GOLD MAGAZINE

ISSUE 12 march 2012 PRICE €6.95

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the international investment, finance & professional services magazine of cyprus

all 4 one The CEOs of the ‘Big Fo ur accounting ’ firms are united on ho w Cyprus sho uld adapt to th e new services economy

+ ELENA AMBROSIADOU, MEGAN GREENE, PRADEEP KUMAR REAL ESTATE

Luxury Properties & Major Projects

TRANSPARENCY

How it is perceived in Cyprus

OPINION

Nicos Rolandis Theodore Panayotou Joanne Theodorides

Plus:

MONEY / BUSINESS ECONOMY TAX & LEGAL LIFESTYLE

www.pwc.com/cy

Tax Facts & Figures 2012 - Cyprus The tax system in Cyprus

Please scan with your smartphone to find the electronic version of the publication.

All of us in PwC are here to offer you our knowledge and expertise and to support you in achieving your personal and corporate tax goals. The specialised solutions we offer to you are adjusted to your own needs and will support you in structuring your tax operations in an efficient way.

The guide is available free of charge at the reception areas of the PwC offices all over Cyprus. You may also find the guide in electronic form on our website.

Š 2012 PricewaterhouseCoopers Ltd. All rights reserved

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issue 12 march 2012

08 EDITORIAL 10 up front 14 FIVE MINUTES WITH

All 4 One

The CEOs of the ‘Big Four’ accounting firms are united on how Cyprus should adapt to its new professional services economy

FEATURE The international business sector is still driving the economy

30 | Investing in Luxury Real Estate in Cyprus Homes in prime coastal locations continue to buck the trend in the local property market

Gas belongs to the future generations too

by Nicos A. Rolandis

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Stop the Collusion!

by Theodore Panayotou

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European Commission sets its sights on double taxation

by Joanne Theodorides

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Feeding the Hungry Beast

by Peter Economides

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30 28 | Growth in the financial and investment services sectors predicted

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+ opinion

56 | Transparency in Cyprus Changing perceptions on transparency and corruption

60 | Wealth Preservation and Investor Protection The Wealth Management unit of Piraeus Bank (Cyprus)

62 | Hellenism in Crisis Greek society is being asked to evolve and adapt on an unprecedented scale

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{money} {business} {economy} {tax&legal} {lifestyle}

©2012 KPMG Limited, a Cyprus limited liability company and member of the KPMG network of independent member firms affiliated with KPMG International Cooperative (”KPMG International”), a Swiss entity. All rights reserved.

EDITORIAL

Small Is Beautiful

ISSUE 12 march 2012 PrIcE €6.95

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all 4 oNE

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n the December issue of Gold, one of our recommended books was Small Is Beautiful: Economics As If People Mattered, a new edition of the 1973 collection of essays by British economist E. F. Schumacher. As we noted in our review, the relevance of Schumacher’s ideas to the world in 2012 is quite remarkable, particularly regarding the need for governments to focus on sustainable development, while his rejection of established concepts such as “growth is good” and that “bigger is better” continues to attract the support of people from all walks of life around the world.

The Small Is Beautiful title has since been used by journalists to refer to a thousand topics from body size to nanotechnology and here it is again, thanks to repeated references in this month’s Gold to the three smallest countries of the European Union: Malta, Luxembourg and Cyprus. It is remarkable that these three countries, whose total population is just over two million, are not only equal members of the EU and the eurozone but are three of Europe’s most successful business centres.

In our cover story, you will find repeated references by the CEOs of the ‘Big Four’ accounting firms to how Malta has not only caught up with Cyprus as a major provider of financial and professional services but has overtaken it thanks to impressive coordinated action between the government and the private sector and a striking ability to respond quickly and effectively to what its competitors are doing. And while Luxembourg’s reputation as a financial centre dates back several decades, it has clearly been keeping a close eye on Cyprus and taking advantage of the island’s sluggishness in reacting to the changing times.

The difference between the three competing jurisdictions is seen most clearly in the way they have dealt with the funds industry. An article published in Bloomberg Markets Magazine in January 2012 (interestingly headlined Malta Lures Hedge Funds With 300 Days of Sunshine. One cannot fail to ask: Why Malta and not Cyprus?), notes that at the end of 2011, the number of funds located in Malta had grown to more than 500 with €8 billion under management. It also points out that “that’s not much compared with Luxembourg, which has more than €143 billion under management across more than 700 hedge funds and funds of hedge funds.” While it would be wrong to dismiss Cyprus’ exceptional achievements in changing the course of its economy – yet again – and in enhancing its status as a regional business centre, it is evident from talking to those who are directly involved in the professional services sector that the government, in particular, could be doing a lot more to assist the one sector of the economy that has the potential for substantial growth during the present crisis.

Gold and its publishers have repeatedly stressed during the past twelve months that one of our key goals is to help promote Cyprus as an international business and finance centre. It is in no-one’s interest to stress the island’s shortcomings rather than its achievements but it is clear that greater vision, a clearer focus, more cooperation and a keener response to the competition are required if Cyprus is to maintain and improve its status and reputation. The four contributors to our cover story make this abundantly plain.

For more than 50 years, successive governments have tended to use Cyprus’ small size as an excuse for its failure to realise its true potential. But things have changed. The island will take over the EU presidency in four months’ time. It is time for the decisionmakers to realise that small is indeed beautiful and with a concerted effort it can become even better for Cyprus.

The CeOs of the ‘Big four’ accounting firms are united on how cyprus shoul d adapt to the new services economy

+ ElENa ambroSIadoU, mEGaN GrEENE, PradEEP KUmar rEal ESTaTE

luxury Properties & major Projects

TraNSParENcy how it is perceived in cyprus

oPINIoN

Nicos rolandis Theodore Panayotou Joanne Theodorides

PlUS:

moNEy / bUSINESS EcoNomy TaX & lEGal lIFESTylE

Published by IMH ISSN 1986 - 3543

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General Manager:

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Editor-In-Chief:

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Senior Editor:

Costa Ioannides

Contributing Editors:

Antonis Antoniou, Stella Mourettou, Maria Pilidou Contributors to this issue:

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Anna Theodosiou

Senior designer: Maria Kyriakou Photography:

Olesia Constantinou, Jo Michaelides Marketing Executive:

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SALES & BUSINESS DEVELOPMENT EXECUTIVE:

Christos Kyriakides

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Printers:

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Elena Ambrosiadou, Chris Damianou , Peter Economides, Maria Krambia-Kapardis, Nathalie Kyrou, Theodore Panayotou, Georgia Papa, Nicos A. Rolandis, Joanne Theodorides

Themoula Leonidou

John Vickers, Chief Editor

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contact: 5 Aigaleo St., Strovolos 2057, Nicosia, Cyprus Mailing address: P.O.Box 21185, 1503, Nicosia, Cyprus Tel: +357 22505555, Fax: +357 22679820 e-mail: gold@imh.com.cy website: www.goldmagazine.com.cy

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Deposit Scheme

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UP FRONT

ALPARI FS MOVES TO ALPARI TOWER

PAMBORIDIS LLC NAMED CROSS BORDER LAW FIRM OF THE YEAR

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lpari Financial Services Ltd (Alpari FS), one of the world’s leading forex brokers, has recently relocated to Alpari Tower, its own stunning new office building in Cyprus. The state-of-the-art building, equipped to meet the demands of the company’s continuing growth, is a symbol of both the character and stature of the Alpari brand, further solidifying the presence of a leading international broker in Cyprus.

Alpari FS CEO Olga Rybalkina says, “We are very proud to see how quickly Alpari FS has grown in Cyprus. Our new offices create an

ideal environment for us to expand and continue providing comprehensive online trading services and highly competitive products to our clients. By all indications, 2012 promises to be an exciting and vibrant year for Alpari FS.” The new office is located at 35, Lamprou Konstantara Street, Kato Polemidia, Limassol.

Alpari FS is an independent Forex broker established in 2010. It provides brokerage services on the international currency market and is part of the internationally recognized family of Alpari companies, with more than 440,000 clients in over 150 countries and a trading volume exceeding $210 billion monthly.

For the third consecutive year, Pamboridis LLC has been named Cross Border Law Firm of the Year in Cyprus in the 2012 Corporate International Magazine awards.

The annual awards are given in recognition of those who have shown excellence in expertise and service in difficult circumstaances during the global economic downturn. The shortlisted firms are researched by Corporate International Magazine’s independent team which focuses on service range, how the business operates and the expertise each firm can offer to companies trading or thinking of trading in their chosen jurisdiction.

CCCI BUSINESS FORUM IN UKRAINE

A BUSINESS FORUM IN KHARKOV AND DONETSK, UKRAINE, TAKES PLACE FROM 2327 APRIL 2012, ORGANISED BY THE CYPRUS CHAMBER OF COMMERCE & INDUSTRY AND THE CYPRUS-UKRAINE BUSINESS ASSOCIATION, IN COOPERATION WITH THE CYPRUS MINISTRY OF COMMERCE, INDUSTRY & TOURISM. THE MAIN OBJECTIVE OF THE BUSINESS FORUM IS THE PROMOTION OF CYPRUS AS AN INTERNATIONAL FINANCIAL AND BUSINESS CENTRE. FOR FURTHER INFORMATION, CONTACT ZACHARIAS MANITARAS, DEPARTMENT OF SERVICES & TRADE, CYPRUS CHAMBER OF COMMERCE & INDUSTRY ON 22889890 OR BY E-MAIL (MANITARAS@CCCI.ORG.CY)

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Stelios Award for Business Cooperation in Cyprus 2012

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ir Stelios Haji-Ioannou, founder of easyJet and serial entrepreneur, has announced the 2012 launch of the Stelios Award for Business Cooperation in Cyprus – now in its 4th year.

Later this year, five entrepreneurial teams – each comprising at least one Greek Cypriot and one Turkish Cypriot – will receive €50,000 each for their work in promoting business cooperation on the island.

Since its inception in 2009, the award has been received by a variety of diverse teams and businesses, all dedicated to fostering cultural and economic ties between the two Cypriot communities.

From the film partnership between 2011 Award recipients Danae Stylianou and Rahme Veziroglou (who produced the film “Sharing An Island”) to Antry Mylona and Mehmet Birinci (partners in business as well as “partners in life”), the winning partnerships exhibit entrepreneurial passion, a unique and solid business idea and a dedication to bringing the communities of Cyprus together for the benefit of the island.

The Award is funded personally by

Sir Stelios Haji-Ioannou through the Stelios Philanthropic Foundation, which is dedicated to the three E’s - Education, Entrepreneurship and the Environment.

Commenting on the awards, Haji-Ioannou says “This island and this Award are very close to my heart and I am so pleased to have been able to witness and reward the success of this growing group of entrepreneurs who are making a difference for Cyprus.”

The Stelios Philanthropic Foundation is committed to dynamic philanthropy: making a positive, exponential difference through funding, inspiring and advising educational, entrepreneurial and environmental initiatives. The Foundation sponsors a number of entrepreneurial awards including the Disabled Entrepreneur of the Year Award, run by Leonard Cheshire Disability, The Stelios Award for Business Cooperation in Cyprus and the Stelios Haji-Ioannou Award for Entrepreneur of the Year in Greece.

Through the foundation, Sir Stelios HajiIoannou has also pledged £3 million for 200 scholarships over 10 years to his almae mater, the London School of Economics and the Cass Business School at City University. He has earmarked the Scholarships for citizens of Cyprus (his family origins), Greece (his birthplace), the UK and Europe (the birthplace of his businesses).

For more information, visit: www.stelios. com/cyprus-business-cooperation.

DUMA RATIFIES

PROTOCOL TO CYPRUSRUSSIA TAX TREATY

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he Protocol to the 1998 Double Tax Treaty between Cyprus and Russia, signed

by Russian President Dmitry Medvedev during his official visit to Cyprus in 2010, was ratified by the Russian State Duma on 15 February 2012. This follows ratification of the Protocol by the Cyprus government in September 2011. The Protocol will come into effect as of 1 January 2013 (with some provisions not taking effect until 1 January 2017). Ratification of the Protocol will result in the removal of Cyprus from a Russian “blacklist” of offshore jurisdictions.

Dividends received by Russian companies from Cypriot subsidiaries will qualify for the Russian dividend participation exemption, and this will further strengthen Cyprus as one of the most attractive jurisdictions for Russian investment.

FIDUCENTER CONFERENCE

A two-day conference entitled “Cyprus in International Business Planning” organised

by Fiducenter (Cyprus) took place on 9-10 February at the Ajax Hotel, Limassol. Participants from Europe and beyond attended presentations on Cyprus’ legal and tax regimes, the real estate and shipping sectors, the human resource and securities markets, the island’s banking system, wealth management services, Cyprus International Trusts and more. There were plenty of opportunities for networking as well as visits to Limassol and Omodos village. Sponsors of the conference were Marfin Laiki Bank, Alathea Audit Ltd, Eurovex, Pandomus, A. Katchies LLC, Advance Career Ltd and InfoScreen Quorum. Gold was Communication sponsor of the event.

Simon Taylor

Marios Tannousis

Angela Katchies

Kyriacos Michaelides

Phivos Michaelides

Annie Papadopoulou

Pambos Kartoudes

George Demetriou

Miltos Michaelas

Andreas Liasides

Christos Panagi

Theodoros Giovanni

THE INTERNATIONAL INVESTMENT, FINANCE & PROFESSIONAL SERVICES

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up front

denmark germany switzerland

austria

new zealand

The World’s Best Places to Live

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he world’s biggest and most important cities are not necessarily the best to live in. High levels of crime, traffic congestion, and long commutes to work are among the factors that can negatively affect the quality of life.

CNBC recently drew up a list of the world’s best cities, based on the human resources consulting firm Mercer’s 2011 quality of living survey. The annual report looks at living conditions in 221 cities worldwide and ranks them against New York as a base city in 10 categories such as economy, socio-cultural environment, politics, education, and the health sector.This year the survey also identified cities with the highest personal safety rankings based on crime levels, law enforcement, international relations, and stability. Limassol came 46th on this list.

1.

Vienna, Austria

Vienna is Austria ’s largest city by population, as well as the country’s cultural, economic and political centre. Vienna is also the world’s number one destination for conferences, drawing five million tourists a year – equivalent to three tourists for every city resident.

2.

Zurich, Switzerland

Zurich is the largest city in Switzerland and is known as the country’s economic engine, with one out of every nine jobs in the country based there. It is the country’s biggest tourist destination as well as Europe’s third most expensive city.

12 Gold the international investment, finance & professional services

3.

Auckland, New Zealand

New Zealand’s largest city, Auckland, has the best quality of life in the Asia-Pacific region.

Its 1.35 million people account for more than 30% of the country’s population. It is also ranked as the second safest city in the Asian region, behind Singapore.

4.

Munich, Germany

Munich is Germany’s third largest city and one of the country’s key economic centres, home to some of its most notable businesses. It generates about 30% of the GDP of Bavaria. Drawing immigrants to its industries from all over the world, more than 40% of Munich’s residents are foreigners.

5.

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Dusseldorf, Germany

Dusseldorf, the seventh most populated city in Germany, is renowned for its fashion and trade fairs, and for being one of the country’s top telecommunications centres. It is also Germany’s leading modern and contemporary art capital.

5.

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Vancouver, Canada

Vancouver boasts one of the mildest climates in Canada and has smallest carbon footprint of any major city in North America. Vancouver’s government is constantly

promoting green building, planning and technology, with the ambition of becoming the world’s greenest city by 2020.

7.

Frankfurt, Germany

8.

Geneva, Switzerland

9.

Bern, Switzerland

9.

Copenhagen, Denmark

Frankfurt is the fifth largest in Germany and the largest financial centre in continental Europe. Home to the European Central Bank. it is also a major transport hub for central Europe and is the 11th safest city in the world based on crime levels and law enforcement effectiveness.

Geneva is Switzerland’s second most populous city and home to about 20 international organizations, including the United Nations and the Red Cross. The cost of living is the highest in Europe and it is the fifth most expensive city in the world. Over 44% of the city’s population are foreigners.

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Often ranked among the most expensive cities in the world, the Swiss capital is the centre of the country’s engineering and manufacturing industries with medical, information technology, automotive, and luxury retail products such as watches made there. It is considered to be the second safest city in the world after Luxembourg.

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Copenhagen is one of the world’s most eco-friendly places. Known as the city of cyclists, it has a total 218 miles of cycle tracks, with about 36% of its population commuting by bicycle every day. Increased health awareness means that about 75% of food consumed in Copenhagen is organic.

interview

five minutes with...

Pradeep Kumar, Senior Vice President of Cargo Revenue Optimisation, Emirates SkyCargo

How do you view the future of Emirates SkyCargo?

We fully recognise that the key to our own growth is through the growth of our customers’ business. And it is through their belief in us that we have been able to optimise our profitability from year to year and make continued investments in our resources and capabilities. As Dubai and Emirates SkyCargo both continue to grow at an unprecedented rate, our investments will also continue in on-the-ground facilities, technological advances, fleet additions, special handling capabilities, new destinations and increased frequency of our services.

Gold: Emirates has a fantastic reputation as a top quality passenger airline but much less is known about its cargo operations Can you give us some basic facts about Emirates SkyCargo?

Emirates SkyCargo is the freight division of Emirates airline. In 2010-11, it carried 1.8 million tonnes of cargo across its network, contributing 17.4% (US$ 2.4 billion) of the airline’s total transport revenue. Based in Dubai International Airport, its $327 million, 43,600 square metre Cargo Mega Terminal is designed to handle 1.2 million tonnes of cargo a year. Emirates’ 169-strong fleet includes eight freighters and now serves a global route network that spans 121 points in 72 countries.

What is the most common cargo you deliver and where to?

Emirates runs a daily wide-bodied inbound and outbound service to Dubai. The aircraft, which lands in the morning from Dubai and in the afternoon from Malta, has a capacity of 17 tons with full passenger on each flight to and from Dubai.

How about Cyprus?

We support many of Cyprus’ industries. Main exports products from Cyprus include pharmaceuticals to the Far East, Africa the Gulf region and Australia, veterinary products to the Gulf countries, and general cargo across the Emirates network worldwide. In terms of imports, it usually includes fresh items such as fish and flowers, plus clothing and general cargo.

How has the industry been affected by the global financial crisis?

Since it was established in 1985, Emirates SkyCargo has overcome many crises. Cargo activity is a good

14 Gold the international investment, finance & professional services

Although these are difficult times with the financial crisis affecting every one, Emirates SkyCargo sees strong growth potential for its operations in Cyprus barometer of economic strength.

Emirates’ management team took on new passenger aircraft and freighters and the right-sized cargo capacity – without shedding jobs – to prepare for the worst-case scenario just before the economic crisis hit. The industry as a whole is now working to return to a level of sustainability and Emirates, in particular, continues to invest in technology and communications.

While keeping our costs to the lowest level possible, investment is key in the cargo sector.

What was the purpose of your recent visit to Cyprus?

The cargo factors on the DubaiCyprus-Malta route have increased considerably in the last years. The carrier supports many new industries in both Cyprus and Malta and on 21 February, Emirates honoured the top three cargo agents and top three cargo customers at an award ceremony in Nicosia. I presented the Top Cargo Agents awards to 2 Serve Airport Services Ltd., Hull Blyth Araouzos, and Eurofreight Logistics in recognition of their significant sales performance.

The Best Cargo Customers in Cyprus are Medochemie Ltd, Remedica Ltd, and G & L Calibers Ltd. How do you see Cyprus’s performance for 2012?

Although these are difficult times with the financial crisis affecting every one, Emirates SkyCargo sees strong growth potential for its operations in Cyprus. We have had an average of 9% year-on-year increase in tonnage and revenue and, due to our type of aircraft-connectivity and competitive rates, we will be able to maintain our market share.

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opinion

Gas belongs to the future generations too The pioneering efforts of 12 years ago on oil and gas exploration have finally come to fruition

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By Nicos A. Rolandis

This wealth has been built up over a period of millions of years and it does not belong to one or two generations

hen I commenced the process for the Cyprus offshore oil and gas in the late 1990s, I was almost alone, supported only by my team at the Ministry of Commerce, Industry & Tourism. I had already been given the green light by President Clerides but the media and the public at large were not ready to accept the idea. I became the laughing stock and the target of ironical comments, to the extent that certain friends of mine advised me to drop the effort which was ‘spoiling my image’.

I persevered. I was encouraged by the fact that 20 years earlier, when I was Foreign Minister, a very large US oil company – Standard Oil of Indiana – together with oil major Amoco had displayed a keen interest in drilling for oil and gas in the sea south of Cyprus. Furthermore, my contacts with my Egyptian counterpart and a US energy services company had convinced me that I should pursue the matter.

The Egyptians were particularly helpful.

They showed us the way and we covered a lot of ground with their assistance. In the meantime I had contacts with Lebanon (at the level of the President and the Prime Minister), Syria and Israel on the respective Exclusive Economic Zones (EEZ) of our countries. The culmination of my efforts was the signature of an EEZ Agreement with Egypt, signed in Cairo by the Foreign Minister of Egypt and myself on 17 February, 2003. It was the first EEZ Agreement signed in the Eastern Mediterranean. We had also started contacts for two-dimensional and three-dimensional offshore surveys.

It is with great satisfaction that I note today that those pioneering efforts, 12 years ago have come to fruition. We already

have approximately 7 trillion cubic feet (tcf) of proven natural gas reserves. This is just a little more than one per thousand of the world’s reserves of natural gas but it is more than sufficient for a small country like Cyprus. And of course there are strong indications that we may have more.

The Egyptians had estimated that Cyprus, in its overall EEZ, may have 0.5% of the world’s reserves of oil and gas. If this proves correct, we may own as much as 30 tcf of gas and 5-6 billion barrels of oil.

The value of these lots at current market prices runs into hundreds of billions of US dollars. Of course, a considerable part of it (normally less than half) will go to the oil companies but what will be left to us will still be equivalent to a huge amount, a few hundred billion dollars. If we pump it out in 20-25 years, our public coffers will have a real blessing from God and Nature.

In this regard there are two things that I would like to underscore: I believe that we have grossly underestimated the possible reaction and the threats by Turkey in connection with our hydrocarbons. I have made some proposals in the past, which might address this serious issue, but unfortunately they have fallen on deaf ears. It seems that we have still not realised how dangerous Turkey may be, despite suffering the invasion in 1974. Turkey may spark an incident or start pumping oil out of our EEZ, which she does not recognise.

We should manage the oil wealth in a professional manner. We should not channel it all into the yearly budgets and squander it. We should invest it with care through an Oil Fund. This wealth has been built up over a period of millions of years and it does not belong to one or two generations.

It belongs to the present and the future.

So, we should behave with a lot of respect and pass on this possible blessing to the generations to come as well.

info: Nicos A. Rolandis was Minister of Foreign Affairs (1978-1983), Minister of Commerce, Industry & Tourism (1998-2003), a Member of the House of Representatives (1991-1996), President of the Liberal Party (1986-1998) and Vice-President of Liberal International (1994-1998).

