Cyprus Mail
Cyprus

Rocky road for foreign investors

By Stefanos Evripidou

AT A time when Cyprus is desperately trying to attract foreign capital to its shores, investors injecting €5 million into a sustainable tourism project northwest of the island have found their efforts consistently thwarted by the banking crisis, government raids, fines, lawsuits, bad press, and “bullying”.

Zening Resorts in Latchi village in the Polis Chrysochous area was meant to open in May for the 2013 tourist season but preparations have been dogged by: the raid on investors’ bank deposits; frozen bank accounts; allegations of legal violations; frequent inspections by government services; union pressure, and legal proceedings launched by a semi-government organisation (SGO).

The person leading the project, Ajay Goyal, argues that the “malicious” and “baseless” allegations are consuming so much time and effort to prove false that investors are reconsidering whether to open at all this year.

“The charges against us are false and the work of a sick mind. The truth is rather opposite and positive in nature,” said Goyal in a recent letter to the government.

In Cyprus’ hour of need, where liquidity in the market has all but dried up, he called on the government and the Cyprus Investment Promotion Agency (CIPA) to act fast to create conditions that would actually welcome foreign, and local, investment rather than repel it.

Speaking to the Sunday Mail, the 47-year-old Indian investor said the Akamas region is the perfect place to develop an eco-friendly, sustainable tourism project, but that constant “harassment” from certain quarters has created a climate that would scare off most investors.

Goyal made his money in software and media, having invested in six countries around the world. He speaks fluent Russian and “probably brought around 400 businesses to Cyprus from Russia”.

He first got a bird’s eye view of Cyprus 20 years ago when landing delays forced his plane to circle over the island a few times. He liked what he saw, came back three months later and bought an apartment. “I’ve loved it ever since,” he said.

More recently, he saw an opportunity to develop a “lifetime dream project”, negotiating a long-term lease for the tourism complex EliaLatchiHolidayVillage, which he hopes to turn into a wellness retreat for the more discerning, high quality tourist.

“I always wanted to do something that makes me happy and gives positive emotions to others. It was a vision that went beyond a hotel, and a commercial enterprise. It’s all about happiness. Zening is the process of achieving a state of zen that is in complete harmony within, and with nature.

He described the area in and around Akamas as a “very unique” part of Cyprus.

The Zening project has been subject to many delays
The Zening project has been subject to many delays

 

“Nature there is everything you’ll see in a National Geographic magazine or documentary. The tourism and business model there should be something that draws from nature and gives back to nature, sustainable”.

He originally attracted €15m to invest in the area in two phases.

The first phase would see €5m invested in Zening Resorts, “an eco-retreat within a luxurious wellness resort for de-stress, detox and weight loss through yoga, fitness, nutrition and natural products”.

It will work all-year round and employ more than 80 persons, most of them Cypriot, said Goyal.

The second phase involved €10m invested horizontally in organic and renewable energy, with plans for a 20MW solar power plant.

Over €3m has already been spent on Zening, the aim of which, explained Goyal, is to offer a different kind of experience to eco-conscience European and Russian tourists, as opposed to the “artificial world of all-inclusive tourism”.

Instead of providing accommodation packages based on nights stayed, Zening will offer various ‘workshops’ aimed at improving the guest’s “wellness”, whether that be through yoga, healthy eating, weight loss, or even night time astronomy classes in Akamas.

The project foresees the development of organic farming on 50,000 square metres nearby “because everything that will be served on our resort is going to be sourced from within 10-15 minutes of our location”.

“We would also like to bring in young people in the area to start new innovative sustainable tourism enterprises,” he said, referring to plans to invest in a local business incubator to encourage innovative projects like smartphone applications on sustainable tourism and nature activities.

He added: “The future is in sustainability. There is a sophisticated group, a very large demographic of tourists who have been everywhere, and abuse of nature offends them. We need to say to these tourists, we’re taking care of our nature, we will reduce our carbon footprint, we’re going to become self-reliant. That’s the way forward.”

