Keynote speech by the Minister of Energy, Commerce and Industry, Mr Georgios Lakkotrypis, at the conference “Investment and Investment Finance: The Cypriot Case”
It is my distinct pleasure and privilege to welcome you all to Nicosia for today’s conference on corporate investment and finance in Cyprus, co-organised by the Nicosia Chamber of Commerce and Industry and the European Investment Bank (EIB).
Having been given the opportunity to take an early look at the findings of EIB’s Investment Survey for 2019, which the Director of the Bank’s Economic Department will present shortly, I am positive that it will prove to be a most valuable tool in the hands of both the public and private sector, in coming up with ways to further accelerate investment activity in Cyprus.
I am also certain that the expert interventions, as well as the panel discussions to follow Mrs Revoltella’s presentation, will help shed light on specific investment area challenges and prospects. Best practices may also be shared and, hopefully, new impetus will be given to the joint efforts of all parties to develop on the island a new entrepreneurial ecosystem, based on long-term competitiveness and sustainability.
At this point, I would like to take a moment to acknowledge the EIB’s valuable contribution to the Cypriot economy. Cyprus and the EIB have been working closely together for more than 35 years, with the Bank’s total funding in Cyprus adding up to 4 billion euro and involving more than 50 public sector and 500 private sector investments.
In a true demonstration of confidence in Cyprus’ potential, the EIB even became especially active on the island following the climax of the financial crisis in 2013. Between 2014 to 2019, EIB funding reached 1.5 billion euro, through a series of targeted financial instruments, such as the highly successful “Multi-Beneficiary Intermediated Lending” scheme, intended to secure local bank loans to Small and Medium Enterprises (SMEs) and guaranteed by the State with 1 billion euro.
For the past 5 years, Cyprus has been on a steady path of economic growth, with the Government working hard, together with our private sector partners, to maintain the positive momentum achieved. Unsurprisingly, investment activity by Cypriot businesses is one of the areas picking up and we have a particular interest in identifying the main long-term barriers they face, cited in the EIB’s 2019 Investment Survey as energy costs, the availability of finance, access to digital infrastructure, the availability of skilled staff and uncertainty about the future.
These, I have to say, are bottlenecks to doing business also identified by our Government and for which concrete steps are already been taken. To reduce energy costs for example – a particularly challenging effort due to our energy isolation – we are now working towards one of the country’s most important restructuring reforms, the introduction of a Competitive Electricity Market.
For this new Electricity Market to be completed, besides the complex regulatory changes needed, we also operate, amongst others, support schemes that attract new participants in the market, such as large commercial projects in Renewable Energy Sources (RES). We currently have under implementation and at the final licensing stage, projects of more than 370 MW, aimed at competing in the open market.
In addition, specialized schemes targeting businesses and providing for the generation of electricity from RES for self-consumption, are also ongoing.
Similarly pertinent here is the fact that Cyprus is now moving forward with plans to import LNG for electricity generation by the end of 2021, the capital expenditure for construction of the infrastructure projects to facilitate LNG imports stands at 300 million euro, of which a grant of 100 million euro has already been secured from the EU. The competent Natural Gas Public Company is, in fact, now in advanced negotiations with the EIB, as well as other institutions, for financing the remaining amount.
The aim, of course, of our restructuring efforts in the electricity market, is for Cyprus to have by 2022, an energy mix that consists of 20% RES and 80% natural gas. As such, we will no longer rely on heavy fuels for electricity production, reducing both the environmental impact and prices for end consumers.
Regarding the concerns expressed by Cypriot firms on the availability of finance, again this is an area where the Government is doing its best to support entrepreneurs. I mentioned earlier the various agreements signed with the EIB and especially the 1.5 billion euro funding during the crucial period of 2014-2019. In addition to these, my Ministry, for instance, is operating support schemes that for the 2014-2020 period add up to almost 100 million euro.
Overall, I have to say, entrepreneurship, attracting skilled labour and training local staff, as well as technological development and innovation, are considered areas of high priority for the Government of the Republic.
In this context, applied research is encouraged through EU or national funding and an attractive Intellectual Property box regime, providing 80% tax exemption of income from the use of a wide range of intangible assets.
At the same time, we have set up the legal and regulatory framework to allow Cypriot State Universities to create and operate spin offs. We are also moving ahead with setting up a Technology Transfer Centre, intended to provide services to researchers for commercialising their research through the licencing of existing or newly established companies.
Moreover, our income tax law regime has been reviewed, with an eye to providing tax incentives to innovative SMEs and start-ups in Cyprus. This includes an income tax relief up to 50% on taxable income for persons investing in qualifying innovative SMEs.
Other notable decisions made by the Council of Ministers include the formation of a working group to develop and implement blockchain technology in Cyprus, as well as the adoption of an integrated governance system for Research and Innovation, aimed at developing a knowledge-based economy and contributing to sustainable growth and the sufficient utilization of our scientific and human capital. The new governance system includes, amongst others, the appointment of a Chief Scientist and a National Board for Research and Innovation, as well as the creation of a dedicated Deputy Ministry of Innovation and Digital Policy.
The Government’s intention is to facilitate and promote the creation of alternative financing mechanisms like crowd funding, venture capitals and business angels, in order to meet the financial needs of innovative enterprises, especially in the tech industry. Our goal, to transform investments made in research into competitiveness and, ultimately, real value for the economy.
Ladies and Gentlemen,
Cyprus has traditionally been a highly attractive investment destination and the positive growth rates achieved, a mere couple of years after the climax of the crisis in 2013, are the best proof that the island has managed to retain its well-deserved reputation as a thriving business hub and a growing financial centre. Through an ongoing restructuring effort, the many advantages offered by Cyprus have not only been safeguarded, but also enhanced – professional services of the highest level, robust and transparent legal and regulatory framework, attractive tax regime, highly educated and skilled workforce, access to European and regional markets.
I would like to close my address, therefore, by assuring you all, the esteemed members of the Cypriot business community and, of course, our partners at the European Investment Bank, that the Government remains committed to our common goal for prosperity and sustainable economic growth. Certainly, the only way to be successful is by actively supporting Cypriot businesses in their investment and operating activities, working in unison to address their concerns efficiently, to alleviate barriers to their development and, importantly, to improve their overall future outlook.
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