The upward trend of the information and communication (ICT) sector reflects the increasing penetration of technology into economic activity
The Information Technology and Communication (ICT) sector emerges as a champion of the development of the last decade in Cyprus, based on the data of the Statistical Service, underlining the dynamics that the sector has acquired as a component of the Cypriot GDP.
H upward trend of the information and communication (ICT) sector reflects the increasing penetration of technology in economic activity, but also the government's efforts to attract companies to Cyprus.
In particular, based on the latest available data from the Statistical Service, processed by KYPE, this sector in the last decade shows an average growth rate of 15%, with catering and catering services (tourism) in second place with 12.7% and administrative and support activities (in this sector there are also activities related to tourism) with an average growth rate of almost 10%.
The ICT sector is now in third place in manufacturing, accounting for 9.6% of total gross value added in 2022 (preliminary figures) behind wholesale and retail trade with 12.2%, which is in first place, and closely followed by financial and insurance activities, which are in second place with 9.8% of total gross output. Indicatively, in 2013 the share of the sector was only 4.3% of the total gross value added, while the financial and insurance activities sector was in first place with 12%, which also demonstrates the diversification that has been achieved in the Cypriot economy after the 2013 crisis.
In absolute numbers, the total contribution (in terms of gross value added) of the sector in 2022 amounted to €2.33 billion, showing a percentage increase of 277% in a decade, with consistently large increases to be recorded in the last three years, aided by the incentives given to the activity of ICT companies in Cyprus.
In this regard, the CEO of the Investment Promotion Organization, Invest Cyprus, Marios Tanousis, told KYPE that “Cyprus' success in attracting a significant number of multinational companies in the technology sector results from the fact that the government has created an attractive package of incentives that promoted in a coordinated way by Invest Cyprus, the private sector, in consultation with the government”.
As he mentioned, the incentive package was framed with the successful and efficient operation of the Business Facilitation Unit of the Ministry of Energy for the quick handling of the company's registration process, as well as the quick securing of work permits for the company's executives as well as other important steps which are needed for the company to operate in Cyprus.
For his part, Dimitris Nisiotis, President of the Cyprus Information Technology Association (CITEA), which has 89 member companies, told KYPE that two reasons led to the rise of the sector. The attraction of technology companies to Cyprus, as a result of the initiative launched a few years ago through Invest Cyprus and secondly as a result of a general development in the technology sector worldwide, as technology companies “appear” in the top positions in the lists of companies with the largest value. “Especially after the Covid-19 pandemic, which is considered a pivotal point, this began to be recorded in Cyprus as well”, he added.
In addition, Mr. Nisiotis sees further dynamics in the sector, due to the investments that the government has committed to digitization through the Recovery and Resilience Plan, but also due to the policy of the European Union, which has highlighted digitization and the green transition as the two main pillars in an effort to strengthen the resilience of the European economy.
Regarding the ways to maintain the dynamics of the sector, Mr. Tanousis emphasized that it is important for international technology companies and other companies that invest in Cyprus to be able to operate in an efficient environment without complexities and adds that for this reason the government and Invest Cyprus organize the Round Table discussions between the Foreign Investors and the President of the Republic with the Ministers and Deputy Ministers.
“Through this dialogue where foreign investors express their challenges, concerns and proposals and receive comments from the President and Ministers and Deputy Ministers, the investment environment of Cyprus is further improved and strengthened contributing to further economic development and the creation of new jobs of work through direct foreign investment”, he added.
Concluding, Mr. Tanousis pointed out that digitalization is an important economic driver that is also linked to the education sector, and that certainly boosts productivity and economic development.
In his turn, Mr. Nisiotis emphasized that the momentum for the sector is good, to add however that an existing obstacle must be addressed and in particular the absence of domestic potential with the necessary skills. “The staff that are there with the necessary skills are not enough. So efforts must be intensified in the short term with the long term,” he said.
As he said, the short-term measures concern the upgrading of skills and re-skilling (up-skilling and re-skilling) or the import of labor force from abroad, with the medium-term challenge concerning the promotion of the sector in schools, to strengthen digital skills of the population and most importantly to increase the percentage of students who choose either IT or science.
“This should start today but results will be seen after five or ten years. As long as this effort does not start, the longer the results will be delayed”, he said.
The Top 5 of the Cypriot GDP
According to the data of Statistical Service, in 2022 the first place in gross added value was held by Wholesale and Retail Trade with almost €3 billion, followed by financial and insurance activities with €2.40 billion, Information Technology and Communication with €2.33 billion. fourth place Real Estate Management with €2.09 billion with the top five completed by the Professional, scientific and technical activities sector with €2.07 billion.