship, thus achieving good cross-border reputation, which led to the development of a concrete international professional network and client base. Our list of clients includes governments, governmental and regulatory bodies, local and international banking and financial institutions, insurance, shipping and listed companies, multinationals and high net worth individuals. LEANDROS PAPAPHILIPPOU MANAGING PARTNER

LIMASSOL MARINA LTD Limassol Marina Ltd is the company responsible for the development and operation of Limassol Marina, an exciting new destination for living, yachting, dining and shopping in the Mediterranean. Located in the heart of the most vibrant city in Cyprus, it combines elegant residences and a full service marina with an enticing mix of restaurants and shops, a spa, gym and cultural centre, to create a lifestyle uniquely shaped by ‘living on the sea’. With 211 luxury apartments and 74 exclusive villas, featuring private berths or direct access to the beach, Limassol Marina is also the only superyacht marina on the island. ANDREAS O. CHRISTODOULIDES CEO

MARIOS ELIADES

M. ELIADES & PARTNERS LLC At Eliades & Partners, trust is our company’s most valuable asset. It is the principle on which we establish our business relationships whose mutual benefits we reap well into the future. Our personal approach enables us to access our clients’ needs effectively and maintain a commercial approach which optimizes efficiency and implementation. We value others just as we value ourselves. Furthermore, we strive to put a meaningful purpose behind what people want to achieve. We will find the real problem and turn it into an opportunity. Meeting your goals is our primary aim. We are dedicated to our clients and their business; our experienced team of professionals will assist you navigate the complex world of international business.

FOUNDER

M.M. MAKRONISOS MARINA LTD Ayia Napa Marina, situated on the southeastern coast of Cyprus, offers luxurious residences, world-class yachting facilities, a variety of retail boutiques, waterfront fine dining options, recreational and nightlife experiences. Its unique location, crystal clear seas, stunning beaches and incredible views combine to entice boaters, visitors and residents who appreciate a lifestyle of class and elegance. With complete privacy and round-the-clock security for homes and yachts, Ayia Napa Marina is the ideal yachting, social and residential destination, offering everything one needs to relax and enjoy the exciting lifestyle of the Mediterranean. STAVROS CARAMONDANIS CEO

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17 Ifigenias Street, 2007 Strovolos, P.O.Box 28541, 2080 Nicosia - Cyprus T: (+357) 22 271 000 Contact: Leandros Papaphilippou - Managing Partner E: info@papaphilippou.eu W: www.papaphilippou.eu

P.O. Box 50160, 3601 Limassol - Cyprus T: (+357) 25 020 020 Contact: Sophia Paraskeva Marketing & PR Manager E: sparaskeva@limassolmarina.com W: www.limassolmarina.com

4 Menandrou, Gala Tower, 2nd floor, office 201, 1066 Nicosia - Cyprus T: (+357) 22 667 730 Contact: Elli Theofanous Corporate Administrator E: etheofanous@eliades.eu W: www.eliades.eu

1 Kronou Str., Pera Chorio Nisou, 2571 Nicosia - Cyprus P.O.Box 27156, 1642 Nicosia, Cyprus T: (+357) 22 818 140 Contact: Stavros Caramondanis - CEO info@marinaayianapa.com www.marinaayianapa.com

Who’s Who - Cyprus Business Profiles

DR. STELIOS PLATIS

MAP S.PLATIS MAP S.Platis is a leading and expert consulting firm in the financial services field in Europe and MENA. Our award-winning team provides unique and tailored solutions for the financial services sector in global licensing, regulatory compliance and risk management, internal audit, legal/corporate support, accounting, taxation, financial audit, EMIR and other trade reporting solutions, banking and payment solutions and human resources support. Our firm has been responsible for licenses with an impeccable 100% success rate. Our portfolio of clients includes some of the largest and most successful financial services companies in the world operating in Brokerage, Fund and Asset Management, Banking and Payment Services sectors.

CHAIRMAN

NOTIS ZANNETOS GENERAL MANAGER

MEDITERRANEAN HOSPITAL OF CYPRUS Located in Limassol, The Mediterranean Hospital of Cyprus is one of the largest private health care institutions in Cyprus and provides safe, affordable and exemplary medical services to local and international patients. The Hospital has succeeded in achieving recognition for its diversity and the specialist quality services it provides, fast becoming the leading specialized MIS surgical facility, locally and internationally. The Hospital prides itself for implementing flexible operational mechanisms and endorsing continued education and training for their physicians and staff. The exemplary infrastructure of the hospital, combined with significant continued investment in state of the art equipment, reflects the commendable adopted attitude of the founder for continuous improvement for the overall benefit of the patient.

