Doing business in Cyprus
UK Trade & Investment Doing business in Cyprus
Are you a member of a UK company wishing to export overseas? Interested in entering or expanding your activity in Cyprus? Then this guide is for you! The main objective of this Doing Business Guide is to provide you with basic knowledge about Cyprus; an overview of its economy, business culture, potential opportunities and an introduction to other relevant issues. Novice exporters, in particular will find it a useful starting point. Further assistance is available from the UKTI team in Cyprus. Full contact details are available at the end of this guide.
Important Information Sanctions and Embargoes Some countries maybe subject to export restrictions due to sanctions and embargoes placed on them by the UN or EU. Exporting companies are responsible for checking that their goods can be exported and that they are using the correct licences. Further information is available on the Businesslink site
The purpose of the Doing Business guides, prepared by UK Trade & Investment (UKTI) is to provide information to help recipients form their own judgments about making business decisions as to whether to invest or operate in a particular country. The Report’s contents were believed (at the time that the Report was prepared) to be reliable, but no representations or warranties, express or implied, are made or given by UKTI or its parent Departments (the Foreign and Commonwealth Office (FCO) and the Department for Business, Innovation and Skills (BIS)) as to the accuracy of the Report, its completeness or its suitability for any purpose. In particular, none of the Report’s contents should be construed as advice or solicitation to purchase or sell securities, commodities or any other form of financial instrument. No liability is accepted by UKTI, the FCO or BIS for any loss or damage (whether consequential or otherwise) which may arise out of or in connection with the Report.
UK Trade & Investment Doing business in Cyprus
Content Introduction
4
Preparing to export to Cyprus
8
How to do business in Cyprus
9
Business etiquette, language and culture
11
How to invest in Cyprus
12
Contacts
13
Resources/Useful Links
14
UK Trade & Investment Doing business in Cyprus
Introduction Cyprus is strategically situated in the north-eastern part of the Mediterranean Sea linking Europe with the Middle East, Central Asia, and North Africa. Its geographical location has influenced the course of the island's eleven thousand year history. The Republic of Cyprus was established in 1960. In 2004 Cyprus became a full member of the European Union. Since 1974 the northern part of Cyprus is occupied by Turkish troops, following a coup on the island backed by the military junta then in power in Greece. As the island remains divided approximately 36% of its territory is not under the control of the Government. The northern part of the island refers to itself as “The Turkish Republic of Northern Cyprus” (TRNC). It is not recognized by the UK, EU or the UN or any other country except Turkey. The UK government’s policy on trade and investment in this area is being kept under review. More information can be obtained from the UKTI team in Nicosia. It is important that companies are aware of the political situation before considering exporting. All information given below refers to the area controlled by the government of the Republic of Cyprus. Cyprus and UK enjoy close trading, economic, political and cultural links. Currently more than half of the tourists, about 1.3 million, visiting Cyprus every year come from UK. An estimated 80,000 British nationals are part-time or permanent residents on the island. More than 200,000 Cypriots are living permanently in UK while about 14,000 Cypriot students are currently studying at British Universities. Traditionally the UK has been the single most significant trading partner for Cyprus. In 2009 UK exports of goods to Cyprus reached over £581 million. UK imports of goods from Cyprus reached £ 72 million. Cyprus is the only EU member state that reported an increase in the value of its imports from UK in 2009.
Strengths of the market In brief these are: • Open economy with no trading barriers with UK • One of the highest standards of living in the EU /High spending power • Similar business culture to UK • Similar banking, accounting, legal systems • Highly educated / skilled work force (mostly UK educated) • Easily accessible (Daily flights, cargo facilities etc) • High Awareness of UK products and Brands • English widely spoken • More than 50% of the tourists visiting Cyprus come from UK and about 80,000 British nationals live on the island • A gate-way to the Middle East, the Gulf, the Russian and East Europe markets
Opportunities in Cyprus Cyprus, as most island economies depends heavily on imports. Over the years UK has been a close trading partner to Cyprus not just in goods but also in services. The two economies have developed in similar ways with more emphasis given to services. Cyprus has one of the highest standards of living in EU with a GDP per capita of € 22,363 ($ 33,033) in 2009. Cypriots can punch well above their weight in terms of spending power. The last six months the Cypriot economy has been affected by the world economic crisis. However important opportunities continue to exist in: Environment (including water) Renewable Energy Oil and Gas Financial Services (including shipping) Tourism and Leisure (including Golf Courses and Marinas) Pharmaceuticals
UK Trade & Investment Doing business in Cyprus
In addition there are other sectors which present good opportunities through niche products. These sectors are Food and Drink, Education and Training, ICT, Clothing.
