For years officials have talked of the need to curb red tape standing in the way of investments. But the establishment of a ‘One Stop Shop’, avoiding the labyrinthine permit process and bringing all paperwork under one roof, never got off the ground. Now, new legislation in the pipeline aims to finally change that – but will it work in practice?
Titled ‘The Facilitation of Investments Law of 2019’, the interior ministry’s bill is on the face of it a well-designed blueprint, covering the A to Z of the permit application and approval process.
The first attempt at a One Stop Shop was floated in 2005, when the cabinet approved the creation of a bureau dedicated to servicing foreign investors.
Then in 2012 the cabinet passed a decision to set up a ‘Mechanism for Detecting and Promoting Investments’.
Is it going to be third time lucky? According to a ministry presentation of the bill seen by the Sunday Mail, previous attempts failed because, rather than simplifying the process, they created a One More Stop. They did not change licensing procedures, while the proposed structures lacked the legal authority to override the jurisdictions of government departments zealously guarding their own turf.
Currently in Cyprus there are 10 town planning authorities – the Town Planning and Housing Department, plus five district offices of the department, as well as the four municipalities in Nicosia, Larnaca, Limassol and Paphos
When it comes to building permits, there are 36 authorities (municipal bodies).
And investors have to deal with disparate authorities covering the environment, sewerage, power supply, workplace safety, fire hazard – you name it.
The new plan intends to sort this mess out by setting up a dedicated Strategic Investments Management Directorate. Under it will come a Single Licensing Authority (issuing both town planning and building permits) and staffed by qualified architects, civil engineers and persons knowledgeable in environmental issues.
Parallel to the licensing authority will be a Project Management Bureau with technical personnel. It is under this bureau that the position project manager will be created.
The project manager (PM) is key to the whole endeavour, as he or she will be the go-between the investor and state authorities. For prospective investors, PMs will be their single point of contact.
Vested with full authority to act, PMs will prepare a list of the permits required for any given project and – this is significant – set strict timetables for the issuance of permits.
The proposal provides for a maximum period of one year for the issuance of permits, although it will strive for six months.
Once an investment proposal is submitted, the designated PM oversees the process, coordinates with all relevant departments, determines what paperwork is needed and delivers a list of all needed applications – called an Investor’s Journey – to the applicant.
The interior ministry has already designed a series of model Investor Journeys customised to specific types of investments: mixed-use developments, tourist developments, industrial facilities, golf courses, solar power facilities, wind parks, imports-exports, private healthcare facilities, and facilities manufacturing and processing agricultural products.
As an example of eliminating overlap and duplicate processes, the Department of Environment will be charged with sole responsibility for consultations and issuing reports relating to all environmental issues; the Department of Town Planning and Housing is out of the loop.
Also, pre-defined timeframes will be set for the duration of consultations with the relevant authorities.
As the situation stands today, there are no timeframes for the completion of an environmental impact assessment. But under the new regime, the Department of Environment has three months to complete the environmental impact assessment after consultations with interested parties. For investments affecting Natura 2000 protected areas, the envisaged consultation deadline is four months.
The legislation applies only to ‘strategic investments’ – effectively large-scale investments. Investment proposals will need to satisfy certain criteria in order to be classified strategic.
One of five criteria must be met.
First, a capital investment of €15m or over, of which 75 per cent should consist of equity capital.
Second, the investment must create at least 100 new full-time jobs, or 70 new jobs with a combined annual payroll of over €1m.
Third, the investor must be an ‘anchor company’ – an established multinational or a company listed on Forbes 2000, Nasdaq 500, or FTSE 350.
Fourth, when it comes to investments in research, development and innovation, a minimum capital investment is needed of €1m.
Lastly, a project can be characterised as strategic if it is an investment in the health, education, or environmental sectors, with a €5m minimum investment.
On paper it all sounds solid and well thought-out. But the ministry’s presentation itself cautions that past experience has shown merely enacting a law means little unless it can be implemented.
The document anticipates resistance from “established interests and fiefdoms”, pointing out that execution will take the necessary political will to move from words into actions.
Asked to comment on the endeavour, Savvakis Savvides, an economist specialising in economic development and project financing, said a One Stop Shop for investors can certainly be useful.
“Put it this way: it can’t do any harm. But my sense is that it’s still treating the symptoms, not the disease. Proposals like these are designed to bypass red tape, and that’s something, but they don’t cut out the fat.
“What’s more, in Cyprus we don’t address the root cause of bureaucracy, which ultimately comes down to vested interests. Encouraging foreign projects is all well and good, but what about existing businesses or local businesses?”
As a businessman himself, Savvides knows how the system works.
“Normally as a company you should be able to dial a single number and sort out your issue over the phone. But as we all know, it never pans out like that – you end up being ping-ponged between 10 different government departments.”