2020 Cyprus Country Report

A NEW VISION
The backbone of the new industrial revolution
Cyprus is embarking on is the gradual implementation
of a new National Industrial Strategy
Policy for 2019-2030. Together with the private
sector, the Ministry of Energy, Commerce and
Industry (MECI) has finalised the new strategy,
which highlights digital transformation and
envisions so-called smart factories increasingly
powered by renewable energy producing high
value-added and ‘green’ products – a principle
already embraced by Cyprus’ leading manufacturers
to compete globally. A key objective
is also to improve access to finance and key
export markets. There are already incentives in
place for investments in fixed assets and industrial
equipment, while innovation projects in
manufacturing are supported by state funding
to promote results-oriented research.
Other incentives to boost the sector include
a fast-track visa programme for start-up entrepreneurs
from outside the EU to establish
ventures with high growth potential, which will
be in force until 2021. The establishment of the
Deputy Ministry of Research, Innovation and
Digital Policy, which has underlined the government’s
recognition of research and innovation as
a fundamental pillar of a new model for growth,
will also help cut government bureaucracy and
attract foreign direct investment in high-tech
and knowledge-based industries.
CORONVIRUS IMPACT
Although Cyprus’ new long-term vision for the
sector is full of promise, there is no doubt the
coronavirus pandemic has taken its toll on the industry
both in Cyprus and globally. The considerable
repercussions of the crisis on normally topperforming
sectors like tourism, where revenues
have plummeted in 2020, has had a significant
knock-on effect on other sectors such as manufacturing
and industry.
The manufacturing sector marked a decline of
19.6% in May 2020 compared to May 2019 and
compared to an annual reduction of 32.6% in
April. The contribution to GDP from manufacturing
in Cyprus decreased to €223.85 million in
the second quarter of 2020 from €240.43 million
in the first quarter of 2020. The contribution
to GDP from manufacturing in Cyprus averaged
€243.65 million from 1995 until 2020.
Cyprus’ Industrial Turnover Index fell by
almost 20% in May 2020 compared to May 2019,
affected by measures to curb the spread of the
pandemic. However, the index marked a steady
improvement as containment measures were
gradually lifted.
By promptly taking
decisive measures
to tackle the Covid-19
pandemic, the government
of the Republic of Cyprus
has protected public health,
ensuring that the island
remains a relatively safe
destination for travel and,
importantly, minimising
the adverse impact on the
country’s economy. The
initial implementation
of a comprehensive, €3
billion, Economy Support
Programme, is backed by
efforts to further improve
the conditions that make
Cyprus an attractive
investment and business
jurisdiction. At the Ministry
of Energy, Commerce and
Industry we are introducing
significant funding schemes
in 2021 and implementing
our new National Industrial
Policy 2030, which aims to
modernise the industrial
sector through digitisation,
skills development,
improvement of the
business environment and
enhancement of access to
finance and markets. To
support businesses setting
up or scaling in Cyprus, we
are also planning to create a
dedicated business service
centre at our Ministry,
tasked with facilitating
licensing procedures and
providing personalised
guidance and advice.
Natasa Pilides
Minister of Energy,
Commerce and Industry
KEY PRODUCTS
Cyprus embraced industrial development in the
decade after independence in 1960, transforming
the largely agricultural country into one where
manufacturing accounted for 20% of GDP by
the 1980s. An early success came in 1967 when
a Cypriot company, Photos Photiades Breweries,
secured a licence to brew Carlsberg, which is now
done at a fully-automated brewery in Nicosia.
It was the first time the Danish brewing giant
allowed its famous beer to be produced outside
Denmark. Further transformation produced
an increasingly services-oriented economy. The
once flourishing but protected textile, clothing
and footwear industries faded after EU membership
in 2004, giving rise to the manufacture
of medium- and high-technology products and
semi-customised small-batch products.
The main growth areas have been in the ICT
sector, manufacturing parts, instruments and
electronics, as well as consumer products such
as cosmetics. Production of pharmaceuticals,
cement and fabricated metal items – all wellestablished
export industries – is performing
strongly.
Industrial production contracted sharply
following the 2013 banking crisis, but the traditionally
resilient sector recovered faster than the
general economy. Some 30,000 people – about
6% of the workforce – are employed in manufacturing
and industry. The main destination for
Cypriot manufactured exports is the European
Union, which constitutes over 50% of the market,
while exports to the Middle East make up around
15%.
SMES LEADING THE WAY
The clear majority of Cyprus’ over 5,000 manufacturers
are small and medium-sized enterprises
(SMEs), mostly family-owned and run. This
makes the sector flexible and open to innovation,
offsetting difficulties with economies of scale
which will also be addressed by plans for clustering
and improving the industrial infrastructure.
The new national industrial strategy policy will
encourage more private investment in research
and innovation and capitalise on robust spending
in this area by Cyprus’ public universities by
improving synergies between academia and industry.
Cyprus also ranks first per capita among EU
members competing for funds from Europe’s
largest research and innovation programme,
Horizon 2020. Acquiring such funds has helped
innovative Cypriot SMEs to become notable successes.
One of these is Vitatrace Nutrition Ltd
(VTN), which employs some 40 people at its
Sector Profile
Country Report CYPRUS 2020 113