MEES On its 60th Anniversary in 2017, MEES continues to be the undisputed authority on Middle East Oil & Gas Analysis, Research and Data. MEES invests its time to delve into the details that will empower you with forward-looking analysis, enabling you to attain your objectives efficiently and successfully within the Middle East region’s constantly changing energy, economic, political and social landscape. These factors directly and indirectly influence the risks involved in a region, that is and will remain vital to global energy supplies.

FADI ABOUALFA MANAGING DIRECTOR

PHILIP VAN DALSEN

MTN CYPRUS MTN is one of the largest telecommunications providers in Cyprus. It offers integrated telecommunications solutions for mobile, fixed telephony, broadband and IT services for private and business clients. With MTN’s private fiber network and 4G technology, its subscribers enjoy high quality and reliability. The company’s experienced staff comprises 400 professionals with relevant background. MTN is the owner of a retail chain with 17 MTN Stores all over Cyprus. MTN contributes to the society through sports, education, youth entrepreneurship, culture programmes and corporate volunteerism. MTN is a member of the MTN Group, a multinational telecommunications company which operates in 22 countries.

CHIEF EXECUTIVE OFFICER

NEXIA POYIADJIS CHARTERED ACCOUNTANTS Founded in 1969, Nexia Poyiadjis is the exclusive member of Nexia International in Cyprus, a leading worldwide network of independent accounting firms, providing clients with national and international audit, tax and advisory services. Nexia Poyiadjis is actively involved in the Cyprus Investment Firms and Funds industry, providing audit and assurance services to regulated entities and funds, as well as fund advisory, administration, and support services. The firm presently operates from prestigious offices located in Nicosia, Limassol and Kakopetria. SUSANA POYIADJIS PARTNER

74 Archiepiskopou Makariou C, 3rd Floor, Mesa Geitonia, 4003, Limassol - Cyprus T: (+357) 25 351 335 Contact: Stavros Yiannakou Head, Business Development E: info@mapsplatis.com W: www.mapsplatis.com

Stygos 9 Street, 3117 Limassol - Cyprus T: (+357) 25 200 000 Contact: Notis Zannetos – General Manager E: info@medihospital.com.cy W: www.medihospital.com.cy

Alkeos 23, Office 502, Engomi 2404, Nicosia - Cyprus T: (+357) 22 675 479 Contact: Fadi Aboualfa - Managing Director E: faboualfa@mees.com W: www.mees.com

87, Kennedy Avenue, 1077 Nicosia - Cyprus T: (+357) 96 222 222 W: www.mtn.com.cy

Sophouli 2 str., The Chanteclair House, 8th floor, 1096 Nicosia - Cyprus T: (+357) 22 456 111 Contact: Susana Poyiadjis - Partner E: susana.poyiadjis@nexia.com.cy W: www.nexia.com.cy

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Whoâ&#x20AC;&#x2122;s Who - Cyprus Business Profiles

EVANGELIA ELIADOU

PAFILIA PROPERTY DEVELOPERS LTD Founded in 1977, Pafilia is the largest privately-owned residential developer in Cyprus, dedicated to delivering the best in concept, design, quality and service. The company offers an innovative and diverse portfolio of prime properties in enviable locations which provide excellent investment opportunities and ideal homes. Pafilia collaborates with internationally acclaimed architecture and engineering firms to achieve its groundbreaking developments, such as ONE â&#x20AC;&#x201C; the tallest residential seafront tower in Europe and Minthis Hills - the islands most exclusive golf, design and leisure resort. Our highly-qualified team offer professional personalised service and immigration expertise, while our global presence enables us to serve our clients wherever they may be.

EXECUTIVE DIRECTOR

STAVROS PAVLOU SENIOR & MANAGING PARTNER

PATRIKIOS PAVLOU & ASSOCIATES LLC Patrikios Pavlou & Associates LLC is a top-tier, multi-award winning law firm based in Cyprus with significant experience in the international legal market. Founded in 1963, the Firm has developed a distinguished dispute resolution department, handling cases at court and at local and international arbitration centers and a notable legal consulting department. Furthermore, in close cooperation with the associated Pagecorp Group, the Firm provides its clients with a comprehensive range of corporate and other related services. Investing continually in the skills and knowledge of its people, the professional client service and in the expansion of its international associations, the Firm today is recognizable as a top performer in respect of its distinctive legal advice and it is highly recommended by prestigious legal directories worldwide.

