2020 Cyprus Country Report
The 2020 Cyprus Country Report features in-depth articles on the economy, foreign direct investment, international trade and headquartering as well as detailed sector profiles and insights from Cyprus’ 100 most influential political, economic and business leaders shaping the future of their country and its industries.
The 2020 Cyprus Country Report features in-depth articles on the economy, foreign direct investment, international trade and headquartering as well as detailed sector profiles and insights from Cyprus’ 100 most influential political, economic and business leaders shaping the future of their country and its industries.
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A GROWING ENERGY SECTOR<br />
Since US company Noble Energy made the first<br />
natural gas discovery in 2011 with estimated<br />
resources of 4.5 trillion cubic feet (tcf) in the<br />
Aphrodite field, <strong>Cyprus</strong>’ hydrocarbons discoveries<br />
have captured the attention of several global<br />
energy giants. ENI, Kogas, ExxonMobil, Royal<br />
Dutch Shell, and Total have all secured exploration<br />
licences and conducted exploratory drilling<br />
while US giant Chevron will be taking a stake in<br />
Block 12 after announcing its intention in July<br />
<strong>2020</strong> to buy out Noble Energy Inc. ExxonMobil<br />
announced the discovery of an estimated 5 to 8<br />
tcf in Block 10 in early 2019 and ENI announced<br />
a promising discovery in Block 6 in early 2018.<br />
More drilling is expected in the next few years<br />
and in 2019 <strong>Cyprus</strong> agreed to build a subsea pipeline<br />
connecting Aphrodite to Egypt’s liquefaction<br />
plants and concluded a production-sharing<br />
deal with Noble Energy and its partners over the<br />
Aphrodite gas reservoir.<br />
New opportunities are being created for<br />
a range of energy investments, including gas<br />
imports for power generation, the expected liberalisation<br />
of the electricity market by 2021,<br />
the growing share of renewables, the EuroAsia<br />
Interconnector project to connect <strong>Cyprus</strong>, Israel<br />
and Greece via submarine electricity cable, the<br />
related EuroAfrica Interconnector to connect<br />
Egypt, and the potential for the world’s longest gas<br />
pipeline from Israel via <strong>Cyprus</strong> to Italy. The discoveries<br />
have boosted the development of a new<br />
energy industry in the country, which is also well<br />
positioned to offer a multitude of auxiliary services<br />
to companies operating in the wider region.<br />
A floating storage and regasification unit (FSRU)<br />
terminal in Vassilikos, which will transform domestic<br />
power production, attracted finance in<br />
<strong>2020</strong> from the European Investment Bank (EIB)<br />
and the European Bank for Reconstruction and<br />
Development (EBRD).<br />
A LEANER BANKING SECTOR<br />
In the era of globalisation,<br />
boundaries between<br />
international politics<br />
and international<br />
economic relations have<br />
become even more<br />
blurred. The outbreak<br />
of Covid-19 pandemic<br />
has posed additional,<br />
unprecedented challenges<br />
on governments and<br />
businesses alike and<br />
has accelerated the<br />
changes that were already<br />
underway. Overcoming<br />
these challenges<br />
successfully will<br />
ultimately depend on how<br />
countries are able to adapt<br />
to the new environment.<br />
I am confident that our<br />
new strategy for Economic<br />
Diplomacy will stand us in<br />
a strong position to bring<br />
into play all elements<br />
that make <strong>Cyprus</strong> an<br />
attractive investment<br />
destination: membership<br />
of the EU with easy access<br />
to a market of 500 million<br />
consumers, a modern<br />
legal framework, an<br />
attractive tax system,<br />
an extensive network<br />
of more than 60 Double<br />
Tax Treaties, a highly<br />
skilled workforce<br />
and high-quality<br />
professional services,<br />
to mention but a few.<br />
Nikos Christodoulides<br />
Minister of Foreign Affairs<br />
<strong>Cyprus</strong> banks maintain high levels of capital adequacy<br />
and liquidity. The gradual restructuring<br />
of the banking sector after 2013 has attracted important<br />
institutional investors and fresh foreign<br />
capital, and encouraged accelerated sales of nonperforming<br />
loans. These developments have substantially<br />
reduced risk and enabled the financial<br />
system to operate on a more sound basis.<br />
The island’s biggest lender, Bank of <strong>Cyprus</strong>,<br />
secured €1 billion of investment from worldrenowned<br />
investors in 2014 and issued another<br />
€220 million in Additional Tier 1 (AT1) capital in<br />
December 2018. The bank listed on the London<br />
Stock Exchange in January 2017, which has substantially<br />
opened up access to large foreign investors,<br />
such as Morgan Stanley.<br />
Hellenic Bank completed a capital increase<br />
of €150 million in March 2019 to support its acquisition<br />
of mainly performing loans from the<br />
former <strong>Cyprus</strong> Cooperative Bank. The acquisition<br />
boosted the bank’s assets to €16 billion and<br />
raised market share for loans to 30%. The capital<br />
raise brought in new international investors, such<br />
as US-based Poppy Sarl (PIMCO), with the other<br />
major shareholders being Demetra Investments<br />
Ltd, Wargaming, Third Point and investment<br />
fund 7Q Financial Services Ltd.<br />
Mergers and acquisitions in the past few years<br />
have transformed the landscape somewhat with<br />
strategic new investment entering the sector from<br />
the sale of the majority stake of the <strong>Cyprus</strong> subsidiary<br />
of Greece’s largest lender Piraeus Bank, to<br />
Lebanese Holding M. Sehnaoui SAL – which injected<br />
€40 million in fresh capital into the bank in<br />
2017, now renamed AstroBank. In January 2019,<br />
AstroBank went on to acquire the locally based<br />
USB Bank for €40 million and agreed to buy<br />
NBG <strong>Cyprus</strong> in late 2019. The deals are expected<br />
to contribute to the further consolidation of the<br />
<strong>Cyprus</strong> banking sector and highlight potential<br />
investment opportunities in <strong>Cyprus</strong>.<br />
The banking sector has seen more activity<br />
and investment in recent years, providing opportunities<br />
for new players to enter into the market<br />
to encourage healthy competition and a wider<br />
scope of services. Investment opportunities that<br />
could be tapped into by international banks and<br />
financial groups are mergers and acquisitions,<br />
private equity and venture capital projects via the<br />
budding funds sector, as well as financing of large<br />
infrastructure projects.<br />
WORLD-CLASS SHIPPING HUB<br />
One of <strong>Cyprus</strong>’ most successful export services<br />
has been the maritime industry, which now has<br />
its own dedicated deputy ministry. The growth<br />
of <strong>Cyprus</strong>’ resident shipping sector over the past<br />
50 years has helped develop a strong maritime<br />
cluster that includes <strong>Cyprus</strong>-based banking, professional<br />
services, insurance and IT. The cluster<br />
has gone from strength to strength over the<br />
years and is consistently attracting more quality<br />
tonnage and shipping-related companies to its<br />
shores.<br />
The decision in July 2018 by leading London<br />
ship insurer P&I Club to open a post-Brexit EU<br />
subsidiary in <strong>Cyprus</strong>, reaffirmed the island’s position<br />
as one of the top global hubs for shipping.<br />
Another coup came in early 2019, when British<br />
shipping firm P&O Ferries decided to register<br />
its English Channel operating fleet under the<br />
<strong>Cyprus</strong> flag to take advantage of the benefits and<br />
Foriegn Direct Investment<br />
<strong>Country</strong> <strong>Report</strong> CYPRUS <strong>2020</strong> 29