Cyprus Mail
Business Cyprus

Rising to the challenge

By Peter Stevenson

THE NEXT few months could prove to be crucial for the island’s economy and any recovery will take time but a lot depends on whether Cyprus can stabilise after the shock of March 15. That is the opinion of one of the world’s most prominent businessmen, Andrey Dashin, founder of Alpari and currently one of the top-five largest forex brokers in the world.

Limassol-based Dashin, who established Forex Time (FXTM) last year after Alpari stopped operating in Cyprus, told the Sunday Mail he is cautiously optimistic about the island’s future.

“I am cautiously positive about the future – the last few months have been very harmful for business in general – and the recuperation process could be prolonged despite authorities doing their best to try to fix the situation,” he said.

Although the banking sector has shrunk now, he argues it is a positive change that could see the sector become stronger in the future.

“If a sector is bigger than a country’s economy then it runs a big risk of collapsing and despite all of the warning signs the government did not react swiftly and allowed it to grow disproportionately,” Dashin said.

This now means recovery will not be easy but Dashin argues that if enough energy is applied, the banking sector can become more efficient than it was, albeit smaller. There are still plenty of positive aspects which will help the survival and recovery of the financial centre on the island like reasonable decision makers and qualified professionals but it will not happen overnight. Revising the terms of the bailout agreement could help Cyprus’ plight, but Dashin said he thought that does not look likely.

The forex magnate believes the mass media is largely to blame for the situation in Cyprus as they cast a shadow on companies on the island and questioned the country’s credibility as a financial centre.

“The media hoopla caused more damage than the actual haircut itself with stories of money laundering and the delay of the deal caused an avalanche of bad press and mistrust in the whole system,” he said.

The state regaining its credibility is an important step to recovery and Cyprus is at an advantage because many foreign businesses want the country to regain its place according to Dashin.

“The core problem is in the banking industry right now and Cyprus needs to find a new niche if it is to recover quickly, because prospects from natural gas are still far away and the tourism industry is not strong enough to sustain the economy on its own,” he added.

Dashin said other problems could stem from the lack of credibility right now as everything is intertwined so it is imperative the government tries to stabilise the current situation.

“The government needs to make more mature and measured steps as it clearly shows from the Eurogroup meeting that they were unprepared, with a cabinet barely formed,” he said.

Dashin explained that if the first deal had been accepted on March15 – which saw a small haircut on all deposits – then there would not be as much turmoil as there is now because people could have lived with the first set of measures and would have moved on.

“Most big companies on the island just have staff here and are not financially dependent on Cyprus’ economy but when the whole sector’s reliability is placed in doubt they might consider relocating eventually,” he added.

An important factor in keeping companies from leaving is offering low corporate tax although that has recently been increased.

“They need to be careful with the tax regime because they have increased corporate tax to 12.5 per cent recently and that is not a wise step as it is the last threshold, if it rises anymore then you can be sure companies will start leaving,” he said.

It is usually the case that when economies do not have resources to develop themselves they have more friendly tax regimes to attract foreign investment. Although there are currently a couple of countries in the EU with better jurisdictions than Cyprus, Dashin said there is no certainty they will remain attractive so companies prefer to stick it out.

“Many companies have not left Cyprus because there is the general belief that higher taxes are a worldwide trend and moving a whole company abroad is not an easy process,” he explained.

Dashin said it is very important that the government makes businesses feel comfortable to prevent a capital run once restrictions are lifted, even more than developing new industries.

The stability of forex trading in Cyprus has meant it has been easy for Dashin to maintain business on the island and be unaffected by financial crisis.

“Setting up FXTM was quite a natural move after I had established Alpari’s presence in Cyprus a couple of years ago, having already collected good personnel and created good relationships with state officials that deal with companies in the business sector,” he explained.

Alpari’s branch in Cyprus was shut down, diverting its operations to the London office.

The forex trading market is an international decentralised financial market whereby one currency is exchanged for another. Individuals and business entities can buy an amount of one currency and pay for it with an amount of another.

The market is not bound by geographical borders and is easy to access. It is available 24-hours-a-day, five days a week and it is the most liquid market in the world, according to experts.

When trading in the forex market there is one simple philosophy; when you trade one currency for another, you buy the currency that is predicted to rise in value (long position) and sell the currency that is predicted to decline in value (short position). You can make such predictions using popular trading tools, but there is always an element of risk in trading. If the currency you bought does rise in value as you predicted, you can sell it and make a profit, but if it falls in value, you will suffer losses. You don’t need to be a financial expert to be a good trader.

Dashin envisaged Cyprus could have a strong position as a forex brand and from his perspective he said he feels it is a comfortable industry.

“A predictable financial environment is one of the most important factors for a business entity,” he said.

He added that he believes the forex regulator CySec, will not make decisions which will negatively affect the industry as those in charge are mature professionals.

As well as being a highly successful businessman, Dashin also gives back to the community and one of the projects he manages is the charity Open Heart that has been operating for the last six years, helping orphanages in his home country.

He has also explored the possibility of starting something on the island. “I would like to invest in a charity in Cyprus but I am currently still in the process of finding an authority which could help organise something on the scale that I would like to contribute,” he said.

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