Trade between UK and Cyprus Cyprus and UK enjoy close trading links. The UK was the second most important source of imports for the country in 2008. During 2009 Cyprus was the only EU country which increased its imports from UK. It is ranked 43rd in the top 100 British Worldwide exports league table for 2009. The value of good exported from UK to Cyprus in 2009 was £ 581 million. The UK has traditionally been the main export market for Cyprus. The value of Cyprus exports to UK in 2009 was reduced to £ 72 million. UK top Five Exports to Cyprus in 2009 Description Petroleum, Petroleum Products & related materials Road Vehicles Non-Ferrous Metals Telecoms, sound recording & reproducing equipment Articles of apparel & Clothing
£ million 128 73 52 41 39
Source: BIS Statistics based on data from HM Revenue & Customs
Economic Overview Cyprus has a record of successful economic performance, reflected in rapid growth, full employment conditions, external and internal stability, almost throughout the post-independence period. This can be largely attributed to the sound macro-economic policies of successive governments, the adoption of a market-oriented economic system, and a well-educated, dynamic and flexible entrepreneurial workforce. Cyprus has an open, free-market, services-based economy with some light manufacturing. Cyprus' accession as a full member to the European Union as in 2004, has been an important milestone in its recent economic development. The Cypriots are among the most prosperous people in the Mediterranean region. Internationally, Cyprus promotes its geographical location as a "bridge" between three continents, along with its educated English-speaking population, good airline connections, and telecommunications. According to the Heritage's Foundation 2009 Index of Economic Freedom, Cyprus's economic freedom score is 70.8, which ranks its economy the 24th in the 2009 Index. Cyprus is ranked 12th out of 43 countries in the Europe region, surpassing countries like Germany, Sweden and Malta. Cyprus overall score is higher than the regional and global averages. The Index covers 183 countries. In the past 20 years, the economy has shifted from agriculture and light manufacturing to services. Currently, agriculture makes up only 2.4% of the GDP and employs 8.2% of the labour force. Industry and construction contribute 18.3% and employ 20.5% of the labour force. The services sector, including tourism, contributes 79.3% to the GDP and employs 71.1% of the labour force. In recent years, the services sector, and financial services in particular, have provided the main impetus for growth, while tourism has been declining in importance. Manufactured goods account for 58.3% of domestic exports, while potatoes and citrus constitute the principal export crops. The island has few proven natural resources. Trade is vital to the Cypriot economy and most goods are imported. Cyprus must import fuels, most raw materials, heavy machinery, and transportation equipment. More than 67% of its imports come from the European Union, particularly Greece, Italy, and the United Kingdom. The average rate of growth of GNP was 3.6% from 2000 to 2008. In the last couple of years (2007 and 2008) growth has remained fairly strong at around 4.4% and 3.8%.
UK Trade & Investment Doing business in Cyprus
However Cyprus did not remain immune to the world economic crisis. This affected primarily the tourist and construction sectors which are mainly dependant on the UK and Russian markets. The banking sector did not suffer the dramatic effect seen elsewhere as its exposure to “contaminated products” was minimal and indirect. 2009 started with positive rate of growth but by the end of the year growth dropped to -2% with inflation at 2.4% and unemployment at 5.4%. The budget deficit reached 6.1% forcing the government to announce a specific package of measures aiming at reducing the deficit. However according to the European Commission Spring Forecast Cyprus’ GDP growth is expected to average at -0.4% in 2010 and at 1.3% in 2011. Inflation is expected to reach 2.7% in 2010 and 2.5% in 2011. Unemployment is expected to reach 6.7% in 2010. According to the same forecast and if the government measures are not implemented budget deficit is expected to reach 7.1% of GDP in 2010. Further information on the economy and specific sectors can be obtained from the UKTI team in Nicosia. Websites: Cyprus Ministry of Finance: http://www.mof.gov.cy Cyprus Chamber of Commerce and Industry: http://www.ccci.org.cy/ Cyprus Central Bank: http://www.centralbank.gov.cy Population The current population of the Republic of Cyprus is approximately 796,900. About 70% of the population lives in urban areas and the average size of households in 2.86. The population is almost equally divided between males and females. Population distribution by age (%) 2008 0 - 14 years 17.1 15 - 64 years 70.2 65 years and over 12.7