PwC CYPRUS We support you to create the value you are looking for by providing specialised solutions based on quality. Together we build relationships based on trust and we say things as they are, to assist you to deal with issues that tomorrow will prove important. We adapt the expertise of our almost 1000 professionals in Cyprus and the power of our global network of more than 223,000 experts in 157 countries to your specific needs, helping you make the difference

EVGENIOS C EVGENIOU CEO, PwC CYPRUS

Pafilia House, 33 Nicodemou Mylona Street - Cyprus T: (+357) 26 848 800 Contact: Michelle Taliotou - Marketing Manager E: m.taliotou@pafilia.com W: www.pafilia.com

Patrician Chambers, 332 Agiou Andreou Str., 3035 Limassol - Cyprus T: (+357) 25 871 599 Contact: Stavros Pavlou Senior & Managing Partner E: spavlou@pavlaw.com W: www.pavlaw.com

PwC Central, 43 Demostheni Severi Avenue, CY-1080 Nicosia - Cyprus T: (+357) 22 555 000 Contact: Konstantina Logotheti Director, Marketing & Communications E: konstantina.logotheti@cy.pwc.com W: www.pwc.com.cy

RCB BANK LTD RCB Bank Ltd was established on August 1st 1995, is one of the largest banks in Cyprus and is one of the European significant Banks, which are under the direct supervision of the European Central Bank through the SSM mechanism. The Bank operates branches in Nicosia, Limassol, Pafos and Luxembourg and has representative offices in London and Moscow.

2, Amathountos Street, P.O. Box 56868, 3310 Limassol - Cyprus T: (+357) 25 837 300 E: rcb@rcbcy.com W: www.rcbcy.com

KIRILL ZIMARIN CHIEF EXECUTIVE OFFICER

RMG HOLDING LTD RMG Holding Ltd is a fully licensed CIF offering wide range of services in financial markets. We offer portfolio management with particular focus on fund management. We manage equity funds investing in EMs and international securities with unique opportunity to gain exposure on developing CIS financial markets. As a licensed (since 2004) CIF RMG is fully compliant with Cyprus securities legislation and employ highly professional staff to carry out our investment and consulting activities. We have deep understanding of EM and CIS financial markets and infrastructure. We also have all necessary experience and capabilities to work in international markets. NATALYA GUTSAL CHIEF EXECUTIVE OFFICER

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RMG HOLDING LTD

25 Michalakopoulou, Office 202 1075 Nicosia - Cyprus T: (+357) 22 447 024 Contact: Natalya Gutsal - Chief Executive Officer E: info@rmgh.eu W: www. rmgh.eu

Who’s Who - Cyprus Business Profiles

ROYAL CROWN INSURANCE CO LTD RCI is a non-life insurance company that has been active in the Cyprus market for more than forty years. Initially RCI was the local agent for Royal & SunAlliance, of which it is still part of the global network, and since 1999, RCI has been licensed as a purely Cypriot private insurance company. RCI’s mission has always been to operate on the principles of absolute integrity, transparency and to provide the best possible services to its clients. The insurance product amounts to a commitment, a contract between the company and the insured, and this management regards as its most significant obligation the certainty that the insured is aware of the exact content of this contract. PHILIOS ZACHARIADES GENERAL MANAGER

RSS (RAPID SOFTWARE SYSTEMS) CYPRUS LTD GhoFi (stands for Ghost Fiber) offers a unique and innovative product – fast uninterrupted access to the internet. It became very popular in Spain and now represented in Cyprus by RSS Cy Ltd. We offer our clients benefits of reduced cost of wi-fi internet connection with the quality and speed of the fiber-optic connection. Our benefits are: *Guaranteed at all times Symmetric Internet Speed of 150 Mbps download and upload. *Next Day Installation. *No Data Caps like 3G/4G. *Lowest possible latency and jitter for better quality of Voice, Video and Gaming. *Safety and security. Full encrypted network for secured and isolated communications. Contact us to solve your connectivity problems. YULIA BYUS DIRECTOR

CLAIRE MAKRIDES

SALUS MEDICAL SOLUTIONS Our Mission is to provide unrivaled healthcare, through our leading surgeons, for the benefit of our patients. We aspire to provide quality of service, combined with cutting edge technology offered by our chosen surgeons. Our patients’ wellbeing is our priority and we ensure they receive our unique and exceptional service through the comprehensive and seamless process we have employed. With over a decade of experience in the Medical Tourism Industry, our Founders and the Team at Salus share one goal: We aspire to offer our international patients a positive life changing experience, by providing access to our leading surgeons, quality service and uncompromised healthcare, combined with cutting edge technology.

