Q You have adopted a very liberal policy on inward investment, including for non-European Union investors. Are the benefits now being felt?
A With its entry into the EU, Cyprus has taken on a new role as the focus for trade between Europe and the Middle East, providing the perfect gateway for businesses to penetrate new markets. We have seen a significant increase in interest from European companies to invest in Cyprus after our accession to the EU, and we are mainly talking about companies that are interested in using Cyprus’s position to do business with the Middle East.
The country is rapidly enhancing its position as a regional logistics hub for moving goods in and out of Europe and the Middle East.
Q You are trying to find ways to grow the economy without needing labour-intensive industries. How much progress are you making in that direction?
A I believe that the Cyprus economy will remain based on services but we are also targeting high-tech, non-labour intensive industries. As a government, we don’t view FDI as important only for capital input.
On the contrary, we consider foreign investment to be an important element in the transfer of know-how and professional expertise from developed market economies. Our emphasis is to attract investments in targeted sectors such as high technology and R&D.
Cyprus has a high standard of living and higher wages than some other markets, and we have a small local market, so we are not targeting big manufacturing companies. We are now seeing the movement of industries from European countries to Asia but Cyprus already faced this problem in the 1990s, when our clothing industry moved production to other countries. So we have already gone through this process.
FDI is the best way to help the economy restructure and develop new technologies, products and brands, leading to higher value-added products.
Q What particular advantages are you offering investors?
A Cyprus offers advantages in relation to tax considerations, which include a uniform corporation tax of 10%, the lowest corporate tax in the EU, relatively low income tax, no tax on interest and dividends, and a wide network of double taxation treaties covering 40 countries.
But our tax policy is just one piece of the puzzle. No foreign company would consider establishing a business if we did not offer a wide range of other advantages, including our strategic location, the stable socio-economic environment, the state-of-the-art infrastructure, a highly qualified labour force, and a business environment that is favourable to international trade.
Q Tourism remains an important sector of the economy. What efforts are you making to strengthen the position of Cyprus as a tourist destination?
A Our strategy is not just to increase the number of tourists, but also to increase the amount that they spend. We have, for example, encouraged investment in golf courses and facilities for sports teams to use Cyprus for winter training.
We are doing more promotional work in markets such as France, Germany and Italy, and we have seen an increase in arrivals from these countries. We also heavily promote Cyprus in the Russian market. After EU accession we lost a lot of visitors from Russia because they needed a visa to enter the EU, but arrivals from Russia are now increasing again.
We expect that joining the eurozone in 2008 will be positive for the tourist industry. Over 90% of our visitors come from within the EU, so they will be able to use their own currency, with the obvious exception of visitors from countries such as the UK.