Political Overview Over the centuries the location of Cyprus in the east Mediterranean corner has attracted political and trading powers. Ethnically Greek from the second millennium BC, Cyprus was subject in turn to various empires. In 1925 Cyprus became a Crown Colony. In 1960 Cyprus became an independent state. The UK retained two Sovereign Base Areas (SBAs) for its own defence purposes. Together with Greece and Turkey the UK was designated guarantor power of the sovereignty of the republic. The early sixties were marked with disagreements between the Greek and Turkish Cypriots over constitutional issues which led to inter-communal fighting. The coup against President Makarios in July 1974 and the subsequent Turkish military intervention dealt the island a severe blow, with considerable population movements and consequent huge economic disruption. Since 1974 the north part of the island has been occupied by Turkish troops and therefore not controlled by the Republic of Cyprus. The northern part of the island refers to itself as the 'Turkish Republic of Northern Cyprus' (TRNC). It is not recognised by the UK, EU or UN, or by any other country except Turkey. More information on the Cyprus problem can be obtained from the UKTI team in Nicosia, but it is important that companies are aware of the political situation before considering exporting. Repeated efforts by the UN to achieve a negotiated settlement of the Cyprus problem have failed. Most recently, in 2004, the UN Secretary General’s Comprehensive Settlement Proposals, known as the “Annan Plan”, failed when put to separate and simultaneous referenda on both sides of the
UK Trade & Investment Doing business in Cyprus
island. In the referenda, 65% of the Turkish Cypriots voted in favour of the plan and the Greek Cypriots rejected it by a 3 to 1 majority (76%). The current round of direct negotiations under the auspices of the UN started in 2008 between President Demetris Christofias and Turkish Cypriot leader Mehmet Ali Talat. The process, which was briefly on hold, due to elections in the Turkish Cypriot community, is expected to continue with the newly elected Turkish Cypriot leader Mr Dervis Eroglu replacing Mr Talat. The British Government continues to strongly support all efforts to achieve a comprehensive solution to the division of Cyprus. The Republic of Cyprus is a presidential democracy currently headed by Demetris Christofias. The legislative power is exercised by the House of Representatives elected by proportional representation Judicial Power is executed by the Supreme Court and Districts Courts The Republic of Cyprus is a full member of the EU since 1 May 2004 and adopted the Euro on 1 January 2008.
Getting here and advice about your stay FCO Travel Advice The FCO website has travel advice to help you prepare for your visits overseas and to stay safe and secure while you are there. For advice please visit the FCO Travel section
Getting here By air Many European and International airlines operate services to Larnaca International Airport and Paphos International Airport. There are daily flights between the UK and Cyprus and in addition to regular airlines; there are also budget flights from UK regional airports.
At the airport Taxis and car hire are available at both Larnaca and Paphos Airports. Charge for a taxi from Larnaca Airport to Nicosia (Lefkosia) will be approximately â‚Ź50. The journey may take up to 45 minutes. Alternatively there is a shuttle bus service between Larnaca Airport and Nicosia. Information may be obtained from www.kapnosairportshuttle.com
UK Trade & Investment Doing business in Cyprus
Preparing to export to Cyprus British companies wishing to approach the Cyprus market are advised to undertake market research consider the market information and plan carefully before actually launching into the market. UKTI’s team in Cyprus can provide a range of services to British-based companies wishing to export and/or grow their business in the Cyprus market. These services are tailor –made to meet the specific requirements and needs of each company. The services include the provision of market information, validated lists of agents/potential partners, identification of key market players or potential customers; planning and arranging business meetings and visiting programmes, in market support, organising of promotional events, etc.
You can commission these services under which are chargeable and operated by UK Trade & Investment (UKTI) to assist British-based companies wishing to enter or expand their business in overseas markets. Under this service, the Embassy's Trade & Investment Advisers, who have wide local experience and knowledge, can identify business partners and provide the support and advice most relevant to your company's specific needs in the market. To find out more about commissioning work, please contact your local UKTI office. See www.ukti.gov.uk
UK Trade & Investment Doing business in Cyprus
How to do business in Cyprus What companies should consider when doing business Cyprus has been an EU member since 2004, so European business practices and standards generally apply.
Key areas for business Although Nicosia (Lefkosia) and Limassol (Lemesos) are the two largest commercial centres, there are industrial clusters and commercial centres in Larnaca, Paphos and Paralimni. Depending on the product /services a UK company seeks to export certain commercial centres might be more appropriate to launch the business than others. The UKTI team in Nicosia can advice accordingly.