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All 4 The CEOs of the ‘Big Four’ accounting firms are united on how Cyprus should adapt to its new professional services economy By John Vickers, Photography by Jo Michaelides

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The success of Cyprus in overcoming the destruction caused by the 1974 Turkish invasion and rebuilding its economy so as to join the EU in 2004 has been widely heralded as an ‘economic miracle’. The linchpin of that success was predominantly its ability to build a very strong services industry (accounting/legal/banking/shipping) around its very tax efficient tax system and double tax treaty network.

EU membership in May 2004 further enhanced Cyprus’ position as an international financial centre and improved its image and brand amongst sophisticated international investors. As a well-regulated EU member state, on the OECD white list, with a wealth of experience in servicing international investors, developed over the past three decades, and with the highest concentration of UK-qualified accountants outside London plus a highly-educated workforce across industry, Cyprus has an important role to play in the modern era of financial centres.

A country needs to continuously monitor and evolve its laws and practices in order to constantly enhance and differentiate its service offering to the international investor, whilst observing OECD requirements and – in the case of EU member states – abiding by the EU code of conduct.

But where do the island’s fortunes lie and what actions are required in the wake of the successive downgrades to its economy, the increased competition in the international financial services arena and the opportunities that arise in the hydrocarbons sector?

The Big Four accounting firms have always been – and still are – on the front line of the development of Cyprus as a financial centre. Gold invited the CEOs of the Big Four for a candid discussion on what needs to be done.

Gold: Successive downgrades of the Cyprus economy and the island’s banks are obvious negative developments that could affect the country’s status as a regional business centre.

What other developments would you point to as potential dangers?

Christis Christoforou: A real rather than a potential danger is the fact that most of our competitors are moving much faster than us and, unfortunately, they are now ahead of us. We now need to take immediate corrective measures to make our product more competitive so that we can catch up and hopefully surpass them. On the one hand we have countries like Luxembourg and Ireland which have always

20 Gold the international investment, finance & professional services magazine of cyprus

been ahead and they continue to improve their product faster than us. Luxemburg, for example, with its recent double tax treaty with Russia, presents even stronger competition than ever before. And regrettably there are jurisdictions like Malta, which entered the scene much later than us but has managed in a relatively short period of time to be ahead of us.

Evgenios Evgeniou: In 2003, the tax reform that took place before Cyprus joined the European Union helped us make the transition from an offshore jurisdiction to a European business and financial centre.

In fact it was the primary reason for the tremendous growth in the export of services in the years that followed, coupled with our good network of double tax treaties. Unfortunately we didn’t build on that whilst some competitive jurisdictions have made progress and we have indeed fallen behind.

However, to see things in a more positive light, I think that the crisis has brought to the surface the importance of this sector for the economy. For the first time, there is a wider recognition of the contribution of the professional export of services sector to the Cyprus economy which, according to the last IMF report, has amounted to 45% of GDP on average over the last 10 years.

In fact, it is the only sector with marginal growth in the last couple of years. Recently we have had some positive messages from the Ministry of Finance and I believe that there is now a realization that we need to move fast to implement changes and to build on our past success to ensure that we stay ahead of the game.

Andreas Christofides: What I find a bit worrying is that with the tax reform in 2003 we effectively got ahead of everybody else, thanks to some clever ideas that worked well for us. Now we’re just trying to do what others have done successfully in an attempt to get back a bigger share of the pie. We should really sit down and look at how we can get ahead with new ideas of our own. That was what differentiated us as a place in the past: we were ahead of everybody else and now we are just copying others.

George Kourris: In the present crisis we need as a country to decide what our future model of development is. One of the areas that it will involve, as one of the primary sectors of the economy, is professional services sector but so far such a decision has never been taken by any government throughout the years. I think we need to stand back and say that we need to develop the services sector, the tourism sector and now – thank God! – we also have the energy sector and, having taken the decision, we do what we need to stay ahead of the game: we have to innovate more, to develop further and faster, not to be reactive but proactive. I find everything a bit haphazard. We don’t have a plan and we don’t have a structured way of going about developing areas as we did, for example, after the Turkish invasion. Once we have a clear direction and we know where we’re going, we can develop a plan, get the consensus.

Evgenios Evgeniou: That’s why I believe that if there is something positive to come out of the current situation it is a realisation of the importance of services for our economy . For the first time, the politicians, the government and people in the street have begun to understand this. And above all, we have our people and their quality. This is evident, for example, from the outstanding international exam results and worldwide prizes obtained by trainee accountants working for all the Big Four firms. It is evident from the fact that Cypriot professionals assist Cypriot companies to list on the London main markets. It is evident from many complex transactions going through Cyprus and involving accountants, lawyers and bankers. It’s only now

In Cyprus we need to change gear and this will only be done if there is ‘tone from the top’ Christis Christoforou

It should be our objective as a country to one day have a AAA rating for our economy Evgenios Evgeniou

that we have finally realised that we have to capitalise on the strength of our people and their collective knowledge and expertise. Over the years the country’s top talent has moved into the services sector and I believe that the discovery of natural gas and the prospects for the energy sector in Cyprus present a great opportunity to further develop the services industry that will be required to support the sector. So we need a holistic new assessment of the economy, a new plan and a new strategy for the country.

Gold: Do you, as the Big Four, take this proactive approach and cooperate with the government of the day? Or are you separate entities?

Christis Christoforou: No, we are not separate entities. We have traditionally had contacts. And as Evgenios said, for the first time it now seems that the financial crisis, the lack of resources and the need for more government revenues, coupled with the realisation that the service industry is important, has led us to a situation where those who matter are finally willing to take things forward. At least we hope that this is the case.

George Kourris: As I mentioned earlier, one of the reasons – possibly the only

reason – why it has always traditionally taken such a long time for the government and the legislature to take steps and to follow the recommendations and suggestions that we, as firms and as a professional body of accountants, have been putting forward, is because for the people taking the decisions –successive governments and members of the House – the development of this sector was not a priority.

Gold: They didn’t know what Cyprus had?

George Kourris: Precisely.

Evgenios Evgeniou: There is misalignment between the structure of our public service and the needs and the prospects of the economy today. We have a structure that was built in the 1960s on the basis of Cyprus being primarily an agricultural country with perhaps some light industry, and it was the start of the development of the tourism sector. Today we are a financial and business centre. What this means in practice is that we have, for example, a big Ministry of Agriculture while in the Ministry of Finance there are no dedicated people to look after our double tax treaty network. It’s only recently that it has been decided to set up such a unit. In fact what we should have is a group of people working closely with the private sector following developments elsewhere, innovating, coming up with new ideas, thinking of the new markets with which we should go and negotiate tax treaties.

Another important issue is the need for government departments to cooperate horizontally across ministries. Servicing foreign investors and the financial services industry often requires the involvement of many different departments and at the moment the necessary cooperation and integration is not in place. So it’s a matter of political decision making and strategy but it’s also a matter of reorganising the public service and aligning it with the needs of the economy today.

Gold: Give us some specific suggestions of what else can be done.

Christis Christoforou: Once it is agreed that we want to be successful in the services sector, we need to decide what resources to allocate. For example, take the government’s own budget that is

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George Kourris Country Managing Partner Ernst & Young Christis Christoforou Chief Executive Officer Deloitte

22 Gold the international investment, finance & professional services magazine of cyprus

Evgenios Evgeniou Chief Executive Officer PWC Andreas K. Christofides FCA, CF Managing Director KPMG

We have a competitive edge based on our tax system, treaty network and the quality and expertise of our professionals Evgenios Evgeniou

it’s important to promote Cyprus more as a business centre where companies can actually come and set up their offices, not just a financial centre where you just set up a company George Kourris

there are jurisdictions like Malta, which entered the scene much later than us but has managed in a relatively short period of time to be ahead of us Christis Christoforou

in the past we were ahead of everybody else and now we are just copying others Andreas Christofides

allocated for the services industry. The Cyprus Investment Promotion Agency (CIPA) was only formed four years ago and it is theoretically the government’s main body for the promotion and development of inward investments and includes the promotion for the increase of international business companies .

It has a budget of around €1.2 million and a promotion budget of around €600.000. This is clearly not enough.

The CTO budget has recently been cut but it’s still around €50 million. But when you watch Euronews, for example, and you see the “Love Cyprus” adverts, you should also be seeing “Invest in Cyprus” in the Wall Street Journal or the Financial Times. Why not? This is the comparison we should make. Why so many million on tourism? It should probably be increased, actually, but there should be a similar budget to promote the services sector.

George Kourris: Malta is a good example of where this has taken place.

Malta decided what it wanted to do and it allocated resources for it. It also got the civil service to respond to this and made the politicians understand its importance and support it.

Evgenios Evgeniou: Malta’s funds industry was tremendously successful and it was set up in a relatively short period of time but they now face problems because they don’t have the resources to support that sector. This is an opportunity for Cyprus. If Cyprus brings in the regulatory framework to develop a funds industry and it addresses our international branding, we have an opportunity even now to come from behind and overtake Malta. It’s just a matter of taking the decisions and implementing them. I believe we have a competitive edge based on our tax system, treaty network and the quality and expertise of our professionals who can service and work for these international clients.

Gold: What should Cyprus be doing to regain its competitive advantage?

Christis Christoforou: As we just mentioned, we have failed to attract the funds industry. It is something that we are still trying to establish with the appropriate funds legislation, necessary regulation and so on. This is a major drawback.

Andreas Christofides: It all comes

back to the question of speed. It’s taken Cyprus years to get the legislation and the process under way. It took Malta the same length of time to get all the funds they could deal with.

Christis Christoforou: Here’s another example: Cyprus made a very successful change to its shipping law with the introduction of the tonnage tax. One week later, Malta had the same thing! It was copied it and passed into legislation in the space of one week. It took Cyprus the better part of three years. In Cyprus we need to change gear and this will only be done if there is ‘tone from the top’.

George Kourris: Yet another example concerns the regulation of fiduciary services. We, as a profession, have been involved in preparing the legislation for enactment into law. After more than five years it is still pending. Why? Because there is no direction from the top. We could have had legislation in place five years ago. We can’t go forward like this.

Evgenios Evgeniou: I think we need to be a bit fairer in our assessment and mention the fact that even in 2003, when there was going to be a change in tax legislation, there was reaction from certain sectors. When there were changes to the legislation that helped Cyprus get on the white list of the OECD for transparency, again there was reaction from some professionals and certain sectors. All of us in the private sector need to realise that the future of Cyprus lies in quality; it lies in the direction of creating more substance in Cyprus by international companies for professionals to come here to work and to set up offices. We need to pass the fiduciary services legislation and create a better brand and a better image for Cyprus as a European financial centre. This requires a greater effort and more infrastructure by the professionals. We need to break from that past and to move forward.

Gold: How important is the brand and the image as opposed to what we are able to offer?

George Kourris: Brand is extremely important. If you put Luxembourg and Cyprus on a scale. Luxembourg, having been in this business for a lot longer, carries a lot more weight than Cyprus.

Evgenios Evgeniou: Luxembourg has a strong brand as a financial services cen-

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tre. Even a jurisdiction like Luxembourg realised that Cyprus was once alone and dominant in the Russian market and made an effort to catch up with us.

Andreas Christofides: If you look at the type of companies we attracted as an offshore jurisdiction and now that we are seen as a lowtax business centre, you see that now we aim at and attract high-quality companies and they do go for branding. The brand is important for them. It was not as important ten years ago.

Christis Christoforou: You are absolutely right and that’s why we should insist on and highlight the fact that we have a product but we don’t have as strong a brand as we should have. If you go to the mature markets they will tell you that Cyprus is more of a Russian colony than anything else. And we need resources to change that perception. Within the limitations of the private sector we are trying our best and we travel from one corner of the Earth to the other to change it but I believe that it has to be combined with serious resources from the public sector.

Gold: Apart from the law to regulate fiduciary services, are there other important pieces of legislation pending?

Evgenios Evgeniou: Yes, for example, there is proposed legislation concerning the taxation of intellectual property rights registered in Cyprus, something on which Luxembourg is thriving; there are changes to our legislation that will attract captive insurance companies to Cyprus; changes to the companies law to create cell companies that will facilitate the setting up of specialised funds and insurance products; there is leasing legislation; and a law which may potentially make Cyprus the preferred place for registration of yachts in the EU. There are a number of things in the pipeline which will improve our product range but as we have all said, we need to move fast with implementation. It must not take us years. And obviously even this is not enough. We need to do more.

George Kourris: We can’t move at the speed of the 1960s. Businesses and the economy do not move at that speed. They work 24/7. We have to get our act together to respond to the 24/7 culture.

We need to promote ourselves as a European base close to the Middle East and the East Evgenios Evgeniou

Gold: Apart from our highly-educated professionals and the attractive 10% corporate tax rate, what else would you point to so as to encourage companies to come to Cyprus rather than Malta and Luxembourg?

Andreas Christofides: Cyprus has all these people with a high education, a

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good standard of living, a pleasant environment – all these things have counted in attracting the Russian, the Ukrainian or the American businessman. We can go even further back and remember how the British set up their marketing centre for the Middle East here because it was a better environment in which to live.

We still have these advantages but I have to say that I am worried about the state we are in now, our dependence on the Greek market, and how close we may be to bringing the whole problem here.

Even though everyone is saying, “Don’t worry, your banking system is safe even if Greece collapses”, I am not that confident but I hope they are correct.

If Greece loses the battle and we get the same sort of treatment here, it is going to take years before we get back to the position we are in now.

Gold: When you look at the figures showing debt as a percentage of GDP in the eurozone, Cyprus is about 14th.

We’re doing very well. How can such a situation arise here?

Christis Christoforou: The banking exposure in the Greek market is our main problem. Almost half of our banks’ assets are located in Greece. They are now in the process of increasing their capital and hopefully they will succeed but what Andreas is saying is that a disorderly dismantling of Greece and its exodus from the euro would be detrimental to Cyprus.

Evgenios Evgeniou: The disaster scenario of Greece getting out the eurozone or a bankruptcy that is not organised will hit the loan portfolio of the banks in Greece in terms of higher non-performing loans and higher levels of provisions.

That is the concern and the big challenge that our banking system has to face.

Gold: So what can be done?

Andreas Christofides: What is absolutely necessary is for the government to analyse the situation and try and implement short-term measures to minimize the impact and, in the long term, try to disassociate our economy from its heavy dependence on that of Greece. If we don’t break the heavy interdependence of our economy with the Greek economy, we could face decades of trouble, not knowing what lies ahead.

Christis Christoforou: That’s why

we now need to exploit our strengths, our relationship with the Russians, to improve our product. But we need to do this swiftly.

Evgenios Evgeniou: It is important to have a stable tax system, particularly in a world of uncertainty and instability.

The fact that a country is able to provide certainty regarding its tax system is critical. As a profession we have been successful in convincing everyone that this is something that we need to protect. It’s not a matter of fixation with specific tax rates. It’s just important to maintain that stability.

George Kourris: As a follow-up to what Andreas was saying about the dependency of our economy on Greece, we should enhance our product and we should not only depend on Russia, for example, which is our main market right now. We should offer our products to additional markets so that if – God forbid – the Russian market shuts down for some reason beyond our control, we will not be closed for business Christis Christoforou: We’ve talked about bring new products like funds, cell companies etc. There are the emerging markets of India, China.

Andreas Christofides: I expect that there will opportunities closer to Cyprus. I think that as soon as Libya has a more stable government there will be massive investment flowing into the country. Unfortunately a revision to the double tax treaty was drafted but not signed before the trouble broke out but it’s there. Foreign Minister Erato Kozakou-Marcouli was there recently and was surprised to see how much investment interest there is. I explained to her that we need the new double tax treaty to be ratified if we are going to succeed there because Malta moved just before us with their double tax treaty and before the Libya problems all the investment into Libya was going through Malta. There will be a large number of infrastructure projects in Libya so a lot of people will be interested in investing and many foreign companies will be going there.

Depending on how things develop, if we are there as soon as there is a stable government and we get the double tax treaty out of the drawer, we will be there. I agree that places like India, China and Brazil are possible areas

where we can get work, provided that we move in the right direction. This is why we need the ability to move fast. If we follow our traditional speed and take our time, by the time we get there it’s going to be too late.

George Kourris: This is why it’s important to promote Cyprus more as a business centre where companies can actually come and set up their offices, not just a financial centre where you just set up a company.

Christis Christoforou: We are just an administrative centre at the moment.

We have not been able to attract the real business, the real fund managers, the real bankers. We don’t a have a single fully operational international bank.

Evgenios Evgeniou: There are investment firms and shipmanagement

of services but will make an indirect contribution through consumption, property development and, primarily, employment for our young graduates.

George Kourris: Only last month CIPA presented a report commissioned by the World Bank on doing business in 183 countries. Cyprus was ranked 40th.

It was quite an elaborate analysis addressing more than 12 different categories. In each category not only did we have a position but also areas of weakness. Now, as a country, we should have taken this report, looked at the areas for improvement – they are very specific: “Improve contract enforcement” for example, or “Improve the time it takes to obtain a ruling in a court of law” – and worked on them.

Andreas Christofides: There are a lot

In the present crisis we need as a country to decide what our future model of development is George Kourris

companies that have set up offices in Cyprus. I agree, we should be trying to attract better-known international banks to Cyprus and this is something missing.

As a financial centre we need well-known international banks here, not for retail operations but to play an active role in the private wealth/investment banking space. If Cyprus is to play a greater part in the region we need to make more progress in attracting companies to make their base here. We are part of the European Union, we have EU-compliant regulations, our system of government and even the weather in Cyprus all make it an attractive place for people to come and work here. We need to promote ourselves as a European base close to the Middle East and the East.

The discovery of gas will help in the sense that supporting industries and services will be necessary so international companies will need to come to Cyprus and establish offices here. It’s important because it will not only help the export

of reports and recommendations. For example, a study on the administrative burden on which the government has to report back by the end of 2012 to say what it has done to reduce it by 20% and thereby save something like €290 million in expenditure. As far as I know very little has been done up to now.

Nobody disputes what needs to be done but we again come back to how slowly the wheels turn when things need to be implemented.

Evgenios Evgeniou: We have to acknowledge that this is a sector of the economy that has experienced tremendous growth over the last few years. The November 2011 IMF report says that it was the major driver of growth in the years up to 2009. So we have obviously done some things right Christis Christoforou: We did things right since 2003 until 2008 when others caught up with us and then we had the crisis.

Evgenios Evgeniou: We did things right when the private and public sectors cooperated to bring about effective legis-

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You watch Euronews and you see the “Love Cyprus” adverts. You should also be seeing “Invest in Cyprus” in the Wall Street Journal or the Financial Times. Christis Christoforou

lation, to make the changes necessary to bring us to the point we are at today.

The fact that we have been complacent means that we have fallen behind. What needs to be done now is to sit down again in a spirit of cooperation – the only interest that all of us have is for our economy to grow, for our young people to get quality jobs – and to have a very honest discussion about what needs to be done, to come up with specific actions. This is critical. The reason that I have some optimism is that we can reflect on our past successes and build on that, realize what has gone wrong and try to rectify it. Obviously the other thing that is important is to implement what we have already decided to do in terms of our budget deficit and debt targets. There are things that we cannot control in terms of what is going to happen in Greece but it is critically important that we are seen to implement the things that we can control so as to have credibility in the international markets and to be able to borrow at affordable rates. As a financial centre, ultimately we need to have a AAA rating for our economy and, strange as it may sound right now, I think that it should be our objective as a country: one day to have a AAA rating for our economy and I believe we can achieve this.

The crisis has brought to the surface the importance of this sector for the economy Evgenios Evgeniou

Gold: What are the latest messages that you have been receiving from your international clients regarding to Greece’s (and possibly Cyprus’) economic predicament? Are they worried?

Christis Christoforou: We would not be telling the truth if we were to say that there is not concern. However, despite that, we see that our clients still show faith in Cyprus. We have seen limited closures.

If you had talked to us two years ago and asked us what we thought would happen, after so many downgradings, I think we would all have said that things could collapse or we would see a massive exodus.

We haven’t seen that which shows that despite the problems, Cyprus still sells.

Andreas Christofides: The basic thing that has changed is not that Cyprus isn’t selling or that our product is not attractive. It’s that we are not alone anymore. So now, clients do not come to find us, we have to find them. The selling effort is much more now than it used to be from 2003-2006. At that time we were just about managing to cope with enquiries.

Evgenios Evgeniou: When you have competition you have to be more proactive and work faster to improve. What has helped us to maintain our client base to a large extent goes back to the people, the quality of service, the expertise, the know-how and primarily the relationships that have been built with international companies and individuals because behind companies there are people. The professionals in Cyprus, the accountants, lawyers and bankers have helped tremendously to maintain this client base and that is why there is so much resilience both in the professional services sector and in the banking sector. Many external commentators find the resilience strange and it is down to the relationships of our professionals and our people. We need to build on that. We have this tremendous

26 Gold the international investment, finance & professional services magazine of cyprus

strength and we can do much more and much better than now.

Gold: Are you optimistic? For the next five years?

Christis Christoforou: If we assume that there will not be a Greek default I am sure that Cyprus will survive the crisis and, provided we take the necessary measures, we will be successful. As far as I’m concerned, the important thing is to try and make the change, to move from being a business centre to being a financial centre.

If you ask the top executives in Europe or the US to name the offshore international financial centres of the world, Cyprus will not feature on their list. They’ll tell you Singapore, Hong Kong Dubai, Luxembourg, Ireland but not Cyprus. The challenge is for us to put Cyprus on the map at that level and that needs vision and significant investment.

George Kourris: I am optimistic if we get our act together. If we realize what we have and we develop it, I have no doubt that we will succeed. If we sit back and say “it worked in the past, it will work in the future”, then I am not optimistic at all.

Andreas Christofides: My optimism is based on the fact that the Cypriots are fighters and I think that once everybody realizes that the world has changed and it’s a much tougher game that we have to play now and we play it correctly, I think we will be there.

Evgenios Evgeniou: In 1974, our economy and our country were completely destroyed. Within 30 years we had joined the European Union and a couple of years later we were in the eurozone. The people of Cyprus have demonstrated in the past that they have the capability to come back and be successful. So I will finish as I started, by saying that this crisis has brought about a realisation that we should stop being complacent; that we have tremendous potential as a knowledge economy which we need to exploit.

Obviously, the opportunity created by the discovery of natural gas – if we handle it responsibly – creates opportunities for the economy as a whole and therefore I am optimistic, provided that the fighting spirit gets back and the private and public sectors collaborate and work together to get our economy back on a growth path with a clear vision for the future.

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recruitment

Growth in the financial

and investment services The international business sector sectors predicted is still driving the economy

D

ata from the latest edition of the Cyprus Recruitment Index, released last month by GRS Global Recruitment Solutions, shows a substantial increase in placements within the corporate services sector for 2011 and projected growth in the financial and investment services sectors for 2012.

Despite the gloomy forecasts of global markets, the latest Cyprus Recruitment Index figures demonstrate that the international

business sector is still driving the economy.

