Interview with Socrates Joachim
Convinced that Cyprus will continue to attract dozens of companies, both technological and from other sectors to establish a base in the country, the new Chairman of the Board of Invest Cyprus Ioannis Matsis appears. In an interview with Insider, he explains that the goal is to attract companies with real substance, real work and structures, in order to contribute to the rational development of the economy. He also talks about the new strategy for attracting investments and whether Cyprus can attract giant companies such as Facebook and Amazon. Finally, he presents his views on the future of the Cypriot economy and the banking sector.
What goals have you set since assuming the Presidency of Invest Cyprus in September 2021? /b>
The goals we set at Invest Cyprus are never personal. Accepting the honor bestowed on me to assume the chairmanship of the Cyprus Investment Promotion Agency, together with the other members of the Board of Directors and the staff of the Agency, we strengthen and update the strategic action plan. A plan, which was developed in full cooperation with the government and is directly linked to the priorities that have been set, through various plans, to create strong conditions for sustainable and inclusive development, attract international companies and Foreign Direct Investment (FDI) in the country. We hope that in 2022, the pandemic will allow us to continue our targeted efforts to promote Cyprus as a base for international companies with highly qualified staff, as an international financial center with a special emphasis on attracting investment funds and managers with Investment opportunities in strategic areas where foreign capital is required such as Renewable Energy Sources (RES), Health, Education, Tourism and Financial Services.
PANDEMIC AND INVESTMENT p>
How much has the investment sector been affected by the pandemic and what steps are you taking to make Cyprus an important investment destination?
In 2020, the effects of the pandemic hit most sectors of economic growth internationally and at the same time caused a freeze or even the cancellation of important investment decisions. In 2021, despite the pandemic continuing, there was a significant recovery in FDI and according to UNCTAD amounted to $ 1.65 trillion. increased by 77% compared to 2020. For 2022, it is estimated that there will be a further increase but not to the levels of 2021. Of course, what should concern the competent bodies at European level, is the fact that the EU has absorbed only a very small percentage of this increase, an indication that the overall investment context may not be as attractive as in other geographical areas.
As for what it takes to make Cyprus an attractive investment destination, the answer is twofold. On the one hand, there must be profitable investment proposals, based on real financial terms, which will make sense from an investment point of view for those interested. In fact, since international competition for investment is fierce, any proposals should not only be advantageous but also more advantageous than those in other countries. On the other hand, the general framework governing the implementation of an investment should be simple, transparent and without bureaucratic obstacles. Respectively, the role of Invest Cyprus is twofold. On the one hand, we promote Cyprus through targeted actions abroad and especially in areas with investors with great investment “appetite”, and on the other hand, we submit targeted suggestions for improving the investment climate that will make the Cypriot choice even more competitive. We must not forget, of course, that any investment decisions, at the end of the day, are made between the parties directly involved and to a large extent in the financial database.
THE NEW STRATEGY FOR ATTRACTION OF INVESTMENTS >
What is your view on the government's plan to attract foreign investment?
The new Strategy of the Ministry of Finance, which came into force on January 1, 2022, is a comprehensive plan that comes to correct any pre-existing distortions. At the same time, it particularly strengthens the efforts made to promote sectors that have significant investment prospects. In fact, the new strategy has already begun to bear fruit and work particularly positively in the cases of international companies that already evaluated Cyprus as one of their options for the creation of a regional headquarters and offices or in general expansion of operations. The new Strategy covers a wide range of issues, especially important for foreign companies, as its main axes are the speed of licensing and operation through the Facility Company, the ease of attracting human resources through a new policy for employment of third country nationals and economic and social targeted tax incentives such as extended tax exemptions, increased tax deductions for research and innovation costs and highly targeted naturalization criteria.
In addition, in the three years 2022-2024, significant additional changes in the regulatory framework are expected, such as the completion of the reform of the justice system and the modernization and reform of the Companies Law. At the same time, major steps are expected in the field of digital transformation of the public sector, which will significantly improve the foreign investor's experience with the state. & Nbsp; In terms of adapting the human resources to the new data and synchronizing it with the real needs of the market, a goal has been set for targeted upgrading of the skills of the employees.
THE AREAS WITH THE BIGGEST INVESTMENT INTEREST
In what areas do you see investment interest focused today?
In relation to foreign direct investment, in recent years we have seen significant inflows of foreign capital in various sectors such as renewable energy, health and education, finance and tourism-hospitality. We believe that these sectors will continue to attract foreign investment and in this context are our efforts to map investment opportunities through the Invest Bank Project Bank and to intensify our promotions in foreign markets. In our discussions with large institutional investors, we observe that they take seriously the positive developments recorded with the development of the country as an international business center, since the existence of demand is a key factor in implementing a new investment. And the & nbsp; The strategy of the Ministry of Finance that we are already implementing to attract highly specialized companies in our country is moving in exactly this direction, ie the growth of the real domestic economy.
What are the benefits of attracting such companies?
These companies attract high-level human resources from abroad, raise international investment funds and contribute to the further development of similar sectors such as real estate, education, entertainment, telecommunications and retail. It is also understood that in this way the tax revenues from direct and indirect taxes increase. With our country plagued by a low birth rate and an aging population, attracting high-income workers and their families can help boost the size of the domestic economy. This Strategy is already bearing fruit as dozens of new international companies choose Cyprus for their new base, while at the same time several of the existing ones are expanding their operations. As a result, multiplier benefits are created for the economy, which in the case of ICT companies alone exceeded € 1.8 billion in 2021. Although it is still too early to talk about a self-sustaining ecosystem of highly specialized companies, we feel that the dynamics that are developing, soon will be even more visible across the economy.
