(Unless the gov’t quickly passes two crucial laws)
Optimists are hoping that the conflict in neighbouring Lebanon and Israel will lead to long-term economic benefits for Cyprus, just as the economy benefited in the 1980s, when many financial operations shifted from Lebanon to the safer haven of Cyprus and many Lebanese brought the benefit of their skills to the Cyprus economy.
The government is obviously hoping so too. In a clear commercial push on Sunday, the Government Spokesman Christodoulos Pashiardis said “Cyprus, an EU member state, will prove to be a safe destination and an effective communication hub between Europe, Middle East and Africa.”
However, although there will be a brief fillip from putting up evacuees in Cypriot hotels, there are a number of reasons why this time, we are more likely to see long-term disadvantages than advantages, unless we move very fast to turn this crisis into an opportunity.
We don’t give work permits any more
First and foremost, we will not benefit from fleeing Lebanese because we no longer give them work permits.
Non-EU nationals are essentially blocked from gaining work permits in anything other than manual labour, thanks to our short-sighted labour laws.
This has nothing to do with EU policy. Apart from having to demand that non-EU nationals get a visa before coming, member states are free to set their own laws on non-EU labour.
Our laws are based on the economically illiterate theory of “a skilled Lebanese is a Lebanese taking my job”, rather than on the theory of “an economy with skilled labour shortages is an economy heading for trouble.”
How can we claim to be a hub for the Middle East if we sit on work permit applications for Arab-speakers for months on end?
Surveys conducted by the Commission among EU member states gave a strong suggestion that open labour markets are good for the economy and therefore good for jobs.
We have Arab competitors now
Second, whereas in the 1980s there were not many financial centres in the region to choose from, in the first decade of the 21st century, there are plenty.
Much of Lebanon’s recovery before the assassination of former Prime Minister Rafik Hariri came from Gulf Arab investment.
Where will that money go now? To Dubai, Bahrain, Qatar: places with a strong business environment, skilled Arab-speakers and booming real estate sectors.
That is, anywhere but Cyprus, who will not let these skilled workers in.
Within target range of Iran?
The third reason is the same reason why tourism suffered in 2003, when the US invaded Iraq.
A friend due to visit in March 2003 cancelled her visit at the last minute because, as she subtly put it, “You are on the front line!”
Scare stories in the British press had said that Saddam’s (non-existent) weapons of mass destruction could hit the British Bases.
No doubt there will be more stories this time about how Cyprus could be an accidental or deliberate target of Iran, on the assumption that this conflict is really between Iran and its allies and the US and its allies and not only between Hizbollah and Israel.
Two quick steps to the opportunity
So how could the government move to turn this crisis into an opportunity, both for Cypriots and for Lebanese?
First, change the labour law fast to lift restrictions on the employment of skilled Arab-speakers, especially those in the financial sector.
Second, pass the law recommended by both PricewaterhouseCoopers and the CFA Society of Cyprus to resolve the tax status of investment funds.
The absence of this law is preventing the multi-billion dollar investment funds from coming to Cyprus.
As PWC Partner Panicos Tsiailis told the Financial Mirror back in February, just a handful of funds would make all the difference to the financial services sector.
“If we get 20 huge funds as a starter here, it will make a tremendous difference to the international business sector. Everything else will follow and a new momentum will be created”, Tsiailis had said.
With those laws in place, Pashiardis could then truly boast that we are a regional hub with the added attraction of being an EU member.
Fiona Mullen