While overall recruitment is down, the activity from international businesses settling or holding in Cyprus has pushed recruitment in corporate services and associated professions up by 20% on 2010.

Donna Stephenson, GRS director and co-author of the Cyprus Recruitment Index, says, “International businesses are keen to take advantage of the benefits offered by Cyprus as a low tax jurisdiction in which to do business.

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New regulations like the arrival of UCITS IV and the Alternative Investment Fund Managers Directive are spurring job creation

To establish and maintain their companies in Cyprus, they need a team of lawyers, auditors, company directors and accountants. As recruiters we have seen the development of skills to answer the needs of this sector, with corporate administrators and newly qualified accountants now available and filling 30.9% of positions in this sector. However a skills gap is expanding at lawyer level, where experienced corporate lawyers are now in high demand.”

Figures from the Cyprus Recruitment Index reveal the quality as well as the quantity of placements with an influx of skilled professionals – 38.8% at Degree level and 31.4% at Masters level. Arno Bijl, managing director of Intertrust Group, confirms the high calibre of new staff that his company has received from GRS, “All were well qualified. The candidates that have lived and worked abroad combine local knowledge, cultural sensitivity and service mentality towards foreign clients and partners. They have learnt customer orientation and responsiveness.”

This profile of candidates continues as the requirement for languages draws applicants from Cyprus (41.4%), Europe (20.2%), Russia (11.5%), Britain (8.3%) and Cypriots from abroad (13.9%). GRS director Steve Slocombe explains, “Cypriots returning from overseas have excellent language skills and they also bring international banking and trust experience. Our clients’ demand for languages means that we are reaching further to bridge the skills gap. For instance, a British national with Russian procured six interviews recently and the company that moves first will gain this contract.”

Other sectors demanding experienced applicants are also making their impact on the Cyprus market. The Index indicates a rosy future for the fund and asset management sectors, as Ioannis Gaiganis, an expert professional in investment management, points out: “New regulations like the arrival of UCITS IV and the Alternative Investment Fund Managers Directive are spurring job creation and are very likely to act as driving forces for further development of the industry.”

GRS data verifies the situation with 17.8% of positions in investment firms at director/ partner level. However, George Rologis, managing director of Alter Domus, a funds administration and corporate service provider, issues a challenge: “Cyprus should continue to develop its legislation in relation to funds to ensure that we remain more than, or at least equally attractive as other competing jurisdictions.”

Moving from sector-based data to overall recruitment, it is the sales and customer

Corporate Service Firms Positions in Cyprus

lishment of the GRS Special Projects Division in response to the demand for resourcing and payrolling large projects. This division was initiated by the Larnaca and Paphos airports project and is now servicing desalination and energy generation projects. Steve Slocombe explains that outsourcing specific HR functions gives flexibility to companies.

“Many clients also use our outsourcing service for one-off contracts such as maternity cover, staff absence, a special project that needs additional staff or a global company looking for a presence in Cyprus.”

The Cyprus Recruitment Index reveals the facts about recruitment in Cyprus with incisive accounts from industry leaders that bear testament to the GRS statistics. As a barometer of the Cyprus economy, the recruitment records point out where demand exceeds supply and vice Donna Stephenson and versa. Also included in the 2011 Steve Slocombe, Joint Managing review are articles regarding the Directors of Global IMF executive board consultaRecruitment tion with Cyprus, competition Solutions. to recruit the best accountants, service roles that come top at 14.9%. Donna employment trends and interview Stephenson aligns this figure to the growth in tactics. GRS produces the Index to give FX players. “Forex needs talented individuboth employers and employees an illustraals with languages such as Spanish, German, tive understanding of the market through Italian, French and Arabic to service clients recruitment figures, enabling them to better abroad. This sector is looking for candidates assess the position and potential of markets. with a customer service ethic and graduates The Cyprus Recruitment Index is available with finance understanding.” as a free download on line at www.grsrecruitOther news from the latest edition of the ment.com Cyprus Recruitment Index covers the estab-

Cypriots returning from overseas have excellent language skills and they also bring international banking and trust experience

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sponsored by

property

Investing in

luxury real

estate in Cyprus homes in prime coastal locations continue to buck the trend in the local property market By Costa Ioannides

Limassol Marina

property

A

lready a wellestablished tourist hotspot, Cyprus is now emerging as a regional international business centre bridging Europe and the Middle East. Given the wealth flows entering the island from all around the world (not least from countries such as Russia), investors now have an opportunity to take a strategic interest in various ambitious developments that are taking place around the island, and particularly along the southern coast.

Prices have remained relatively static in the wake of the global financial crisis but opportunities still exist for making short-term gains, given that the market is now more mature and structured. Cyprus surprised the real estate world recently with the news that domestic property sales in January 2012 had jumped by a massive 97% compared to 2011.

Given the number of exciting investments taking place in Cyprus, it is almost certain that the island will increasingly attract both residential and strategic investors. The next five years in particular will see many positive property developments that should prove beneficial to the luxury real estate market investor.

The rationale behind such a purchase stems from simple supply/demand dynamics. Prime beachfront locations are finite in terms of supply, yet there are ever more people becoming wealthy enough to consider buying one.

Prices for this type of real estate will, therefore, invariably increase over the medium to long term. While real estate in general has suffered an erosion of value as a result of the financial crisis, the value of homes in prime coastal locations is expected to bounce back, making the current buyers’ market a playground for the far-sighted investor with a taste for the sun and sea.

Projects Limassol Marina

The hottest and most ambitious project on the island, the new Limassol marina, is a stunning waterside development designed by a world-renowned team of architects and engineers. The marina’s development has not only created new prospects for Limassol but for Cyprus as a whole. Well into the project’s development, the Limassol coastline has

Limassol is by far the prime coastal location in Cyprus and the one that will be the most sought after in the next decade already changed and the original site of the groundbreaking project is virtually unrecognizable.

A major element of the project consists of luxury properties with outstanding facilities.

It will also feature restaurants and shops to create a lifestyle uniquely shaped by ‘living on the sea’. The development is widely anticipated to become the most exclusive marina resorts in the Mediterranean and one of the finest in the world.

The Opera Project

In the heart of Limassol, the Askanis Group’s Opera Project offers villas that feature a private swimming pool, gardens, a wine cellar, sauna/steam bath, cinema room, gym, covered and uncovered areas on the rooftop with an outdoor hydro-massage tub and BBQ; and an en-suite guest bedroom on the lower ground floor with a private kitchenette.

Akamas Bay Villas

As locations go, Cybarco’s Akamas Peninsula and Akamas Bay Villas project on the north-west coast of Cyprus is about as private as it gets with uninterrupted views of the Mediterranean.

Penteli Mansions

Penteli Mansions (by Giovanni Developers) is a small, carefully designed development of eight detached villas situated in a prime position at Kokkines, Protaras on the east coast.

Kanika International Business centre

The Kanika International Business Centre, a luxurious commercial development project

by Kanika Developments on the prestigious seaside promenade of Limassol, is only 100m from the sea.

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Akamas Bay Villas

The Opera Project

Coming Attractions

A number of major projects should boost the Cyprus property market Golf Course Development

Cyprus already has four golf courses and serious applications have been submitted for the construction of seven more. These will constitute a great asset to the island for the tourism and property sectors.

Marina & Harbour Projects Limassol Marina is well on the way to completion but others are being discussed for Larnaca and Agia Napa.

UK Universities

Several UK universities have expressed an interest in setting up their own branches here. Two, in particular, are already searching for suitable properties and their presence is expected to provide a further boost to the economy, providing alternatives for Cypriot and foreign students.

Casinos

One of the positive aspects of the recent crisis has been a change of heart by the goverment towards the setting up of casinos. It is expected that as many of five will be built in the next 3-5 years, boosting tourism, tax revenues and employment as well as property sales.

Kanika International Business centre

the international investment, finance & professional services magazine of cyprus

Gold 33

property

Patroclos Georghiou, Chairman, Patroclos Group of Companies

Michalis Hadjipanayiotou, CEO, Cybarco

Nicholas K. Tofarides, Managing Director, Tofarco Ltd

Spyros Karaolis, Group Executive Chairman, Kanika Develpoments

The View from the Top Gold sought the views of the CEOs of four of Cyprus’ major real estate developers: Cybarco, the Patroclos Group, Kanika Developments and Tofarco regard ing the future of the luxury real estate sector on the island.

Gold: What are the major trends currently affecting the real estate market and how does the Cyprus luxury property market currently compare to its competitors abroad?

Michalis Hadjipanayiotou: The Cyprus economy has been affected by the financial crisis in Europe and a general feeling of uncertainty has resulted in a ‘wait and see’ approach by customers who want to buy property. Since prices are always determined by supply and demand, for non-privileged properties, prices have been reduced. The new measures that have recently been implemented for the aboli-

The discovery of hydrocarbons in the Exclusive Economic Zone of Cyprus will have a positive impact not only on the economy but on the real estate sector as well.

tion of transfer fees and the reduction of VAT have boosted the property market. Activity will be further enhanced if the banks give their customers access to cheaper financing. On the positive side, the demand for high-end residential properties has remained strong over the past two years. Coupled with the constrained supply, prices have risen by around 5%-10%.

Limassol Marina is a very good example. It has been favourably compared to competition abroad and is the only new development in the Mediterranean to provides berths directly in front of private villas. Contracts in excess of €40 million have been signed in the past 12 months alone.

Patroclos Georghiou: As with all crisis situations and in all aspects of life, the target audience is being more cautious. They are playing it safe. As a result the available budget has shrunk and, consequently, the profit margin has been reduced in order to maintain competitiveness.

More competition is now apparent from countries like Turkey and Malta. Spain and Portugal were traditionally our direct competitors but the international crisis has meant that

34 Gold the international investment, finance & professional services magazine of cyprus

they, too, have lost a share of the market.

Turkey has benefited from very low labour costs which lead to competitive pricing and it also has the attraction of its weather conditions and access to the Mediterranean Sea. Malta has a very positive tax structure on both the value of goods purchased and income.

Nicholas K. Tofarides: The real estate market has undoubtedly been affected by the current state of the Cyprus economy and the European economy in general.

The trends affecting the market have remained unchanged throughout the years and they are the key to our swift exit from this current situation. They concern location, quality and value. Nevertheless, I am of the opinion that the product that is offered here in Cyprus is of a high standard and is good value for money, bearing in mind the prices that are asked for by our European competitors.

Gold: What are the major projects currently being undertaken that you feel will substantially boost Cyprus’s attractiveness as a luxury property location?

Michalis Hadjipanayiotou: The developments that are currently in demand are those in prime locations, by the sea or in close proximity to the beach with uninterrupted sea views, high-specifications and as part of a concept or masterplan offering on-site facilities.

The major project currently boosting Cyprus’ attractiveness as a luxury property location is undoubtedly Limassol Marina. Cybarco is a major shareholder and sales manager of this waterfront development. The Marina is attracting High Net Worth Individuals from various countries. Combining luxury living, residences with private berths and direct access to the beach, yachting, dining and shopping, Limassol Marina offers an unrivalled way of life. The Marina is expected to upgrade the calibre of the country’s tourism and it is set to become the focal point of Limassol.

Patroclos Georghiou: Cyprus needs to be in a position to offer what its direct competitors are offering and more. To the luxury market, this usually translates as marinas and golf courses as well as a reliable transport infrastructure. Other services and conveniences (bars, restaurants, supermarkets, etc.) will be created almost instantaneously once the developments and some sales are there. At the highest level, it is important for the government to maintain a solid banking, Land Registry and legal system to safeguard the interests of sellers and buyers and increase the country’s attractiveness.

Nicholas K. Tofarides: The construction of the two Marina projects will boost Cyprus’ attractiveness as a luxury property hot-spot just as casinos will equally do. I also believe that the recent findings of natural resources in Cyprus’ Exclusive Economic Zone will boost entrepreneurial interest which will result in a higher demand for luxury office developments and residences. In prime commercial and housing areas we should also mention the proposed golf courses that will also give the property market a necessary boost.

Gold: Do you feel that the luxury property market in Cyprus is largely detached from that of standard residential property prices?

Michalis Hadjipanayiotou: Yes, particularly in Limassol. Demand for the very top-end luxury properties has remained strong over the past couple of years. For example, Akamas Bay Villas by Cybarco is a luxury development of 39 beachfront villas at Latchi. We have sold and delivered 60% of Phase I and we are now launching the second phase, sooner than expected, due to high demand.

Patroclos Georghiou: Those involved in the luxury market have different budgets and different criteria. Things that might be critical for a residential investment, such as access to

the city centre and work, are of less importance than, say, proximity to a golf course or the beach. There is also the issue of the higher quality of materials, more expensive land and the larger size of the luxury development. As such the market price of such a project will be much higher than the price of a residential project. Uniqueness plays a large part as property near the coastline is limited when compared to a residential project which can be constructed almost anywhere.

Nicholas K. Tofarides: It is a fact that, up until two years ago, the asking prices for property in the coastal areas of Cyprus differed to a large extent from standard residential prices in the main cities. The main factor behind this was land value which tends to shift to a much lesser degree depending on the location of each project.

Gold: Of all the popular coastal locations in Cyprus, which do you feel will be the most highly sought after over the next 10 years and why?

Michalis Hadjipanayiotou: Definitely Limassol, thanks to the continuous upgrading of the city, and the Akamas Peninsula, due to its natural beauty. The current and upcoming infrastructure, with Limassol Marina and the new golf course at Fasouri, combined with the prospects of Cyprus as an energy, financial and shipping centre, are creating the appropriate environment for the cosmopolitan Limassol to be the most sought-after coastal location over the next 10 years. I am confident it will become an invaluable hub in the Eastern Mediterranean and the investment ‘place to be’.

Patroclos Georghiou: The younger locals prefer Protaras while the older ones tend to opt for Paphos. This is because of all the services provided as well as the well-organised and impressive coastline (especially in Protaras). Right now, though, the winner – hands down – is Limassol. This is mainly due to the increase in the Russian population over the past 15 years which has also led to new infrastructure and services being provided

High-end commercial property is expected to follow a positive trend for the next few years

(schools, church, banks, etc.). However, with several projects in the pipeline and its more easygoing culture, Larnaca is also set to become a key player. Larnaca is being developed now with new roads and infrastructure such as the main airport. It has the space to spread out and it is still somewhat underdeveloped compared to Protaras or Limassol.

Spyros Karaolis: Limassol is by far the prime coastal location in Cyprus and the one that will be the most sought after in the next decade. For years now it has combined both business and leisure and has proved to be the right destination for investors and tourists as well as people who buy property for residential purposes. During the past few years, Limassol has been the focus of major fiscal subsidies for infrastructure projects and developments that have transformed the city into a modern and elegant place to work and live in. This has attracted a large number of major offshore companies and residents from abroad, a fact that has added a more international tone to the city’s already sophisticated lifestyle. Finally, with recent developments regarding the natural resources of the island, Limassol’s role will be that of leader once again.

Nicholas K. Tofarides: I agree. Limassol will definitely differ from the other coastal cities of Cyprus due to the established business environment, the vibrant and high standard of entertainment venues and the large society of Russian residents who are looking to buy homes in Cyprus.

Gold: What advice or tips would you offer to someone considering an investment in high end luxury property?

Michalis Hadjipanayiotou: To choose a reliable developer with experience in creating high-end luxury properties in prime locations.

Generally speaking, choose projects that can be favourably compared to others abroad, with a unique concept and character that will result in value appreciation over the years and a hasslefree purchase for the years to come.

Patroclos Georghiou: To have a five-year plan in the back of their mind. Try and visualize how the area will grow, what services are (or will be) available within easy reach. Accessibility to main routes, etc. You don’t want to buy premium property and end up near a factory or a farm. It is also very important to contact reputable developers who will deliver on their promises and provide guarantees on title deeds and quality.

Nicholas K. Tofarides: Any interested party considering an investment in high-end luxury, or any property in Cyprus for that matter, should initially complete a thorough due diligence on the property and the developer

the international investment, finance & professional services magazine of cyprus

Gold 35

property

with the assistance of their bankers, lawyers and accountants. Advice from a qualified property valuer could also be of assistance when the matter of price is in question. Otherwise they should focus on the three basics: prime location, quality and value.

Gold: What are the advantages to owning a high-end luxury property? And are there any disadvantages?

Michalis Hadjipanayiotou: The main advantage of owning a high-end luxury property, apart from the lifestyle options it can offer, is the fact that the risk of value depreciation is very low. A disadvantage could be considered the low yield for rental income.

Patroclos Georghiou: Value does not deteriorate as rapidly as mainstream property.

In fact, due to its rarity it actually gains in value in some instances. It offers a better quality of life (less noise pollution, better ambience, less crime, etc.) The disadvantages would be accessibility to services and high maintenance costs.

Nicholas K. Tofarides: I am of the opinion that despite the current European conditions, Cyprus still offers a high standard of living at relatively low cost. There is sufficient safety in all aspects of life here, both personal and business. The only disadvantage is that the rental market of high-end property is relatively limited and the return on the investment does not always coincide with that obtained in some major European cities. However, the property market in Cyprus is relatively more stable and growth-inclined than in any other competitive country, and therefore what is lost in terms of yield is gained in capital appreciation.

Gold: How confident should buyers be of buying ‘off-plan’ in the current market environment?

Michalis Hadjipanayiotou: In the current, unstable market environment, there is uncertainty and a lack of trust by potential buyers in ‘locking’ their money in off-plan properties and this is understandable. But, when buying a property from a reliable developer, the risk is cancelled out. The proof of this is in the results of our developments, such as Limassol Marina, Akamas Bay Villas in Latchi and Sea Gallery Villas in Limassol, which are being sold during the construction period.

Patroclos Georghiou: Off-plan purchasing entails many dangers, especially from little-known land developers as there can be little to no guarantee as to the completion of the project, the build quality and the issue of title deeds. What is more, clients have no real perspective as to the size, shape, etc. of

their property. This is, of course, becoming more and more rare. Most purchasers buy when the property is 3 months or so from completion so that they can change the fittings (ceramic tiles, colouring, built-in furniture, etc.) to their liking but feel confident the project can be completed.

Spyros Karaolis: Confidence and trust are important assets in the property market and buyers have to do their best to find a company that reflects these specific values. Moreover, being in a market that has been recently hit by one of the worst crises ever, not only on a local scale but on a global one, this attempt becomes even more difficult since all the relevant market factors are becoming more and more aggressive in their need for sales and cash-in-hand.

Buying off-plan is, therefore, a risk only if a buyer chooses to do it through a company that is in need of cash, has no solid background and inevitably can be considered as unreli-

36 Gold the international investment, finance & professional services magazine of cyprus

able. Prudent companies, with the necessary experience, who can actually deliver what they promise and what their contracts depict, are the ones who can make off-plan purchase a real deal. Our market provides enough safe options for off-plan purchases as long as the buyers do the right research and choose wisely.

Nicholas K. Tofarides: Depending on the results of the due diligence report, as mentioned earlier, potential buyers should feel a high level of confidence regarding off-plan purchases, provided that they know from whom to buy, a factor which sometimes all depends on the ‘chemistry’ between the parties, which should not be neglected.

Gold: How buoyant is the high-end commercial property market at this time?

Michalis Hadjipanayiotou: As we look forward to the remainder of 2012 and beyond, we anticipate that despite the many dif-

Limassol Marina

is going to be transformed into the next keyplayer in European energy and trade and the role this commercial development will play in that shift is self-explanatory.

ficulties still ahead, real estate will continue to receive favourable marks from those investors looking for a less volatile component to their portfolio. There is a growing demand for office space in landmark buildings and this is closely related to the needs of the market for a solid business and physical presence of foreign companies in Cyprus. Additionally, we expect that the discovery of hydrocarbons in the Exclusive Economic Zone of Cyprus will have a positive impact not only on the economy, but on the real estate sector as well.

Patroclos Georghiou: The current banking crisis has greatly affected the real estate market in two main ways: Land developers have greater difficulty in securing loans to complete projects or do so at a greater lending cost, which raises the cost of construction and thus the price. But also, the client has a harder time securing a loan to acquire the property. The high-end market

is slightly more buoyant as most investors are cash buyers with a lot of capital but there are still issues with transferring the money to Cyprus and payment of all relevant taxes.

Spyros Karaolis: High-end commercial property is expected to follow a positive trend for the next few years, basically due to the natural resources recently discovered. Fortunately, this has already started to attract a lot of large foreign companies and the first results seem very promising. This type of property is expected to be the most developed one in the near future, which will be very healthy for our property market since it will fuel our economy with millions in investments and with some sophisticated commercial projects.

Nicholas K. Tofarides: The future lies in high-end commercial developments. Our company is one of the pioneers of commercial high-end development in Nicosia and we are firm believers in its potential and value. Cyprus

Gold: What could the government be doing better in order to help local realestate developers?

Michalis Hadjipanayiotou: The government needs to strengthen cooperation with the private sector by assigning projects that can compete with those abroad, and by attracting affluent buyers and investors to the island. Developers need to be given more incentives in order to start new projects and, as a result, to help the real estate sector. Finally, Cyprus needs more infrastructure development projects such as golf courses and marinas and commercial developments.

Patroclos Georghiou: It can assist the banking sector in finding capital in order to improve cash flows. It should simplify the title deed procedure in order to acquire title deeds faster. A title deed is very important, especially to a European clientele and it can make or break a deal. This will also increase income for the Land Registry via transfer costs. The government should invest in transport infrastructure to allow easy and more comfortable access throughout Cyprus which will make the country more attractive.

It can reduce taxation on companies. This will work in a myriad of ways, especially due to the EU. More companies will relocate to Cyprus, which will lead to higher revenue from taxes. It will also reduce tax evasion and fraud. The reduced cost (from taxes) on land development companies will assist in driving prices lower, which will attract more sales, both local and international. This will lead to higher revenue for the government through VAT, title transfers and stamp duty.

Nicholas K. Tofarides: The business environment and confidence are key factors to boost the revival of the property market.

Much depends on what is happening in Europe and around the globe but, in the meantime, there are measures which, if taken by the Government, can contribute to the upturn of the sector and also serve as a kick-start for the economy. Such measures may be a free profit period for projects undertaken by developers, an accelerated rate of depreciation for an unlimited period for investors, concessionary development rights to projects that could start immediately and the granting of building permits at short notice.

the international investment, finance & professional services magazine of cyprus

Gold 37

special advertising feature

Boosting the Property Sector

By George Z. Georgiou

A

lthough the experts are predicting that 2012 will be a very difficult financial year for Cyprus, not only due to the global financial crisis but also because of the major Greek economic crisis which has directly and negatively affected the Cypriot economy, major construction projects are being undertaken which are expected to boost the property market and attract important investors, foreign and local. Examples of such projects are the Marina in Limassol, the golf course at ElĂŠa Estate, Limni golf resort, etc.

Moreover, attempts have been made to balance the large reduction in investment in the construction sector and the purchase of immovable property, which has fallen dramatically over the past year.

The most important are the following:

Planning Amnesty

An important development was introduced in April 2011 with regard to the Planning Amnesty Laws, consisting of the Town and Country Planning Law, the Streets and Building Regulations and the Immovable Property Law (Tenure, Registration and Valuation).

