Insider
The need to strengthen the institutional, regulatory and supervisory framework of the country, with targeted interventions in the fight against corruption and the modernization of laws (better quality laws & regulations) seeking better general organization and administration, is highlighted through the proposal of 66 points of the CCCI as a key intervention.
The Public Sector and the Local Government need important reforms such as reforms in the judiciary, education, public service, etc. Elimination of bureaucracy, modernization and acceleration in the administration of justice, the creation of a more efficient and business-friendly citizens state with quality infrastructure and services as well as the acceleration in the internet coverage of the whole of Cyprus can no longer be delayed. Only in this way will we achieve the goal of attracting foreign companies with a real presence.
Particular emphasis should also be placed on introducing good practices into the recruitment / evaluation / promotion system in the wider public sector. Serious efforts must also be made to strengthen the independence and modernization of governance and the manner of appointment of all Independent Institutions and Services and members of the Boards of Governmental Organizations, in line with the model developed by the OECD.
Economic support measures should be phased out only when it is clear that the crisis has been overcome, while they should gradually become more targeted at both businesses and households.
At the same time, the right institutional framework for the development and empowerment of start-ups must be formed by creating incubators and seed funding schemes, promoting the green economy and in particular the cyclical development model by encouraging the use of RES and the re-use of recyclable materials. There is also a serious lag in the practical implementation of higher education institutions' cooperation with companies and the public sector.
The stability of the banking system is an equally serious issue and must be constantly monitored. The problem of NPLs remains a significant risk to financial stability and public finances and should not be a matter of political exploitation. tackling the NIS of the really vulnerable groups with fair pricing to help the banks but also reducing the burden on taxpayers.
Simultaneously with the above, the Registry of Non-performing loans should be upgraded to include, in addition to overdue loans, overdue but confirmed liabilities / payments to the public (eg tax, social security) in order to more easily identify the users of the system. .
In addition, the modernization of the banking sector is needed to meet the challenges and the intensifying competition.
The modernization and consolidation of the supervision of the insurance sector and the provident funds should also be promoted.
The state has an important role in promoting social convergence and cohesion. The modernization and upgrading of the level of education (curriculum and teaching methods), taking into account on the one hand the needs of the economy (technical education, training, informatics, etc.) and society on the other hand (especially the need for full-time schools), they help both to create the necessary skills and to better involve women in the labor market.
Finally, the state must intervene in the economy through targeted measures to address the issues of poverty, social housing and the access of vulnerable groups to education and health.
The transition to normalcy must be based on the following directions according to the CCCI:
Continue targeted support to companies that continue to be affected by the pandemic.
Gradual withdrawal of the expansion measures implemented due to the pandemic
Restoration of the name of Cyprus in the international markets.
Insist on completing reforms
Complete modernization of the Tax system with the aim of making it simpler and leading to the strengthening of the competitiveness and attractiveness of Cyprus as a business and investment destination.
Enhancing tax revenues through the effective fight against tax evasion while maintaining low tax rates that encourage investment.
Transition to a more sustainable development model with emphasis on green and digital economy, innovation and attracting foreign productive investment with high added value.
Sectoral balanced growth that includes various sectors in order to reduce the risk of over-dependence of the economy on some sectors, when they are hit hard.
Restraint of consumers, better targeting of the social and strengthening of the state investment expenses.
Formulation of an integrated strategy for reducing the public debt that should be promoted gradually (horizon of 3-5 years), when the course of economic recovery is stabilized.
Extension of the debt repayment period with low interest rates to be more sustainable in the long run.
Active participation of the State to support those who have a real need for state aid.
Re-education and reinforcement of labor force data in the new realities and needs of the real economy.
Strengthening the medical infrastructure for more effective treatment of any future health crises.
Enhancing education to quickly fill the gaps created by the pandemic.
Combating opacity and entanglement elements that distort the smooth and equitable functioning of the market.
Strengthening critical infrastructure (energy, telecommunications, e-government)
Regaining the trust of the citizens and the productive forces in the state mechanisms.
