Cyprus Mail
Business Cyprus

The secret is out

By Poly Pantelides

THE first Maritime Cyprus conference in 1989 was called Cyprus, The Best Kept Secret and the title was fitting. But times have changed and following almost 15 years of promotion by the Cyprus Shipping Chamber (CSC) around 800 people have registered for this month’s conference, most of whom will be bringing a team with them for parallel meetings. “The secret is out,” says CSC director general Thomas Kazakos.
The shipping industry in Cyprus – covering the ownerships, management and charter of ships and shipping-related services – contributes at least 7.0 per cent to the country’s gross domestic product. Ship management comes to about 5.0 per cent and the remaining 2.0 per cent is a very conservative estimate: the government does not keep those statistics.
The global debt crisis has of course impacted shipping but its international aspect also explains the sector’s resilience to Cyprus’ most immediate financial woes, which culminated in an eleventh hour international bailout in March. Cypriots have braced themselves for years of recession but if there is one healthy sector to rely on, then shipping is it. Cyprus’ lenders, the troika of the European Commission, European Central Bank and the international monetary fund consider shipping one of the “serious sectors,” communication minister Tasos Mitsopoulos said.
“Shipping is one of the most important sectors of the Cyprus economy… and exactly because of the financial crisis its importance is highlighted even more,” Mitsopoulos added. For one thing, shipping has turned the coastal city of Limassol into one of the world’s top third party ship management service centres, Mitsopoulos added. Indeed, it is the biggest in Europe and among the biggest in the world.
The CSC’s ship registry ranks third in the EU and eleventh in the world. And according to Kazakos, twenty years of hard and quiet work can contribute to a bigger growth in the years to come. But to get to that, Kazakos first speaks of a field of thorns.
“We worked for ten years to clear out the field of thorns,” Kazakos said. That was in the 90s when Cyprus had a reputation of a “sub-standard registry,” he said. Cyprus’ reputation of being a flag of convenience – a catch-all for the not-so-honest ship owners – had landed it on port controls’ black lists. It took years to reverse Cyprus’ reputation, by hiring inspectors in ports around the world, identifying ships needing safety inspections and even deleting several from the registry. Eventually, Cyprus was moved in 2004 from black list to the grey list in the Paris Memorandum of Understanding (MoU) on port state control, and later to the white list in 2005.
Kazakos said, with evident pride, that not only is Cyprus now off the black lists, not only has it moved from the grey lists to the white lists, but “Cyprus is on top of the white lists”.
And that was the field of thorns cleared. With the new millennium came the need to “build a nice building with nice foundations,” continued Kazakos, his hands flying in the air as he described what came next: convincing the European Commission to back its tax structure. The tonnage tax – which has now been approved – is based on taxing ships on carrying capacity. This is attractive because it means that ship owners will know exactly how much tax they are due to pay any given year. Cyprus’ tax system is competitive and attractive. And the troika of lenders who have called for changes in other taxes have left this one alone.
What does this have to do with the 1989 ‘Field of Dreams’ film starring Kevin Costner? In the film, Kevin Costner’s character, a farmer, hears a voice saying, “If you build it, he will come”. “We built a competitive taxation. Strictly speaking, this means they will come,” Kazakos said.
But this is where the state needs to step up, Kazakos said. The merchant shipping department is one of nine falling under the auspices of the communications ministry, which also monitors other authorities and semi-governmental bodies. It is impossible to give the sector the attention it deserves, he said. To make things worse, with emergency austerity measures putting a freeze on hiring and promoting staff, the merchant shipping department has been without a director since April 2012. This means that major players in the shipping industry – investing millions in the sector – need to deal with a different director every month. The CSC, a private body that does not receive state funding, wants to see one person – one project manager – supervising the department and representing the industry.
All presidential candidates had committed to creating a deputy minister for merchant shipping and the matter is now in the hands of parliament. Mitsopoulos said his ministry has asked the finance ministry and the President to fill in the vacant position of a head of department. “We have clients and we must be in a position to serve them,” he said. But he also added that as a minister he is meeting with industry stakeholders in Cyprus and abroad and giving merchant shipping unprecedented attention. The merchant shipping department is also being restructured, Mitsopoulos said.
On Wednesday Mitsopoulos presided over an inter-ministerial meeting that settled on the final text for the island’s integrated maritime policy strategy. This is due to be submitted to Cabinet to become the Republic’s official document.
Natural gas prospects also open up new opportunities for merchant shipping, Mitsopoulos said. But Kazakos said he will remain a “doubting Thomas” until such promises from natural gas hopes materialise. What takes priority right now is securing the political support to expand the sector, he said. For Kazakos, shipping has produced tangible evidence of growth and productivity, and may well grow further if the state backs it up with the political gravitas it deserves.



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