Cyprus Mail
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Our View: A dysfunctional banking system will not help in attracting investors

IN CURRENT market conditions, characterised by illiquid banks, an impecunious state, a rapidly shrinking economy and zero business confidence, foreign investment appears the only hope for Cyprus.

As funds for investment are not available locally they must be found from abroad. It is the only way that much-needed cash would be injected into our stagnant economy, creating real, as opposed to state-sponsored, jobs and some business opportunities.

The opening of casinos, which was included in President Anastasiades’ election programme, would certainly give a boost to the economy, creating jobs and attracting more visitors to the island as well as providing funds for the state. But it may take a while for offers to be made and evaluated, licences to be issued and operations to commence.

In the meantime the government needs to formulate a strategy for attracting investment, offering incentives and proposing projects that could be undertaken.

It would be very difficult to attract investors when our economy is being served by a dysfunctional banking system, subject to a strict capital controls, but the ground-work could be prepared and ways of exempting foreign investors from these controls, should be given serious consideration. Without preferential treatment, with regard to the movement of capital, no foreign firm would be willing to make a big investment.

The government could pay lip service to the need to attract foreign investment, but it cannot realise this objective without offering strong guarantees that capital controls would not apply to interested companies.

While this seems easier said than done, it is an imperative to find a way to eliminate the disincentive of controls – which might be in place for another year as far as we know – for potential investors if we are to have a chance of attracting some.

On Monday President Anastasiades met a representative of the Hong Kong investors, who bought the Venus Rock Golf Resort, and gave his full support to the project that would include two golf courses, a five-star hotel, commercial and leisure centres and luxury homes. The deal was good news for the country, sending a message that there are investors who have confidence in the economy.

As for complaints that the Resort was bought on the cheap, €80m below its December 2012 valuation of €370m, these are meaningless.

A competitive price is what makes an investment attractive to a foreign company.

We should bear this in mind if we want to encourage foreign investment, because the days of charging inflated prices for everything we sold to foreigners, belong to the past. Now, we have no choice but to sell on the cheap.

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