By Andreas Charalambous and Omiros Pissarides
Economic indicators confirm that Cyprus enjoys a satisfactory standard of living. However, the periodic crises, experienced during recent decades, as well as the new environment shaped by the pandemic and the war in Ukraine, reinforce the urgency for a radical reassessment of Cyprus’ growth model, with a view to strengthening its resilience and adaptability.
In this framework, the state is called upon to undertake a central, regulatory role, guiding the private sector towards activities with promising opportunities.
High on the priorities list rank the investment activities of the public sector, which should focus on the transition towards the green and digital economy, as incorporated in the National Recovery and Resilience Plan submitted to the European Commission.
In concrete terms, to substantially increase the market share of renewable energy and for the green transition to become a reality, the upgrading of the energy grid and the modernisation of its management is of utmost importance. Without this precondition, all other schemes and incentives are unlikely to lead to the desired outcome and will leave Cyprus laggard in this crucial sector.
Equally important is the digitalisation of all public services on the basis of a comprehensive strategic plan, following the example of Estonia which achieved great success in this vital sector. Currently and despite the various announcements, the communication of business and individuals with the public sector in Cyprus continues to be mainly via written documents and physical presence.
The upgrading of the public sector activity should be accompanied by ambitious reforms. Two reforms stand out and are of strategic importance.
Reform of the justice system is a precondition for Cyprus to become a reputable business centre and attract serious investors. The draft laws pending approval before parliament constitute only a small step in the right direction. Without a broader reform on the basis of the detailed proposals, submitted by a group of Irish experts five years ago, and without the digitalisation of justice and the simplification of administrative and civil procedures, the desired acceleration and improved effectiveness of justice will not materialise.
The second vital reform concerns the public sector. The reform efforts go back decades, but noteworthy progress has not been achieved thus far. Two issues of decisive importance are not covered comprehensively in the political discussion currently underway in parliament. The first refers to modernising the recruitment and promotion system, which should be performance based, and the second to facilitating the transfer of civil servants between departments and directorates which experience manpower or talent shortages so that additional recruitment is contained.
The current economic model of Cyprus has reached its limits over the successive crises during the past 15 years. It is up to us to adapt our economic model in a way that will support the needs and requirements of future generations.
Andreas Charalambous is an economist and a former director at the Ministry of Finance. Omiros Pissarides is the managing director of PricewaterhouseCoopers Investment Services