CYPRUS AT A GLANCE


Country presentation

Cyprus is the third largest island in the Mediterranean, situated in the eastern corner of the Mediterranean Sea. It lies at the crossroads of Europe, Africa and Asia, close to the busy shipping and air routes linking Europe with the Arab World and Far East, representing a strategic hub for business activities in the region. Upon membership into the European Union, since 1st May 2004, Cyprus is being transformed into a key outpost in the Eastern Mediterranean, facilitating partnerships and serving as the springboard for investments among Europe, Africa, and Asia

Introduction

Cyprus has successfully faced the challenge of integration, and its accession to the European Union has not resulted in any insurmountable difficulties. On the contrary, harmonisation with the EU’s acquis communautaire was carefully planned and supported by appropriate policies. In particular, Cyprus has undertaken significant economic and structural reforms that have transformed its economic landscape. Tariffs and quantitative restrictions have been eliminated for all manufactured goods and agricultural products originating in Cyprus and other EU countries. Trade and interest rates have been liberalised, while price controls and investment restrictions have been lifted. In addition, private financing has been introduced for the construction and operation of infrastructure projects; while the electricity supply and the telecommunications sectors have been liberalised.

Cyprus has a record of successful economic performance, reflected in rapid growth, full employment conditions, external and internal stability. The annual rate of growth in 2006 reached 3.8 percent, while inflation (2.2%) and unemployment rate (4.6%) were maintained at low levels. In terms of per capita income, estimated at CY£11.192 in 2006 (US$ 24.323), Cyprus is classified by the World Bank among the high-income economies.

Having achieved a high degree of sustainable economic convergence with the euro area Member States, Cyprus adopted the euro in January 2008 based on the conclusions of the European Commission. “The introduction of the euro was a milestone in the short history of the Republic of Cyprus. The entry into Eurozone is expected to boost foreign direct investments due to, among others, the enhancement of macroeconomic stability and investors confidence, the reduced transactions costs i.e. for exports and imports, the elimination of the exchange risk, the anticipated lower interest rates that will lead to lower cost of financing.

Challenges

Scarce natural resources and reliance on foreign energy sources. Towards this end, the Government is encouraging the utilization of renewable energy sources, such as the solar energy.

In light of the challenges inherent with the intensification of competition and the globalization of the economy, the Government has introduced a framework of incentives within the EU harmonization process and the Acquis–Communautaire in general. Such schemes and incentives, inter alia, aim at the reconstruction of Cyprus traditional economic sectors, improvement of productivity and labour skills, the development of technologically advanced products and services and the attraction capital-intensive foreign investments in new high-tech industries and the development of skill intensive products.

Cyprus is largely dependent on tourism which is highly sensitive to the international situation. Towards this end, the Government has been pursuing measures for the diversification of the economy; hence, Cyprus has developed through the years into a reputable international services hub, especially in the banking and shipping activities

Strong points

Cyprus offers a unique basket of advantages to foreign investors utilizing Cyprus as a base for conducting their business activities worldwide. Its competitive advantages derive from its strategic geographical location, favourable business climate, fiscal regime, stable macroeconomic environment, high educational level of the labour force in conjunction with the comparatively low level of graduates’ remuneration, modern legal, banking and financing systems, excellent infrastructure with advanced transport and telecommunications network, as well as the widespread knowledge of English.

Among its other assets, its advantageous fiscal regime: taxation of company profits is only 10 %.

References

Capital Nicosia
Surface Area 9,251 km2
Population 2009 768 000 (IMF)
Languages Greek and Turkish are the official languages. English is widely spoken
GDP 2009 (dollars) US$ 13 bn (IMF)
Religion Greek orthodox, Maronites, Armenian apostolic (80,1%), Muslims (10,9%), Foreign residents -Permanent Residents of Cyprus- (9%)
National Holiday 1st October