Education capacity flagged as key growth obstacle

As Cyprus steps up its efforts to attract international talent and long-term investment, the country’s private education system is facing growing scrutiny, with capacity constraints emerging as a major barrier to sustainable growth. 

This was the core issue tackled by a panel at the TechIsland Summit in Limassol on Thursday, where government officials, investors, and education leaders explored targeted solutions, policy incentives, and structural reforms to support the expansion of private schools and meet future demand. 

The discussion, moderated by TechIsland board member Angelos Gregoriades, brought together Interior Minister Constantinos Ioannou, MP Nicholas Papadopoulos, SPORTSOFT CEO Mila Marochkina, and Alexis Andreou, Cyprus Director of Globeducate.  

Their shared concern, whether Cyprus may soon be unable to accommodate the children of the very professionals and entrepreneurs it is striving to attract. 

“In Cyprus we have a fast-growing community of tech companies, international investors and highly skilled individuals who have chosen Cyprus as their home base,” Gregoriades said at the outset.  

“And while we’re excited by the momentum in the tech sector, we are equally aware of the structural limitations that could jeopardise this progress – including the capacity of our private education system.” 

“Why is this such a critical issue? Because access to high-quality, internationally-oriented education is one of the top priorities for the professionals and entrepreneurs we’re attracting,” he continued.  

He added that “These individuals don’t relocate alone. According to a recent TechIsland survey conducted in collaboration with IMR/UNIC, nearly 60 per cent of highly skilled individuals moving to Cyprus bring their children, with an average of two children per employee.” 

Between 2020 and 2024, he added, more than 2,600 children arrived with their parents from just 50 companies – placing “tremendous pressure” on already stretched school infrastructure. With 68 per cent of international firms now planning to relocate an average of 49 new employees each over the next five years, Gregoriades warned that the country is likely to see “thousands more children” needing spaces in schools that are already full. 

“At TechIsland, we’ve been working closely with the government and other stakeholders to address this challenge,” he said, noting that solutions under review include building permits, operational licensing, teacher recruitment, and investment incentives. 

In response, Ioannou confirmed that a new government scheme is already underway, allowing existing schools to expand their infrastructure by up to 25 per cent under certain conditions.  

“This offers a faster way to increase capacity,” the Minister said, adding that the scheme includes a streamlined process for increasing the building coefficient. 

He also noted that 20 private school projects are currently in the permitting pipeline, with one already approved.  

At the same time, he revealed that legislation is being submitted to the Attorney General that would allow the state to allocate land specifically for the development of all levels of educational institutions, not just universities. A decision is expected by June. 

The conversation also turned to the broader economic implications.  

“Private school availability is becoming a key factor in Cyprus’ competitiveness compared to other EU business hubs,” Ioannou said, adding that education is now an integral part of the country’s long-term economic strategy.  

He also referred to legislation passed earlier this year defining projects of €20 million or more – or those creating 75 jobs – as strategic investments, making them eligible for fast-track licensing and dedicated support via a one-stop-shop. 

For Papadopoulos, however, more radical measures are needed, starting with tax incentives.  

“We strongly support the reduction of VAT on the construction of buildings that will be used for education, sports and culture,” he said, emphasising that this was essential if Cyprus hoped to remain attractive to families and international investors. 

“I think our mantra should be, ‘Come to the island for the money, stay for the quality of life,’” he added. 

Marochkina offered a candid view of her experience applying for permits.  

While she acknowledged that the process had improved in recent years, she called for greater clarity and simplicity, proposing the creation of an online platform to guide investors through the requirements. 

At the same time, she expressed concern that school investors still face VAT burdens even when investing millions, a cost not typically imposed on investors in other sectors.  

She also raised the issue of bringing in qualified teachers from abroad, likening the current system to an orchestra “with musicians playing different instruments.” 

As an operator of international schools, Andreou emphasised the challenge of attracting experienced native English-speaking teachers under current rules.  

“Being able to more easily obtain work permits for the right type of people is important,” he said, noting that the recognition of overseas qualifications remains inconsistent when compared to Cyprus or Greece. 

Both Andreou and Marochkina pointed out that schools face regulatory hurdles not just when opening but also in their daily operations, particularly when it comes to staffing, infrastructure, and planning. 

Andreou shared that many of the difficulties seen in Cyprus mirror those encountered by Globeducate in other countries, but are felt more acutely due to Cyprus’ rapid growth and limited infrastructure.  

Instead of continually introducing new incentives, he suggested that existing ones should be refined and properly implemented. 

For TechIsland, which represents many of the tech companies now fuelling this growth, the stakes are high.  

In a statement, the association welcomed the government’s initiative but stressed that further action is needed to secure long-term solutions. 

“As TechIsland, we welcome the government’s initiative to address the pressing issue of limited capacity in private schools, which now stands as one of the main blockers not only for the further growth of the tech sector, but also for Cyprus to remain competitive as a business hub,” it said.  

“Highly skilled professionals and entrepreneurs come to the island bringing necessary expertise. These people often relocate with their families, and access to quality education is a decisive factor in their decision-making. If suitable schooling options are not available, it becomes a significant deterrent.” 

The same IMR/UNIC survey showed that nearly 60 per cent of skilled professionals relocating to Cyprus – both EU and third-country nationals – bring children, with an average of two children per employee.  

Between 2020 and 2024 alone, more than 2,600 children relocated from a sample of just 50 companies, intensifying pressure on the already overburdened system.  

And with 68 per cent of international firms planning to bring in an average of 49 new skilled professionals over the next five years, demand is only set to rise. 

The measures announced by the Ministry of the Interior are seen as a step in the right direction, but TechIsland argues that more is needed.  

Reducing VAT on the construction of school infrastructure is one of the group’s key recommendations.  

As schools, hospitals and museums do not typically charge VAT, the current tax burden makes school projects financially unviable – particularly when an investor must pay VAT upfront and attempt to recover it through rent.  

The association is calling for VAT to be cut from 19 per cent to 5 or even zero for a period of ten years, in line with other EU countries.  

In Belgium, for example, VAT was reduced from 21 to 6 per cent under the Scholen van Morgen programme, freeing up €160 million for 182 new school projects.  

France and Spain have adopted similar policies, with VAT rates at 5 and 4 per cent respectively. 

TechIsland also suggested broadening the scope of this incentive to include universities, hospitals, museums and sports facilities, effectively boosting investment in social infrastructure.  

Beyond VAT, the group proposes additional density incentives, such as allowing the transfer of unused development rights from school construction to other real estate projects, mirroring the system currently used for restoring listed buildings.  

Where agricultural land is involved, it called for the permitted building coefficient to be increased from 30 to 50 per cent. 

On employment, the statement pointed to the need for streamlined hiring procedures for international teachers, particularly native English speakers.  

The inclusion of these educators under the Business Facilitation Unit (BFU) framework would, it said, help private schools meet rising demand more effectively. 

“Private school availability is a critical component of Cyprus’ competitiveness against other EU business hubs,” TechIsland concluded.  

“It is therefore essential to recognise this as part of the broader strategy for further economic growth. We look forward to additional initiatives that will strengthen the country’s education infrastructure and reinforce its position, not only as a tech and business hub but also as an education hub.” 

As the discussion drew to a close, Ioannou reiterated that Cyprus’ upcoming accession to the Schengen Zone – combined with expanded housing efforts and one-stop-shop investor support – will also help make the island more attractive.