Foreign Direct Investment in Cyprus and the real economy
By our Partner, Tax & Legal Services Leader, Pieris Markou
Cyprus ranked 8th out of the top 20 countries globally in the Global Finance magazine’s ‘FDI Superstars 2018’ for Foreign Direct Investments (FDI) performance and appeal. We have come a long way in the last few years, surpassing all international expectations since the banking crisis of 2013.
Cyprus is now attracting significant inflows of foreign investments from countries like the US, Asia, Russia and the Middle East. Cyprus’ improved credit ratings by international credit rating agencies, the successful recapitalisation of its major banks and recent government bond issues raising over €5 billion in the international markets coupled with the numerous large-scale projects, have all contributed to the resurgence of Cyprus as a top FDI destination.
During the last six years we have seen more than €10bln of FDI the most important being the recapitalization of the banks, major acquisitions in the pharmaceutical and retail industries with major foreign investors entering the market, investments in hotel and leisure the most significant being the €0,5bln investment in the integrated casino resort and new players entering the health and education sectors by acquiring major stakes in existing operations.
These type of investments are indeed encouraging, however, what makes a country really successful in attracting FDI is its ability to encourage foreign investors to develop industries and sectors within its economy. The success of Ireland, Luxembourg and the like, is their ability to encourage multinationals to set up operations, headquarters, large scale warehouses and regional centres, creating jobs and other opportunities not only in the respective industries but also in all the peripheral services being offered to such corporations.
It is inevitable that when such global organisations set up shop in a specific country, they would look for support from local sources in legal, accounting and human capital services. Their highly paid expats will use our restaurants, education and retail shops and many other products and services.
Within the tourist industry, we should be looking for big international hotel chains and in the wider spectrum of the hotel and leisure industry entering the market and enhancing in this way our tourist product.
Two recent examples of companies taking advantage of what Cyprus can offer are Sykes Enterprises, a global leader in business process outsourcing, which picked Cyprus from 20 other competing jurisdictions as its base, citing the right work-life balance as a key reason and high-tech and entertainment start-up Whipper, also established its global headquarters in Limassol, adding more weight to the growing start-up culture in Cyprus.
Companies like Wargaming, who moved their headquarters to Cyprus bringing with them more than 200 top executives to Cyprus most of them with their families are a prime example of the increased number of companies in the Intellectual Property and technology industry setting up real presence on the island. These are encouraging and welcomed signs of what real FDI is all about.
Brexit is also providing opportunities. The major global shipping insurer, London P&I Club, announced in July 2018 that it was setting up a ‘post-Brexit subsidiary’ in Cyprus. And there should be many more opportunities in other industries too.
The recent gas findings are promising and some of the big names in the industry have already set up operations on the island. These include not only the well-known operators but many of the support companies which should be looking to set up regional headquarters for servicing their clients in the wider region of the eastern Mediterranean, Middle East and Africa.
The rapid expansion of the tertiary education of the recent years has created opportunities for regional educational centres attracting foreign students from all parts of the world. We have already seen cooperation between local institutions and many international universities bringing with it increased foreign investment in the industry.
There is a bright future for Cyprus in attracting even more FDI which can have a real impact on the economy. For many years, Cyprus has been identified as an ideal location to establish business presence, offering an enviable combination of climate, business and culture with many key benefits to foreign investors and their dependent family members who are looking for a jurisdiction that offers financial stability, a gateway to Europe and a quality standard of living for their families.
Let’s take advantage of our uniqueness!