Customs and Regulations Cyprus is a member of GATT, the World Trade Organisation (WTO) and the European Union. Import duties have been abolished for goods coming from EU countries. There are however other duties/taxes imposed by the government on certain products, such as vehicles. VAT is levied at 15 percent. Some commodities coming from other countries other than the EU require specific import licenses. Further details may be obtained from the: Department of Customs and Excise Ministry of Finance Tel: +357 22601172 Fax: +357 22602748 www.mof.gov.cy/mof/customs Details of Customs clearance agents can be found on the following website: www.ccci.org.cy Getting your goods to market The main options are, airfreight, sea-freight and post, (air parcel post /express or courier service). For all methods, except post, it is often easier to use a freight forwarder. Forwarders should be identified at an early stage as part of the initial market research. Your nearest UKTI team will also be able to provide advice and some specific forwarding companies
Legislation and Local Regulations Companies are always advised to seek legal/taxation advice before entering a joint venture or any partnership. Lists of local lawyers and chartered accountants are available on request from the UKTI Section of the British High Commission in Nicosia.
Responding to Tenders In Cyprus all major public projects, go through public tenders, which are published in the Cyprus Government Gazette www.cygazette.com and the Tenders Electronic Daily (TED) www.ted.europa.eu The UKTI team in Nicosia monitors projects which are considered an opportunity for UK companies. Many of these are tenders which are published on the UKTI website under the ‘Business Opportunities’ section and UK companies should be aware of how best to take advantage of these. Labelling and Packaging Regulations Cyprus follows EU regulations in consumer packaging. For packaging regulations on medicinal products for human consumption, it is advisable to contact the Pharmaceutical Services and the Medical & Public Health Services of the Ministry of Health (Web: www.moh.gov.cy/moh/phs )
UK Trade & Investment Doing business in Cyprus
Standards and Technical Regulation Information on Standards and Technical Regulations can be obtained from the following: www.ccci.com.cy
Documentation Cyprus follows EU regulations in terms of documentations for goods exported between member states. However exporters are prompted to seek advice from the Department of customs and Excise at the Ministry of Ministry of Finance and the Department of Trade at the Ministry of Commerce, Industry and Tourism.
Recruiting and Retaining Staffing Cyprus boasts a highly-educated workforce. There is however shortage of skilled and unskilled workers. Recruitment can be done through local recruitment agencies or through large accountancy firms offering this service. The local press is often used for this purpose. Local employment laws are strict so UK firms are urged to get expert legal advice prior to hiring staff.
Intellectual Property Rights Cyprus subscribes to the International Convention for the Protection of Industrial Property. Local information may be obtained from: www.mcit.gov.cy/drcor
UK Trade & Investment Doing business in Cyprus
Business etiquette, language and culture Apart from common courtesy, there are no special local business characteristics. Although first names are used in day to day business, it is usual to use more formal addressing (Mr, Mrs, Ms) for those in senior positions and on formal occasions. Punctuality is expected and appreciated and business dress should be smart. The use of business cards is important and exchanges are always made on first meeting.
Language English is widely spoken in Cyprus and generally used in commercial circles. It is advisable though, to present trade literature in both Greek and English were possible. The UKTI team can help you find a translator or interpreter if required.
Meetings and Presentations As in other countries, more than anything it is important to target the right person in your contacts, the decision maker. It is also preferable to establish new business contacts via an introduction by mutual contact. It is preferable to have face-to-face meetings, than keep to contacts by e-mail or phone, which are seen as more impersonal. Cypriots generally also enjoy discussing business over a lunch meeting. Appointments should be made at least 1 or 2 weeks in advance, and confirmed a few days before the actual meeting.
Negotiations When negotiating, companies will respond to your approach in an equal manner. Therefore, if you demonstrate flexibility and a willingness to commit, they will gladly put the same effort in the partnership. The success in any business relationship will depend very much on the nature of the product/service and the level of domestic competition given that Cyprus is a small market. However, developing a personal relationship with a Cypriot partner can be just as significant as the product or service itself. Personal contact with potential and existing partners/clients and regular visits to the market are of utmost importance.
What are the challenges? Getting Paid - Terms of Payment Cypriot importers have generally enjoyed a good commercial reputation and are normally regular in their dealings and payments. Business is regularly done on cash against document (CAD) terms, although payment terms of duration of up to 90 to 180 days are widely requested. While it is important the British suppliers should be able to make offers which are fully competitive as regards credit terms, normal caution should be exercised in dealings with firms not previously supplied.
