Cyprus & World News

The good, the bad and the ugly of “Doing Business in Cyprus”

17 February, 2014

 * ‘Chapter 11’ insolvency plan on the table; CIPA wants to take over ‘one-stop-shop’ *

The latest World Bank report has shown that there has been little, if any, progress for Cyprus in the annual ‘Doing Business Report’, a benchmark that determines whether it is worthwhile for companies to invest here.
The need to combat bureaucracy, simplify procedures and update the structures and practices in Cyprus are confirmed through the results of the report, presented during an event hosted by the Cyprus Investment Promotion Agency (CIPA).
Last Friday’s presentation in Nicosia was also different from previous analyses of the report, whereby CIPA officials were critical of the slow progress in many fields, while for the first time the CIPA chairman engaged in heated debate and outright criticism with public officials.
Perhaps, the economic crisis that followed the Eurogroup’s damning decision last year and the subsequent collapse of the Cyprus financial sector, was a wake-up call. The Trouble is, once again, only CIPA and the private sector have heeded to this call, while civil servants seem undisturbed by the whole crisis, as long as they receive their fat cheques at the end of the month.
One significant outburst from the CIPA chairman Christodoulos Angastiniotis came when the Registrar of Companies, Spyros Kokkinos, tried to justify his department’s workload and that it was the fault of lawyers who created red tape with the paperwork they submit, with the CIPA chairman retorting: “Company House should become more productive and effective. If it’s a cost issue, maybe we should reduce the load of the Registrar’s office.”
Angastiniotis admitted that the most embarrassing fact is that the ‘one-stop-shop never took off, with only officials from the Registrar of Companies manning their desks at the unit, while officials from other services (tax, immigration, etc.) have never shown up.
“If we want this concept to work and to attract foreign investors, we should either create a new system or let it be taken over by another body. Perhaps, even by CIPA.”
As regards seeking protection from creditors, the CIPA chairman said that the current legislation is not suitable and does not provide proper remedies. For that reason, plans are underway to adopt the Irish model of dealing with insolvencies, which is similar to the U.S. Chapter 11 protection law.
“Once again, we don’t need bureaucrats to deal with time consuming efforts. We have conducted our study and we have a ready-made proposal that will soon be submitted to parliament for approval,” he said.
Cyprus is included in the report for the fifth consecutive year, dropping a place to 39th among 189 participating countries.
Cyprus ranked 16th among the 28 EU member states, after France. In the total of ten indexes, Cyprus improved its ranking in three sectors, kept its ratings stable in one and marked losses in six.
Cyprus’ assessment on the "Installation and Supply of Electricity", "Registration of real estate" and “Execution of Contracts” indexes was not at all favourable. It takes 247 days to apply for, install and approve electricity services, the construction sector requires 735 days for a final approval, while Cyprus lags in investment protection because of the lack of protection provided to small shareholders. Securities and Exchange Commission (CySEC) chairman Demetra Kalogirou admitted that this was a problem, but that the Companies Law must first be changed in order for the regulator to adopt and implement this safety clause.
A significant decline was recorded on the “Starting a new business” and “Building Permits” indexes. New companies have to undergo a series of six procedures, requiring eight days. Once again, the problem arises from the absence of an effective ‘one-stop-shop’, officials said.
The CIPA President stressed that “some problems are not new. We need to change our mentality. We need to raise our pace and increase the speed with which we respond to new developments. Some decisions should be taken, no matter how difficult they may be.”