2020 Cyprus Country Report

Maritime & Shipping
Sector Profile
OPPORTUNITIES AND CHALLENGES
The last few years have seen opportunities arise for
Cyprus shipping in the wake of Brexit and natural
gas exploration in the Eastern Mediterranean,
however, the biggest trends that are already impacting
the sector are rapid tech development,
environmental challenges, dealing with decarbonisation
and finding alternative fuel options to
power global shipping in the future. Ship owners
are also facing a predicament of whether to buy
ships at this point, when in less than 10 years the
tech and other spec requirements could be completely
different – making it a costly and perhaps
redundant investment.
The next five years will be most exciting in
terms of satellite communication developments
and disruptive tech being introduced to improve
safety and efficiency in the industry. Much of
core tech being used by shipping companies will
be replaced by new smart tech, such as smart
weather foresight, smart performance analytics
and report alarms. Digitalisation is key to staying
competitive, but industry experts say tech and AI
will not replace humans anytime soon.
Speaking of the human element, shipping executives
have voiced concerns that finding competent
crew is a growing problem worldwide. It
is increasingly difficult to attract young people of
high calibre and ambition to choose a career at
sea. Seafarers are both the heart and soul as well
as the Achilles heel of the industry, and companies
are acutely aware that all the tech in the world
will never replace a well-trained and experienced
crew. Shipmanagement giants such as Columbia
Marlow have highlighted the industry’s need for
more care and support of crew members whether
on- or off-shore, to introduce more perks and
better training opportunities and to create a safer
working environment.
Fintech is also set to bring new ways to raise
capital in shipping and introduce better ways of
risk profiling for both investors and investments,
and growing ship financing possibilities available
through Cyprus banks will support the future
growth and diversification of the sector.
Although the banks’ portfolios are still comparatively
small, this development will not only
increase the size and scope of the maritime
cluster and create opportunities, but expand the
expertise in this area within Cyprus’ financial services
sector. Following the financial crisis of 2013,
shipping finance virtually stalled in Cyprus, but
there are signs of a revival. The gap left by the
once-dominant foreign banks is being filled by
local banks, Greek banks with subsidiaries, and/
or independent entities based in Cyprus.
Due to the smaller size of these banks, their
focus is on providing a close, relationship-based
service and being carefully selective of the clients
they onboard. For example, local banks consider
how the prospective client behaved during the
downturn and assess the quality of the clients’
so-called soft assets, such as management and
ownership history, with equal precision to assessing
the quality of the asset itself. The majority of
owners that Cyprus banks deal with are small-tomedium
companies with a limited fleet of vessels,
as larger companies are well catered to by big US
and European banks, or Chinese leasing companies.
One improvement that shipping executives
have been calling for to help Cyprus strengthen
its maritime centre is to improve flight connectivity
and establish more direct flights to other
key hubs around the world. One historical challenge
of significant impact remains for Cyprus.
The size of the world fleet has doubled over the
last two decades, but currently the Cyprus industry
is prevented from realising its true potential
by the Turkish embargo, which was unilaterally
imposed in 1987 on Cyprus-flagged ships calling
at Turkish ports. A settlement of the Cyprus
problem would immediately resolve this and dramatically
boost the size of the country’s commercial
fleet. Pending a settlement, Cypriot officials
continue to press for the lifting of the Turkish
embargo to be included in any package of confidence-building
measures in reunification talks.
RIDING OUT THE STORM
Although a small economy, Cyprus’ shipping
sector punches well above its weight, expertly
navigating through economic storms and market
fluctuations and evolving with new tech coming
on stream. Recognised for its competence, safety
and multiple advantages, Cyprus is clearly capable
of competing on a global scale. Although the fullscale
impact of the Coronavirus pandemic is yet
to be unveiled, what is certain is that global trade
and shipping will not emerge unscathed.
However, there is always a silver lining to
every storm cloud. Maritime industry observers
say these developments could also be a blessing in
disguise for the Cyprus shipping sector, forcing it
to fast-track reforms and speed up the introduction
of advanced communications services, thus
beefing up the cluster to become more efficient in
a shorter period of time. With its growing registry
and reformed procedures, Cyprus will emerge
as a more competitive shipping hub once this
storm passes – and quite rightfully stand strong
as an EU jurisdiction and maritime centre full of
potential and ambition. n
Discover more at www.cyprusprofile.com
Shipping accounts for
7%
of Cyprus’ GDP
1 in 5
vessels under thirdparty
management are
controlled from Cyprus
3rd largest merchant
fleet in Europe
11th largest merchant
fleet in the world
200+ shipping
related companies
based in Cyprus
EU’s largest
shipmanagement
centre
120 Country Report CYPRUS 2020