The purpose of the amendments was, and still is, to bring an end to a long period of difficulties and obstacles experienced by numerous property owners because of the non-issuance of proper certificates of registration regarding their properties by the Land and Surveys Department for many reasons, some of which were related to the need for the legalisation of minor building irregularities. The new provisions have simplified and modernized the procedures which lead to the issuance of new, updated title deeds for the current property owners. However, applicants should be aware that the time

limit for submitting all relevant applications is 6 April 2012.

Suspension of Property Transfer fees for Immovable Property

Another significant amendment concerns the Immovable Property (Fees and Charges) Law, Cap. 219. The said amendment, which came into force on 2 December 2011, introduced a six-month suspension of the payment of transfer fees on a property’s purchase, which are subject to VAT, and a 50% suspension of all payable transfer fees which are not subject to VAT on proerties sold during the suspension period. Also, the suspension refers to contracts of sale which are submitted to the Land Registry before 1 June 2012, even if title deeds are issued after this period. The amendment remains in force until 2 June 2012.

Reduction to VAT on immovable property

Another major development is the amendment to VAT legislation which came into force on 1 October 2011 introducing a reduced VAT rate of 5% with regard to the purchase or construction of a residence. It is important to note that the said residence should be used as the permanent residence of any person who is entitled to apply for the said reduction. However, the reduction applies only to the first 200m2 of the residence while the total area should not exceed 275m2.

Government Incentives to Third Country Nationals

38 Gold the international investment, finance & professional services magazine of cyprus

In order to boost property investments in Cyprus, the Council of Ministers has approved the favourable issuing of Type F (permanent) immigration permits for non-EU nationals who purchase privately-owned residences for self-occupancy in Cyprus. In this way, the holders will be exempt from the lengthy immigration renewal procedures which apply to other non-EU nationals.

There are a number of criteria that need to be fulfilled, the most important of which are: The property must be of over â‚Ź300.000 in value The applicant must have sufficient income from abroad It is important to have in mind that in Cyprus an immigration permit is equivalent to a permanent residence permit and, in this way, holders are exempt from the lengthy immigration procedures which apply to other types of third country nationals.

Overview

The current situation provides the prospective buyer with a number of distinct advantages. Firstly, the buyer has more choice and is able to negotiate much harder on the price. Secondly, the buyer can take advantage of the reduced rates of tax and save substantially. Thirdly, the foreign (third country national) buyer may also benefit from a permanent residency visa (or even a Cypriot passport in certain cases). Finally and most importantly, it is now possible to invest in properties with excellent potential for the mid- to longer-term at prices lower than would have been thought possible 3-4 years ago. In short, this is an excellent time for any astute investor to buy property but always with proper research and due diligence.

George Z. Georgiou & Associates LLC – Services Provided

G

eorge Z. Georgiou & Associates LLC is a dynamic, professional full-service civil law firm, consisting of experienced multi-lingual lawyers and legal consultants. It specializes in land and property; corporate, commercial and tax; employment, pensions and corporate immigration; and all forms of dispute resolution. Founded in 2005

by George Z. Georgiou, the Firm has quickly grown and is recognised as one of Cyprus’ leading practices.

George Z. Georgiou & Associates LLC supports and advises on legal issues with an international element on a daily basis. Clients include individuals, companies of all sizes, municipalities, banks and multinationals to name but a few. As the sole Cypriot member of the international alliance Ius Laboris, which comprises member firms in 42 countries, with coverage in more than 100 countries, the Firm is able to provide any international client with fully-coordinated yet locally-specific global advice. Ius Laboris is the leading Global Alliance of Labour and Employment Law practitioners with 2,500 lawyers specializing in all areas of law relating to Human Resources. George Z. Georgiou is also a member of the Royal Institute of Arbitrators (RICS), the Chartered Institute of Arbitrators (CIArb) and numerous other associations and professional bodies worldwide.

The Firm’s close ties with the top law firms (including magic circle), accounting firms and actuarial firms in Cyprus and abroad, as well as with the Cypriot land valuation firm of A. Z. Georgiou & Associates, further allows the Firm to provide its clients with the best service available.

the international investment, finance & professional services magazine of cyprus

Gold 39

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special advertising feature Akamas Bay Villas, Latsi

Cybarco Development Ltd Projects A member of the Lanitis Group of Com-

panies, Cybarco develops projects of quality, such as the Akamas Bay Villas, the Amathusa Coastal Heights, the Sea Gallery Villas and the Limassol Marina. For more than 65 years, the company has fairly gained the trust of its costumers as one of the most substantial property development companies in Cyprus and Greece.

Sea Gallery Villas Located on the spectacular coastal cliffs of Amathus, Sea Gallery Villas are perfectly positioned to take in the best of everything Limassol has to offer and are within easy reach of the city centre. Each of the 17 villas presents its own design and character, offering the very highest standards of finish and detailing. From Sea Gallery Villas, the island’s most breathtaking panoramic views can be enjoyed, from the living room to the landscaped private garden, from terrace to overflow swimming pool. Luxury hotels, gourmet restaurants and numerous beachfront bars are all within a short walk, while a blue flag beach is just 100m away.

Akamas Bay Villas This is the most exclusive beachfront development in Cyprus, setting new standards for luxury living.

Superbly located on the most sought-after stretch of coastline, the Akamas Peninsula, this stunning development offers uninterrupted views of the sparkling Mediterranean Sea and is just a stroll from the restaurants and bars that line the charming resort of Latsi.

Blending harmonious architecture and outstanding design, this unique development sets new standards for luxury living. In keeping with such a rare creation, numbers are strictly limited to just 39 spacious villas, set within exceptionally large, beautifully landscaped plots of up to 1830m² and living areas of up to 425 m². Combined with a range of exclusive services, including an on-call concierge service to take care of one’s every need, from golf days and private parties to deliveries, chauffeurs, landscaping and more.

We have recently delivered the first 6 units of Phase I of the project, while 60% of the Phase has been sold to buyers around the world, all of whom have been looking for a stylish, discreet retreat where they can relax and unwind.

Amathusa Coastal Heights

Sea Gallery Villas, Limassol

The Bentley Award-winning project is located just 100 metres from one of the best blue-flagged beaches in Limassol. The apartments and villas gain their distinctive appeal by combining stylish contemporary design with traditional elements of Mediterranean architecture, all enjoying superb sea views. Considered a distinct exception among development projects across the island, the coastal villas and apartments share common fully-landscaped areas, walkways and squares

as well as play areas, swimming pools and a fitness centre.

Limassol Marina Cybarco is a shareholder in the Limassol Marina project and is also responsible for the management and property sales within the development. Surrounded by the sparkling Mediterranean, with unrivalled sea views, the luxury apartments, penthouses and exclusive villas offer a new way of life, “Living on the Sea”. You very rarely get the opportunity to step out onto a sandy beach from your home or moor your yacht of up to 60 metres in length outside your very own garden, merging the pleasures of living and sailing on your doorstep. These unique concepts make the waterfront development an extremely enticing proposition. Limassol Marina Ltd has signed contracts in excess of €40 million in the last 12 months. Nereids Residences will be delivered to their owners by November 2012, Peninsula Villas by December 2013 and Island Villas by November 2014. Set to place Cyprus on the nautical and yachting map, Limassol Marina will be fully operational by the end of 2012, with the capacity to accommodate yachts from 8m to 115m in length. Operated

by Camper & Nicholsons, one of the world’s oldest and most prestigious yachting business names, it will offer facilities and services of the highest international standards.

Cybarco Development Ltd

10, Tefkrou Anthia Street, Dali Industrial Zone, P.O. Box 21653, 1511 Nicosia, Cyprus,Tel: +357 22 741300, Fax: +357 22 741 400, Toll free number: 8000 50 30, e-mail: info@cybarco.com, Website: www.cybarco.com

42 Gold the international investment, finance & professional services magazine of cyprus

Cybarco_L

Sea Gallery Sea Gallery VillasVillas

Delivery of Phase 1 & 2: October 2012

Akamas Bay Villas

Limassol Marina

Delivery of Phase I: December 2011

Opening November 2012

Unique beachfront, marina and golf properties.

Spectacular locations, award-winning architecture, exclusive lifestyles.

From the leading luxury property developer in Cyprus.

For further information or to arrange a bespoke viewing, contact us on freephone 8000 50 30 Cybarco offices: Cyprus / Athens / London / Moscow / St. Petersburg / Ekaterinburg / Kiev Developing homes since 1945

cybarco.com

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special advertising feature

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CYFIELD BUSINESS CENTRE On the highest point of Demosthenes Severis Avenue in Nicosia, a new luxury office complex is being constructed by CYFIELD Development Public Ltd. With unobstructed 360o views of Nicosia, CYFIELD BUSINESS CENTRE is located in the midst of the most important buildings of the capital: the Presidential Palace, the Ministry of Foreign Affairs, the Attorney General’s Office, the English School and many others.The building, a jewel of architecture and technology, consists of 7 U-shaped office floors with natural light and unobstructed views from all points. Situated in a plot of 2,192 m2 the building has 6,380m2 of covered space and 166 parking spaces on 6 underground levels.

The ground floor is dominated by the grand double height glass lobby which connects

the exterior and interior spaces. The building is surrounded by landscaped terraces with bioclimatic plants, water feature and recreation areas. On either side of the building, two large security controlled ramps provide access to the underground parking areas.

The versatility of its design allows it to be vertically split into two distinct buildings measuring approximately 3,000m2 each with separate entrance and two fast elevators.

The office floors may be internally divided into two, three or four independent offices per floor, into separate offices varying from 150m2 to 850m2 each. All office areas may be individually adapted to the needs of each company. Our highly qualified team of architects, engineers and designers can design and propose any solutions that best fit the professional requirements of each company.

44 Gold the international investment, finance & professional services magazine of cyprus

CYFIELD BUSINESS CENTRE will become a landmark for the area and will provide prestige and enhanced status to its residents.

CYFIELD DEVELOPMENT PUBLIC LTD CYFIELD TOWER 132 LIMASSOL AVENUE NICOSIA – CYPRUS TEL: 22427230, FREEPHONE: 80005757 FAX: 22495203 EMAIL: sales@ cyfieldgroup.com, WEBSITE: www. cyfieldgroup.com

A Group of Companies with a leading position in all the sectors of the construction industry:

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Design, construction and sale of residential, commercial and industrial properties in Cyprus and Greece,

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Contracting of large infrastructure works

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Production and sale of specialized construction materials

•

Import and trading of building products

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special advertising feature

KANIKA Group of Companies

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he starting point for the KANIKA Group was 1962, when Theodosis Karaolis opened his architectural office in the city of Famagusta. Following the events of 1974, together with two other partners, he founded the KANIKA Group, whose primary activities were concentrated on the construction and land development sectors. Subsequently, Theodosis Karaolis took over the reins of the Group, recording a brilliant career in the hotel and construction industries. Today, the KANIKA Group consists of the following companies: Kanika Developments & Construction Ltd, Kanika Property Management Ltd, which offers services relating to property management and maintenance, Kanika Hotels Plc, which owns numerous hotels such as Alexander the Great Beach Hotel in Paphos, Kanika Pantheon as well as the management of the Elias Beach Hotel in Limassol, and Kanika Olympic Ltd company, owner of the hotels Olympic Lagoon Resort and Olympic Bay in Agia Napa.

In the construction sector, the company has delivered hundreds of apartments and villas and enjoys a leading position in the wider district of Limassol, when it comes to offering villas that stand for good taste, high construction standards, a privileged location and impressive indoor and outdoor areas.

An important milestone in the Group’s development, but also an important achievement for the benefit of Cyprus as whole, was the Kanika Enaerios Complex development project. This complex consists of 750 apartments, shops, offices, and the renowned Kanika Pantheon Hotel.

The KANIKA Group of companies employs approximately 800 people nationwide.

ACTIVITIES KANIKA DEVELOPMENTS specializes

in building all kinds of high quality residential houses as well as commercial properties.

So far it has developed projects that have contributed towards Cyprus establishing an excellent reputation on an international level, by highlighting the tourism/investment product of the country. One of the most prominent commercial projects of the Group is the KANIKA BUSINESS CENTRE (a seaside building in which numerous large and well-known international corporations have chosen to house their headquarters) and the KANIKA INTERNATIONAL BUSINESS CENTRE, a pioneering project with luxurious office spaces located in the coastal area of Limassol.

CONTRIBUTION TO SOCIETY The Group has set multiple targets in the

field of corporate responsibility: charity work, environmental issues, etc. On the occasion of the European Year of Volunteering 2011, the KANIKA Group of companies founded the Ithaca Association, a non-profit organisation with the purpose of educating the public on matters concerning the prevention and treatment of Alzheimer’s disease.

The environmental goals include the continuous improvement of production by using modern technologies to save energy and the multifaceted protection of the environment.

48 Gold the international investment, finance & professional services magazine of cyprus

BEING OPTIMISTIC The backbone of the Group is the Group’s

team of people, who have the capacity to demonstrate a spirit of commitment, consistency and dynamism, who possess the know-how and who are willing to undergo continuous training. The company has adopted a human approach to customer care, thereby mastering the ability to offer impeccable services. A fundamental principle followed by the KANIKA Group is to always treat customers as part of a large family. In addition, it always makes sure to share the same timeless values of trust and care, and as such, it has managed to record a long history and tradition.

Having come a long way on the path of contribution and dedication, the new generation of Group directors, consisting of KANIKA Group Executive Chairman Spyros Karaolis, Group Deputy Chairman George Karaolis, and Group Vice Chairman Marios Karaolis, is determined to continue on the course set out by the Group’s founder, Theodosis Karaolis, and declares itself ready and always up to big challenges.

AWARDS AND HONOURS We consider these accolades to be a particular

honour for our Group of companies. One of the most important distinctions is the one granted by the British tourist giant Saga Holidays, who presented two separate awards for the Alexander the Great Beach Hotel in Paphos and the Elias Beach Hotel in Limassol respectively. With this award, the Alexander the Great was named as one of the best hotels in the world amongst a total of 4,000 hotels listed. Another major award went to the Olympic Lagoon Resort in Agia Napa, which was awarded the First World Prize “Responsible Tourism Award” by the renowned tour operator Thomas Cook UK.

Head Office

28th October 329A & Makarios III Ave., KANIKA ENAERIOS COMPLEX – BLOCK A, APOLLO HOUSE, P.O BOX 53029, CY-3300 Limassol, Cyprus, Tel.: (+357) 25814266 Free Phone from Cyprus 8000 5080 Free Phone from UK 08082341805 Free Phone from Russia 81080020041357 Fax.: (+357) 25582124 e-mail: info@kanikadevelopments.com Website: www.kanikadevelopments. com, www.kanika-ibc.com

special advertising feature

Limassol Marina operational by the end of 2012

T

he development of Limassol Marina is creating new prospects for Limassol and Cyprus as a whole. Construction works at the site of the groundbreaking project are progressing rapidly, with the completion of the land reclamation and south eastern breakwater revealing its final formation. A show apartment is now available for viewings and construction of the villas has begun. Moving ahead, as planned, Limassol Marina will be fully operational and ready to welcome its first residents by the end of 2012.

A glittering new destination for living and sailing in Cyprus, it is set to become the most exclusive marina resort in the Mediterranean – and one of the finest in the world. With all the trimmings of a luxury waterfront development and a modern marina, Limassol Marina is already changing the face of Limassol town.

Exuding charm in an unrivalled environment, it offers the perfect blend of luxury and elegance, comfort and convenience, privacy and community. Unique, rare in its concept and a first for Cyprus!

Estimated to cost €350 million, Limassol Marina offers a variety of luxury residences

and will be able to accommodate up to 650 yachts from 8m to 115m. Providing facilities and services of the highest standard, it will be operated by the internationally renowned Camper & Nicholsons Marinas. The Yacht Club, 24-hour help desk, full concierge service, marina services and facilities, combined with the 6,000m² of commercial area, will ensure the full satisfaction of all visitors.

Featuring an enticing mix of traditional tavernas, stylish international restaurants, waterfront bars and a comprehensive range of shops, elegant boutiques, designer stores and amenities along the promenade, Limassol Marina is designed for “living on the sea”. It provides an extension of the town, blending seamlessly with the historical hub of the city, the old harbour and mediaeval castle.

With its broad international appeal, extensive promotion and unique product offering, Limassol Marina has already received recognition at the International Property Awards for two consecutive years. It has also established itself as one of the bestsellers of the last 12 months, with contracts in excess of €40 million already signed for its residential properties. Set in a verdant landscape with a communal swimming pool and uninterrupted sea views, the 94 luxury apart-

50 Gold the international investment, finance & professional services magazine of cyprus

ments and penthouses at ‘Nereids Residences’ were the first to be released to the market.

Their successful launch was followed by the release of the stunning ‘Peninsula Villas’ and the highly anticipated ‘Island Villas’, offering owners the opportunity to moor their yacht outside their home or to step out onto the beach from their own garden. Featuring private berths for yachts up to 60 metres in length, the enticing luxury residences combine the ultimate in privacy and exclusivity, just a stroll away from the heart of the cosmopolitan city of Limassol.

The company bringing this prestigious project to fruition is Limassol Marina Ltd, a group of developers, construction companies and investors, whose specialist knowledge and proven experience guarantees the lasting success of Limassol Marina. The shareholders of Limassol Marina Ltd are: Cybarco Limited, J&P-Avax S.A., Joannou & Paraskevaides Ltd, Francoudi & Stephanou Ltd, Athena S.A., CADS Holdings Ltd and Limassol Marina Development Company Ltd. For more information on Limassol Marina’s properties, e-mail info@ limassolmarina.com or call 80080010.

opinion

Stop the Collusion!

Something has to be done about the unholy alliance between the forces of the state and the banking system

T

By Theodore Panayotou

What good is a bank that cannot lend or a government that cannot govern?

wo institutions that we have trusted to serve our best interests have failed us badly, choosing to serve their own narrow interests instead.

To the one – the government – we gave the right to tax away a good part of our earnings to help us do collectively what we cannot do individually.

To the other – the banks – we hand our savings and allow them to lend it out many times over, thus creating new money to finance investment, prosperity and growth. Betraying our trust, consciously or subconsciously, governments and banks have colluded to enlarge themselves at the expense of the taxpayer in a tacit process of mutual support: deregulation for cash. The underlying motivation: economic and political greed.

Twenty years ago, different winds were blowing. The centrally-planned economies of the Soviet Union and Eastern Europe had just collapsed under the weight of unmanageable debt, accumulated as a result of the rejection of the powerful incentives of human greed and market competition. We were then celebrating the superiority of the market, of democracy and of competition and looked forward to the future with optimism.

The climate today is very different. Greed has been replaced by fear, optimism by pessimism, and confidence by self-doubt. The economies of Western Europe and America are in real danger of collapsing under the weight of unmanageable debt accumulated by the very forces of human greed and market competition which declared victory 20 years ago. Hubris for the triumph of capitalism over its nemesis, communism, has led to an unholy alliance between the forces of the state and the banking system to bring much of the world’s wealth under their command for their own narrow benefit, in a collusion of economic and political greed. Governments deregulated the financial markets and turned a blind eye to “getrich-quick” schemes and toxic assets purveyed by the banks, thereby laying the ground for the financial meltdown. Returning the favour, the banks invested their depositors’ hard-earned cash in bonds that governments issued by the truckload to finance over-bloated public sectors, pet projects and handouts to cronies. These bonds

were supposedly risk-free but they turned out to be as risky and as toxic as the banks’ packaged mortgages and structured investment vehicles.

The result? Sovereign governments run huge deficits but cannot borrow to pay their bills and service their accumulated debts. Banks, which lost a large part of their capital to worthless government bonds, cannot recapitalize themselves nor can they lend to their customers. A stalled economy is saddled with more taxes and fewer jobs, more risks and fewer opportunities, more debts and less liquidity. The battered taxpayer faces an uncertain economic future and the gloomy prospect of having to bail out governments and banks that have become so big that we cannot afford to let them fail while we lack the means to save them. Governments and banks are meant to serve the public, not themselves. What good is a bank that cannot lend or a government that cannot govern? A system replete with conflicts of interests and moral hazards has led to big banks and big governments that serve themselves instead of what we need: great banks and great governments that serve the public.

Our choice is not between unfettered greed and its total rejection; both lead to economic collapse.

Only the intelligent regulation – to preserve incentives and competition while guarding against abuses and manipulation – can generate sustainable wealth and prosperity. This requires breaking up the collusion between big banks and big government, cutting them down to size, redefining their role and re-dedicating them to the service of the public interest.

Banks may think of themselves as private businesses privileged to print money but they are also among the very few private institutions that have – or ought to have – a public purpose.This does not include the right to tax people to bail them out of their bad investments. Governments may relish their taxing and spending powers but this does not give them the right to borrow and grow ad infinitum, handing out favours and privileges at the expense of the taxpayer. We demand a new social contract to limit our liabilities and protect our assets from those that show no restraint in their appetite for aggrandisement and no hesitation in leveraging their size to extract even more and to force others to pay for their mistakes.

info: Theodore Panayotou is Director of the Cyprus International Institute of Management (CIIM) and Professor of Environmental Economics and Management at CIIM and Harvard University.

54 Gold the international investment, finance & professional services

Number 1 in Cyprus, number 1 in Greece

The olive wreath is a symbol of victory, used to crown the winners.

A T H E N S EXCHANGE S.A.

Member of Marfin Popular Bank

Number 1 in trading volumes at the Cyprus Stock Exchange and at the Athens Stock Exchange for 2011* In times of crisis investors are in search of safer choices.

In 2011, Marfin Popular Bank was the investorsâ&#x20AC;&#x2122; clear choice.

With its subsidiary companies Marfin CLR (Financial Services) Ltd and Investment Bank of Greece, Marfin Popular Bank was number 1 in trading volumes at the Cyprus Stock Exchange and for the 5th consecutive year, number 1 at the Athens Stock Exchange in stock and derivatives trading volumes.

Marfin CLR (Financial Services) Ltd is a member of the Cyprus Stock Exchange and the Athens Stock Exchange and is regulated by the Cyprus Securities and Exchange Commission (lic. no. 002/03).

Investment Bank of Greece is a member of the Athens Stock Exchange, the Athens Derivatives Exchange, the Cyprus Stock Exchange and the European Securities Network and is regulated by the Bank of Greece (lic. no. 52/2/17.12.99).

Opportunities can be identified in everlasting values. Once again Marfin Popular Bank is steadily in the lead.

ΤELEBANK 8000 2000, www.marfinclr.com

*According

to published data from the ASE and CSE

transparency cyprus

Transparency in cyprus “The accomplice to the crime of corruption is frequently our own indifference” (Bess Myerso, New York City’s first Commissioner of Consumer Affairs) By Maria Krambia-Kapardis

N

o country is immune to corruption. According to Transparency International, it affects all sectors of society “from construction (France), education (Uganda) and the police (Malaysia), to parliament (Japan), the judiciary (Brazil, Burkina Faso, Ecuador, Israel and Nepal) and even the church (Greece)”.