In general, the role of the Government in the coming years must be upgraded in terms of investments to strengthen infrastructure, to promote reforms, to operate efficiently in the market by minimizing distortions, to targeted upgrading of social welfare, and to form a new development model. To succeed in this role, the precondition is to strengthen the effectiveness of state mechanisms and to build a solid relationship of trust with the business class and the citizens.
Policy Suggestions
In order to achieve the above, the CCCI submits a series of proposals in 5 axes, aiming at the gradual transformation of the economy in the next 10-15 years to become a competitive, sustainable, modern, green and digital economy without social exclusion. This new economy must to be characterized by resistance to external shocks, to have extroversion and flexibility and to move in the lines of the New growth model formed by the Council of Economy and Competitiveness.
Adoption of the New Model by all without exception the Government, Parliament and Social Partners in the logic of a binding Social Contract
This Social Contract should go beyond the electoral cycles and be implemented as a National Plan for the next 10-15 years with intermediate goals for 2025 and 2030.
Creation of a flexible, independent and effective mechanism in order to systematically monitor the degree of implementation of the Social Contract.
Defining appropriate indicators for each unit and the obligation to prepare an independent progress report at predetermined regular intervals to the Council of Ministers, the Parliament and the Social Partners, in order to evaluate the progress achieved.
(b) Entrepreneurship – Development Incentives
The goal is for Cyprus to become a modern and reliable business center that attracts investments and companies of recognized value.
To achieve this, you must:
Strengthen the institutional, regulatory and supervisory framework of the country
Fight bureaucracy and corruption
Modernize and speed up the justice system
The aim is to attract companies with a real presence
Much more emphasis is placed on creating a more efficient state with quality infrastructure and services.
To maintain the basic characteristics of our tax system, while differentiating tax provisions that are not in line with the emerging framework of international tax cooperation.
Provide tax incentives to attract the new category of workers, the so-called “digital nomads”. These are usually self-employed workers with advanced digital skills who work remotely.
The amount of incentives should be proportional to the benefit that the economy derives from the specific activity.
Expand and accelerate the internet coverage of the whole of Cyprus with the Government subsidizing the necessary infrastructure for the expansion of optical fibers outside the major urban centers. These investments contribute to the development of the countryside, tourism and other businesses and encourage new forms of work ( ) etc.
Provide selective investment and tax incentives for business mergers / partnerships with the aim of creating larger companies with a modern governance framework. resilience to competition while limiting the development of “economies of scale” for raising capital from the stock market.
Tax incentives are provided for companies to build equity with retention of profits, thus reducing dependence on over-indebtedness.
Form the right institutional framework for the development and empowerment of start-ups, by creating hatcheries and seed funding schemes.
Promoting the green economy and in particular the cyclical development model by encouraging the use of RES and the reuse of recyclable materials.
Promote by law the obligation to recycle and reuse products.
Promote Green taxation in a budget-neutral way.
Encourage through specific incentives the cooperation of Higher Education institutions with companies and to seek the most substantial use of universities in business and the public sector.
Create programs of academic and practical / business content that include as part of the program and practical employment / training in companies that have an appropriate educational infrastructure.
Develop a framework of incentives (and disincentives) to push the private sector to the green / sustainable model, the use of technology and organic farming, directions that the EU also promotes.
(c) Financial Sector
The problem of NPLs remains a significant risk to financial stability and public finances. It is necessary to modernize the banking sector to meet the challenges and the intensifying competition from non-banking institutions.
For this purpose it is proposed as:
The consolidation of the banks' balance sheets should proceed as soon as possible.
Significantly reduce the operating costs of banks.
Examine the feasibility of mergers to make banking institutions more resilient and efficient.
Special arrangements are made to deal with the NPLs of the really vulnerable groups with fair pricing in order to help the banks by reducing the burden on the taxpayers.
Adopt plans that provide for the distribution of burdens to all involved, banks and borrowers according to the possibility of repayment.
Strengthen the political and legislative framework in terms of financial training and in general the creation of a culture and culture that in a benevolent state the fulfillment of obligations to the state and the banks is an obligation but also a social necessity.
Upgrade the Registry of Non-performing loans to include in addition to overdue loans and overdue but confirmed liabilities / payments to the public (eg tax, social security). In this way there will be a complete picture of systematic defaulters and can be excluded from the provision of government incentives and aid or even from the participation in boards of directors of the wider public sector.