Particularly positive are the developments in the development of the country as an international financial center, with & nbsp; sector of investment funds to record significant growth in recent years. Both in terms of the number of investment funds and in terms of managers who choose the Cypriot jurisdiction, Cyprus is gradually consolidating as one of the & nbsp; alternatives within the EU. The ongoing efforts of the Hellenic Capital Market Commission to modernize and upgrade the regulatory framework and effective supervision are key to the whole effort.
Which countries are currently investing in and in which other markets should we target in your opinion?
It is a fact that & nbsp; The geographical location of Cyprus and the advantages it offers create the conditions for attracting interest from all major international markets, such as the United Kingdom, the USA, France, Israel, India, the Arab countries, Canada, Egypt and others. . The & nbsp; Invest Cyprus's efforts are focused and focused on large international companies and large institutional investors operating in an internationalized global economy anyway. In general, in the new internationalized environment, investment decisions are usually made in large business centers internationally, regardless of where the investor is located. That's why our roadshows and targeted meetings focus mainly on the financial metropolises of every continent without excluding or ignoring the interest that & nbsp; exists from smaller markets.
The amounts are satisfactory spent on promoting the country as an investment destination?
The financial and human resources we have at our disposal, & nbsp; they may not be favorably compared to their counterparts in the competition, but we must not forget that it is the duty of all of us to maximize the result. That is why we also choose very carefully, purposefully and after analysis of reliable data any actions and actions that we implement, so that the annual budget is utilized to the best degree. & Nbsp;
THE COMPETITORS b >
Which countries do you consider to be our main competitors in attracting investment and consolidating foreign companies and what do you think we need to improve in order to become an even more attractive destination?
Depending on the sector, and the size of each country, the competition varies. For example, some are our competitors for tourism investment, others for attracting technology companies and others for licensing financial products. In terms of attracting investment, we certainly have to compete with other European countries and our neighboring countries. On the other hand, there are many countries that claim the establishment of foreign companies either for the creation of a regional headquarters, expansion of activities, opening of new offices, etc. Some of the examples are London, Dubai, Malta, Luxembourg and Ireland. Undoubtedly, the international competition is huge and we must make continuous efforts to improve and modernize the institutional framework for investment. The government's new strategy for attracting companies was the result of an in-depth study of data, evaluation and adaptation of best practices from abroad and solving practical problems faced by organizations already operating through Cyprus. At the same time, through the Recovery and Sustainability Plan, a unique opportunity is created to raise significant funds for the purposes of digital transformation and transition to a green economy. As well as for the implementation of important reforms to increase productivity, financial stability, improve access to finance, improve the provision of health services, modernize the education system and strengthen the labor market. It is therefore understood that the correct and timely implementation of the provisions of the Plan will lead to significant private investments, either complementary or additional, to those provided in the Plan. That is why we call for no delays in meeting the prerequisites that need to be implemented.
In relation to your headquartering efforts, what have we achieved so far and what can we expect in future; Can we attract giant companies like Facebook and Amazon?
In recent years, dozens of companies, both technological and from other sectors, have established a base in Cyprus. In fact, most of them are constantly strengthening their presence in the country by increasing their staff and enriching the services provided through Cyprus. The important thing, of course, is that they are not shell companies. On the contrary, they are companies with real estate, real jobs and structures. And this is exactly what we have been seeking in recent years. Companies of good reputation and high standards should come to Cyprus which will contribute to the rational development of the economy, so that the impact of the € 1.8 billion that we mentioned earlier becomes even greater. In terms of attracting well-known and large groups from abroad such as those you mentioned, certainly as the technological ecosystem develops, the chances of attracting larger companies increase. Although we must say that companies that are considered leading in their fields, already maintain activities in Cyprus. Companies like Nexters, Amdocs, Easybrain, NCR, The Soul Publishing, eToro, Murex and many more. & Nbsp;
& nbsp; ADOPTION OF SUSTAINABLE DEVELOPMENT PRACTICES
You also served as CEO of a systemic bank in Cyprus. We would like your opinion on the future of the banking sector and the Cypriot economy.
The banking sector in Cyprus has improved significantly since the 2011-2013 crisis. The percentage of Non-Performing Loans (NPLs) is at its lowest levels, capital and liquidity reserves are satisfactory and the banks' operating model adapts to the new digital environment. There is of course the great challenge of achieving sustainable profitability, but the signs are that they are on the right track as they try to create new sources of revenue but also to reduce their costs. Foreign investors always look at the state of a country's banking system during the investment decision-making process. The progress made in recent years is another advantage for the country as an international business center.
The Cypriot economy has proven to be more resilient to the coronavirus crisis than originally expected. Compared to other southern European economies, which also have significant tourism-related activities, Cyprus' recovery has been one of the most impressive. Despite the uncertainty that the pandemic is still causing, the expectation is that in 2022 and the following years significant growth rates will be recorded, and if we do not find ourselves in front of other epidemiological surprises, it will be the year in which we will learn to live with virus, which we hope will soon become endemic. The most important aspect from an economic point of view is for the country to follow a path of sustainable development, not an opportunistic one, as many times in the past. The adoption of sustainable development practices and the implementation of plans for the long-term strategy of the Cypriot economy “Vision 2035” is the only way for a strong economy that will be attractive to foreign investors.