In January, while maintenance and renovation works were underway, flash floods in the Latchi area caused chaos, spreading river sediments through the retreat and even washing away a car.

Goyal noted that little has been done by the authorities to ensure the same won’t happen again.

Then, in March, the Eurogroup happened.

The banks were closed for almost two weeks, after which capital controls were imposed. Zening couldn’t pay suppliers for items it had already paid advances on, resulting in contracts being cancelled. Other orders had to be postponed.

For supplies already at Limassol port, Customs refused to clear them until all taxes were paid, imposing fines for each day they stayed on site.

With the banks in lockdown, investors had to pay with cash to release the imported items.

“The freezing of monies in different banks and capital controls have cost us a direct loss of about half a million euro. We had planned to open for the tourist season on May 1, and have lost two months of revenue.

“We are hoping to get away with a further loss of €2m from a haircut in Bank of Cyprus and Laiki. We had a bigger plan to set up organic farming, renewable energy, and those investors have now said ‘over our dead bodies, never ever in Cyprus’,” he said, noting that phase II is now off the cards.

As the Eurogroup mulled over various ways to hit insured and uninsured depositors, Zening Resort was being promoted at the International Travel Exhibition in Moscow.

Only, it wasn’t, exactly. After paying to participate in the exhibition, the Cyprus Tourism Organisation (CTO) informed investors that they could not use the registered name of ‘Zening Resort’ in Moscow because it did not fulfil the CTO criteria for a resort. Zening Resort became Zening.

Despite many setbacks, Goyal remained confident the eco-project was worth seeing through to the end and pushed ahead, with the launch date set for some time in June.

The project, however, became the target of a number of allegations by the Paphos contractors’ association, headed by Antonis Petrides, who was heard on local radio claiming the site was a den of irregular activity and that over 100 illegal workers were on site, while the state stood idly by.

According to Goyal, police, labour and migration officials descended on the site numerous times to inspect the place and check everything was in order.

On May 23, acting on behalf of the local contractors’ association, Petrides sent a letter to the Ministries of Communications and Works, Labour and Interior.

He argued that the numerous legal violations at Zening were causing “great upheaval among our members and indignation among the wider public”.

He alleged that the project had no building permit; non-licensed contractors had been hired to do the job without any supervision; illegally employed labourers were being used for undeclared work; health and safety rules were being ignored, as were laws on the disposal of waste from construction and demolition sites.

“It appears ‘vested interests’ are continuing to this day to be above the law,” said Petrides in the letter, calling on ministers to intervene.

Speaking to the Sunday Mail, Petrides said all the reported violations had been confirmed by the authorities, noting that the labour ministry was allegedly fining the investors for 25 cases of undeclared employment.

The labour ministry told the Sunday Mail they found eight undeclared workers, while Goyal says there were seven.

“We are a professional association. We are trying to ensure the construction sector works within the laws,” said Petrides.

He further hinted that if any media tried to cover up the issue, they would be pursued legally.

Goyal’s response to the allegation of unlicensed construction work was: “We have not erected any new buildings; we have demolished none. We have carried out much needed renovations and upgrades, as every hotel in Cyprus does daily using their own maintenance staff.”

Feeling the pressure from the contractors’ association, the Polis municipality released a statement on Wednesday rejecting the notion it was serving vested interests.

The local authority said the tourism complex in Latchi has been operating legally for at least the last 30 years with all building and CTO permits obtained.

The maintenance and renovation work underway now does not require a building or planning permit because it only “involves window repair or replacement, replacing or supplementing tiles, replacing interior and exterior floors etc”, as confirmed in a report prepared by the former director of the Town Planning Department.

However, after receiving a letter from the communications ministry seeking clarifications, Polis Mayor Angelos Georgiou, perhaps feeling the heat of the allegations, said he has ordered a second municipal inspection of the site to see if any new renovation work might fit the criteria for a building or planning permit.

