There is an urgent need to boost the resilience of the Cyprus economy, through the immediate resolution of long-standing problems, and the swift expansion of Cypriot businesses and investments to other markets.
Following the successive crises of the past few years, the Cyprus economy now stands again at a critical crossroads. The exacerbation of the Middle East conflict was added to the list of challenges facing our country’s economy today.
Cyprus has repeatedly shown that it can overcome even the most trying circumstances. Our country has a small, yet flexible economy. In times of recession, our economy’s small size is a plus, allowing for easier and quicker recovery, through a small number of foreign investments.
It should be clarified however, that the foreign investments taking place in Cyprus today, which are mainly connected – either directly or indirectly – with properties in coastal areas, cannot provide a long-term solution to our economy’s structural problems. This is because they cannot resolve these issues in a substantive manner, nor do they improve our productivity, effectiveness, and competitiveness in the global market.
The new crisis facing our neighbourhood, which is expected to lead to a renewed build-up of economic pressures, should serve as a wake-up call for our government, pushing it to intervene by strengthening the foundations of our economy.
Today, the prospects of a crisis unveiled an urgent need to address the big, long-standing, systemic problems facing our country, including its debilitating bureaucracy, ineffective public sector and delays in delivering justice, while this encouraged us to ramp up investments in education. Resolving these long-standing problems, will give our economy a much needed momentum, strengthening productivity and boosting the resilience of the Cyprus economy.
Beyond the effort to create a friendly business environment that will attract international investments, the State needs to encourage Cypriot businesses to expand abroad, using avenues already established by a number of Cypriot businesses that are successfully operating in foreign markets.
Though they have excellent products and services as well as talented managers, many Cypriot businesses, remain trapped in the narrow confines of the Cypriot market. We must not forget that Cyprus has a population of around 900,000 people – similar to the population of a British city like Liverpool, while our economy is similar to that of a British city like Birmingham. This is why Cypriot investments need to become more extroverted, and branch out to larger, foreign markets.
The extroversion of Cypriot businesses will be beneficial for the Cyprus economy. All the profits from these activities abroad will, sooner or later, return to their shareholders back in Cyprus.
International studies, as well as our experience in Cyprus have shown that Cypriot businesses operating abroad tend to hire Cypriots both in their headquarters in Cyprus, as well as their offices abroad. Besides, all Cypriots have relatives or friends who worked for Cypriot contractors in the Gulf, Cypriot market research companies in the Middle East, Cypriot banks with branches in Greece and the UK, Cypriot hotel groups in Greece etc.
When Cypriot companies expand to other markets, they become bigger and more robust, achieving better risk diversification, as they are not solely dependent on the Cypriot market and economy. Moreover, their exposure to larger international markets enriches their know-how – an advantage that has a multiplier effect, and is integrated into their operations at home.
Consulco is an example of such a company, as it has been successfully operating, for a number of years, in real estate investment management and credit and private equity investments in the UK and Europe.
The company, with offices in Nicosia, Limassol, London and Dubai, serves Cypriot and foreign institutional and private investors, helping them to invest into the British and European markets, through their participation in the company’s investment funds.
One such example is the London Credit Fund, which offers lending in London secured against British property, while Consulco also owns various funds operating in the financing, development, and management of commercial properties in London, Birmingham and Manchester.
Common sense, and now legislation itself, prescribe the diversification of investment portfolios across multiple investment categories and various markets, so that the funds’ assets are as secure as possible in the face of market fluctuations and volatility.
This same rationale also applies in the case of family wealth management. Many Cypriot families saw their life savings, which they accrued over many years of hard work – in the form of deposits, bonds and shares, as well as Cypriot properties – wither away or go up in smoke entirely, with each crisis that hit the Cyprus economy over the past few decades. Just like institutional investors, Cypriot families need to diversify their assets and investments.
The government’s efforts to this end, through the resolution of long-standing problems facing the Cyprus economy, the private sector’s contribution, through their expansion to bigger foreign markets and a higher market and geographical diversification of institutional and private investment portfolios, will lead to a new, resilient, competitive, and productive economy, that will ensure the welfare and future of both the current and future generations of Cypriots.
As published in Kathimerini.