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A brief review of 2019 and business priorities for 2020

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By Michael Antoniou

The Cyprus Employers & Industrialists Federation (OEB) believes that 2019, a tough year for the Cyprus economy overall and without disregarding several positive developments, draws to an end with serious challenges that have to be addressed in the new year.

More specifically, in 2019 we contained unemployment to a significantly low 6.6%, whereas the economy continued to grow (3.2% in the third quarter) and the Government abandoned plans to raise the corporate tax.

In industrial relations, after long and strenuous negotiations in which OEB was directly involved, we succeeded in renewing collective agreements in the construction industry, seaports and hotels, all made possible with the Minister of Labour’s decisive intervention.

Significant progress was made towards the very end of the year in the renewal of collective agreements in the banking sector, enabling industrial peace.

Initiated by the Trade Unions, OEB has co-signed a Code for the Prevention of Sexual Harassment and Harassment at Work with SEK and PEO, for which we are particularly proud of, intending to be adapted and integrated into all collective agreements.

Furthermore, we have reached an agreement regarding the fate of existing healthcare funds in light of the gradual implementation of the new General Healthcare System (GHS).

Finally, we wish to note the establishment of the Shipping Deputy Ministry, a long-standing demand of OEB, and the commencement of discussions for establishing an Innovation Deputy Ministry.

Despite the aforementioned achievements, important unresolved issues and risks loom over 2020. The reduction of NPLs was lower than expected, as was the adoption of the related ESTIA scheme. Although temporarily, public debt increased, and the state payroll has once more begun growing to unsustainable rates.

Pending Reforms

Civil service reforms are pending and so is the reform of local government, two important priorities for OEB.

The uncertainty surrounding the pending Supreme Court ruling regarding the legality of civil servants’ pay cuts (implemented by the Government in the crisis years), the results of the experts’ study for the implementation of a national minimum wage and Brexit terms is cause for great concern.

In the first case, the possible restitution of civil servants’ pay cuts will considerably strain public finances at the expense of the economy and fiscal stability.

In the second case, the introduction of a statutory national minimum wage will alter permanently and irreparably the voluntary character of the Cypriot industrial relations system which has served our country for decades, harming SMEs and depriving the economy of a tried and tested economic shock absorption mechanism.

Autonomisation of public hospitals, a precondition for the successful implementation of the GHS, has been limited and problematic so far, turning them into the system’s Achilles heel.

Although public hospitals are expected to become operationally and financially autonomous within a set timeframe, OEB is worried of the possibility their losses will need to be covered by the taxpayer in perpetuity, effectively expanding the healthcare system’s estimated cost with undesirable consequences to the economy.

In 2020 OEB will be pursuing several goals in various policy areas.

We intend to address the issue of COLA, an anachronistic and counterproductive practice that burdens businesses indiscriminately and that has long served its purpose, asking for its abolishment.

We also intend to deter the implementation of a statutory national minimum wage for the reasons I have already mentioned.

OEB will also continue working towards the regulation of the right to strike in essential services so that the country’s vital services will cease, finally, to operate under threat from small interest groups.

Other priority areas include the implementation of a viable and functioning GHS, achieving national targets for renewable energy use and the provision of affordable electricity to businesses and household consumers from natural gas.

And 2020 will be an interesting year for sure, full of promise, optimism and known risks.

It remains to be seen whether decisive action is taken to mitigate these risks.

If the financial crisis has taught us anything, is that our successes and achievements cannot be taken for granted which is why now is the time to make radical but much-needed reforms.

Should we rest on our laurels gratified and complacent about our successes, we do so at our peril.

The writer is Director General of the Cyprus Employers & Industrialists Federation (OEB)