He added, cautiously: “Investments are welcome and sought after, in these times, we cannot say we don’t want investments.”

Meanwhile, the semi-government Council for Registration and Control of (Building and Civil Engineering) Contractors (CRCC) initiated proceedings against Zening for a single allegation of allegedly hiring a non-licensed contractor to do renovation work.

The CRCC official responsible for Paphos, Antonis Pittokoptis, told the paper that the Council believes, after making its own investigation, that the law has been broken.

Pittokoptis, who conducted the onsite inspection himself said it was now up to the court to decide whether they are right.

According to Goyal, the Council tried to secure an interim injunction to stop work at the site, but failed. The court rejected the Council’s argument as the contractor in question, it turns out, does actually have a licence, which raises the question how did the CRCC not know that since their raison d’etre, so to speak, is to register and monitor contractors.

The Council’s lawyers have reportedly asked for an adjournment to come up with a new affidavit claiming that the contract of the licenced contractor expired in February. The next court hearing will be on Tuesday.

Goyal’s response: “This is preposterous because we have a contractor and that is it.”

The Sunday Mail spoke to various departments within the labour ministry on the project.

Speaking off the record, one ministry official said he did not have direct knowledge of the case but that he had heard the entire site in Latchi was riddled with illegalities, while construction was going on without a single permit.

He also heard that many undeclared workers were found during raids on site, while illegal workers were seen running away when inspectors arrived.

However, according to labour relations department head Andrea Mylonas in Nicosia, from the 100-odd workers employed, eight were found to be ‘undeclared’, meaning they had no social insurance papers, while one was arrested for illegal employment.

According to Goyal, only seven were found not to have social insurance cards on them, four of whom worked for subcontractors, and a fine was paid for €1,400. He added that the company has paid near €40,000 in social insurance so far.

No one was arrested for illegal employment, though the authorities did find one person who was legally resident in Cyprus but only permitted to work in agriculture, he said.

Goyal highlighted that in the contract with the contractor, Zening included a provision which “clearly states that they will make the best effort to employ local people on the project”.

In fact, he said, “most of the people working on the property are from Polis and adjoining villages”.

“And as far as I know, we’re the only construction site in the country that give free meals to all our workers while they’re on the site.”

Regarding “fanciful” allegations of dozens of illegals running away during the inspection, he said: “There are mountains on one side, sea on the other, there is nowhere to run from this property.”

Goyal plans to sue the contractors’ association for “slanderous” statements made numerous times on air and questioned the reasons behind them.

Goyal notes that the campaign provides an exception to the “extremely welcoming” support from the local community, that are relying on Zening to provide a much-needed boost to tourism-related businesses in the remote area.

One local restaurateur, Dinos Paraskevas, said the allegations were “fantasy” and has launched a petition in support of the project to send to the local radio station, CTO and government ministries.

Meanwhile, Goyal has come under pressure from unions to hire the entire former staff of Elia holiday village before Zening even opens for business.

European law provides that the former staff have to be hired back under new management, and Zening plans to do that, but not before the resort opens.

However, Zening’s investors are questioning the logic of opening two months after the season has started, with the “witch hunt” against them ongoing.

Goyal argued that not opening this year would be the “rational” thing to do, saving the company almost a  million euro in costs. This would, however, leave staff unemployed for another year, meaning the government would have to cover their redundancy package.

Asked if they would postpone the opening, he said: “I’m not always rational.”

Zening has already signed more than €3.5m of contracts with leading tour operators interested in sustainable tourism.

Having faced a host of allegations, damaging floods, a financial crisis with capital controls, Goyal said: “It has taken a herculean effort to keep the project on track. We would appreciate a modicum of support or incentive from government.”

He called on the government to “convey a message of urgency to every department in the country” to not view law-abiding investors as hostile enemies, and to set up a public-private partnership which would appoint a ‘sherpa’ for investors, helping to facilitate their way through the labyrinth of state machinery.

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Source: Cyprus News Agency