Sustainable growth combined with social sensitivity

By Achilleas Demetriades

Developments in the global economy, the effects of the pandemic and the collapse of the “state of corruption”, all call for a new model of economic development for Cyprus.

The state has an important and substantial role to play in shaping the economy. It needs to facilitate growth by ensuring a healthy business environment and setting a strategy to promote investment. Given the current state of affairs, a prerequisite for recovery is the fight against corruption and the upgrading of Cyprus’ image as a serious investment destination. The key to growth combined with social justice is the development of the potential of human capital, by enabling access to equal opportunities for everyone.

The Cypriot economy has flexibility and comparative advantages that can be utilised to a much greater degree. We enjoy an above average standard of living which is largely due to the high level of education, industriousness and the adaptability shown by the business sector. At the same time, Cyprus’ participation in the EU and the Eurozone, which offers an overall policy framework as well as financial resources for development and the upgrading of environmental and social policy, is also a positive contribution.

However, the government’s socio-economic policy exhibits glaring and growing weaknesses. Without a long-term vision and prioritisation, it is reduced to opportunistic interventions. The policy and decision-making framework is anachronistic, driven by vested economic interests, with strong elements of corruption.

The growth of our economy is mainly based on tourism and construction. The excessive development of the construction sector, with the focus on constructing multi-storey buildings for the sale of ‘golden passports’, has provided great benefits to specific interest groups while hugely damaging Cyprus’ image as an investment centre. Other areas of business activity, based on the knowledge, technology and new skills of our young people, have been neglected.

The social structure remains incomplete for vulnerable groups and low-income pensioners. Creating quality jobs for our young people is our debt to the younger generation. We will rely on them to get ahead in the areas of green growth and technology, which are fields where we are lagging behind. The digital skills of our population will be upgraded once the state leads by example by digitalising the services offered by the public sector.

The Cypriot economy stands at a critical juncture. A continuation of the current course will lead to a worsening of chronic structural problems, with dire repercussions on living standards.

My proposal has emerged from an intensive dialogue with society at large and focuses on three main pillars:

1. Rebuilding and diversifying the base of the economy by promoting growth sectors that provide productive employment for our young people, and supporting business innovation with environmentally friendly investments
2. Effective support for vulnerable groups with extensive education and retraining programmes to enable them to participate in economic and social life
3. Upgrading the environment to ensure the quality of life of future generations.

In the social sector in particular, three concrete policy measures are necessary. The minimum income should be adjusted with an institutionally based system of revising it to the constantly changing circumstances. A mechanism for the continuous adjustment of the minimum wage should be introduced so that it rises to 60 per cent of average income, as in the socially developed countries of Europe. Finally, the pension system should be modernised with the institutionalisation of occupational pensions in the private sector as a key pillar, so that everyone enjoys adequate pensions.

All these presuppose an enhanced role for a state free of corruption. The “Honest State” can restore the dynamic of a modernised public service so as to play its important role effectively.

In this way we will lay the right foundations for an economy that is free from the weight of corruption that so plagues our country and give special emphasis to growth with social justice and solidarity.

Achilleas Demetriades is a partner at the Lellos P Demetriades law office LLC  https://achilleas.eu