Cyprus Mail
Business Cyprus

Harassed foreign investor granted palace meeting

By Stefanos Evripidou

A FOREIGN investor facing a host of bureaucratic obstacles to opening an eco-friendly sustainable resort in Latchi village, made worse by a “hostile” public service, has found a government willing to listen.

Ajay Goyal told the Cyprus Mail earlier this month that his €5 million sustainable tourism project – the Zening Resorts in Latchi village in the Polis Chrysochous area – was being consistently thwarted by a raid on bank accounts, capital controls, frequent government inspections on site, fines, lawsuits, bad press, and “bullying”.

Following a detailed report by the Sunday Mail on June 2, Goyal was invited to the Presidential Palace on Monday this week, where he met Undersecretary to the President, Constantinos Petrides.

According to Goyal, the meeting was “very interesting and constructive”, with the government showing a real interest in hearing “a firsthand account of what it’s really like for a foreign investor on the frontlines”, who wants to make a “real and sustainable” investment in the country, as opposed to simply buying real estate and acquiring permanent residency.

He said the government was willing to go all the way to support foreign investors who abide by the country’s rules and law.

“I explained to them that an investor coming into a new country is like a kid going to kindergarten for the first time. If he does not act within the rules on the first day, you cannot slap the kid. You have to first teach the child the rules. You can’t start sending 20 government departments, whose job it is to come and make sure we are doing everything according to rules that only they know.”

Even his Cypriot managers were not aware of all the rules that a project is meant to abide by, argued Goyal, using as an example the case of the yellow slip that all workers were meant to have, in addition, to actually paying their social insurance.

“It’s a question of bureaucracy going berserk. You can’t implement obscure rules on first inspection. Or at least, come and say, guys you’re starting a business, these are the rules.”

The investor proposed the government provide a channel of communication between business and bureaucracy “so that before slapping wrist, and pushing people around, you can tell them what is right and what is wrong… because right now businesses are being treated very antagonistically”.

He called for a ‘sherpa’ office which could communicate directly with investors on all their obligations and help them get through the labyrinth of bureaucratic procedures, as well as act as a go-between for businesses and government.

“They thought it was a very interesting proposal,” he said.

This Sherpa could also help protect investors from “vested interests and unscrupulous operators”, he said, highlighting his own experience in Latchi.
“The government has an obligation to investigate allegations but also to protect investors from bullying,” he said.

Finally, Goyal called on the government to do its best to attract real FDI.

“Until now, someone who comes shopping for real estate is considered a foreign investor. Certainly buying a house contributes to the economy but that is not FDI. An FDI support mechanism is simply absent in Cyprus, it does not exist, and it needs to be created.

“And they need to act fast, they don’t have time to wait, because the situation is dire,” he added, referring to the complete lack of liquidity in the market and absence of any credit being offered by credit institutions to businesses.

“If things continue like this, in four, five months, businesses will have run out of stock,” he said.
Zening was meant to open in May for the 2013 tourist season but the project was pushed back after the Eurogroup decision last March, which saw investors lose half a million euros in lost revenue as a result of the delay.

They expect to lose a further €2m from the haircut on deposits in Bank of Cyprus and the former Laiki Bank.

Goyal originally attracted €15m to invest in the area in two phases: the first €5m earmarked for Zening Resorts, an all-year round retreat hiring over 80 people, mostly Cypriots; while the remaining €10m was meant to be invested horizontally in organic farming and renewable energy.

Following the troika’s decision to raid the bank deposits of the island’s two most systemic banks, investors have scrapped phase two, deciding instead to pull their money out as soon as possible.

Over €3m has already been spent on Zening, and Goyal remains confident that Cyprus has what it takes to offer a different kind of experience to eco-conscience European and Russian tourists, as opposed to the “artificial world of all-inclusive tourism”.

However, the Indian investor said he was spending so much time and effort countering allegations of supposed illegalities and irregularities made by the Paphos contractors’ association, headed by Antonis Petrides, that he even considered not opening at all this summer.

Petrides was heard numerous times on local radio claiming that the tourism project was riddled with illegalities, allegedly employing dozens of illegal and undocumented workers, and operating without a building permit.

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

The CRCC tried to secure an interim injunction to stop renovation work at Zening (formerly the Elia holiday village) but failed, once it transpired that the hired contractor does have a licence, something which should have been obvious to the semi-government body since they are the ones responsible for registering contractors. The CRCC has since asked for an adjournment, to prepare a new charge against Zening.

The investor said since the allegations surfaced by Petrides, he has become the target of regular inspections from the police, labour ministry, and other government departments.
He questioned whether the government really wanted to attract foreign direct investment (FDI) in Cyprus or scare it away.

Since publication of the Mail article, Zening was again subject to another “big labour ministry inspection” last week where no violations of any kind were found. The official opening is now set for July 4.

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