I had the privilege of participating in a distinguished panel at the Best Invest Сongress 2024, organized by my exceptional friend and professional colleague, Natalia Kardash. The panel, comprising notable experts such as Philip Ammerman (Navigator Consulting Group), Petros Mavromatis (Vice Chair of CIFA), Andrey Narutskiy (Leon MFO Investments), and Yangos Hadjiyannis (Business School CIM), focused on the economic outlook and prospects for Cyprus in 2024.
Our discussion illuminated the opportunities and challenges of doing business in Cyprus, with a special focus on strategies for raising capital through EU funding, particularly for investments aimed at digital transformation and the green transition.
Improving the Business Environment in Cyprus through the Recovery and Resilience Plan (RRP)
Green and Digital Transitions as Priorities
Central to the EU's Recovery and Resilience strategy, the green and digital transitions, alongside social cohesion, remain pivotal. Cyprus's allocation from the Next Generation EU Recovery and Resilience Plan includes €1 billion in grants and €200 million in loans. This investment allocation targets 45% for the green transition and 24% for the digital transition, with measures slated for completion by 2026. To date, Cyprus has received 19.8% of these funds, below the EU average, with future disbursements contingent on the successful implementation of various projects and targets.
Reforms for a Business-Friendly Environment
The RRP encompasses reforms designed to simplify administrative processes, enhance regulatory frameworks, and improve public administration efficiency. These measures aim to create a more business-friendly environment by reducing bureaucratic hurdles, thereby encouraging both domestic and foreign investment.
Specific initiatives include:
– Streamlining procedures for starting a business.
– Simplifying the process of obtaining permits.
– Improving mechanisms for resolving insolvencies.
These reforms are intended to make it easier and faster for companies to operate in Cyprus, fostering an attractive environment for financial entities and other businesses to establish and expand their operations.
Digital Transition
A significant portion of the Next Generation EU funding will be allocated to foster a digitally focused growth economy by:
– Building a Data-Driven Economy: Leveraging regtech solutions and artificial intelligence to analyze big data, enabling early detection of risks and proactive problem-solving.
– Supporting Improved Connectivity: Deploying cutting-edge and resilient digital infrastructures, such as 5G networks.
– Enhancing Public Administration Digitalization: Modernizing judicial, healthcare systems, and land registry through digital innovations.
– Encouraging Enterprise Digital Transition: Promoting the digitization of business processes, especially in a post-COVID-19 landscape where hybrid models and digital banking are prevalent.
– Improving Financial Sector Capabilities: Leveraging digital technologies such as AI, cloud computing, cybersecurity, digital identification, and blockchain for financial innovations.
– Adapting Education Systems: Enhancing digital skills education to support a technologically adept workforce.
Green Transition
The EU's new strategy aims to address climate and environmental challenges, facilitating a transition to a modern, competitive, and resource-efficient economy. The NGEU will play a key role in making Europe the first climate-neutral continent by 2050 through:
– Investing in Clean Technologies: Supporting future-proof, sustainable innovations.
– Improving Energy Efficiency: Enhancing the energy performance of public and private buildings.
– Promoting Sustainable Transportation: Encouraging smart and accessible transportation options.
– Fostering a Circular Economy: Enabling more sustainable production and consumption practices.
– Supporting Renewable Energy: Facilitating the shift towards renewable energy sources.
– Leveraging Green Finance: Encouraging financial entities to channel capital towards green investments, including green bonds and sustainable investment funds.
An Economy that Works for People
Creating a favorable investment environment and fostering job creation, particularly for young people and small businesses, is essential. This priority aims to make the economy more inclusive and resilient by:
– Ensuring Equal Services: Providing homogeneous service levels to all EU citizens.
– Improving Labor Policies: Modernizing labor market systems.
– Supporting Social Inclusion: Reducing social gaps and fostering inclusion.
– Investing in Social Infrastructure: Modernizing educational and social facilities.
Resilience to External Shocks
The RRP includes measures to enhance the Cypriot economy's resilience to external shocks, such as economic downturns and geopolitical risks. Strengthening economic resilience involves:
– Diversifying the Economy: Reducing reliance on any single sector.
– Improving Public Health Infrastructure: Enhancing healthcare systems.
– Enhancing Social Protection: Strengthening social safety nets.
A more resilient economy is better positioned to withstand crises, providing a stable environment for financial entities to operate and invest in. This stability is crucial for attracting long-term investments in the financial sector.
Conclusion
The Cypriot Recovery and Resilience Plan represents a comprehensive strategy to revitalize the economy, modernize infrastructure, and foster an innovative, sustainable, and business-friendly environment. These initiatives collectively enhance Cyprus's appeal as a hub for financial services and other investments, ensuring a prosperous future.
By focusing on these priorities, Cyprus can create a more dynamic, inclusive, and resilient economic landscape, capable of withstanding future challenges and seizing new opportunities.
Demetra Kalogerou
Financial Consultant