BUSINESS DEVELOPMENT MANAGER

FIONA MULLEN

SAPIENTA ECONOMICS LTD Sapienta Economics is a Nicosia-based economic consultancy producing toplevel analysis primarily on Cyprus for a range of prestigious clients. Our services include bespoke consultancy and the monthly Sapienta Country Analysis Cyprus. Each month we take an in-depth look at prospects for political stability, government effectiveness, a resolution of the Cyprus problem, structural policies including natural gas, fiscal performance, debt sustainability, banking sector stability and the latest economic trends. No other organization offers such breadth and depth of inter-related issues. Sapienta Economics and its Director Fiona Mullen are independent, with no political ties in Cyprus or abroad and no investment in Cyprus shares or bonds.

DIRECTOR

SAXO BANK A/S Saxo Bank is a leading multi-asset trading and investment specialist, offering a complete set of investment and trading technologies, tools and strategies. As a fully licensed and regulated bank, Saxo enables its private clients to trade multiple asset classes across global financial markets from one single margin account and across multiple devices. Saxo’s award winning trading platforms are available in more than 20 languages and form the technology backbone of more than 100 financial institutions worldwide. Founded in 1992 and headquartered in Copenhagen, Saxo employs more than 1500 people in financial centres around the world including London, Singapore, Paris, Zurich, Dubai and Tokyo. KIM FOURNAIS CEO

16-20 Mnasiadou Street P.O.Box: 24690 1302 Nicosia - Cyprus T: (+357) 22 885 555 Contact: Anthie Zachariadou – Executive Director E: info@royalcrowninsurance.com W: www.royalcrowninsurance.com

12 Kadmou, 1105, Nicosia - Cyprus T: (+357) 22 745 195 Contact: Kyriakos Papakyriakou - Managing Director E: yb@ghofi.com.cy W: www.ghofi.com.cy

Representative’s Address: 32 Strovolos Avenue, Suite 21, Strovolos, 2018, Nicosia - Cyprus T: (+357) 700 700 35 E: info@salusmedical.solutions W: www.salusmedical.solutions

Tenedou 7, No 401, Lykavitos, CY1055 Nicosia - Cyprus T; (+357) 99 338 224 Contact: Fiona Mullen - Director E: fiona.mullen@sapientaeconomics.com W: www.sapientaeconomics.com

Agias Fylaxeos Street, Floor 1, 3025 Limassol - Cyprus T: (+357) 25 021 121 Contact: Olga Mavlianova - Marketing Manager E: CyprusDesk@saxobank.com W: www.saxobank.com

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Who’s Who - Cyprus Business Profiles

SCORDIS, PAPAPETROU & CO LLC SCORDIS, PAPAPETROU & CO LLC is a full service Law Firm in Cyprus (established in 1973) offering, together with its affiliates and subsidiaries (the “SPC Group”), a wide range of services such as International Litigation, Arbitration & Dispute Resolution, Corporate & Commercial, Mergers & Acquisitions, Estate & Tax Planning & Trusts, Company / Fund Formation and Administration, Fiduciary & Trustee Services, Accounting & Tax Advisory and Financial Services in addition to other traditional services of a law firm. The SPC Group currently has offices in Nicosia, Limassol, Athens, Moscow and Valletta. KYRIACOS SCORDIS MANAGING PARTNER

SERVPRO ACCOUNTANTS & CONSULTANTS ServPRO is a well-established firm of accountants, advocates and business consultants who have the necessary local and international expertise to provide clients with a comprehensive range of high quality services that exceed expectations. The firm offers a wide range of services such as International Tax Planning, Company Formation, Corporate & Legal, Formation of Trust & Trustee Services, Accounting & Financial Reporting, Auditing & Assurance, Management & Administration, Information Technology, Citizenship & Residency, Immovable Property/Real Estate, Dispute Resolution/ Litigation. Clients include individuals, international business organizations and other entities. PETROS THEODOTOU DIRECTOR

