THE RESURRECTION of the idea for the establishment of a technology park at Pentakomo can only be regarded as sign of government desperation, given its failure to attract foreign investment. The proposal for this project was made more than 10 years ago, during the Papadopoulos presidency, and although it generated a lot of talk and claims that the park would attract high-tech businesses it was eventually shelved and forgotten. Some pieces of land in Pentakomo may have been expropriated by the state but that was the sum total of the actions taken to establish the park that companies would supposedly use for research purposes.
On Wednesday, the Council of Ministers decided that in September it would announce a competition designed to find a strategic investor to construct and administer the park. The decision came out of the blue without any explanation to justify it or any evidence that it would work. Is there growing demand for technology parks or are there many hi-tech companies looking for new locations to base their operations? Do we have an abundance of hi-tech experts or scientists for foreign tech businesses to employ? Do we have an efficient and business-friendly state bureaucracy that would facilitate specialised businesses to set up operations here?
We doubt these questions have been asked by the government and we doubt the incentives it plans to give to make a technology park a success will be strong enough. It is even questionable if technology parks work as a business model nowadays. They were in vogue some 20 years ago when economic conditions were different and before the internet made the location of a business irrelevant. This is why the government decision seems like an act of desperation caused by its inability to attract foreign investment.
It has also tried to compensate for this failure by announcing a series of dubious measures on Wednesday aimed at stimulating demand for construction. These measures open the way for higher building co-efficients, the legalisation of violations of town planning laws and/or building permits as well as the lifting of restrictions on building expansions. In short, given the failure to attract foreign investment, the government will try to kick-start the economy by lifting building restrictions, in the hope that this would boost the ailing construction industry as well as generate tax revenue.
This is another indication of despair over low investment. The remedies that have been chosen, however, are the wrong ones. Policy-makers it seems are incapable of thinking of any other way of giving the economy a boost than via construction which, admittedly, served the country well in the past. But conditions have changed and construction might no longer be the answer. The banks will certainly not be giving out loans for construction projects like they did in the past, not with so many unsold properties on the market, not to mention the house re-possessions that are on the cards. The assorted building relaxations the government proposes are highly unlikely to revive demand for construction.
New thinking is needed by policy-makers to kick-start the economy and they should realise that the old methods will not work forever. The construction industry will be revived when the economy starts to grow but it can not lead the recovery. Resurrecting old ideas like the technology park that had failed to attract interest in the first place is not the answer. The president has been announcing state spending on development projects in all districts, which will be helpful but not make a difference given the snail’s pace at which government projects materialise.
What all governments have failed to understand is that to attract foreign investment, apart from offering incentives, which all countries offer, business conditions that are attractive to companies must be created. For decades we have been hearing that bureaucratic delays and red tape would be reduced, without anything ever being done; restrictive practices that stifle business and discourage investment have never been tackled for fear of upsetting unions and other interest groups; the banking sector may have been stabilised but the full return to normalcy is prevented by politicians blocking legislation that would assist this.
And when all this is finally resolved, the government should decide what type of investment it wants to attract (as in the case of the casino) and develop a strategy for achieving its objective. We should abandon these naive ideas that foreign businesses will make big investments in Cyprus, because we are at the crossroads of three continents and because of the good weather.