EDITORIAL
Recently revised data from the Central Bank of Cyprus underline the fact that professional business services (and therefore a large proportion of our readers) are fast becoming the real backbone of the Cyprus economy.
Although receipts from travel continue to outstrip those of business services, the gap is closing. Travel receipts (primarily from tourists) fell from 19.6% of GDP in 1995 to 14.5% of GDP in 2004. At the same time, receipts from “other business services” rose from 6.3% of GDP to 9.4% of GDP.
Moreover, in 2004, receipts from business services slightly surpassed those from “transport”, which includes the booming shipping sector.
Other business services are dominated by the legal and accounting professions, so when the Financial Mirror was asked on Monday where the best opportunities for foreign investment lay, we had no difficulty in replying that these highly educated, multilingual but comparatively cheap (compared with the “old EU”) professionals provide the key.
Growth in business services is explained both by the quality of the professionals and the regulatory environment set by the government.
A favourable tax regime is certainly an important part of this. But so, too, are the laws on licensing, permits, hiring skilled foreigners, and so on.
Since the Central Bank ceased being the intermediary for offshore companies, policy in this area has been lacking and complaints from foreign investors have been on the rise.
Therefore, the recent move by the government to speed up these procedures is welcome. Last month the Council of Ministers approved a set of criteria for both local and foreign investors that would help speed up the cumbersome procedures.
Once the criteria are met, the Foreign Investors Service Center would authorise the relevant ministries to prioritise application approvals for qualifying companies.
Two people in each ministry will be tasked with speeding up such applications.
The threshold is currently fairly high, at CYP 1 mln of investment, and would have to fall in line with the government’s strategic objectives. Invest in R&D, for example, would be a strong candidate.
This is an interim step while the government prepares the new Investment Promotion Centre, a private company with the state as main shareholder, which will be tasked with actively promoting investment in Cyprus.
Let’s hope that investment in professional business services, possibly the strongest and most dynamic sector in Cyprus, will also qualify for the new speedier service.
