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Cyprus

Public service bane of investors

File photo: Inland Revenue Department

Well over half of foreign investors in Cyprus have a “very negative” or “somewhat negative” view of the  public service, and though the tax regime topped the list of advantages, there was  concern as to whether it alone could remain the deciding factor in setting up base here, a poll revealed on Friday.

Red tape remained the number one disadvantage as an investment destination with 36 per cent expressing frustration over bureaucratic delays, according to the survey of 111 of Cyprus-based companies mainly operating in banking and finance, shipping, currency and stock, and legal and consultancy sectors.

The survey, carried out by the Cyprus Investment Promotion Agency (CIPA) said 49 per cent chose the tax regime as the number one advantage, 21 per cent the location, human resources, 20 per cent, professional services, 19 per cent, and EU membership, 11 per cent.

Among the negatives, apart from the public service and bureaucracy, were the banking sector 18 per cent, the economic crisis, 12 per cent, and the island’s division, 10 per cent.

Specifically as regards the tax regime, the survey showed that there was concern on whether it could alone remain a deciding factor for investors selecting their company base and emphasised the need for additional measures as regards long-term strategy.

According to the investors, Cyprus’ geographic location is also tending to diminish as a traditional advantage when compared to other countries.

A total of 79 per cent of the participating companies said they had no intention of moving their base elsewhere, which was slightly down compared with an 81 per cent response in the 2014 survey. Some 15 per cent of respondents said they were not sure whether they would move their company base to another country, compared with 12 per cent in 2014 while 6.3 per cent said they would move their base compared with 4 per cent who said the same in 2014.
Presenting the findings of the survey, conducted for the third consecutive year, CIPA Senior Investment Promotion Officer Lefteris Eleftheriou said Cyprus still had significant advantages as an investment destination, but efforts to improve competiveness must continue and be reinforced.

According to the survey, 43 per cent of those polled found that red tape was worse than expected, 21 per cent found the banking system worse than they expected and 16 per cent found that strategic planning was worse than they expected.

CIPA said Investors were particularly concerned about the delays they face in their dealings with public service. Some 38.7 per cent had a “very negative” image of the civil service,  and 11.7 per cent had a “somewhat negative” view while  42.3 per cent had a negative image of the incentives offered to private businesses. The general sentiment was that Cyprus’ public sector remained large in size and ineffective.

The survey also showed that while investors recognised that there was improvement in some services in 2015, they were not optimistic about an overall change.

Despite the negative views and impressions however, the island remained an alternative option for most businesses based in the Middle East and Israel, as it offered more security and stability, the survey found.

“Investor concerns on Cyprus mainly concern structural vulnerabilities and not coincidental challenges, such as the impact of the financial crisis,” CIPA Chairman Christodoulos Angastiniotis said.

Some of the advantages, investors singled out included low operational costs to run a business, the low crime rates as well as the stability stemming from the fact that the island is a member state of the EU.

Regarding human resources, investors said that education was at a high level and skills were at satisfactory levels.

But they pointed out that there were still shortcomings, such as the lack of specialisation on technical issues, which appears to be linked to the emigration of many Cypriot specialised professionals abroad.

A total of 92 per cent of personnel at foreign companies operating in Cyprus are Cypriots, 4 per cent are nationals of other EU member states and 4 per cent third-country nationals.

“The information gathered regarding the beliefs, needs, and problems foreign investors face, will prove a useful tool in the hands of the state,” Angastiniotis said. “If properly utilised, it can contribute towards better planning and in achieving our collective goal as a country to promote Cyprus as an attractive business centre.”

Stressing the importance of investment in the attempt to achieve viable growth, Angastiniotis welcomed the government’s efforts to strategically reposition CIPA, based on a new vision and a clear strategic plan.

“Freeing the organisation from complex state procedures and assigning it executive powers is now more necessary than ever if we want to have flexibility and a direct relation with investors,” he added.

The quantitative survey was carried out by Noverna Analytics & Research.


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