Optimism is growing about Cyprus’ potential to attract more foreign direct investment (FDI), despite a decline from an annual average of €5.7 billion between 2018 and 2021 to €4.8 billion in 2022 and €4.2 billion in 2023.

This was highlighted in the EY attractiveness survey, released this week, which explored global investment trends and their regional impacts.

The survey revealed Cyprus’ mixed results as an FDI destination, highlighting its strengths and areas for improvement while showing the changing investment plans of international investors.

Conducted in March and April 2024, it involved 100 executives from foreign companies across 13 countries, with nearly two-thirds of them already having operations in Cyprus.

Results from the survey show a significant shift in investor sentiment; notably, more than half (57 per cent) plan to either establish or expand their operations in Cyprus over the next year.

This marks a considerable increase from only 29 per cent in 2022.

However, this enthusiasm is somewhat tempered by a comparison with the wider European region, where 72 per cent of investors express similar intentions, suggesting that Cyprus still has potential to increase its appeal.

Investment trends show a preference for establishing sales and marketing offices (53 per cent), with manufacturing (40 per cent), supply chain and logistics (37 per cent), and headquarters (33 per cent) also prominent.

What is more, the interest in supply chain and logistics has declined, falling two places from its top ranking in 2022, which might suggest unmet expectations in this sector.

Furthermore, other areas of interest include business support services such as call centres and shared services (32 per cent), training centres (32 per cent), and research and development (R&D) activities (30 per cent).

The increasing interest in R&D, fuelled by the government’s efforts to establish Cyprus as an innovation hub, marks a significant trend towards higher-value investments.

Additionally, manufacturing has gained unexpected popularity, aligning with broader trends across Europe, indicating a shift towards more substantial, technologically advanced investments.

Likewise, educational centres are also gaining traction, reflecting a broader interest in educational investments by international players.

When considering Cyprus as an investment destination, the primary strategies highlighted by investors include adopting additive manufacturing methods like 3D printing (44 per cent) and relocating activities closer to their home markets (43 per cent).

These strategies aim to reduce dependency on dominant source countries (36 per cent), enhance manufacturing presence within Europe (34 per cent), operate more regional supply models (33 per cent), and increase nearshoring (28 per cent).

Moreover, the ongoing geopolitical tensions in the Middle East have also prompted investors to consider relocating some production activities from Lebanon and Israel to Cyprus, seeking increased security and benefiting from Cyprus’ EU membership.

Lastly, sustainability has become a central factor in FDI decisions, surpassing traditional focuses on growth and cost reduction, especially among companies in high-impact sectors like industrial, chemical, and high technology.