GEORGE MAVROS

SKYLINK SERVICES LTD Skylink Services Ltd is a provider of ground handling services for Executive Aviation Aircraft in Cyprus. We began operations in 1998, filling the gap in the Executive Aircraft ground handling market at both International Airports of Cyprus, Larnaca and Paphos. Skylink Services now owns and operates the only FBO facility at Larnaka Airport offering around-the-clock professional VIP aircraft and passenger handling services. Currently representing over 400 companies that own or operate executive aircraft worldwide. Skylink Services also manages and operates the new Heads of State Lounge facility at Larnaka International Airport. This Lounge is used by all Heads of State visiting the Republic of Cyprus as well as a host of other visiting dignitaries.

MANAGING DIRECTOR

YIANNIS DEMETRIADES

SOCIETY OF TRUST AND ESTATE PRACTITIONERS (STEP) STEP is the worldwide professional association for those advising families across generations, and helps people understand the issues families face in this area. Today STEP has more than 20,000 members across 95 countries from a range of professions, including lawyers, accountants and other specialists. The Cyprus branch of STEP numbers over 185 experienced professionals from all over Cyprus, and is active in the spread of industry related knowledge, through regular conferences and presentations. The Cyprus committee of STEP is comprised of the following: Yiannis Demetriades – Chairman; Stella Kammitsi – Secretary; Chrysthia Papacleovolou – treasurer, and members Peter Economides, Elias Neocleous, Elena Papandreaou, Spyros Evangelou and Panicos Loizou.

STEP CYPRUS CHAIRMAN

STELIOS AMERICANOS

STELIOS AMERICANOS & CO LLC Stelios Americanos & Co LLC is a full services commercial law firm with headquarters based in Nicosia, Cyprus and a branch in Athens, Greece. It specializes in corporate and commercial law, focusing mainly on transboundary banking finance, consortia, mergers and acquisitions. Additionally, it provides services and consults on areas involving administrative and public law, energynatural resources, property and construction work, BOT / PFI, competition law, public procurement and tenders and tax services. The firm is also highly respected for its corporate and banking litigation practice. Today, Stelios Americanos & Co LLC is considered one of the leading law firms in Cyprus in the areas of its specialty.

MANAGING PARTNER

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30, Karpenisi Street, P.O. Box 20533, 1660 Nicosia - Cyprus T: (+357) 22 843 000 Contact: Kyriacos Scordis - Managing Partner E: k.scordis@scordispapapetrou.com W: www.scordispapapetrou.com

28 Kennedy Avenue, 4th Floor, 1087 Nicosia - Cyprus T: (+357) 22 021 100 Contact: Petros Theodotou, Director E: info@servpro.com.cy W: www.servpro.com.cy

P.O. Box 43012, Larnaca Airport, 6650 Larnaca - Cyprus T: (+357) 24 840 900 Contact: George Mavros - Managing Director E: flightops@skylink.com.cy W: www.skylink.com.cy

8 Stassinos Avenue, Photiades Business Center, 1st Floor, 1060, Nicosia - Cyprus T: (+357) 22 755 656 Contact: Yiannis Demetriades STEP Cyprus Chairman E: chairman@stepcyprus.com W: www.stepcyprus.com

12, Demostheni Severi Av. Office 601, 6th Floor 1080 Nicosia - Cyprus T: (+357) 22 465 500 Contact: Stelios Americanos, Managing Partner E: stelios@americanoslaw.com W: www.americanoslaw.com

Who’s Who - Cyprus Business Profiles

DEMETRIS VAKIS

THE INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS OF CYPRUS (ICPAC) The Institute of Certified Public Accountants of Cyprus (ICPAC) is the competent authority for regulating the accounting and audit profession in Cyprus. Established in 1961, ICPAC currently has more than 3,600 professional accountants as members and 3,000 students. ICPAC houses all professional accountants, supports and promotes the activities and interests of the accountancy profession, safeguards the reputation of the profession and adherence to the Code of Ethics, as well as, provides for the continuous professional development and updating of members. In addition, ICPAC is also a competent authority under the Anti-Money Laundering laws, the laws on the Regulation of Enterprises Providing Administrative Services and the Insolvency Practitioners Law.