Apart from the obvious financial cost, corruption also has global consequences, trapping millions in poverty and misery and breeding social, economic and political unrest.

The effects of corruption

• Corruption is both a cause of poverty and a barrier to overcoming it.

• Corruption denies poor people the basic

means of survival, forcing them to spend more of their income on bribes.

• Where the courts are corrupted, human rights are denied and a fair trial comes with a heavy price tag.

• Corruption undermines democracy and distorts national and international trade.

• Corruption both jeopardizes sound governance and ethics in the private sector as well as threatens the sustainability of natural resources.

56 Gold the international investment, finance & professional services magazine of cyprus

The US Association of Certified Fraud Examiners has classified corruption in four categories: bribery, conflict of interest, illegal gratuities, and economic extortion.

• Bribery is the offering, giving, receiving or soliciting anything of value to influence an act. This can happen through invoice kickback (giving or receiving an invoice which is overpriced or completely fictitious) or when someone intervenes in a tendering process by providing valuable inside information so as to ensure that a vendor will win a contract. These acts can happen at various stages of the bidding process, i.e. at the Pre-

Transparency is the principle that addresses honesty and respect for truth and openness.

solicitation phase, and/or the Solicitation phase, and/or the Submission phase.

• Conflict of interest arises when an employee or a person in management has a vested interest in the vendor submitting a proposal (such cases have been reported recently by the Auditor General and cited in the media).

• Illegal gratuities are similar to bribes except that something of value is given to an employee to reward a decision rather than to influence it..

• Economic extortion arises in cases of ‘pay-up or else’.

Transparency is the principle that addresses honesty and respect for truth and openness. It refers to the accurate representation of information and prohibits behaviour such as misleading stakeholders (e.g., customers, suppliers, etc.).

Transparency Cyprus (TC) is the national contact group of Transparency International and its aim and vision is to combat corruption in Cyprus. More specifically, TC is a non-profit NGO, politically non-partisan and does not investigate cases of corruption. However, it does receive complaints which it forwards to the relevant regulatory authorities for investigation.

TC’s mission is to contribute to the strengthening of civil society and to improve the quality of public and private sector governance in Cyprus by promoting transparency, integrity and accountability. Some of its main priorities include raising awareness of the damaging impact of corruption, and empowering as well as encouraging citizens to participate in the fight against it.

Transparency Cyprus The vision of Transparency Cyprus is:

• to serve as the primary source of

information for both the government and the broader public on corruption and reform in Cyprus • to work with the Cyprus Government and other organisations to limit the discretion of government officials • to build and strengthen institutions • to facilitate reform in sectors where corruption exists • to promote good governance in key policy fields.

the international investment, finance & professional services magazine of cyprus

Gold 57

transparency cyprus

perceived Reasons for corruption in cyprus (2010 and 2011) 90% 80% 70% 60% 50% 40% 30% 20% 10% 0%

There are close links between business and politics.

84% 74%

77%

84%

82%

81%

79% 62% 51%

58%

67%

56%

67%

69%

Politicians (the Goverment and Parliament) are not doing enough to fight corruption.

There is no real punishment for corruption (light sentences in the courts or no prosecution).

Many appointments in the public administration are not based on merit/ qualifications.

47%

61%

59%

34%

Public money is not spent in a transparent manner.

56%

The law is often not applied by the authorities in charge

Many people accept corruption as part of everyday life

32%

35% 29%

You don’t need to obey the law since nobody will find out

Poor socio economic conditions (low incomes, poverty) leads to corruption

To make a process faster and easier it is acceptable to give someone money or other consideration

When personal or family interests are not adversely affected then it is acceptable to give money or other consideration for facilities

Diagram 1

TC aims to put pressure on the political parties and the party in power to put corruption at the top of the governmental agenda and to carry out the necessary reforms to effectively fight it. It intends to raise awareness about corruption, to advocate legal and regulatory reform at national levels, to promote practical tools for institutions, individuals and companies wishing to combat corruption, to act as a leading centre of anti-corruption expertise in Cyprus, and to undertake initiatives or actions on behalf of third parties to request transparency of specific events/situations.

TC conducts an annual corruption perception survey with the aim of identifying which actions/types of behaviour are perceived as corrupt, addressing the causes of corruption and identifying the perceived level of corruption in various decision-making bodies.

The latest survey was carried out in September-November 2011 among 1,521 respondents in all major towns. The majority of the respondents were aged 18-30 (45%) and 31-40 (24%). The vast majority (66%) had a university degree or postgradu-

ate qualification. Women comprised 52% of the respondents and about half (51%) worked in the private sector.

In line with other surveys carried out at EU level, it appears that Cypriots perceive a growing trend of corruption. The 2011 Corruption Perception Survey found that 86% of respondents see corruption as a major problem, they believe that it exists at national level (80%) and will rise due to the present financial crisis (79%).

The suggested causes of corruption include a lack of determined effort (i.e. the politicians are not doing enough to fight corruption) and the fact that there is no real punishment. Some believe that corruption is an unavoidable part of everyday life. (see Diagram 1) Another part of the questionnaire attempted to identify those acts that constitute corruption: The respondents appeared to be more knowledgeable as to what constitutes corruption in 2011 as opposed to those surveyed in 2010. This is evident from their responses to questions regarding giving money or other consideration

58 Gold the international investment, finance & professional services magazine of cyprus

in return for an academic qualification, obtaining a driving license or a reduction of taxes – considered by 89%, 88% and 86% respectively – as acts constituting corruption. In the 2010 survey, only 55%, 55% and 58% of respondents respectively perceived the same actions as examples of corruption. This finding raises the question of what happened in the 12 months between the two studies that might explain this.

Firstly, in July 2011 the Mari explosion made many Cypriots rethink issues of ethics, responsibility, transparency and governance. Secondly, the financial crisis had begun to be felt by most Cypriots and it is a normal when one’s wellbeing is affected that one begins to question what has gone wrong and wants to blame someone.

Finally, Transparency Cyprus had begun a number of anti-corruption awareness activities in the intervening 12 months.

The second part of the questionnaire covered a wide range of professions in an attempt to find out which ones were perceived to have abused their positions and the power

TC has proposed the adoption of a Code of Conduct similar to that for Commissioners which is enforced at EU level.

TC has also suggested the enactment of legislation protecting whistle-blowers (similar to the UKâ&#x20AC;&#x2122;s Public Interest Disclosure Act of 1998) who may feel threatened if they report cases of corruption or other illegal activities committed in their workplace.

TC recognises that legislative regulation is not enough without a change of culture so that zero tolerance is implemented as far as nepotism, conflict of interest, bribery, illegal gratuities, etc., are concerned. In the creation of such a culture, those at the top play a major role. Thus, when the politicians and officials are perceived by the public to behave ethically, with independence, integrity, honesty, accountability and transparency, the public, too, will gradually adopt the same behaviour.

At present there is no system for reporting corruption in Cyprus. TC recommends the creation of an Independent Commission Against Corruption such as those that have

entrusted on them for personal gain. Those perceived to abuse trust the most were politicians, officials awarding public tenders and the police (see Diagram 2) Various laws dealing with corruption exist in Cyprus, specifically in the Penal Code (Cap. 154) and Laws 23 (III)/2000 and 22(III)/2006, while specific legislation has been enacted regarding political party funding.

There is also a Public Service Law and a Police Code of Conduct as well as National Guard Rules that specifically prohibit bribery. However, there is undoubtedly an urgent need for a uniform legal framework where anti-corruption is concerned and it is important to enforce existing legislation as well as have the ability to investigate and prosecute offenders.

Transparency Cyprus has made a number of suggestions to the authorities, including the enforcement of the requirement for Members of the House of Representatives to declare their assets when entering parliament and again at the end of their term. If such legislation is deemed unconstitutional,

existed for decades in Australia and Hong Kong and are considered very successful.

The fact that Transparency Cyprus receives frequent allegations of corruption only serves to further emphasise the need for an Independent agency which has the power to investigate such allegations.

Transparency Cyprus invites individuals and corporations to join it in its mission. You may fear corruption but together we shall have the courage to combat it. If you care about a corrupt-free Cyprus, if you wish to see an end to nepotism and you want to provide your customers, suppliers, employees and other stakeholders opportunities that are free of corruption, membership of TC will give you the knowledge required to make a lasting difference. You will also receive discounts on Transparency International publications, tools developed by TI to combat corruption and invitations to TC and TI events. TC Members are entitled to vote and stand for election to the Board of Directors. (www.transparencycyprus.org)

professions where abuse of power is perceived 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0%

93%

87%

88%

88%

92% 82%

86%

82%

83%

74% 90%

90%

83%

Officials issuing building permits

79%

72%

69%

90% 80%

81%

80%

Inspectors (health, construction, food quality, health permitting) Officials awarding public tenders

Politicians at national level

92%

Officials at local level Officials at regional level

The people working in the police service

77%

79%

82%

71%

The people working in the judicial services Officials issuing professional licenses

76%

People working in the public health sector (e.g. Hospitals) The people working in the custom officers

71%

67%

People working in the private health services

People working in the Public Education services

People working in the private education services

Diagram 2

info: Maria Krambia-Kapardis (B.Ec., M.Bus, PhD, ACA, ACFE) is Chair of Transparency Cyprus, Associate Professor of Accounting and Associate Dean of the School of Management and Economics, Cyprus University of Technology. the international investment, finance & professional services magazine of cyprus

Gold 59

wealth management

Wealth Preservation and Investor Protection

O

Asset allocation and helping clients avoid risk remains the focus for the Wealth Management unit of Piraeus Bank (Cyprus) Ltd

riginally founded in 1916, Piraeus Bank is one of the three largest private sector banks in Greece and it has a presence in major financial centres such as London and New York. For an expert view of what the markets may have in store for its clients, Gold sought the views of Marios Loizides, Head of Wealth Management at Piraeus Bank (Cyprus) Ltd. Â

Gold: What is Piraeus Bankâ&#x20AC;&#x2122;s concept of Wealth Management and for whom are your services designed?

Marios Loizides: Wealth Management is a service provided by financial institutions to help High Net Worth Individuals (HNWIs) and their families to preserve and grow their wealth. Greater wealth is associated both with more investment options and greater risks. With thousand of investment products and complicated financial solutions provided to individuals, identifying the right ones is not a trivial task.

Our aim is to identify what is of importance to the customer, what he or she wants to achieve, and to create strategies to help them realize their goals. We will sit down with the client and, through an in-depth personal analysis, try to understand his/her specific needs and what the client wants to achieve in the short and long term. What we offer to a client is designed to fit the full range of his/her needs. We explicitly outline all the possible risks and do our utmost to provide the most appropriate financial solutions, taking into consideration different factors such as age and risk profile.

will last for years. We are in a position to offer our services and products to clients locally and abroad and our relationship managers travel frequently to visit existing and new clients around the globe. Given the fact that the group has a presence in 11 countries, our unit utilises these channels of communication as the need arises.

Gold: What do you expect for 2012 and what do you think investors will be after?

M.L.: Asset allocation is still the focus of our business. Protecting investors from downside risks while looking for investment opportunities will be our main target in 2012 as it was in 2011. The outlook for the global economy has deteriorated further since the end of 2011, largely due to the worrying picture in Europe. The eurozone remains the main issue.

I expect the recession to continue in the eurozone, mainly due to government fiscal tightening and credit conditions.

Wealth preservation is the main objective of investors but market volatility is expected to remain extremely high in 2012. So even though good investment opportunities may eventually arise, investors are extremely careful and they do not hesitate to scale down from risky assets.

The European Union is trying to fix the flaws and enforce structural reforms that will build confidence and calm the markets.

I am encouraged by the recent betterthan-expected performance of the US economy and I believe that this positive outlook will continue through 2012 and 2013. US companies have performed well and beaten the analystsâ&#x20AC;&#x2122; profit estimates. However, if the European situation deteriorates, it will definitely affect the US markets as well.

For Asia, there are two internal risks that concern me. Firstly, credit growth has recently been well above the levels considered critical in most Asian countries and, secondly, property prices are expected to correct.

As we have already experienced in other countries, this could have a very negative effect in the markets.

We have to continuously monitor developments, given that volatility is so high, and we advise our clients accordingly. We are currently experiencing difficult times, with economic affairs changing constantly.

The outlook for the global economy has deteriorated further since the end of 2011, largely due to the worrying picture in Europe

Gold: How does the bank-client relationship work in practical terms?

M.L.: Most HNWIs prefer working with a single relationship manager for all their banking and investment needs. At Piraeus Bank (Cyprus) Ltd Wealth Management, we will assign a relationship manager to a client and he/she will be responsible for all the banking or investment requests the client may have. The relationship manager is the main and only point of reference for the client. With full confidentiality and the ability to proactively listen to the client, the relationship manager provides excellent service and coordinates everything in an efficient manner.

Our main goal is to create long-term relationships with our clients that

60 Gold the international investment, finance & professional services magazine of cyprus

Gold: Many investors look to effectively diversify their investments by simply buying low transaction cost Exchange Traded Funds

The main reason that investors look to gold is to hedge themselves against the economy

(ETFs). What does the investment element of wealth management do to beat the safety and returns of gaining diversification through a careful selection of major index and commodity ETFs? M.L.: An Exchange Traded Fund (ETF) is a security that tracks an index, a basket of assets or a commodity such as gold or silver and trades like a stock on an exchange. Even thought the transaction costs are low, what makes ETFs really attractive to investors is the liquidity they provide. Investors do not have to wait for the cutoff time of the day to buy or sell as with traditional funds. They can buy or sell at any time of the day. Another major advantage of ETFs is the large diversification or the ability to hedge current positions they provide.

ETFs are becoming very popular financial instruments among investors and, wherever we think it appropriate, we do make such recommendations. Including ETFs in a portfolio can help an investor to hedge risk, increase market exposure and diversify. An ETF can easily give an investor exposure to foreign markets that show potential growth. A good example of this is an index ETF. Gold: How do you view gold as an asset class and an investment?

M.L.: Gold is the most popular of all the precious metals and investments in gold have grown dramatically over the last five to seven years.

However, compared with the other traditional financial assets, investing in gold still represents only a very small proportion. The main reason that investors look to gold is to hedge themselves against the economy.

Gold is an excellent way to diversify a clientâ&#x20AC;&#x2122;s portfolio and it is useful at times of high inflation to protect wealth. An investor can take exposure to gold via an ETF fund that is physically backed by real gold or by investing in stocks of companies that physically mine the gold. Another less popular way is the physical delivery of gold where an investor can

hold either gold coins or gold bars. Throughout 2011 we had a good percentage of gold related instruments in our clientsâ&#x20AC;&#x2122; portfolios and, if things do not change drastically, we will most probably keep the positions.

Gold: How do your services deal with the currency risk aspect when it comes to wealth management?

M.L.: It is obviously very hard to determine the reasons why currencies increase or decrease in value. Currency movements are some of the toughest investments to predict. Although mathematical models and different technical analysis theories work very well in explaining currency movements in the short term, they fail when it comes to predicting exchange rate levels over the long term. We certainly take currency risks into consideration when we construct a portfolio and we advise our clients accordingly. In some instances we use derivatives in major currencies for cross-hedging risks for assets that are denominated in different currencies.

Gold: What is the greatest current concern of your wealth management clients?

M.L.: The biggest concern is the financial crisis in Europe and specifically the issue of Greece. I believe that the euro debt crisis will remain the principal theme for 2012. Most investors deem a break-up of the eurozone to be highly unlikely but confidence in the markets has been shaken. With Greece reaching an agreement and private bondholders pledging a strong participation in the bailout deal, the markets may calm down, at least for the near future. The latest deal and, hopefully, a successful PSI transaction should put Greeceâ&#x20AC;&#x2122;s debt-to-GDP ratio on a downward path, reaching 120.5% by 2020.

For more information: www.piraeusbank.com.cy

the international investment, finance & professional services magazine of cyprus

Gold 61

greece

hellenism in crisis

Greek society is being asked to evolve and adapt on an unprecedented scale By Elena Ambrosiadou

H

ellenism is in crisis, a crisis of such serious implications as the catastrophe of Asia Minor. The damage is done and it is irrecoverable, not quickly at any rate. In the short term there will be no investments, there is no planned or anticipated growth and the current processes are not achieving sufficient results. Why? Because the current processes are focused on managing the debt and nothing more. They are led by bankers, economists and political specialists.

What we are doing wrong? Taking too long has made the loan more expensive and unserviceable. Making the political survival decision more important than the national survival decision has not helped and will not help anybody. Greece should have shed 30% of its public sector at the outset. Maybe that percentage is now higher. Instead it has employed horizontal revenue contraction in order not to upset any embedded interests. It has sacrificed private enterprise by overtaxing and offering no stimulus, hence entering a death spiral of ever lower demand. It has not focused on protecting vital activities in favour of appeasement, misplaced efficiency drives, dangerous neglect and corruption.

An example of appeasement is the public TV and radio. We have three institutions. You might argue that we need one. They strike and we keep them employed. Yet if we rationalised we would cut the budget by â&#x201A;Ź5-10 billion a year. Similarly we have 4-5 institutions for public buildings, from schools to courts. They

are all under-invested, with a crumbling infrastructure, a fact which makes many Greeks ashamed of their country. Just one institution with proper technology, and a strategic plan which it develops and applies over the years, would deliver a better result at a fraction of the cost. An example of this misplaced and destructive pretence to efficiency is the focus on the taxi sector in the middle of the tourist season. And an example of dangerous neglect is the total squeeze on defence resources.

An example of corruption is an oversized and over-expensive public sector. Salaries have been high, not because public sector workers are adding value to the economy through the application of technology and innovation by the appropriate ministries, but because cash was available to employ them using a network of favours that organised political loyalty instead of economic development and efficiency. This, in addition to pension and other ancillary benefits, has created a disaster in at least three ways: (1) It starved the private

62 Gold the international investment, finance & professional services magazine of cyprus

sector of a high quality workforce who saw employment in the public sector as a position of superiority due to contractual benefits; (2) it made the private sector dependent on the public sector and vulnerable to any economic crisis; and (3) it prevented the rationalisation of any industry, ministry or sector of the economy. So corruption in Greece is not restricted to the tax collection system.

People are saying many things about Greece at the moment: for example, that the country is being run by an unelected government. This is not true. Elected politicians from across the spectrum of orientation have to work together, see the problem together and deliver a result together, when any single party alone would not be able to implement the measures required with any level of expected political stability. Our politicians know that, and yet they keep talking about elections. And here is the difficulty. Why do they think that, after so many years of failing to instil order and discipline in the country, they will be able to do so

Elena Ambrosiadou

Elena Ambrosiadou has been at the forefront of hedge fund developments in Europe for two decades and is the CEO of the globally regulated IKOS Structure. She is responsible for strategic development and is a member of the Investment and Risk Management Committees.

She was ranked among the Top 50 Leading Women in Hedge Funds by The Hedge Fund Journal/Ernst & Young in 2010 and 2011.

now, at the time of greatest difficulty? Nothing has changed in the political environment to indicate that the will power is there to deliver evolution and long-term stability through the correct strategic plan.

An interim government has been created but it has not yet been able to implement any of the changes required and it has demonstrated no power to enforce them.

The two-year plan and budget have yet to be finalised in detail and they will have to be followed by whoever is in power without fail. This is what the people of Greece are expecting from the current government.

There is one other well-known state in the world where the citizens are rich but the public treasury is out of balance: California, the state of innovation. There is no talk of throwing it out of the USA or the currency not being the dollar, yet the problem of California has been very substantial.

Bankruptcy does not occur because a state is not able to produce or because there is a north-south divide in production and demand, or because the people are not hard-working, or its economy is independent from a federal state – all fever pills offered to Greece. Bankruptcy occurs because of long-term inadequate planning which leaves a budget unable to deal with an economic crisis. Spending too much on the public sector and on benefits, without building reserves and without revenue growth exceeding – or at least matching – spending growth will sooner or later get you into trouble.

Going back to California, they saw the one-time dot.com surplus at the end of

the last decade and started spending like it would always be there. 9/11 and a recession? They kept spending, kept hiring state workers, kept issuing bonds to balance the budget. Financial meltdown? They kept spending and raised taxes.

So this is where we are. How do we get out of it?

I logged onto the Internet to see the California government state budget. Here is what their Governor has written in his introduction: “The 2011 budget did ... lay the foundation for fiscal stability. It cut the annual budget shortfall by three-quarters – from $20 billion to $5 billion or less. It shrunk state government, reduced our borrowing costs and gave local governments more authority to make decisions. The budget that I am submitting today keeps the cuts made last year and adds new ones. The stark truth is that without some new taxes, damaging cuts to schools, universities, public safety and our courts will only increase.

That is why I will ask the voters to approve a temporary tax increase on the wealthy, a modest and temporary increase in the sales tax and to guarantee that the new revenues

Greece should have shed 30% of its public sector at the outset

be spent only on education.” More detailed information is provided on the website about each sector of the economy and those services under government control and their rationalisation as well as the growth plans.

When one looks at Greece, the PSI and the international effort made to achieve stability, one realises that evolution and adaptation must be achieved by Greek society on an unprecedented scale. The Greeks naturally do not want change – it would be the same for any people – and yet this could be helped if they were offered the hope of stability and a vision of the advantages and benefits of change. Let us allow the spirit of improved management which controls the unions, eliminates senseless benefits and delivers severe contraction of the size of the public sector, together with a growth-led approach. But the latter cannot and will not happen until the former is more than words on paper and becomes a reality.

What about the future of Europe and Greece within it? In the banking sector, Goldman Sachs and JP Morgan, for example, expect that the euro will hold and Europe will withstand whatever pain and conceptual, structural and political adjustment is required for all Europeans. So the euro is here to stay for Greece, the borders of Europe are the borders of Greece; the people of Europe are the brethren of Greece. Let us not be afraid to make that commitment to our future, to our allies and to ourselves. It takes courage to accept what is wrong and even more courage to subject oneself to the operating table without an anaesthetic.

But without it, there is no chance.

info: This article is adapted from Elena Ambrosiadou’s address to a February 2012 conference in Nicosia.

the international investment, finance & professional services magazine of cyprus

Gold 63

opinion

European Commission sets its sights on double taxation New developments should help to further strengthen Cyprus’ position as a European regional financial centre

L

ast November the European Commission (EC) outlined its 2012 strategy for combating double taxation and double non-taxation in the EU. Regarding avoiding double taxation, the EC proposes to strengthen existing EU tax policy instruments such as the Interest and Royalties Directive and the Arbitration Convention on Transfer Pricing, and implement an EU-wide common consolidated corporate tax base. It also wants to extend the coverage and the scope of double tax treaties and ensure a more consistent interpretation and application of these treaties’ provisions. Additionally it wants to beef up and accelerate dispute resolution within the EU. The Interest and Royalties Directive is designed to ensure that the payments of interest and royalties can flow without tax being withheld between associated companies based in different EU Member States.

