Cyprus is hoping to mitigate Brexit challenges while making the most of the UK’s withdrawal from the European Union with a trade deal after 47 years of membership.
The last-minute deal between the Union and the UK, avoiding a hard Brexit, is the largest bilateral trade pact in history, but it is also the first modern trade deal to disintegrate a trading partnership, erecting and defining barriers between markets.
The EU and the UK jointly agreed on a transition period, which ends on 31 December 2020.
Talking to the Financial Mirror, Marios Tsiakkis Secretary-General at Cyprus Chamber of Commerce and Industry (KEVE) said the trade agreement was welcomed by the business world in Cyprus with relief, as a chaotic relationship between the two sides was adverted but grey zones in the deal prevent clear visibility on possible opportunities arising.
“Brexit is more than just the UK withdrawing from a trade partnership, as it brings along several challenges and opportunities.
“Opportunities former EU partners of the UK will try to make the most of, however, many parts of the agreement need to be clarified,” said Tsiakkis.
While duty-free and quota-free access to one of the world’s largest markets is the backbone of the Brexit agreement and goes beyond the EU’s deal with Canada or Japan, Brexit still poses several challenges.
Cyprus exporters and importers must deal with an ever-increasing amount of red tape.
They will have to obtain certificates proving the products origin and approval from local authorities their products meet UK health criteria.
Exporters on both sides will now have to go through the same procedures as they would exporting to a third country.
“Another challenge is that importers will have to pay the VAT upfront, rather than transferring it to the purchase price of the product with consumers paying the VAT to the state when they purchase the product.”
According to Tsiakkis, Cyprus could exploit opportunities created from Brexit, as the UK, currently the second largest financial services industry after the USA, does not have an EU base.
“Furthermore, there many grey areas regarding the recognition of professional qualifications that could make the UK’s job of doing business within the EU even harder.”
There will be no more automatic recognition for many professionals from auditors to doctors, nurses, architects, dentists, pharmacists, veterinarians, engineers.
From 2021, they must seek recognition by authorities in the Member State in which they wish to practice their profession.
He argued this could present Cyprus with opportunities to attract investors from the UK, who had an EU base there to look for an alternative within the bloc with Cyprus having a lot to offer.
In earlier comments to the Financial Mirror, Institute of Certified Public Accountants (ICPAC) president Demetris Vakis said: “We found Brexit to be a first-class opportunity to start promoting Cyprus as an alternative EU base for companies headquartered in the UK”.
He believes efforts have paid off, as firms, mainly insurance companies, formerly headquartered in the UK have moved to Cyprus.
“It is important to attract investments which will not just pass by and leave, but investments that create wealth and benefit society.
“When a company relocates, it does not just relocate its offices, but also its executives,” said Vakis.
He said this would spark movement in the market as these people will be renting houses, cars, spending at restaurants and shops.
Listing the comparative advantages that make Cyprus an ideal destination for multinational companies, he mentioned geographical location, favourable business environment, robust European legal framework, attractive tax regime, and low operating costs.
“Firms relocating here will not only benefit from incentives the island has to offer but they will also be able to find skilled manpower, quality support services and other specialized incentives such as the attractive intellectual property regime, an important parameter for technology and IT companies.”
“In time, these people will become ambassadors for Cyprus and its business ecosystem, helping to do away with the stain left by errors of the past.”
Vakis argued that apart from eyeing big Fintech companies, Cyprus should also enhance its reputation as a destination for financial services and investment funds.
“We have already succeeded in recent years to attract International Mutual and Pension Investment Funds to register in Cyprus. Currently, funds registered have a portfolio worth €7.2 mln.”
Tourism, Cyprus’ key industry, contributed 22.7 % to the country’s GDP in 2019, experts say that Brexit will pose challenges but there is a window of opportunities.
Fanos Tekelas, UCLAN Cyprus lecturer in Innovation and Entrepreneurship told the Financial Mirror, that it will depend on how British tourists are treated.
“Obviously the first thing the Deputy Ministry of Tourism should be doing is making sure that tourists arriving from the UK will not have to dig into their pockets to pay for a tourist visa. This could easily be done with an interstate agreement,” said Tekelas.
The professor argued that Cyprus should focus more on attracting British tourists following the UK withdrawal.
“While Cyprus has traditionally had good relations with the UK, countries like France and Germany had a harsh stance towards Britain. These countries may not be so willing to facilitate the movement of British tourists,” explained Tekelas.
He added that in combination with political instability in neighbouring countries, Cyprus could benefit from focusing more on facilitating British tourists.
“We had lost a number of British tourists who were repeat visitors to our island with which our turning to the Russian market did not sit well. This could be a fantastic opportunity to win them back.”
Tekelas urged authorities to consider facilitating Britons who wish to buy a property and relocate to the island.
“Expats, especially those from the UK, are Cyprus’ best ambassadors abroad. These people share their experiences of the island with their family and friends, who, in turn, are tempted to visit to get first-hand experience of its beauties.”
The UK is Cyprus’ largest tourist market making up a third of annual tourist arrivals which reached 3.97 million in 2019.
“We need to make our tourist product more attractive for British tourists if you want to make the most of Brexit.”