Create a special fund to finance the economy, with the participation of the Government, banks and insurance companies, which aims to strengthen the equity of companies in priority areas e.g. recycling, digitization, green growth, etc.
Promote the modernization and consolidation of the supervision of the insurance sector and the provident funds.
(d) Public Sector – Public Economy
The big bet is that through the right decisions to achieve the gradual de-escalation of the budget deficit and public debt with a parallel strengthening of economic activity. To achieve the above, it is necessary to make full use of the resources of the Recovery and Sustainability Fund and the Multiannual Financial Framework of the EU.
The state in the coming years will need additional revenue to finance the new growth model and reduce debt and deficits due to a pandemic. The pandemic highlighted the upgraded (and intrusive) role of the state. This does not mean a bigger state but more efficient. The public sector needs significant reforms, including reducing bureaucracy, adopting better quality regulation, better overall organization and governance.
In order to achieve the above, the CCCI proposes:
Extension of the public debt repayment period by utilizing the historically low epitaphs for this purpose.
Regular assessment of public debt taking into account important variables such as the growth rate of the economy, international interest rates, and the indirect potential liabilities of the State.
Taking targeted measures to reduce the informal economy and tax evasion by imposing exemplary deterrent penalties.
Increased use of electronic payments and invoices.
Complete key reforms to strengthen the competitiveness of the economy and the efficiency of the public service, the Local Government and the justice system.
Modernization of the systems and procedures in the Land Registry, the Registrar of Companies, public offerings and other departments that serve the public.
Rapid promotion of e-government in the wider Public sector.
Introduction of good practices in the system of recruitment / evaluations / promotions that inspire confidence in the citizens that party executives or members do not benefit.
Strengthen the independence and modernize the governance of all Independent Institutions, Semi-Governmental Organizations and Services to the model developed by the OECD.
Separation between the Executive responsibilities assigned to the Executive Management arm and the Supervisory responsibilities assigned to the BoD.
The selection of senior management and board members should be made by an independent committee which will be selected from a list of experts of recognized prestige and knowledge that includes experts from international organizations (eg ECB, IMF, EU). The list of names (3: 1) will be given to the PD for the selection of the persons to be appointed.
Better management and utilization of the assets of the State, including the real estate and utilization of the incomes for development purposes.
(e) Social Convergence and Cohesion
Education and lifelong learning must be the backbone of future development, prosperity and social convergence. To achieve these goals the following are proposed:
Modernization of teaching materials and methods taking into account the current needs of the economy and society, which require multiple skills, flexibility, digital knowledge and communication skills, based on successful standards eg Finland.
Modernize teacher evaluation at all levels.
Upgrading the level of education taking into account the weaknesses and gaps as reflected in international and European assessment indicators (eg PISA). The gradual introduction of the all-day school and the strengthening of technical education will also contribute in this direction.
The new growth model is expected to contribute to social prosperity and reduce economic inequalities by creating new and relatively well-paid jobs, increasing the emphasis on small and medium-sized enterprises and rural development.
At the same time, the state must intervene through targeted measures, covering the level of poverty, social housing, access of vulnerable groups to education and health. The tax system, the provision of incentives and in general the correct planning of social policy, within the economic possibilities of the state, will contribute to the reduction of inequalities and the guarantee of social cohesion.
Finally, the CCCI and the team of economists who collaborated in the preparation of this Proposal, firmly believe that Cyprus is not entitled nor has the luxury of losing this opportunity to modernize and create the bases and infrastructure for the transition to a more resilient and competitive economy. The CCCI expects all political leadership and the social partners to immediately recognize the need for these reforms and changes and to commit to work in a coordinated and coordinated manner in the formulation and implementation of the New Social Contract for the next 15 years.
The CCCI expresses its special thanks to the economists Mario Clerides, Sofronis Clerides, Michalis Sarris, George Syrichas and Andreas Charalambous for the valuable help and the very detailed suggestions and proposals submitted as well as the time available for its preparation. which will be officially submitted to the President of the Republic, to all the Political Parties and other bodies of the economy, for study and utilization.