UK Trade & Investment Doing business in Cyprus
How to invest in Cyprus Attracting foreign capital has always been among the primary objectives of the country’s development policy. Cyprus offers numerous advantages and incentives to the foreign investor. Investors from the European Union are allowed 100 percent equity participation in any enterprise in Cyprus without a minimum level of capital investment. Further details may be obtained through the following: Ministry of Commerce, Industry and Tourism Foreign Investors Service Centre (One-Stop-Shop) Senior Commerce, Industry and Tourism Officer Tel: +357 22867148 Fax: +357 22376493 Contact: Mr Andreas Nicolaou E-mail: anicolaou@mcit.gov.cy Web: www.mcit.gov.cy And the Central Bank of Cyprus, www.centralbank.gov.cy
Financial Assistance
There are a number of incentives to encourage both local and foreign investment in Cyprus. Some are funded by the Cyprus government and others by the EU usually available to specific sectors such as environment and energy .Conditions for application are governed by specific legislation for each incentive programme. The UKTI team will be able to advise on the appropriate contact details depending on the type of investment.
UK Trade & Investment Doing business in Cyprus
Contacts If you have a specific export enquiry about the Cypriot market which is not answered by the information on this report, you may contact:
UK Trade & Investment Enquiry Service Tel: +44 (0)20 7215 8000 Fax: +44 (0)141 228 3693 Email: enquiries@ukti.gsi.gov.uk Otherwise contact the team in Cyprus directly:
UK Trade & Investment Cyprus British High Commission Alexander Pallis Street P O Box 21978 1587 Nicosia Cyprus Tel: +357 22861100 Fax: +357 22861150 Email address: brithc.1@cytanet.com.cy We have 3 staff working at the British High Commission in Nicosia dedicated to helping British exporters win business in Cyprus, as well as assisting Cyprus investors to the UK. The following provides details of the UKTI staff in Nicosia and the main sectors they cover: Elena Orphanidou Rhodes Head, Trade & Investment Email: Elena.orphanidou@fco.gov.uk Tel: +357 22861340 Athena Achilleos Trade & Investment Officer Email: Athena.achilleos@fco.gov.uk Tel: +357 22861341 Helen Paphitis Trade & Investment Assistant Email: Helen.paphitis@fco.gov.uk Tel: +357 22861344
UK Trade & Investment Doing business in Cyprus
Resources/Useful Links Country Information: BBC Website http://news.bbc.co.uk/1/hi/country_profiles/default.stm
FCO Country Profile http://www.fco.gov.uk/en/travel-and-living-abroad/travel-advice-bycountry/country-profile/
Culture and communications CILT – National Centre for Languages - Regional Language Network in your area: http://www.cilt.org.uk/workplace/employer_support/in_your_area.aspx Kwintessential culture guides: http://www.kwintessential.co.uk
Customs & Regulations HM Revenue & Customs: www.hmrc.gov.uk Import controls and documentation (SITPRO): http://www.sitpro.org.uk
Economic Information: Economist http://www.economist.com/countries/
Export Control Export Control Organisation: http://www.businesslink.gov.uk/exportcontrol
Export Finance and Insurance: ECGD http://www.ecgd.gov.uk/
Intellectual Property Intellectual Property Office: www.ipo.gov.uk
Market Access Market Access Database for Tariffs (for non-EU markets only): http://mkaccdb.eu.int/mkaccdb2/indexPubli.htm SOLVIT – Overcoming Trade Barriers (EU Markets only) www.bis.gov.uk/EUMarketAccessUnit
Standard and Technical Regulations: British Standards Institution (BSI): http://www.bsigroup.com/en/sectorsandservices/Disciplines/ImportExport/ National Physical Laboratory: http://www.npl.co.uk/ Intellectual Property: http://www.ipo.gov.uk/
UK Trade & Investment Doing business in Cyprus
Trade Statistics National Statistics Information: http://www.statistics.gov.uk/hub/index.html UK Trade Info: https://www.uktradeinfo.co.uk/
Travel Advice FCO Travel: http://www.fco.gov.uk/en/travel-and-living-abroad/ NHS: http://www.nhs.uk/nhsengland/Healthcareabroad/ Travel health: http://www.travelhealth.co.uk/
Business Link: International Trade Business Link’s International Trade pages provide an overview of export basics including licensing, customs procedures, classifying and movement of goods, other regulatory information and export paperwork issues. It also introduces exporters to the UK Trade Tariff.
Essential reading for exporters! Find out more at: http://www.businesslink.gov.uk/bdotg/action/layer?r.s=tl&r.lc=en&topicId=1079 717544
Produced by the UKTI Team at the British High Commission, Cyprus Contact: Helen Paphitis Email: helen.paphitis@fco.gov.uk Last Updated: May 2010
UK Trade & Investment Doing business in Cyprus