PRESIDENT

CHRISTOS CHRISTODOULOU

TRUST INTERNATIONAL INSURANCE COMPANY (CYPRUS) LTD Trust Insurance Cyprus has been the fastest growing insurance company in Cyprus since it began its local operations in August 2009, offering a full range of personal and corporate insurance products. Today we are a leading insurance company of the General Business Sector in the industry, with a net capital of more than €26 million. Trust Insurance enjoys the privilege of being under the umbrella of the Nest Group, which operates in 23 countries in Europe, North America and Middle East with net assets of $2.5 billion. Under the Group’s insurance operations are nine Insurance Companies, one Reinsurance Company and the Lloyd’s Brokerage. The Group’s expertise and insurance knowhow has positively contributed to Trust Insurance Cyprus’ remarkable growth over the last five years of operations.

CHIEF EXECUTIVE OFFICER

ANDREAS THEODORIDES CHIEF EXECUTIVE OFFICER

USB BANK PLC Established in 1925 to evolve in 2009 to USB Bank Plc and in 2011 to become a member of the International BLC Bank-FRANSABANK Group, fourth-largest banking Group in Lebanon with active presence in 11 countries. Contemporary and reliable, USB Bank supports its customers, offering innovative and flexible solutions tailored to the newly emerged market needs, with efficient products and services. As a member of an International Group with strong capital base and liquidity, USB Bank has been focusing on business growth and on strengthening its presence, capitalizing on the opportunities arising from the Group’s wide network. USB Bank offers a wide range of banking products and services in the Retail and Corporate Division as well through its International division with International Business Units in Nicosia and Limassol and a Representative Office in Moscow.

VISTRA CYPRUS LTD Vistra Cyprus is part of the world wide Vistra group, which employs over 2,600 professionals across 41 jurisdictions. Vistra Cyprus is licensed and regulated by the Cyprus Securities and exchange commission to provide administrative/ fiduciary services and it has been providing corporate, accounting and tax compliance services, including various adjacent services, to a number of Cyprus companies established by private and multinational clients. Our team consists of 40 highly professional lawyers, accountants and corporate secretaries who understand that clients are varied and diverse; for that reason we take pride in a personal, qualitative and efficient approach, always exceeding expectations. GERARD JAN VAN SPALL MANAGING DIRECTOR

YIANNOS G. GEORGIADES MANAGING PARTNER

Y. GEORGIADES & ASSOCIATES LLC Y. Georgiades & Associates LLC was established in 1992 by Yiannos Georgiades and is now a thriving concern. The firm is international in outlook, with half of its clientele of international origin; it has a firm foothold in the domestic market, providing an extensive range of legal consultancy services to its Cypriot clients, to local councils and charitable organizations, and to multinational clientele. The firm has established a network of legal contacts and associates in many countries around the world and focuses on providing a first-class service to its clients worldwide. The firm specialises in M&A, investments, trusts, intellectual property, corporate and commercial law, real estate, medical malpractice, dispute resolution and corporate litigation. The firm is also a Nominated Advisor of the Cyprus Stock Exchange for the Emerging Companies Market.

11 Byron Avenue, CY-1096, Nicosia - Cyprus T: (+357) 22 870 030 Contact: Demetris Vakis - President E: president@icpac.org.cy W: www.icpac.org.cy

79, Limassol Avenue, 1 & 3 Kosti Palama Corner, 2121, P.O.Box. 20344, 2151, Aglantzia - Cyprus T: (+357) 22 050 100 • F: (+357) 22 050 290 Contact: Galatia Loizou - Marketing Officer E: enquiries@trustcyprusinsurance.com W: www.trustcyprusinsurance.com

Moscow Representative Office: Presnenskaya Nab.10, Block C, Office 549, 123317, Moscow T: (+7) 4956516690 IBU Nicosia: T: (+357) 22 883 740 IBU Limassol: T: (+357) 25 314 160 Contact: Nicolas Yiannakas - Manager International Business Division E: Yiannakas.n@usbbank.com.cy W: www.usbbank.com.cy

2nd Floor, Sotiri Tofini 4, Agios Athanasios, 4102, Limassol - Cyprus T: (+357) 25 817 411 Contact: Gerard Jan van Spall - Managing Director E: gerard.van.spall@vistra.com W: www.vistra.com

2, Ayios Pavlos & Kadmos Street, Wisdom Tower, 3rd Floor, 1105 Nicosia - Cyprus T: (+357) 22 819 292 Contact: Yiannos Georgiades - Managing Partner E: yiannos.georgiades@gmadvocates.com W: www.gmadvocates.com

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