Uncertainty over the controversial foreclosures law and the insolvency framework is discouraging foreign direct investors who intended to pump money into projects in Cyprus, investor groups told the House Trade Committee on Tuesday.
The foreclosures bill remained in limbo after opposition parties in parliament voted to keep the present package suspended, jeopardising a calm review of the island’s economic adjustment programme under the 10 bln euro bailout programme.
The parallel set of regulations on insolvencies seems to be proceeding, at last, with the regulations determining examinership now concluded, while the final thorny issue of third party loan guarantors still pending.
Political parties want guarantors and primary homes to be exempted from foreclosures by banks, where the rate of non-performing loans has soared to an unmanageable 50% of the banking system’s loanbook
Frixos Savvides, Chairman of Cyprus International Businesses Association (CIBA), said that the first thing investors see is insecurity in relation to the foreclosures law.
The issue must be resolved very soon and “we need to see serious moves from banks so as to attract investment funds,” he said.
Marios Tsiakkis, Secretary General of the Cyprus Chamber of Commerce and Industry (KEVE), added that the delay with the foreclosures problem is also preventing Cyprus from taking advantage of the ECB’s quantitative easing programme that would have seen the central bank purchasing up to 120 mln euros worth of Cyprus equities a month starting in March.
On the other hand, Commerce and Industry Ministry officials insist that the procedure to register a company is just three days with a cost of 100 euros and that while the one-stop shop exists, it is not fully effective.
Christodoulos Angastiniotis, Chairman of the state’s Cyprus Investment Promotion Agency (CIPA), said that in order to attract businesses, bureaucracy must be eliminated.
“From March 2013 onwards, foreign investments in Cyprus have totalled 3.2 bln euros,” he said. Of that, investments worth 400 mln euros were made in sports and hotels, 1.2 bln went towards the recapitalisation of banks and 1.5 bln flowed into state coffers from issuing residence permits and passports.
Angastiniotis added that investments in the energy sector included the creation of a solar thermal park in Limassol.
He said, however, that during his trip to Australia he met the representatives of a large pipe manufacturing company who was considering investing in Cyprus, however, the unfriendly environment due to these processes prevented him from doing so.
He said that an investment conference will be held in Limassol in few days, where 14 investment projects will be presented.
The conference will be attended by major companies and 63 investment funds, including big names such as Goldman Sachs, Bank of America, Societe Generale, HSBC and at least 15 funds from the Arab world, Angastiniotis said.
On behalf of the accounting profession, ICPAC General Manager Kyriacos Ioannou stressed the need for strategic planning for the foreign investments and to enrich the country’s product.
House Commerce Committee Chairman and DISY MP Zacharias Zachariou noted that investors want to invest safely.
“When they are frightened by the uncertainties of the banking system and they are suffering in the public service, they will go elsewhere”, he added.
