Cyprus & World News

Fact-finding or white knights?

24 April, 2014

 * Foreign funds investigating FDI prospects in Cyprus *

The first in a series of potential investors will be in Cyprus this week on a fact-finding mission to investigate the merits of investments in the public and private sector, as promoted by President Nicos Anastasiades during his recent tour of the Middle East.
But market experts warn that these are not white knights and are simply exploring the prospects of large-scale projects such as the privatisation of public utilities and services, as well as investments in the oil and gas sectors.
A three-member delegation will be arriving on Thursday representing the Kuwait Investment Company and other Gulf funds, who will meet with the president, Finance Minister Haris Georgiades and Energy and Trade Minister Yiorgos Lakkotrypis, as well as officials from the Cyprus Investment Promotion Agency.
According to a report on Antenna TV, the visitors are keen to hear about the privatisation process of the six semi-government organisations (SGOs) that should be completed by the end of 2018, as well as the LNG plant at Vassiliko, investments in aviation and the banking sectors.
Communications and Agriculture Ministers Marios Demetriades and Nicos Kouyialis are also expected to discuss investments in new projects, such as the Larnaca marina and port, a leisure development that did not get off the ground due to lack of investors.
“Some of the funds are interest in land development, but I think they are more likely to be here to get an understanding of what is available, not that they will be investing immediately,” CIPA chief executive Haris Papacharalambous told the Financial Mirror, confirming media reports that these meetings had been scheduled from last October, when Anastasiades first embarked on a tour of investor-nations.
Another delegations from Deutsche bank is also expected on the island on Thursday, who seem interested in the LNG plant, an issue that will probably be discussed during the president’s state visit to Berlin on May 6-8.
Another delegation is also expected in May with fund representatives from Qatar, where Cypriot companies such as construction giants Cybarco have had a long presence, while investors had shown keen interest in Cyprus projects when the president visited the emirate recently. Last week, Anastasiades also concluded a high-level meeting in Abu Dhabi and Dubai and headed a large trade delegation that took part in investment forum.

CIPA, headed by its chairman Christodoulos Angastiniotis, was at two business meetings as well in recent weeks, taking part in the Global Russia Business Meeting in Spain and the Annual Investment Meeting in Dubai.
“Our strategy now is to arrange one-on-one meetings with potential investors and fund managers,” Papacharalambous told the Financial Mirror.
Another government official said that there were two important messages that come out of these high-level and fact-finding missions to Cyprus.
“The first is that these delegations are coming to see and are considering public projects as well. The fact that they are spending time and sending out scouting teams in itself is good news as regards Cyprus’ credibility,” he said, adding that FDI figures could be misleading as they also include investments made through Cyprus companies, but not necessarily in Cyprus.
Although the Central Bank has not issued a recent FDI report, a foreign direct investment is determined by “the participation of more than 10% in the share capital of an enterprise resident by an investor resident in another country and implies the existence of a long-term interest on the part of the foreign investor.
“The recent investment by U.S. and other fund managers in Hellenic Bank, as well as the invest-for-citizenship plan and the PRPs (permanent residency permit) are issues that most investors are looking at,” the government official said, adding that although Cyprus is still not yet part of the Schengen area of visa-free travel, nonetheless it makes life easier for new investors to travel to the European Union or seek a visa from the relevant embassies in Cyprus.”

However, investors might be disappointed to see the slow pace of developments and decision-making in Cyprus, such as the delay in concluding a casino license tender, setting up the technological park and the privatisation of SGOs (EAC, Cyta, ports, etc.)
“Of course, these large funds are also looking at the timeframe for a return on their investments and the conditions under which these are made,” the official concluded.
Another economist told the Financial Mirror that foreign investors and fund managers “are aware that we are on a steady path of recovery, although not yet fully out of recession. The investment scope is for the medium-to long-term, with a 5-10 years positive outlook, and also if there is a “correct” solution to the Cyprus problem, with regional benefits for Cyprus.”
However, experts also believe that the focus should not stray from the steady sectors of the Cyprus economy, such as tourism, shipping and professional services.
“What we lack from rival destinations such as Singapore and Dubai are both opposing views: on the one hand, they each have an undisputed leader, which is our disadvantage of a being a democracy, on the other hand, these countries have a clear vision and strategy, which we lack here.”