The EU proposes to strengthen the Interest and Royalty Directive by:

By Joanne Theodorides

Many MEPs have said that aggressive tax planning in the EU is perhaps not illegal but it is definitely undesirable in the current climate

• Extending the list of company types covered; • Easing the shareholding requirements to be met for companies to qualify as associated from the current 25% to 10%; • Requiring the recipient benefiting from the Directive to be subject to corporate income tax in the Member State of his establishment on the income derived from the interest or royalty payment; and • Avoiding that payments made by a permanent establishment and deriving from its activities are denied a tax exemption under the Directive on the grounds that they do not constitute a tax deductible expense.

Probably of greater importance to multinational businesses, however, is that the EC has also announced that in 2012 it will launch a public consultation on situations of double non-taxation in the EU. It wants to analyse the full scale of this issue – which, according to the EC, causes considerable losses to public revenues in Europe – and then, based

info: Joanne Theodorides is Senior Manager, Tax & Legal Services at PwC Cyprus.

64 Gold the international investment, finance & professional services

on this preliminary analysis, to propose appropriate and effective measures to the EU Council (the 27 Member State governments) for preventing double non-taxation.

The EU’s code of conduct group on business taxation (an EU Council working group for discussions between national government representatives and the EC in a peer pressure, non-legally binding setting) has been discussing the issue of profit participating loans and hybrid entities for a number of years now. Profit participating loans can allow for a tax deduction on interest payments in the payer’s Member State without a corresponding pick up of tax on the interest income in the recipient’s Member State.

Hybrid entities are entities that are classified for tax purposes in different ways in different Member States and thus may avoid tax in each Member State in which the entity operates. In October 2011, the code of conduct group reached broad consensus that this issue reflects inefficiency in Europe’s internal market, and invited the EC to come forward with a legislative proposal in 2012.

The group will, however, still need to agree on whether it wants the EC to table a hard law or soft law EU proposal on double nontaxation. The EC’s announcement of the public consultation must therefore be seen as a first step.

The above developments are closely connected to the international debate on aggressive tax planning. Algirdas Semeta, the EU Commissioner for taxation and many MEPs have said that aggressive tax planning in the EU is perhaps not illegal but it is definitely undesirable in the current climate.

In general the above developments should be welcomed by Cyprus as they will help to further strengthen Cyprus’ position as a European regional financial centre. But, of course, a close eye must be kept on the detail as to how such measures will develop. Perhaps of some concern to Cyprus is the prospect of a common consolidated tax base. However much more work and greater EU cooperation will be needed in this area before it will ever – if ever – be implemented.

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80 68

{money}

68 A Whole New World of Trust and Corporate Solutions IFG Trust (Cyprus) Ltd

72

{business}

72 Shipping Revenues Continue to Rise The results of the Central Bank’s biannual Ship Management Survey 74 A Cohesive Global Organisation Grant Thornton

ECONOMY: Valuing the Future: A Conversation About Investment

By Ben Paton 78

TAX & LEGAL: Political Economy of Corporation Tax: Theory, Values and Law Reform By John Snape 85

LIFESTYLE: Religion for Atheists: A nonbeliever’s guide to the uses of religion

By Alain de Botton 89

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76 Greene Energy Leading eurozone crisis economist Megan Greene has no doubts about where the single currency is heading 80 THe China Conundrum Once Beijing makes its currency convertible and starts to issue sovereign debt, there will be no stopping the Chinese economy.

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82 Holding On Two recent court cases strengthen the status of Cypriot holding companies 84 Tax News Recent changes and amendments to Cypriot tax legislation

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86 Suite Luxury Staying in the world’s most expensive hotels

the international investment, finance & professional services of cyprus

Gold 67

financial services

{money}

IFG

A WHOLE NEW WORLD OF TRUST AND CORPORATE SOLUTIONS

I

FG Trust (Cyprus) Ltd is part of the International Trust and Corporate Services Division of IFG Group Plc, a specialised financial services company listed on the London and Dublin Stock Exchanges.

It works closely with clients and professional advisers to establish and manage a range of internationally structured solutions, including trusts, companies and foundations. The firm also provides fund administration services.

“Our vision is to be the leading, service-driven, innovative provider of fiduciary solutions to our clients,” says CEO Christos Michael. “Our values comprise the ‘four Cs’, namely Collaboration, Challenge and Innovation, Cast Iron Integrity and Client focus. We strive to create a motivating workplace with the right framework where people can work and express themselves, promoting open and honest communication mutual respect and support. We challenge our people to think outside the box and find innovative ways of meeting client requirements encouraging an entrepreneurial approach, innovative use of the organisation’s existing resources and lateral thinking.”

IFG also strives to ensure adherence to the highest ethical standards and best business practices, promoting accountability and transparency. Having created the appropriate work environment allied with proper ethical standards, clients benefit from the distinctive offering and highest service standards and, says Michael, “they can rest assured that we will always go the extra mile for them.”

IFG’s experienced and well qualified teams of in-house professionals provide advice on the day-to-day management of simple and complex structures established for both private and corporate clients.

Often, these structures are established for the purposes of the mitigation and neutralisation of tax and for the protection and preservation of wealth within a secure environment. The uses of such structures are broad and almost limitless. In many cases a bespoke approach and interpretation is required in order to ensure that client objectives are met.

IFG has dedicated teams specialising in the following areas: • Trust Establishment and Administration

The company has significant experience

68 Gold the international investment, finance & professional services magazine of cyprus

(L-R, standing: Petros Petrides, Christos Michael (CEO), Constantinos Meivatzis.

Seated: Marios Alexandrou, Maria Hadjivassiliou)

Cyprus offers one of the most attractive tax regimes in Europe, which is in full compliance with the requirements of the OECD against harmful tax practices, and the lowest corporate tax rate in the European Union

in establishing trust arrangements for a wide variety of private and corporate clients. IFG will advise on the set-up of a trust in conjunction with the client’s professional advisers and will act as corporate trustee, ensuring continuity of management and administration.

tailored to client’s individual requirements. Directors and senior staff can be directors of client companies, adding real substance. The company also provides all secretarial, administration, banking and accounting related services.

Company Incorporation and Management

IFG’s experienced accountants and inhouse lawyers are well suited to provide support on a wide range of M&A transactions undertaken by clients such as mergers, acquisitions or disposals including drafting or reviewing of relevant agree-

IFG provides centralised and coordinated management and administration of companies incorporated in a wide variety of jurisdictions with regular reporting

Transaction support services

ments, financial or legal due diligence and other necessary M&A support work.

How does IFG differentiate itself from its competitors?

CEO Christos Michael puts it this way: “We adopt a distinct ‘hands-on’ approach in the establishment and ongoing administration of structures. The knowledge and experience of directors and staff enable us to add real value to the entities we manage. We also forge strong relationships with major banks, lawyers and accountants. Our com-

the international investment, finance & professional services magazine of cyprus

Gold 69

financial services

mitment to service is paramount. Each client is allocated a dedicated Client Service Director who is fully acquainted with the relevant structure and who will be available on an ongoing basis to service client requirements. Each Client Service Director’s team consists of a UK Qualified Accountant and Lawyer and company administrators.”

With more than 50 people in Cyprus, and a proportion of 1 to 5 in terms of qualified to non-qualified staff, IFG possesses a wide range of skills and experienced professionals fully committed to clients, with a distinct ‘can-do’ approach. The firm also has offices with over 400 people in some of the world’s premier and tax efficient locations, including Geneva, Ireland, the Isle of Man, Jersey, London, Zurich and the British Virgin Islands.

IFG works closely with clients and their advisers to ensure that appropriate independent legal/tax advice is obtained prior to the establishment of a structure.

Most clients are initially introduced by professional contacts in some of the world’s major legal and accounting firms.

As CEO of an international company which has chosen to set up an office in Cyprus, Christos Michael believes that the increasing sophistication of international tax regimes means that the location of an international centre rarely offers absolute tax advantages. International investors are looking for jurisdictions with reliable legal frameworks, a good network of double tax treaties, high quality of professional services at a reasonable cost and sustainable reputation.

“Over the past 20 years, Cyprus has managed to transform itself into a globally recognized international financial centre. Prompt and clear government decisions at the beginning of the previous decade, combined with the entrepreneurial attitude of Cypriot accountants and lawyers, have given Cyprus a prominent position on the list of preferred jurisdictions for international tax planners.

Cyprus offers one of the most attractive

The increasing sophistication of international tax regimes means that the location of an international centre rarely offers absolute tax advantages tax regimes in Europe, which is in full compliance with the requirements of the OECD against harmful tax practices, and the lowest corporate tax rate in the European Union coupled with a sizable list of double tax treaties with more than 40 countries.”

Many international centres have reinvented themselves in the recent years and have signed tax treaties and obtained benefits in return for their cooperation in sharing tax information.

“The international financial centres most likely to succeed in the future are those that are successful in concluding tax treaties and sign Tax Information Exchange Agreements (TIEAs),” says Christos Michael, noting that operating as an International Financial Centre in the modern environment, however, requires critical mass and a scale of infrastructure that, for both fiscal and reputational reasons, precludes taking on questionable business.

“These are the main challenges of the Cyprus Government and professional community in the forthcoming years,” he says. “The Government has no other option but to redefine its strategy in this respect and to intensify its efforts in renegotiating existing double tax treaties and signing new ones with growing economies and emerging markets, while introducing regulation for fiduciary services which is long overdue.”

Although fiduciary services are mainly offered by accountants, who are members of the Institute of Certified

70 Gold the international investment, finance & professional services magazine of cyprus

Public Accounts (ICPAC), and lawyers who are members of the Cyprus Bar Association and regulated for offering audit or accounting and legal services respectively, they are not effectively regulated for the provision of fiduciary services. The recent establishment of the Cyprus Fiduciary Association (CFA), of which IFG is a founder member, for the purpose of regulating the sector of professional activities provided by fiduciary service providers is seen as a step in the right direction.

“The CFA aims at implementing high professional and ethical standards in the industry and promoting and further developing the common interests of its members with all competent regulatory authorities, and getting actively involved in law drafting and other regulatory matters relevant to the industry, for the purpose of strengthening the development of Cyprus as an International Business Centre for the provision of corporate and fiduciary services,” notes Christos Michael.

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shipping

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Shipping revenues continue to rise The results of the biannual Ship Management Survey conducted by the Central Bank’s Balance of Payments Section were published last month. The survey, which was first carried out in March 2009, covers residents of Cyprus who provide ship management services to ship owning companies registered both in Cyprus and abroad.

D

uring the first half of 2011, ship management revenues increased marginally to 4.9% of Cyprus’s GDP, despite the economic crisis.

The majority of these revenues came from Germany (57%). Most companies in the sector generate revenues within the range of €1 million to €10 million, but there are a few very large companies with halfyearly revenues exceeding €27 million. As a result, the sector is relatively concentrated with 24% of the companies generating 83% of the sector’s total revenues.

Shipping revenues have been exhibiting an upward trend since 2002 (with strong seasonal and cyclical characteristics) and indications for the second half of 2011 are that they will continue on their upward path.

Total ship management revenues from non-resident ship owning companies for the first half of 2011 were €431 million (at current prices), which corresponds to 4.9% of Cyprus’s GDP. There was a marginal

The main countries to which most payment flows were directed during the first half of 2011.

increase in revenues during the first half of 2011 from €431 million to €432 million. Despite the economic crisis, the ship management sector continued its stable performance in 2011, since it depends more on foreign than domestic income.

It is expected that revenues will increase further during the second half of 2011.

Most revenues for the second half of 2010 were received from Germany, which is traditionally the main trading partner

72 Gold the international investment, finance & professional services magazine of cyprus

of the industry. There were also significant contributions from Switzerland and Latvia. These figures do not necessarily represent the countries of the beneficial ship owners whose ships are managed by companies based in Cyprus (they are the countries from where the payments were transferred to Cyprus), though in most cases these countries also represent the country of the beneficial ship owner. The Survey’s compilers note that as a future strategic objective, it is important for the shipping sector in Cyprus to generate revenues from other countries in order to further diversify the client portfolio and to become less dependent on German exports and growth.

The general upward trend of revenues reveals that the shipping sector remains strong and has the potential for further development in the years to come, especially with the introduction of the new Cyprus tonnage tax system approved by the EU in March 2010 and enacted by the House of Representatives in April 2010.

Despite the economic crisis, the ship management sector continued its stable performance in 2011

SHIP MANAGEMENT SERVICES

Most of the ship management sector’s revenues during the period under review were derived from the provision of core ship management services (66%). Of these, 49% concerned crew management and 39% full management. Germany contributed 74% of revenues from ship management services, 58% in the case of crew management and only 10% in the case of full management. The later category is much more diversified and includes revenues from many other countries.

In total, ship management services (crew, full and technical management)

The countries from where the payments were transferred to Cyprus.

markets such as Russia, UK, Italy and Denmark. Further research needs to investigate whether the two main types of ship management services (full and crew) can be offered to more ship owning companies in each country and how to increase market shares.

COUNTRY PORTFOLIOS

Most revenues for the second half of 2010 were received from Germany.

correspond to 66% of the sector’s revenues, which underlines its specialization in the provision of crew and full management services. Additional contributions are provided by freight (12%), chartering (13%) and other services (i.e. finance, logistics).

Russia (32%) and Malta (14%) were the main contributors to the full management revenues of the sector during the first half of 2011. There is sufficient diversification of the country portfolio for long-term income stability.

A different picture is observed for crew management revenues for the first half of 2011, most of which came from German ship owners (58%) and the rest of the revenues were accounted for by many countries with relatively small contributions. The Central Bank notes that the companies’ client portfolios need to be diversified by exploring other promising

Ship management services are offered almost exclusively to ships with foreign flags. Only 9% of the revenues corresponded to ships under the Cyprus flag for the first half of 2011 but, given the size of Cyprus’s shipping registry, it is important to increase the sector’s share in this segment.

Even though Germany is the most important market for the Cyprus ship management sector, it has remained static. It is, therefore, important to increase revenues from new markets, note the compilers of the Ship Management Survey. Currently, there is limited provision of ship management services to countries like Russia, the Netherlands and the UK. Client portfolios are positively related with market share. Few companies managed large portfolios of ship owning companies during the first half of 2011. Most companies managed fewer than 10 ship owning companies, while a strong market share performance is achieved with the handling of more than 41 ship owners.

Only 7% of the companies handled more than 41 clients during the first half of 2011 but they shared 49% of the sector’s revenues. Market share performance also varies considerably with the size of the portfolio: when the size of the portfolio is between 4 and 10 clients, market share does not exceed 2%. When the size of the portfolio exceeds 41 clients, the average share increases considerably to 16.3%. As a result, there is considerable concentration in the sector.

Many Cypriot companies offered ship management services in Germany, indicating strong competition for the handling of German ship owning companies. Specifically, 48% of the companies in Cyprus offered their services in Germany during the period under examination. In other countries, however, competition is still relatively low. For example, in Russia services were offered by 7% of these ship management companies. In the Netherlands the figure was 21% and in the Marshall Islands 17%. A similar situation exists with other countries and more effort should be devoted to establishing links with local ship owners.

SHIP MANAGEMENT EXPENSES

During the first half of 2011, ship management expenses decreased from €332.31 million to €321.23 million.

Revenues received from abroad were higher than expenses paid abroad. Most of the expenses (47%) concern crew earnings and were paid to staff from

THE SHIPPING SECTOR REMAINS STRONG AND HAS THE POTENTIAL FOR FURTHER DEVELOPMENT IN THE YEARS TO COME the Philippines, Ukraine and Poland. A considerable amount (20%) of the sector’s total expenses was paid in Cyprus and concerned mostly administration and ship management expenses.

Most of the expenses concern crew earnings and constituted 47% of total expenses while the rest of the sector’s expenses were directed to ship management (29%) and administration expenses (24%). These two categories are mainly paid in Cyprus where the companies have a physical presence and employ most of their labour force.

Crew expenses can be further analysed into payments to EU citizens (15%) and non-EU citizens (32%). The majority of crew staff employed on board by ship management companies are from Southeast Asia (e.g. the Philippines), Poland and Ukraine.

THE INTERNATIONAL INVESTMENT, FINANCE & PROFESSIONAL SERVICES MAGAZINE OF CYPRUS

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accountants

{business}

Grant Thornton A Cohesive Global Organisation Helping dynamic organisations unlock their potential for growth

Grant Thorntom partners (left to right): Stelios Loizides, George Pouros, Stephen Michaelides, Stavros Ioannou, Avgoustinos Papathomas, George Karavis, Achilleas Achilleos.

G

rant Thornton is one of the worldâ&#x20AC;&#x2122;s leading organisations of independent assurance, tax and advisory firms.

These firms help dynamic organisations unlock their potential for growth by providing meaningful, actionable advice through a broad range of services. Proactive teams, led by approachable partners

in these firms, use insights, experience and instinct to solve complex issues for privately owned, publicly listed and public sector clients. Over 31,000 Grant Thornton people, across 100 countries, are focused on making a difference to clients, colleagues and the communities in which the firm lives and works. The firmâ&#x20AC;&#x2122;s tagline shows that it recognises the importance of using both reason and instinct to help clients make the right business decisions.

Grant Thornton Cyprus is one of the oldest accounting practices on the island.

74 Gold the international investment, finance & professional services magazine of cyprus

It offers a full range of assurance, tax, specialist advisory and business support services to clients ranging from public companies and multinationals to government agencies and private business across a broad spectrum of industries.

Grant Thornton prides itself on providing partner-led service for all its clients and a consistent adherence to important matters of principle: a belief in accessibility and the need for responsiveness based on understanding the clientâ&#x20AC;&#x2122;s business.

As a member firm within Grant Thornton International, Grant Thorn-

ton Cyprus is able to combine the knowledge and experience of the local marketplace with the technologies, methodologies and specialist resources of more than 2,600 partners and 31,000 qualified staff of Grant Thornton International member firms in over 100 countries worldwide.

Services

or transactions such as raising capital for M&A, restructuring or tax planning • T hey are open to and they value integrated service solutions Grant Thornton is the perfect partner for these organisations because it shares the characteristics of ambition, dynamism and purpose.

Grant Thornton prides itself on providing partner -led service for all its clients

Assurance

Grant Thornton Cyprus shares a common approach with all Grant Thornton International member firms, performing audits that utilise its expertise, enabling it to provide management with practical advice as well as providing assurance on historical information.

Business services The firm offers a one-stop shop for all clients’ needs in connection with Cyprus companies, from initial discussions regarding the company structure and its registration, to handling the ongoing administrative, legal and statutory obligations.

Taxation With a thorough command of the rules of the game, for both Cyprus and international tax, the firm offers a wide range of tax services, from corporate tax consulting to personal taxation.

Advisory services

As a member firm within Grant Thornton International, it is able to complement its in-house competence with an enormous pool of experience and specialised knowledge to advise clients on:

Business risk services

• Corporate finance • Forensic & investigation services • Project finance • Recovery and reorganisation • Valuations

Clear Ambition

The firm’s ambition is as simple as it is challenging. In 2011, Grant Thornton said that by 2015 it wanted to have doubled in size in terms of revenue and be recognized as the leading brand in its chosen markets. More importantly, it wants to be known for navigating complexity for dynamic organisations.

It will achieve this ambition through the right combination of organic growth, strategic investment and mergers and acquisitions. The firm’s strategic actions for this ambition are: • F ast and strategic growth in selected areas • Distinctive client service •H iring, training and continuously developing the best people • Efficient operations Grant Thornton shares the same values across all member firms – to show that it is living the values of collaboration and leadership and creating a cohesive organisation and to ensure that its dynamic teams have adequate leadership skills and can offer distinctive client service.

The firm’s values:

• Collaboration • Leadership • Excellence • Agility • Respect • Responsibility

Grant Thornton believes that through its strategic actions and values it will be able to achieve its ambition. Without quality, it has nothing!

Dynamic organisations

Grant Thornton wants to work for dynamic organisations that are ambitious and going somewhere. Organisations that want to grow, that are going through change and that need advice and support. What might characterise these organisations?

• T hey are growing or have a potential to grow • T hey have an international capability or plans for cross-border expansion • T hey have the ability to adapt to different market conditions • T hey are dealing with complex events

Distinctive client service

Grant Thornton has established a flexible team whose aim is to make a difference – to its colleagues, the profession, the environment and the community it works and lives in. Grant Thornton is proud of the distinctive client service it offers to all clients, large or small. All its services are partner-led using insight, experience and instinct. This implies that clients have easy access to partners and service stands out from the crowd in terms of quality and response time.

Awards

Grant Thornton is proud of its various awards. It has been awarded the prestigious ‘ICPAC Quality Checked’ certificate by the Institute of Certified Public Accountants of Cyprus (ICPAC) following a review carried out by the Association of Chartered Certified Accountants (ACCA).This certification is a quality assurance scheme introduced to help ICPAC member firms enhance the quality and efficiency of services they provide to their clients by ensuring that the procedures and checks in place are consistent with the demands of the quality programmes and generally accepted best practice within the industry.

Grant Thornton has also been awarded Platinum Approved Employer Trainee Development status by ACCA. This award is the highest level that an ACCA Approved Employer can achieve. It is an indicator to current and prospective trainees looking to train within an organisation that standards of tuition and development are of the highest order.

Grant Thornton is an ICAEW (Institute of Chartered Accountants in England and Wales) Authorised Training Employer and is therefore authorised to train students for their ACA qualification. This achievement demonstrates that the firm has met the training standards of the ICAEW.

the international investment, finance & professional services magazine of cyprus

Gold 75

eurozone

{economy}

Greene Energy Leading eurozone crisis economist Megan Greene has no doubts about where the single currency is heading.

By Costa Ioannides

A

t the comparatively young age of thirty-three, Megan Greene is one of the most cerebral economic analysts of her generation. Currently serving as head of the Western Europe macroeconomics team at Roubini Global Economics, she is in great demand for her personal interpretation of eurozone crisis developments and features regularly on the BBC, CNBC, Sky News and Al Jazeera. Her immense knowledge of European political economy is clearly not the only reason why she is so frequently put in the spotlight: on witnessing one of her recent public appearances, a colleague impulsively gushed, “Megan Greene makes me proud to be a woman!”

Despite professing to be a Europhile, Greene’s vision is a dark one: the euro is doomed and Greece is very likely to leave the eurozone which will change drastically from what we have known until now.

Gold caught up with Greene in Nicosia to find out why she is fast becoming one of the finance industry’s most respected harbingers of bad news.

Gold: What should Europeans be most concerned about with regard to the current eurozone crisis?

Megan Greene: Europeans should be most concerned about the lack of growth in their economies. EU leaders are finally starting to openly talk about this now – for example, at the beginning of this year we had Nicolas Sarkozy and Angela Merkel getting together to try and figure out a growth strategy. This is, of course, positive but it’s now getting very late in the game. Economic growth heals all wounds, especially from the debt-sustainability perspective, but with debt rising and GDP contracting many European countries are looking increasingly insolvent and this will drive investment away. Growth is really the key.

Gold: Do you believe that growth in the eurozone is achievable?

