2020 Cyprus Country Report

The economy
of Cyprus is
expected to
suffer in 2020
due to the
outbreak of
the Covid-19 pandemic. Recent
estimates project shrinking of
the GDP by approximately 7%
due to the sharp slowdown in
domestic economic activity
and the contraction of GDP
both in Europe and the rest
of the world. Measures taken
by the government have
temporarily prevented the
loss of job positions, however
the situation is still fluid while
the Covid-19 continues.
George Petrou
Chairman
Cyprus Employers and
Industrialists Federation (OEB)
Muskita Aluminium Industries
ing and production, and prides itself on fostering
green initiatives. In 2019, the electricity-intensive
business set up 6,750 panels with 2.5 MW in total,
constituting the biggest roof solar power system
in the country, which will meet almost a third of
the company’s demand.
Today, Muskita is one of the most technologically
advanced firms in its industry worldwide
and the largest, most progressive factory of its
kind in Cyprus. The company’s systems have
been tested and certified to withstand the severe
rain and snow of Northern Europe, the pounding
cyclones of the Indian Ocean and the searing heat
of the Middle East. Its products are used internationally,
a testament to the cutting-edge technology,
engineering, quality and skilled workforce
that have been paramount to the company’s
success.
OPPORTUNITIES AND CHALLENGES
Access to financing has been a serious concern
for small manufacturers because financial institutions
have set stricter lending conditions in
the wake of Cyprus’ 2013 bailout – and now with
the challenges brought about with the coronavirus
pandemic. Although the economic climate
has improved substantially, the financing environment
remains difficult for SMEs which have
limited collateral available and many companies
also remain indebted. In a bid to support SMEs,
Cyprus is offering opportunities to make use of
tax breaks for new export-oriented companies,
access to training grants and soft loans, as well as
funding opportunities for small start-up companies.
Climate change remains a big issue and to
address the common complaint by manufacturers
about the high cost of electricity, the strategy
will incentivise greater use and development of
renewable energy resources (RES). Installing
new, clean energy-powered heating and cooling
systems in factories will be a priority. With the
island’s aims to become a hub for solar innovation,
technology transfer and start-ups, the clean
energy industry is ripe for foreign investment.
The future exploitation of significant natural gas
reserves in Cyprus’ waters could also facilitate
growth in the manufacturing sector, with prospects
of using the island’s own energy supply to
lower production costs in the future. The national
strategy is undertaking a techno-economic study
for industrial sustainable management of waste
and assessing the capacity to generate electricity
from better waste management in industrial
zones. In addition, the study will examine
the possibility of installing treatment plants for
wastewater from food and wastewater industries.
The results of the study will eventually create new
grant schemes and other incentives to industries
and SMEs.
The new industrial strategy policy is designed
to maximise the opportunities and address the
challenges inherent in a sector where most enterprises
are SMEs largely dependent on imported
raw materials from distant markets. A major
strength of the strategy is that it was formulated
after lengthy consultations between the government
and stakeholders, primarily the private
sector’s two main representative and lobbying
bodies, the Cyprus Chamber of Commerce and
Industry (CCCI) and the Cyprus Employers and
Industrialists Federation (OEB). All stakeholders
are working together to make the strategy work.
Most SMEs are entrepreneurial and have the advantage
of being agile, flexible and innovative, but
face difficulty in keeping the cost of imported raw
materials down by buying in bulk. Now plans for
clustering units of similar producers that can join
in bulk orders will reduce costs.
On another front, the new strategy has plans to
boost competitiveness and productivity by ensuring
that the sector’s labour force is continuously
trained to capitalise on rapidly evolving technologies.
This, together with further investment in
modern tech solutions, will enable manufacturers
to keep their advantage over competition from
lower-wage producers in Eastern Europe.
INNOVATING INDUSTRY
Cyprus SMEs are increasingly following the
pioneering lead of several large, innovative and
export-oriented companies, and with renewed
support and incentives in place, Cyprus will
certainly see a revolution in this sector in the
coming years. The foundations are there to
further strengthen and expand a strong industrial
base in Cyprus, and the island has a
deep pool of well-educated human capital and
a sophisticated infrastructure to help tackle
future challenges. In addition, its strategic location
with good connectivity makes it the ideal
springboard for European manufacturers keen
to expand into the markets of the East and vice
versa. It may take a few years to see concrete
results from the new industrial strategy policy,
but Cyprus’ manufacturing and industrial sector
is determined to realise its true potential. The
guiding vision is to create a robust, flexible and
technologically advanced industry with services
that will substantially contribute to the development
of the overall Cypriot economy. n
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Sector Profile
Country Report CYPRUS 2020 115