Tourism has often been touted as the lifeblood of the Cypriot economy, but after COVID-19 sent airport arrivals plunging by 84% last year, the island nation has turned its attention to the Fourth Industrial Revolution – positioning itself as a player in the ICT and fintech sectors while emerging as a potential trading capital.
Already home to several international tech companies, Cyprus has made a number of moves in recent years to secure its future as an international business centre, and according to a survey by Finance Magnates Intelligence, the island is expected to come out on top should brokers look to locate in Continental Europe post-Brexit.
Of the brokerage firms that responded to the Quarterly Intelligence Report survey, 35% said Cyprus had most to gain out of Europe’s licensing jurisdictions, with 24% believing Malta could take a large part of the brokerage business, followed by Germany at 16% and France at 13%.
It’s a belief echoed among business leaders and economists on the island who increasingly view the financial landscape away from the beaches.
Marios Christou, who heads the Centre of Economic Studies at the University of Nicosia, said: “Tourism is a vital component of the Cyprus economy and an undeniably strong contributor to GDP. However, other sectors of the economy are equally strong contributors, including financial services and, in the past few years, shipping. The tech sector is indubitably a promising one for the simple reason that Cyprus has a compelling comparative advantage; namely, a highly qualified labour force. This, coupled with the general infrastructure of the economy and the established business environment, topped by a largely favourable tax system, can indeed offer an attractive package to potential technology investors.
“The continued presence in Cyprus of global tech giants is a clear testament of the potential the country has in this domain. Moreover, free access to the EU market is a definite plus, offering companies the possibility to bypass any restrictive practices they may come up against when introducing products manufactured outside the 27-nation bloc and imported into the Union.”
The shift from sunbeds to spreadsheets is partly due to Invest Cyprus, the national investment authority and promotional powerhouse that has been relentlessly selling the island’s investment potential abroad. With a five-year plan implemented in 2019, the long-term goal has been to attract the best of the ICT world in order to cement the island’s growing reputation as a regional business centre and vibrant tech hub.
CEO George Campanellas, said: “Tourism is one the island’s most important sectors for economic growth. However, even pre-pandemic, Cyprus had made efforts to cast off its traditional tourist destination image and focus on promoting other important sectors, especially in terms of attracting valuable investments in technology, innovation, infrastructure, health, education, film and more.
“Undoubtedly, tourism will remain one of the driving forces for the economy, however, Cyprus is proving to be more than a tourist destination.”
Several major international ICT companies currently have their regional and global headquarters in Cyprus including: NCR, a world leader in consumer transaction solutions; Amdocs, a leading multinational software and services provider; Wargaming, a world-renowned video game developer; and Viber, the popular online communications platform, started in 2010 by a team of foreign nationals and bought four years later by Japanese giant Rakuten for $900mn.
A growing list of prolific game development and publishing companies include GameNexters Global Ltd, who recently announced it was going public following a €1.9 billion deal with Kismet Acquisition One Corp, and Easybrain Ltd, who have just reached a $640m merger agreement with the Swedish video game holding company Embracer Group.
Elsewhere, fintech has also been making itself at home, with Cyprus now housing some of the world’s biggest, online-trading platforms such as Exness and the Israeli fintech eToro, as well as digital innovators, such as Point Nine.
Victor Trokoudes, founder of London-based money management app Plum, who recently announced a new office opening in Nicosia, said: “Europe is changing and creating prospects for other member states to develop into competitive fintech centres, with Cyprus leading the way. Cyprus is known for its fast-licensing mechanism as well as its business attitude. It also provides access to groups of young EU talent, with a high level of education, who are multilingual and are mainly specialised in the field of technology. All this is key for a company that wants to provide an innovative and alternative solution to its customers’ money management.”
According to Invest Cyprus’s five-year strategic plan, the aim is to attract foreign direct investment in vital sectors of the economy, with emphasis placed on the development of the international tech cluster. To support this ambition, ICT has now become a priority growth sector for the government and as such it enjoys increased support from the state in the form of national strategies to integrate innovative tech as well as incentives to attract IT start-ups and regional headquarters.
“Foreign direct investments are essential in order to achieve economic sustainability and long-term growth,” said Campanellas. “The government has realised this and has increased its efforts in this sphere. Long term investments, especially in the tech sector, are the catalyst to increasing productivity and economic growth, as well as development in society. Digital technologies are booming, especially during these unprecedented times and Cyprus can only follow the current trends to keep up with global competition. Productivity is the main driving force of economic growth and this is where Constantinos Petrides, the Finance Minister, is putting its main focus and resources.”
One of the most recent overtures made to entice tech investors to the island was passed by the Council of Ministers in October last year, whereby the agreed to massively speed up the process of allowing third-country nationals to establish new businesses.
According to the provisions of the government’s Fast Track Business Activation Mechanism, all necessary procedures for the registration and incorporation of a company in Cyprus will now be completed within seven working days, once all the required information has been submitted.
Furthermore, tech companies will get the added bonus of a warm welcome for any employees they choose to bring with them.
Campanellas said: “Companies are entitled to employ third-country nationals with a wide range of skills, from software and system engineers to cybersecurity specialists, provided that they first obtain temporary residence and employment permits. Again, these requirements will be fast-tracked in order to allow specialist tech companies to hit the ground running when they come to Cyprus.”
According to statistics, the contribution of tourism to GDP has been on the slide for a number of years, even before COVID-19 brought travel grinding to a halt. Global data compiler, Knoema, said GDP percentage for travel and tourism had been falling gradually from 31.2 % in 2001 to 23 % in 2020. It’s a shift that hasn’t gone unnoticed by accounting giants PwC who recently published a comprehensive study entitled ‘Restart Cyprus: Now’. The report included a series of proposals aimed at promoting reforms to restart and transform the economy and achieve sustainable growth in the post COVID-19 era.
CEO of PwC Cyprus, Evgenios Evgeniou said that while tourism was not finished, the advantages the island offers new businesses and investors would continue to impact on the overall economic picture.
He said: “Amongst others, Cyprus offers a key geographic location, a well-educated, trained and versatile labour force and investment opportunities both in traditional and emerging sectors. In addition, the business-friendly environment and the high-quality services available in Cyprus in combination with a high standard of living have attracted a number of businesses to set up, establish or expand their operations on the island. To maintain this dynamic profile in future, as a country we need to proceed with the changes that will allow us to maintain an attractive business environment where businesses can create, grow and thrive.”
With the world slowly inching its way out of pandemic paralysis, government officials and locals alike, are cautiously looking forward to the return of tourists to the island. Cypriot hoteliers were especially buoyed by the news this week that tour operators in the UK had seen a 600% rise in holiday bookings. However, the devastation caused by COVID-19 has served to energise attempts to establish an alternative source of income.
“Undoubtedly, tourism will remain one of the driving forces for the economy,” Invest Cyprus’s Campanellas admitted. “However, Cyprus is proving to be more than a tourist destination. The country’s tech landscape is expected to see significant growth in the coming years, through government initiatives and top-tier research carried out by institutes and universities on the island, which support technologically innovative projects. Additionally, the fact that the number of technology companies selecting to locate their operations and business to Cyprus is increasing is a clear indicator that Cyprus will continue growing and emerging as a tech hub in the next decade.”