M.G.: Well in the core, yes I do. My growth outlook for the eurozone is that the core will either stagnate or experience marginal growth while the periphery will contract significantly well into next year. Overall we have this very asymmetric adjustment happening in the eurozone which has been institutionalised by the fiscal compact whereby all the peripheral countries are having to do all the adjusting. The same goes for the European Central Bank’s inflation target – a ‘one size fits all’ policy that works well for Germany but terribly for the eurozone periphery. All this really does is to ensure that the periphery goes further into recession. We’ve recently had new governments in Spain and Italy announcing immediate far-reaching austerity measures and aggressive structural reform programmes, all of which will undermine their growth prospects for the next couple of years.

Gold: That’s your short-term expectation. Is your medium-to-long-term view equally grim?

M.G.: If we are looking at the 5-10-year picture, I think we’ll be seeing a very different eurozone. By then we will probably looking at a ‘rump’ eurozone consisting of the Northern European countries plus France which will do everything possible to tether itself to Germany. Once all the weaker countries peel out of the eurozone, the remaining ‘rump’

I don’t think there’s any way that Angela Merkel will risk her re-election chances by cutting Greece off

76 Gold the international investment, finance & professional services magazine of cyprus

euro will appreciate considerably. This will pose increasing challenges for the German and Northern European growth model. If you’re asking when we will see growth rates such as those during the boom years of 2006-2007, my answer is that it simply won’t happen for an extremely long time. The norm from now on will be extremely sluggish rates of growth if there is any growth at all.

Gold: In a previous interview you have expressed the view that the euro is doomed because the EU leaders are unwilling to take the steps necessary to create fiscal union and issue Eurobonds. How far down the road do you believe the fracturing of the eurozone (beginning with Greece’s exit from the single currency) will occur?

M.G.: My ‘base-case’ is that countries will start peeling out of the eurozone at the end of next year. The timing is really that hardest part in all this because the ‘Troika’ [the European Commission, the International Monetary Fund and the European Central Bank] is willing to keep Greece on life support for a very long time because it is very concerned about what might happen if Greece defaults now and exits the euro. Given that there are German elections at the end of 2013, I don’t think there’s any way that Angela Merkel will risk her re-election chances by cutting Greece off. However, from the Greek side it’s a little bit more risky in that the Greek government will probably continue to agree to austerity measures without actually implementing them. The Troika will then huff and puff but continue to lend Greece more money as it has been doing already. As such, the most likely scenario for me is that things will continue as they are until the German elections are held in 2013 and then both sides will decide to part, given that the medicine is effectively killing the patient. But of course there is always a chance that things could unravel sooner.

Weâ&#x20AC;&#x2122;ll be looking at a lot more social unrest in the eurozone over the coming years and not just in Greece

the international investment, finance & professional services magazine of cyprus

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eurozone

Gold: How bad do you expect things to become in the next five years here in Europe?

M.G.: I think we’ll be looking at a lot more social unrest in the eurozone over the coming years and not just in Greece. The Portuguese were also rioting en masse recently and Italy and Spain have a track record of taking to the streets when things get tough. However, once these countries peel out of the eurozone, the whole point would be to return to growth.

Yes there will be upheaval and it will all seem dramatic but we need to remember that Argentina was in a similar situation not that long ago – at the time it was awful, 16 people died in the unrest – but they’ve since moved on and returned to growth very quickly. As such, when the peripheral countries do leave the eurozone it will be ultimately be in their own best interest to do so and it will help them in getting their economies growing again, which is a good thing. On the other hand, the countries remaining in the ‘rump’ euro will look increasingly like Germany economically and so Germany can then look into forming the long awaited fiscal union to make the single currency truly sustainable.

Gold: Many EU member states and their banks have been downgraded by the rating agencies. In your view what’s the next for the European banking sector?

M.G.: Ultimately the European banking sector has been saved via the ECB’s Long Tern Refinancing Operation. This has avoided the potential failure of a major bank which would have signified a Lehman-type event times five: if you had a bank like Deutsche Bank or Société Générale fail it would have been catastrophic for the eurozone. So I don’t think there are any prospects of that type of event happening. The idea now is to stuff the banks with as much liquidity as possible which doesn’t resolve the solvency issue but it does buy a hell of a lot of time and allows continental European banks to deleverage by gaining access to lots of cheap liquidity.

Even if things begin to deteriorate beyond our expectations, I think the ECB is now willing to step in as a lender of last resort and act as a central bank is supposed to in such situations.

Retail and commercial lending will still suffer due to bearish market sentiment but I don’t see any systemic bank failure risks anymore.

Gold: If you were a young Greek graduate living in Athens, would you emigrate or would you seek out exceptional opportunities (and where would you expect these to be found)?

M.G.: Actually I’ve been asking people in

Greece needs to find a niche besides tourism and green energy could be the answer countries like Greece and Ireland whether they plan to emigrate. If I was in their position and I was able to move, yes I’d leave and seek out a country where there are investments being made and there are some prospects for growth. If I was unable to emigrate, then maybe it would be a good idea to get into a growth sector such as green energy.

Greece needs to find a niche besides tourism and green energy could be the answer.

Gold: They say that a crisis is a good time for opportunity. If you had to turn entrepreneur immediately and had a million dollars to set up a business, what line (outside of economic consultancy) would you pursue?

M.G.: Probably something tech-related, because technology is the fabric of society these days and at the centre of conducting business.

Gold: Given that an economist’s reputation is built on the accuracy of his/her expectations, you must be both planning and hoping for the worst in macro-economic terms.

As such, is your mood negatively correlated to eurozone stock market indices?

M.G.: [laughs] I fundamentally disagree with that statement! The good thing about where I work is that we don’t manage any money. For this reason I have absolutely no ‘skin in the game’ and no agenda – I’m not even European. I was born in Connecticut in the US. I am a Europhile and I believe in the EU project. I want things to work out but my job is not to say what I believe should happen but what is likely to happen.

Gold: But as an economist, it’s better to be proved right?

M.G.: All I’ve told you is what I believe will happen If things turn out that way then I’ve been validated, but economists don’t always get things right. I don’t hope that the eurozone will fail. I hope it survives, and I believe it will, but in a different form.

Gold: It must be tiring to have your finger on the pulse of the finance industry and to be on top of the latest developments that affect the sector. How do you switch off?

78 Gold the international investment, finance & professional services magazine of cyprus

M.G.: I do switch off occasionally but it usually involves physically removing me from a Twitter feed! I run daily and it helps in making my brain go dead for a while because running is so mind-numbingly boring. I also spend time with my husband who has nothing to do with the eurozone crisis so that helps too.

Follow Megan’s latest eurocrisis analysis on twitter at @economistmeg or economistmeg.com.

BOOK REVIEW Valuing the Future: A Conversation About Investment

By Ben Paton (Sociables Publishing, 2012) RRP: £12.50 (£12.50 from Amazon.co.uk) Most investment guides are penned by journalists who have typically never invested other people’s money. This one explains concisely and very clearly what most investors need to know about the art and science of making money. Professionals will also learn from his many insights. The book is a dialogue between a money manager and a young man who asks whether or not he should invest. Their conversation explores, among other things, how ‘for money’ and ‘not-for-money’ investment differ; how accounting and economic assets compare with social and natural assets; how time is central to all of investment; how banks collectively create and destroy money; how the yield curve shows the market interest rates for financial assets of different durations and how competitive advantage is important in determining the returns achieved on real assets.

Ben Paton is a ‘value’ investor and his philosophy is spelt out through a dialogue with a prospective client. Wellwritten, peppered with erudite quotes and amusingly illustrated (check out the ‘safe sex’ cartoon), it’s a great read.

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china

{economy}

The China

Conundrum Once Beijing makes its currency convertible and starts to issue sovereign debt, there will be no stopping the Chinese economy.

By Dr Savvas Savouri

T

o say that China’s influence on economies across the world looms large is not to be terribly profound.

That its actions – self-interested as they invariably always have been – threaten to make it as much a Black Knight to some as a White Knight to others is largely overlooked. Also essentially ignored is the fact that China’s actions will cause what can best be described as collateral damage to nations on which it has hitherto had a favourable impact. With this in mind I would like to consider what awaits the United States and Europe in the wake of actions taken by those in authority in Beijing. First, however, it is worth reflecting on the past ten years or so.

From late 2001 until very recently, China and the United States engaged in what can only be described as symbiotic

Quite frankly, austerity is not a suitable backdrop for collective intra- European trade growth growth. China provided the US with cheap goods which American households consumed in ever-growing numbers.

American consumption exploited cheap funding provided by Beijing, which it was happy to supply because of the favourable impact export growth had on expanding China’s manufacturing employment which absorbed the many tens of millions making the rural-urban shift each year. China funded US consumption by recycling its current account earnings into US Treasuries, whose yields

80 Gold the international investment, finance & professional services magazine of cyprus

they compressed sufficiently to fuel the US housing market (making China culpable, in part at least, for the boom and bust in the US residential property market). Now, with US domestic consumption limping along where it once sprinted, this vendor financing model no longer serves China’s growth interests.

Having relied on low value added mercantilism for its GDP growth, China will now have to shift more and more to internal elements, essentially a combination of investing in infrastructure and developing private consumption. These elements, of course, require access to capital. If a sizeable surplus in its current account cannot be relied upon to deliver this, China’s capital account can, once it is allowed to develop. This, in turn, demands a convertible currency.

Beijing needs to allow widespread ownership of its currency, even if this means that it moves higher.

As China’s currency moves higher

Once Beijing begins to issue sovereign debt it will find very willing buyers

against the dollar (continuing a now established upward trend), this makes goods entering the US ever more expensive. It is putting downward pressure on US retail margins and forcing a reluctant pass through into prices and thus fuelling inflation. The latter is having a noticeable effect of draining momentum from US retail volume growth. This is an alarming development in an economy that has come to rely heavily on household consumption for growth and whose interest rates are woefully unreflective of the true inflation risk it faces. There is, in short, something of an inevitability in the United States succumbing to the stagflation virus.

Just as China is being forced to reorientate, so too will the US economy have to restructure itself to rely for growth on its once traditional manufacturing

and product development avenues. The US labour force will have to learn new skills, a process which will itself take awhile and, in the interim, skill shortages will fuel inflation further. Whilst the process will not be particularly swift, something of a role reversal will come about. As Chinese households grow, their spending they will be drawn to US consumer brands, devouring the toiletries, drinks and foods – home and fast – we all have a taste for, and extending to the software and technology goods markets which American corporations now largely dominate.

As for Europe, most of its economies rely on close neighbours to consume their exports. And quite frankly, austerity is not a suitable backdrop for collective intra-European trade growth.

Even Germany may have to accept that its days of enjoying current account surpluses are numbered. After all, despite the bombastic talk out of Berlin berating the spendthrift Southern Europeans, one must remember that those “reckless” Greeks, Irish, Spaniards et al were buying Mercedes, Porches and BMWs and the Bosch, Miele and AEG white goods produced in the very country that is complaining about such wayward spending behaviour. Looking ahead, thrifty German – and indeed French and other – households will have to begin spending in almost an Anglo-Saxon way. This leads me to what may seem an exchange rate paradox: whilst the euro may be under downward pressure at the moment against the dollar, this cannot continue.

As China releases the dollars it has saved to fund its internal economic growth, the euro will begin to strengthen. It can move no other way. One needs only to look to Japan to see how the currency of a failing internal economy can painfully rise and rise. Beijing will not, however, have to rely alone on its saved and future (narrowing) current account surpluses. It will tap into capital markets as a sovereign.

On the other hand China’s once legendarily large current account surpluses will turn to deficits. Some may see this claim as suggesting that I expect a collapse in exports which, in turn, will trigger a hard landing for China’s internal economy. My reasoning is nothing of the

sort. Rather, I see the shift from current account surplus to deficit as reflective of a Chinese internal economy which is growing strongly and, with it, its appetite for imports, raw materials, capital goods and even consumer products. I also expect Germany’s legendarily large surpluses to narrow, quite possibly very sharply. The reasoning in the short to medium term is a sharp fall in exports to its important EU neighbours. Over the longer-term (where long here is measured from 2015) Germany’s trade position is certain to deteriorate as the euro begins to strengthen materially against the dollar. As for the United States, the looming sell-off in the dollar will provide it with a favourable competitive boost as it injects what to domestic facing sectors will prove extremely unwelcome monetary shocks. For its part, Japan’s mercantilist future will turn on how the yen performs

There is something of an inevitability in the United States succumbing to the stagflation virus against the dollar, something which, again, is likely to favour US exporters.

Returning to China, I am convinced that in line with its current account falling into deficit, its capital account surplus will grow and grow. Once Beijing begins to issue sovereign debt I have no doubt it will find very willing buyers.

Of course it cannot open itself up to capital markets unless and until it makes the yuan convertible, ending its years of manipulation and under-valuation. The simple truth then is that the current accounts of China, Germany, the US and Japan will look quite different in 2015, reflecting favourable developments for some and less than welcome moves for others. For Germany in particular, internal consumption has to be increased by whatever means. Teutonic thrift will have to end if that nation is to hope to mitigate a misfiring in the trade facing sectors it has so much relied on for almost seventy years.

info: Dr. Savvas Savouri is a Partner and Chief Economist of Toscafund. the international investment, finance & professional services magazine of cyprus

Gold 81

legal action

{tax&legal}

Holding On Two recent court cases strengthen the status of Cypriot holding companies

By Chris Damianou and Georgia Papa

C

yprus has always been regarded as an exceptional setting for holding companies, not only because of its advantageous tax system and straightforward legal structure but also because of the island’s outstanding geographical location at the crossroads of three continents, its low operating costs, world class professionals and excellent banking services.

Two recent court decisions have reinforced the country’s position as a commercial and business centre and further strengthened the status of Cypriot holding companies.

On January 19, 2012, the Seventeenth Arbitration Court of Appeal confirmed the position of the first-instance court regarding the “Monetka” case (No. A60-32327/2010).

The “Monetka” case is remarkable for the detailed analysis of a back-to-back royalty scheme involving an Intellectual Property (IP) company registered in Cyprus and a Russian licensee. The Russian tax authorities sought to convince the court that the taxpayer (licensee) had used conduit arrangements that solely aimed at obtaining tax benefits. In order to support its claim of a sham structure, tax officials pointed to the fact that the licensor and the licensee were related parties, that a stepby-step plan had been implemented for the transfer of IP rights and that the transactions lacked economic substance.

Cypriot holding companies have once again justified their first class ranking when it comes to international tax planning The Court of Appeal upheld the lower court’s decision, considering the presence of accurate documentation supporting the payment of royalties and the actual use of the trademark in the business activity of the licensee, as well as the lack of convincing evidence that the intragroup relationship between the parties had affected the terms of their transaction.

The decision is still subject to appeal and we expect the tax authorities not to miss the chance. It is also worth mentioning that on the day following the delivery of the above decision, charges were pressed against one of the appellant’s subsidiaries for alleged violations of the Labour Code.

It should be noted that this decision provides substantial relief to participants in similar structures, a great majority of which involve Cyprus IP companies, as the careful structuring of the ownership of IP and routing license payments through a Cyprus company can lead to major tax benefits. Cyprus has placed itself among the best tax planning jurisdictions for IP and the decision demonstrates that this is not about to change.

However, the fact that just one day after the decision was announced, action was launched for alleged violations of the Labour Code, is an indication of the Tax Authorities’ determination and shows how aggressive they can become where tax collection is concerned. The recent trend is to attack common IP structures

82 Gold the international investment, finance & professional services magazine of cyprus

and there is now a vital need to make IP structures more sophisticated. Taxpayers should not be appeased by the result of this decision: on the contrary, they should revisit their existing IP structures and engage experienced tax consultants to help them add proper economic substance behind their structures and make these structures robust enough to sustain any future attacks by the tax authorities.

Another interesting case that focused on “beneficial ownership and substance” was heard by the Danish Tax Tribunal. It concerned whether a Danish company should withhold tax on dividends paid out to a Cypriot holding company.

As a general rule, a Danish company is obliged to withhold taxes on the distribution of dividends, except if one of the EU Directives or a Double Tax Treaty provides for a reduction or elimination of Danish withholding tax. The Danish company in question was a subsidiary company – via a holding company in Bermuda – of an American Group. The Bermuda limited company incorporated a subsidiary in Cyprus that obtained the shares in the Danish company; subsequently, the Danish company distributed dividends amounting to €88 million to the Cyprus holding company and the Cyprus holding company paid an analogous sum to its parent company in Bermuda as a repayment for a loan.

The Danish Tax Authorities asserted that a withholding tax should be imposed on the Danish Company as the Cypriot holding company was not the beneficial owner of the abovementioned dividends.

The Danish Tax Tribunal agreed that the Cypriot holding company was not the beneficial owner as it lacked substance. However, it held that the Cyprus Company was protected by the Parent/Subsidiary Directive which states that dividends distributed by an EU subsidiary to its EU parent company are exempted from withholding tax.

Georgia Papa

Cyprus has an incomparable system for holding and trading companies and is among the most tax-favourable jurisdictions in the EU

Chris Damianou

Furthermore, the Danish Tax Tribunal also stated that the Parent/Subsidiary Directive does not prevent the use of national legislation or treaties necessary to avoid fraud or abuse. Denmark, however, has not implemented such legislation and, accordingly, the requirement for beneficial ownership does not apply. The Danish Tax Tribunal further stated that there was a possibility of disregarding legal transactions to prevent abuse under basic principles of law.

This decision adds to the pending clarification regarding the standing of Double Tax Treaties and EU Directives as regards withholding tax on dividends under Danish tax law. Based on precedence from the Danish Supreme Court, it also recognizes the holding of shares as a commercial business activity and, therefore, Cyprus holding companies whose only function is to hold shares will not be considered abusive and for that reason disregarded, even with limited substance.

The Danish Tax Tribunal’s decision is a firm one; however, the Danish Tax Authorities are now considering the possibility of an appeal as the ruling is a significant blow in relation to all pending cases concerning dividends paid to EU holding companies. The result of any appeal will be very interesting.

The concept of “beneficial ownership” arises in more and more court cases around the world nowadays, a fact that should alert businessmen appropriately. If the relevant legislation existed in Denmark, the chances are that the Cyprus Company would have lost the case. It is therefore strongly advisable to review all existing structures and expose them to a “stress test” to evaluate their level of endurance in case of a future tax attack. Eurofast is using its popular relevant “substance” and “beneficial ownership” tests in such cases, which usually lead to innovative practical solutions for the restructuring of existing tax structures that do not perform that well in above test.

The Cypriot holding company, with its European identity and European benefits, presents a legitimate method of entering Europe and exiting without undesirable tax consequences. Cyprus has an incomparable system for holding and trading companies and is among the most tax-favourable jurisdictions in the European Union and even the world.

Cypriot holding companies are subject to the lowest corporation tax, they are EU compliant and they fulfil all the OECD’s demands against harmful tax practice. It is no coincidence that the use of Cypriot holding companies is growing so much in popularity.

About Eurofast Taxand

•

Eurofast Taxand provides a range of tax advisory services in Cyprus. Throughout the years, we have accumulated considerable know-how in addressing cross border tax issues which have proven our invaluable competitive advantage. We work with a wide range of clients including multinational and locally-listed companies, mid-market companies and large private entities.

•

Eurofast Taxand is part of Eurofast Global, an international boutique professional services Group, delivering a range of professional services in South Eastern Europe and East Mediterranean through its fullyfledged offices in Athens, Thessaloniki, Sofia, Bucharest, Belgrade, Podgorica, Tirana, Skopje, Zagreb, Pristina, Banja Luca, Sarajevo, Cairo and Alexandria.

•

In recent years, Eurofast has achieved worldwide market recognition for its exceptional tax advice, capabilities and innovation in the area of international tax planning. In 2011 Eurofast was voted “Cyprus Tax Firm of the year 2011” and “Tier One Tax Transactional Practice in Cyprus” by International Tax Review (ITR). In 2010 Taxand was voted “European Indirect Tax Firm of the Year” by ITR and Eurofast was voted “Best Tax Practice in Cyprus 2010” by the European CEO and also ranked “Tier One Advisor” in Cyprus

by ITR.

•

Taxand provides high quality, integrated tax advice worldwide. Our tax professionals – nearly 400 tax partners and over 2,000 tax advisors in nearly 50 countries – grasp both the fine points of tax and the broader strategic implications, helping you mitigate risk, manage your tax burden and drive the performance of your business. We’re passionate about tax. We collaborate and share knowledge, capitalising on our collective expertise to provide you with high quality, tailored advice that helps relieve the pressures associated with making complex tax decisions.

We’re also independent, ensuring that you adhere both to best practice and to tax law and that we remain free from time-consuming audit-based conflict checks.

For further information, visit www.eurofast. eu and www.taxand.com

info: Chris Damianou (Director-International Tax), Chris.damianou@eurofast.eu , Georgia Papa (Tax & Legal Associate), Georgia.papa@eurofast.eu, Eurofast Taxand, Cyprus, Tel: +357 22 699 222, www.eurofast.eu the international investment, finance & professional services magazine of cyprus

Gold 83

tax changes

{tax&legal}

TAX NEWS recent changes and amendments to tax legislation in cyprus

Pay your

taxes online

T

he Department of Inland Revenue has announced that it can now accept online payment by credit card for a number of taxes provided that the amount is not overdue and does not exceed â&#x201A;Ź1,000. You can pay the following online: Personal income tax withheld at source (PAYE); Selfassessment of income tax due for individuals and legal persons; Withholding or self-assessment of the Special Defence Contribution on interest, rent, and dividends; Self-assessment of the Special Defence Contribution, where a deemed distribution arises.

This method cannot yet be used for payment of provisional income tax or payment in respect of assessments issued by the Cyprus Tax Authorities.

Interest and Penalties on Tax Liability

T

he House of Representatives passed a new law in November, waiving all interest and penalties imposed for tax liabilities incurred in previous tax years up to 2008. The new tax law specifically states that the taxpayer is liable to the principal amount plus a 5% penalty.

All previous penalties and interest imposed on the tax principal amount due will be waived and effectively written-off. The new legislation entered into force on 12 December, the date of its publication in the Official Gazette, and will remain in force until 30 March 2012. The objective is the efficient and prompt collection of tax liabilities as part of the recent package of austerity measures.

info: Information provided by HTT Audit Limited, Nicosia

84 Gold the international investment, finance & professional services magazine of cyprus

Tax Law Amendments â&#x20AC;&#x201C; Transfer Fees

Amendments to the Department of Land and Surveys (Fees and Duties) Law are now in force after being published in the official Gazette on 2 December, 2011.

The amendments to the law are the following: Any transfers of immovable property that take place between 2 December 2011 and 1 June 2012 are exempt from any transfer duties, if the transaction is subject to Value Added Tax (VAT).

In cases where immovable property transactions are not subject to VAT, exemption is provided for 50% of the transfer duties. This exemption applies to plots of land, buildings or interests in land or indivisible interests that are sold for the first time since the date of the relevant planning permission

issuance and the contract is prepared and filed for the first time at the Land Registry prior 1 June 2012.

