CIPA Chairman stresses prospects of foreign investment in energy

In an interview with Cyprus News Agency, Angastiniotis analysed the priorities of CIPA’s newly appointed Board of Directors and the fields and countries that Cyprus should focus in order to attract foreign investment. He pointed out the great interest of many countries, such as China, Russia, France and Norway, in investing in the field of energy in Cyprus. He also noted that income from hydrocarbon reserves should be used on a long term basis.

In addition, Angastiniotis commented on the Finance Minister’s fiscal consolidation measures announced in November, noting that the levy on the turnover of Cypriot firms for the next two years would harm entrepreneurship and would have negative effect on the economy.

Asked about CIPA priorities, Angastiniotis said that the new Board of Directors will be organized into committees. “We will follow almost the same structure as the former Board of Director, which means that we will establish an Executive Committee, a Promotion Committee, a Committee on Investments Support, a Committee on Human Resources, and a Committee on Internal Auditing”, he explained. He added that the new Board of Directors will work out a plan on how to promote Cyprus as an attractive destination for investments.

On the importance of CIPA and its enhanced role, Angastiniotis said that it is important for CIPA to work with flexibility and not to follow the bureaucratic procedures of the public sector. He said that a delegation from CIPA will meet with the Ministers of Commerce, Finance and Foreign Affairs, as well as with the President of the Republic in order to coordinate their moves. “Everybody should understand that CIPA is the official representative of Cyprus on attracting foreign investments”, he added.

Asked about amendments to existing legislation to boost investment, Angastiniotis said that the Committee on Institutional Framework has prepared legislative proposals on tackling bureaucracy and on many other issues, that have been adopted. There are however, many more proposals that are pending and many other ideas that will be prepared. In addition, he said that the Committee on Institutional Framework is preparing the Double Taxation Agreements, noting that such an agreement with Kazakhstan has already been prepared.

Replying to a question on CIPA’s results, Agastiniotis said that many foreign companies have invested in Cyprus through CIPA. There is still room for additional investments, he said, noting that especially now, with the prospects of finding hydrocarbon reserves in Cyprus’ EEZ, the potential for attracting foreign investments is much greater.

Asked to elaborate on this issue, Angastiniotis said that there are inventors from China, Russia, France and Norway who are interested in investing in energy in Cyprus. “It is the sector that will be in the epicenter during the next years in Cyprus and we should deal with that very carefully”, he pointed out. Noting that the issue of hydrocarbon reserves has its political aspect, he said that the Government is right in proceeding with the second hydrocarbons licensing round in Cyprus’ EEZ.

“If we say that, in the worst case scenario, the reserves from the block 12 cover the needs of Cyprus for the next 80 years and that there are reserves in the other blocks – for which the government has proceeded with the second hydrocarbons licensing round – then the field of energy constitutes the most promising sector for foreign investment and it could save our economy”, he stressed.

However, he noted, we should deal with that issue by thinking on a long term basis, following the model of Norway. Thus, we could cover some immediate needs with the income from the natural gas, but at the same time we should establish a national reserve fund which would provide the Republic of Cyprus with constant annual income for covering part of the expenses of the Republic and for providing prosperity to the people of Cyprus.

“This money (from national natural resources) should not be put in the direct consumption. Moreover, the money should not be used for the Republic’s expenditure, which should be immediately put under control and be reduced to be in line with the GDP”, he said.

Angastiniotis added that this government, as well as former governments, have excellently dealt with the issue of delineating the Exclusive Economic Zone, by signing agreements with neighbouring states. “We haven’t concluded yet the issue with Syria and Lebanon due to Turkey’s intervention, but I consider that this government and the former government have dealt with that issue in an excellent manner”, he pointed out.

Asked about the ongoing debate on the government-proposed fiscal consolidation measures, Angastiniotis said that the Finance Minister Kikis Kazamias has the good will, works hard and is capable to put things in the right direction. “There has certainly been a delay in adopting measures and the government and the political parties are responsible for that. There is no national consensus on economy”, he acknowledged.

He described as “unfair” a proposal for a 5% levy on the turnover of Cypriot firms for the next two years, saying that there are many firms in Cyprus which although they have a big turnover, they sustain losses or their margin for profit is under 0,5%. “The Finance Minister should distinguish the entrepreneurship from the wealth”, he said, noting that “if we harm the entrepreneurship, we will affect growth and public revenue and there will be no progress and no surpluses, and there will be unemployment and deficits.”

On the other hand, Angastiniotis said he agrees with the measure that includes the freezing of salary increases in the public sector for the next two years. He pointed out that this measure should be extended to three years and “we should also consider, if this is not enough, to include more salary cuts in the public sector for those employees with high income”. As regards the private sector employees, Angastiniotis said that the employees with high income should also contribute.

Asked about the 50% haircut of the Greek public debt and its fallout on Cypriot banks and foreign investments, Angastiniotis said that the Cypriot banks are facing an unprecedented crisis. He added that it is very difficult for them to attract money from existing shareholders and from the internal market, and it is also difficult to attract foreign institutional investors.

However, he noted that he does not worry about the foreign and the internal deposits in the Cypriot banks. He said that the Cypriot banks should reconsider their costs and their interest rates. “With the current interest rates, not only do they not help the economy, but they also strangle the economy, they strangle the entrepreneurship and work against their own interests”, he said.

Replying to a question regarding the prospects of attracting investments from China, Angastiniotis said that China is the future for foreign investment. He added that CIPA has opened an office in China, having considered the encouraging results and the prospects of investments from that country.

Finally, asked about his prediction for 2012, Angastiniotis expressed optimism for the future. He assured that CIPA will make whatever possible in order to attract foreign investment. “There are prospects that we should seek and I am optimist that we will make it”, he concluded.

Cypriot Finance Minister Kikis Kazamias presented on November 18 a new set of fiscal consolidation measures which would enable Cyprus to regain access to international markets and to achieve its fiscal targets. The measures include the freezing of salary increases in the public sector for the next two years, amounting to savings of 255 million euro (125 million 2012 and 230 in 2013), a levy for private sector employees earning more than 2.500 euro, as well as a 5% levy on the turnover of Cypriot firms for the next two years.

Houston-based ‘Noble Energy’, whose drilling rig is already in place, off the island’s southern coast, has begun drilling in Cyprus’ EEZ last September. The company has a concession to explore for hydrocarbons in an offshore field, south of Cyprus, known as Block 12 or “Aphrodite”.

Cyprus has signed an agreement to delineate the EEZ with Egypt and Israel with a view to exploit any possible natural gas and oil reserves in its EEZ. A similar agreement was signed with Lebanon but the Lebanese Parliament has not yet ratified it.