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COVID19: Cyprus needs sustainable economic reboot

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PwC has issued a digital and green blueprint to restarting Cyprus’ battered economy following the coronavirus crisis and lockdown measures causing severe financial trauma.

In a study entitled “Restart Cyprus: Now”, PricewaterhouseCoopers suggests proposals, aimed at promoting reforms to restart and transform the economy to achieve sustainable growth in the post-COVID-19 era.

“The study focuses on strengthening our economy’s competitiveness and achieving economic and social resilience.

“It presents specific ways to increase productivity as well as to enhance development and create jobs, in line with the priorities set by the European Union especially regarding the digital and green economy,” said a PwC statement.

PwC Cyprus CEO Evgenios Evgeniou said while repairing the damage caused by the pandemic, there needs to be a rethink to reconfigure the economy and business models.

“This is the time to transform the Cyprus economy and businesses to be fit for the 21st century, in line with the EU priorities of a Digital and Green economy. The key to achieving this is a common vision and collective effort,” said Evgeniou.

He said the country will need to go about rebuilding its economy, this time keeping away from easy solutions of the past.

Sir Christopher Pissarides, Nobel Laureate for Economics contributed to drafting the study.

“Staying put is regress – however good the level at which we are stationed. An open exchange of ideas and decisions that go to the heart of our economic system have to be made all the time,” said Pissarides.

The proposals included in the “Restart Cyprus: Now” study focus on social developments, environmental reforms, and public sector reforms.

It covers research and innovation, education, transport, alternative investments (i.e., aggrotech) and sustainable tourism.

For the Real Estate sector, PwC says the focus should switch to affordable housing in a bid to address challenges in the housing market.

Around 70% of the Cypriot housing stock is owner-occupied, a substantial proportion of which is subject to a mortgage or loan. The debt burden of such households reaches almost €3.5 bln.

“Even though the ESTIA scheme could limit part of the problem, the number of households defaulting against their housing loans is not declining.

“The introduction of an effective housing policy is considered critical. Policy measures in this framework should induce developments and housing projects for lower-income tiers of the society,” reads the study.

PwC argues that such policies should be tailored to demographic needs and copy examples of alternative housing policies in other countries.

Such as housing subsidies to families that cannot afford to pay market rents, stricter regulations and incentives that achieve a downward shift in the size of new-built residential properties, rent-to-buy schemes, and repurposing of vacant properties into affordable housing.

National Health system

The ‘Restart’ publication offered practical measures for the health system to be able to manage crises and future COVID-19 waves in a more decisive, planned, and controlled manner.

These measures have four main directions:

  • Building surge capacity and ensuring better use of available hospital capacity
  • Re-designing the role of the retail pharmacy
  • Using proven health technologies and analytics to identify and support COVID-19 patients and population at risk
  • Enabling and reinforcing the role of the Ministry of Health’s public health team

PwC said the General Health Scheme should be safeguarded against misuse and abuse.

“One of the biggest challenges of the still-infant GHS is to continue to evolve its control mechanisms to (a) detect & prevent abuse of the system and (b) preserve the quality of services provision to ensure the viability of the system.

“To minimise abuse and errors, the Health Insurance Organisation could invest in data analytics to be able to detect suspicious activity patterns including doctor referral patterns.”

The study argues Cyprus must turn to a greener, more sustainable, growth, by introducing reforms which create a supportive business environment for Environmental, Social and Governance (ESG), while promoting a circular economy and introducing more Renewable Energy Sources.

PwC said the government will need to introduce reforms to modernise public administration to achieve efficiency and effectiveness while pushing for the digitalisation of government services.

“The civil service needs to shift away from traditional people management practices to attract needed talent and make better use of employee capabilities.”

Meanwhile, the digital transformation of public administration is also crucial, according to PwC, as “it allows the government to redefine its role and become more citizen-focused”.

It argued the government should use digital technology and leverage Cyprus’ assets to achieve economic growth transcending national borders, and social development, raising Cyprus’s position to an above-average position in the Digital Economy and Society Index (DESI).

“To bring its vision to fruition, in an effective manner, the Government needs to formulate an e-government strategy that would reflect the necessary interventions and promote effective and efficient coordination between the ministries and the other public entities.”

PwC notes that Cyprus must push forward with reforms on tax and the judicial system if it is to become an attractive and reputable business jurisdiction.

The study suggests that authorities will need to revisit the education system, by upgrading the curriculum, supporting children of migrants, and introducing all-day schools.

“Education reform is key to narrow the gap between what our education system provides and actual needs of our society.

“To this end, the State needs to invest in the country’s entire education system and especially at a digital level, to modernise and revamp teaching methods and improve quality.”

“Restart Cyprus: Now”, is PwC Cyprus’ third study on the impact of the pandemic, as well as the restart and transformation of the economy for the 21st century.

The report is available at www.pwc.com.cy/restart-cyprus

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