In cases where there is an agreed and filed contract with the Land Registry before 1 June 2012, the above exemptions will still apply even if registration of the title takes place after this date.

The above temporary exemptions do not apply, if the documents for the sale of the immovable property were submitted and then withdrawn after the adoption of the tax law amendment. They do not apply to agreements executed before 2 December 2011.

Law Amending the Special Contribution for the Defence Law

Amendment to the Income Tax Law

W

here a company director, or an individual shareholder, or his/her spouse, or any relative up to second degree, receives an amount as a loan or financial support from the company, then that person is deemed to have obtained a monthly benefit in kind equal to 9% per annum on the above amount. This benefit in kind will be included in the individual’s personal taxable income and suffer tax in accordance with Income Tax Law. The particular tax must be deducted from the individual’s monthly salary and paid to the Inland Revenue on a monthly basis according to the PAYE scheme.

In the case where contributions to Social Insurance Fund, Redundancy Fund, Human Resource Development Fund, Social Cohesion Fund, Pension Fund and Provident Fund have not been paid within the tax year due, then these expenses and the related salaries will not be tax allowable for the calculation of the Company’s taxable income.

If and only if, the abovementioned contributions (including any penalties and interest) are paid in full within two years from the last due date, the previously disallowed expenses will be tax deductible in the tax year during which they were paid.

Article 39 (Loans to directors) which provides for 9% interest to be applied on loans or any financial assistance provided by a company controlled by not more than five persons, to its directors, or its individual shareholders, or relatives up to second degree of relative is abolished.

The above changes are effective as from 1 January 2012.

The rate of the Special Defence Contribution imposed on dividends has been increased from 17% to 20% for the tax years 2012 and 2013.

The Special Defence contribution will be imposed on dividends paid by a Cyprus resident company to another Cyprus resident company, after four years from the end of the year in which the profits were created.

Any dividends derived directly or indirectly

Value Added Tax

The basic VAT rate increased from 15% to 17% on 1 March 2012. The reduced VAT rates of 5% and 8% are not affected.

By changing Schedule 10 of the Law, all taxable persons making taxable supplies of goods or providing services to nontaxable persons must issue and deliver legal receipts. These legal receipts must include the following essential information: Issue Date

➊

➋ ID number ➌ Name, address and registration

number of the taxable person

Detailed enough description of the goods offered or services provided

➍

➎ Total amount payable including of VAT ➏ For each rate of VAT, the total amount

payable (including VAT) and the applicable VAT rate.

Indication of whether the transaction involves deposit payment, part consideration, cash payment or otherwise.

➐

If an invoice is paid in cash, the issue of a legal receipt is not required as the cash invoice may also be used as a receipt. Any person failing to comply with the abovementioned regulations will be subject to a penalty of 20% of the value of the transaction. On the other hand, any person failing to issue and deliver the designated receipt at the time of the transaction will be subject to a fine up to €1,700 or imprisonment up to 3 years or both.

from dividends on which Special Defence Contribution has already been paid, are exempted from Special Defence Contribution in any future distribution.

The above amendments are effective as from 1 January 2012. The amended rate of Special Defence Contributions will be applied on income derived or deemed to have been derived or accrued in the period from 1 January 2012 until 31 December 2013.

BOOK REVIEW Principles of International Taxation

By Angharad Miller and Lynne Oats (Bloomsbury Professional, 2012) RRP: £104.50 (£99.27 from Amazon.co.uk) Written by two leading specialists in this area, the book guides you through the key issues and practical aspects of international tax practice, demonstrating how different global tax systems interact and how to prevent paying more tax than necessary.

Examples of policies adopted in other countries are included along with specialist commentary and guidance.

The book is broken down into five sections: Key background information on how tax systems are designed and administered; an introduction to crucial issues such as globalisation, residence and double taxation; what happens when a company moves from doing business with another country to doing business in another country; the main anti-avoidance strategies adopted by governments to minimise the loss of tax revenues through international tax planning; and how the international tax planning arena will evolve and develop. Coverage includes both UK and EU legislation and regulation plus key cases and rulings. Complicated double taxation concepts are clearly illustrated with examples and diagrams to help the reader quickly understand how they apply in practice.

the international investment, finance & professional services magazine of cyprus

Gold 85

hotels

{lifestyle}

The Sultan’s Suite, Çirağan Palace Kempinski, Istanbul, Turkey Royal Penthouse Suite, Hotel President Wilson, Geneva, Switzerland

By Nathalie Kyrou

Suite

Luxury

Staying in the world’s most expensive hotels 86 Gold the international investment, finance & professional services magazine of cyprus

Hugh Hefner Sky Villa Palms Resort, Las Vegas, USA Intercontinental Hong Kong

2012 Traveler’s

Choice Awards For the

World’s Best Hotels 1.The Phoenix Resort, San Pedro, Belize 2. Anastasis Apartments, Imerovigli, Greece 3. Hamanasi Adventure and Dive Resort, Hopkins, Belize 4. Riad Kniza, Marrakech, Morocco 5.Derwent House Boutique Hotel, Cape Town, South Africa 6. Castlewood House, Dingle, Ireland 7. Palais Amani, Fes, Morocco 8. LockLein County House, Killarney, Ireland 9. Tambo del Inka, Urubamba, Peru 10. Golden Well (U Zlate Studne), Prague, Czech Republic 11. Elysian Hotel Chicago, Chicago, United States 12. Wellness Hotel Casa Barca, Malcesine, Italy 13. Strandhill Lodge and Suites Hotel, Strandhill, Ireland 14. Alchymist Residence Nosticova, Prague, Czech Republic 15. Charterouse Hotel, Torquay, England

i

Penthouse Suite, Hotel Martinez, Cannes, France

The Presidential Suite, The Raj Palace Hotel, Jaipur, India

n 1829, a highly influential hotel was designed in Boston, Massachusetts, whose guests included celebrated novelist Charles Dickens.

Tremont House, considered to be the world’s first hotel (in the modern sense of the word), set the standard for luxury accommodation and was the model for many hotels built in major cities at this time. It incorporated many hotel firsts, including indoor toilets and baths, a reception area, locked rooms for guests, free soap and bellboys. Despite this long list of innovations, it is probably best known as the first hotel with indoor plumbing and running water.

Hotels have come a long way since then.

With luxury amenities and ground-breaking designs, they can be places of comfort and wonder to which one can escape for business or pleasure. The evolution in style, technology, architecture and décor is, however, mirrored by an evolution in prices. Today, the world’s topclass hotels are so expensive to stay in that they can usually only be enjoyed by the extremely wealthy. The philosophy behind all extravagant luxury goods is, of course, that money is worth nothing unless you spend it. So if you’re looking for an interesting way to offload a few hundred thousand euros, here are the Top 15 destinations that will be happy to make you feel much better than you ever do at home.

Royal Penthouse Suite, Hotel President Wilson, Geneva, Switzerland

How much? US$65,000 per night For the security-conscious (or paranoid) there’s nowhere better (or more expensive) to stay than this penthouse suite which offers panoramic views of Lake Geneva and Mont Blanc.

Claiming to be the largest and most luxurious hotel suite in the world, this safehouse for visiting heads of state and privacy-conscious celebs, taking up the entire top floor of the hotel, has bulletproof doors and windows as well as its own private elevator leading up to an apartment with 12 rooms, 12 bathrooms a Steinway

grand piano, billiard room, library and private fitness centre Breakfast is (surprisingly) not included! www.hotelpwilson.com Tel: +41 229066666

The Presidential Suite, The Raj Palace Hotel, Jaipur, India

How much? US$45,000 per night This palatial suite was a former Maharaja’s residence, and at nearly 1,500 square metres, is one of the biggest in Asia. Comprising a 4th floor apartment lavishly decorated in gold leaf, stucco, ivory and mirror work, the suite has a private roof terrace and swimming pool offering panoramic views of the pink city of Jaipur.

It even has its own private museum. www.rajpalace.com, Tel: + 91 1412634077;

Ty Warner Penthouse Suite, Four Seasons Hotel, New York, USA

How much? US$41,836 per night This 400 square metre penthouse takes the entire top floor of this magnificent hotel, offering a 360-degree view of the Manhattan skyline.

The suite has 9 rooms with walls inlaid with mother of pearl and is adorned with gold and platinum-woven fabrics. There is an indooroutdoor Zen garden, a stupendous chandelier, cantilevered glass balconies and floor-to-ceiling bay windows set beneath 7.6-metre cathedral ceilings. Perks include a butler, personal trainer, chauffeur and a library. www.fourseasons. com/newyork, Tel: +1 7585700;

Penthouse Suite, Hotel Martinez, Cannes, France

How much? US$37,500 per night Located on the famous Croisette, Hotel Martinez boasts a Michelin-starred restaurant, a piano bar and huge private beach. If you stay in the penthouse, you’ll be immersed in art deco. A sitting room, dining room, 2 bedrooms, 2 bathrooms with hammam, shower, spa bath, dressing room and sauna will be at your disposal, as well as a huge terrace overlooking the Bay of Cannes. Splash out and

the international investment, finance & professional services magazine of cyprus

Gold 87

Top 3in Cyprus

hotels

Presidential Suite, Le Méridien Limassol Spa & Resort, Limassol, Cyprus

The Royal Villa, Grand Resort Lagonissi, Athens, Greece

The Royal Villa, Grand Resort Lagonissi, Athens, Greece

Aether 3 Bedroom Suite, Anassa Hotel, Polis, Cyprus www.anassa.com.cy, Tel: +357 26888000 How much? €4,680 per night

enjoy the kind of accommodation that film stars attending the Cannes Film Festival are used to. www.hotel-martinez.com, Tel: +33 4 92 98 73 00;

Hugh Hefner Sky Villa Palms Resort, Las Vegas, USA

How much? US$35,487 per night The Hugh Hefner Sky Villa, high in the Palms’ Fantasy Tower, is fitted out with everything Playboy, including racy artwork selected by Hef himself. A private glass enclosed elevator lifts you to the entrance of your 9,000 square feet of exclusive living space, with 2 bedrooms and amenities including pop-up plasma TVs, a fully-equipped gym with a sauna and spa-style treatment room, a media room, a full bar, a poker table and an eight-foot round rotating bed. Invite your closest playmates and end the night in your private outdoor, Playboy jacuzzi pool. You can even have your own butler…but you’ll have to provide your own Bunnies. www.palms.com, Tel: +1 7029427777

Ty Warner Penthouse Suite, Four Seasons Hotel, New York, USA

Designed by Parisian designer, Joelle Pléot, this 225 square metre suite features a spacious living room, decorated with bespoke handcrafted furniture, a fully equipped kitchen, dining room, a small study and the option of 2 or 3 bedrooms. The worldrenowned Anassa luxury 5-star resort overlooking Chrysochou Bay boasts a luxury Roman-style Thalassa Spa as well as five ‘farm-fresh’ restaurants. The suite also boasts a private infinity-edge pool (heated on request), a complimentary fully stocked bar, Blu-ray DVD, Wi-Fi, a private fax and printer, an entertainment system with iPod connectivity, and much more.

The Royal Suite, Four Seasons Hotel, Limassol, Cyprus www.fourseasons.com.cy, Tel: 357-25858000 How much? €2,600 per night The 334 square metre suite includes a bedroom, a large open-plan living room and a dining area for eight persons, an executive office area with desk and library, a master bathroom and separate guest washroom.

The bedroom is furnished with a king-size bed, extensive ‘His & Hers’ wardrobes, a large electronic safe and a 42” plasma screen and Hi-Fi system. The Master Bathroom comes complete with a Jacuzzi and a separate walk-in steam room. On an elevated deck there is a shallow swimming pool and Jacuzzi, sun-beds, coffee table and chairs where you can enjoy the panoramic views of the sea and gardens below.

Presidential Suite, Le Méridien Limassol Spa & Resort, Limassol, Cyprus www.lemeridienlimassol.com,Tel: 35725862000, How much? €2,470 per night

The award-winning Le Méridien Limassol Spa & Resort is situated amid 100,000 square metres of gardens on a secluded and serene strip of Limassol’s coastline. The 162 square metre Presidential Suite offers distinct luxury and privacy, with panoramic views of the sea and pool and its own outdoor private pool and deck area. There is a separate lounge and dining/kitchen area, equipped with a coffee/tea maker, 24hrs room service, a Jacuzzi and walk-in shower. Other VIP amenities include an iPod docking station, CD/DVD player umbrellas and sunbeds.

88 Gold the international investment, finance & professional services magazine of cyprus

How much? US$34,356 per night With a butler, private chef and pianist at your beck and call, there’s little need to lift a finger when you stay in this 3 bedroom villa. If you are feeling more active you can take advantage of the indoor pool, outdoor heated pool and gym, as well as a steam bath and massage room. There’s also a nearby private marina and beach. The ultimate place to stay for a luxurious Greek holiday. www.lagonissiresort.gr, Tel: +30 2291076000;

Presidential Suite, Hotel Cala di Volpe, Sardinia, Italy

How much? US$32,736 per night Perfect for the summer social scene, the Presidential Suite overlooks the sparkling waters of the Costa Smeralda. Renowned as one of the most beautiful suites in the world, this 3 bedroom luxury pad stands above the rambling towers and roofs of the Porto Cervo resort. An understated blend of Mediterranean style and sensational bay views, the suite also has its own pool on the private roof terrace, along with an outdoor gym and a wine cellar from which you can select and enjoy some of Italy’s finest vintages. www.luxurycollection.com/caladivolpe, Tel: +39 789976111;

Villa La Cupola Suite, Westin Excelsior, Rome, Italy

How much? US$31,000 per night For the ultimate La Dolce Vita, check into the stunning Villa La Cupola suite in Rome’s Westin Excelsior which has hosted celebrities, statesmen and artists, all visiting the Eternal City since the beginning of the last century. It enjoys a prime location in the celebrated Via Veneto district, and it is known for outstanding service in an exceptional setting. One of the largest suites in Europe, and recently undergone a $7 million renovation, the Villa La Cupola is inspired by ancient Rome, and is lavishly decorated with marble, stained glass and frescoes. There is beautiful wraparound terrace, a private spa with sauna, whirlpool and steam bath, and even a private 8 screen cinema. www.westinrome.com, Tel: +39 0647081

Ritz-Carlton Suite, Ritz-Carlton, Tokyo, Japan

How much? US$25,050 per night At 120 square meters, the Carlton Suite has many of the usual big suite highlights: Frette linen sheets, an oversized marble bathroom, huge beds, flat-screen TVs and individual rain

Royal Suite, Burj Al Arab, Dubai, UAR

Ritz-Carlton Suite, RitzCarlton, Moscow, Russia

Royal Towers Bridge Suite, Atlantis, Bahamas

Villa La Cupola Suite, Westin Excelsior, Rome, Italy Ritz-Carlton Suite, RitzCarlton, Tokyo, Japan

BOOK REVIEW shower booths. The icing on the very tall cake is the fact that it tops the highest skyscraper in Tokyo and has marriage proposal-worthy views over the Imperial Palace, Roppongi Hills and Mount Fuji. www.ritzcarlton.com, Tel: +81 334238000

Royal Towers Bridge Suite, Atlantis, Bahamas

How much? US$25,000 per night This 10 room suite with gold sofas, cushions, gilt mirrors and chandeliers is pure ostentatious glamour. The grand foyer dazzles the eye with an elaborate floor made of four kinds of marble, as do the breathtaking balcony views.

The 15-metre-long living room contains a baby grand piano, and the vast entertainment center comes with a full-service bar. The butler is the cherry on top! www.atlantis.com, Tel: +1 2423633000

Royal Suite, Four Seasons Hotel George V, Paris, France

How much? US$24,550 per night There is a pair of Royal Suites at Hotel George V, both of which have private terraces overlooking the historic art deco fountain of the Three Graces. Adorned with magnificent French antiques, these vast suites display 18thand 19th-century fine art, glittering crystal chandeliers glitter and huge vases of pale pink roses. The master bedrooms have spacious marble bathrooms with steam rooms, sauna and walk-in dressing rooms. Showy luxury steeped in history. www.fourseasons.com, Tel: +33 149527000

Royal Suite, Burj Al Arab, Dubai, UAR

How much? US$18,716 per night This iconic hotel screams opulence and is one of the world’s most luxurious (self-proclaimed 7-stars’ worth). Since its 1999 opening, the sail-shaped Dubai resort has been a benchmark of extravagance and the ultimate in Arabian hospitality. All of the suites (the word “room” does not exist here) are arranged over two floors and have whirlpool baths, living/ dining areas and dedicated butlers. This shimmering tower, peaking at 321m, offers the latest in technology. Take advantage of reception desks on every floor, rain showers and jacuzzis in every suite, a Rolls Royce fleet, butlers on call around the clock and dining under the sea (sic) and stars. You even get the services of a private shopper while you relax at the spa. www.jumeirah.com, Tel: +971 43017777

Ritz-Carlton Suite, Ritz-Carlton, Moscow, Russia

How much? US$18,000 per night The floor-to-ceiling windows in the RitzCarlton Suite frame an unparalleled view of the Kremlin, Red Square, St. Basil’s Cathedral and Christ the Saviour Cathedral. With classic Russian Imperial furnishings, the 232-squaremetre suite comes with a spacious living room, dining area, library, office, grand piano and heated flooring, perfect for bone-chilling Moscow winters. www.ritzcarlton.com, Tel: +7 495225 8888

Religion for Atheists: A non-believer’s guide to the uses of religion

By Alain de Botton (Hamish Hamilton, 2012) RRP: £18.99 (£11.79 from Amazon.co.uk) The debate between believers and non-believers is finally moved on by Alain de Botton’s latest book, which is a bold attempt to convince those who don’t believe in the existence of God that it is possible to derive important lessons from religions around the world without accepting any supernatural claims they might make.

The author is unequivocal about his own atheistic stance but the position that many people adopt today, he says, should not prevent them from appreciating the effective ways religions have provided to meet what he calls the needs of souls that tend all too often to be left unattended in our secularized world but remain none the less existent. Rather than mocking religions, agnostics and atheists should instead steal from them, he argues, because they are packed with good ideas.

He also proposes that we should look to religions for insights into how to build a sense of community, make our relationships last, get more out of art, overcome feelings of envy and inadequacy, and much more.

the international investment, finance & professional services magazine of cyprus

Gold 89

the last word

Feeding the Hungry Beast Media reports on Greece are clouding the judgment of European policy makers

By Peter Economides

G

reece is entering its fifth year of recession.

Severe wage and pension cuts called for by the toughest austerity programme in modern history are taking their toll and affecting the lives of every Greek.

The sacrifices that are being made are monumental. They affect life today and they will continue to affect the life of the next generations.

Yet the European rhetoric is focused on the lazy and corrupt stereotype. And this stereotype is, I am afraid, the prevailing view amongst European policy makers as they decide the fate of this nation.

There is another story about Greece.

And it plays out in the streets of Athens, within a stone’s throw of the Acropolis, symbol of so much that is sacred to the Western world. It’s the story of a proud ancient city in flames ... played out by riot police and hooded gangsters with innocent citizens, exercising their democratic right to protest, often caught in the middle.

Greece does not sell cars, television sets and washing machines to the world.

And the Greeks have undersold their superb olive oil to Italian repackers at

just €2 per litre. The Greeks rely on tourism for the bulk of their revenue.

And the media focus on the flames of Athens does not build tourism.

I read a brilliantly honest piece last week by Barnaby Phillips, a journalist at Al Jazeera.

In this article he answered a Greek who confronted him and asked, “Why do you only show what is bad in Greece?”

Here is Mr. Phillips’ answer: “What happens next in this small country on the edge of Europe affects all of us. So, be it economic salvation, or else disastrous default, we’ll carry on

The modern news machine is a hungry beast, and we have to keep on feeding it reporting this story.

“Reporters based in the former war zones of the Balkans now rotate in and out of Greece, in time for the latest strike or debt deadline. We bring tripods, light cases and satellite phones.

“We look for defining images – riots

in Syntagma Square! – and the worst of us have got our clichés ready for our scripts: Greek Tragedy! Greek Drama! ”Never mind that for most, local language skills don’t extend beyond ‘Kalimera’. That won’t stop the confident-sounding analysis on the 24 hour news channels.

“And our appetite is voracious. The modern news machine is a hungry beast, and we have to keep on feeding it.”

I understand his point. And I understand the media well enough to know that his answer is right. That’s the way things work.

But the Greeks need a break. The majority of Greeks are honest, hardworking citizens who pay their taxes (as long as they can afford to.)

They are Europeans who aspire to a European future. They understand that there is a price to be paid. And they are paying it. Just walk the streets of Athens to confirm this.

European policymakers need to understand this. But with all the media coverage, it’s not surprising they don’t.

The risk is that their judgment is clouded. The Greeks need their continued support. And they also need the breathing space to do what they know needs to be done. Hey, it’s their future we are talking about. And the future of their children.

info: Peter Economides is a Brand Strategist and founder of Felix BNI. He is a former Executive Vice President and Worldwide Director of Client Services at global advertising agencies McCann-Erickson Worldwide and TBWA\Worldwide. He has worked on some of the world’s most iconic brands including Coca-Cola, Apple, Absolut, illy, Audi and Nike. In Cyprus, he has been involved in branding projects for Bank of Cyprus, Sigma Television and easy-forex. Peter is based in Athens.

90 Gold the international investment, finance & professional services magazine of cyprus

More than just a holiday destination with pristine white beaches and 300 days of sunshine, Cyprus can also cater to your business needs ranging from registering and setting up your company’s operations to managing your EU, North African and Middle Eastern clients at a considerably lower cost.

As well as being an EU country and a member of the European Monetary Union since 2008, Cyprus enjoys the lowest corporate tax rate in the EU of 10%. Cyprus belongs to those jurisdictions on the OECD White List which have substantially implemented the internationally agreed tax standard.

In addition to this, Cyprus provides efficient business services, has a transparent legal and regulatory system and is committed to sustainable growth.

“Columbia’s growth and expansion over the years is attributed to the uniqueness of Cyprus; being the island’s strategic position at the crossroads of three continents, its comprehensive legal framework, double tax treaties regime,

communication

system,

banking system, infrastructure in general and last but not least its highly educated labor force.”

Captain Dirk Fry, Managing Director Columbia Ship Management Ltd

“The the

favorable excellent

infrastructure,

business

climate,

telecommunications the

well

educated

and skilled human resources, the favorable tax rates and the proximity to the Middle East and Africa markets, were some of the key factors that enabled NCR to decide to move its regional offices to Cyprus in the 80’s.

Cyprus welcomes both visitors and investors to work here, so, if you are searching for a new business base, consider Cyprus. It’s more than just beaches and sun.

Cyprus Investment Promotion Agency Tel + 357 22 441133 Fax + 357 22 441134 www.cipa.org.cy info@cipa.org.cy

The Ministry of Commerce, Industry and Tourism Tel + 357 22 867100 Fax + 357 22 375120 www.mcit.gov.cy/ts perm.sec@mcit.gov.cy

Gradually, NCR managed to expand the office in Cyprus to cover also all the African Countries.”

Managing Director of NCR Cyprus, Mr. George Flouros