GOLD MAGAZINE ISSUE 42

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ISSUE 42 SEPTEMBER 14 - OCTOBER 13, 2014 PRICE â‚Ź4.95 powered by:

the international investment, finance & professional services magazine of cyprus EVGENIOS C. EVGENIOU CEO, PwC Cyprus (Platinum Sponsor)

Nicos Anastasiades President of the Republic of Cyprus

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Christodoulos Angastiniotis Chairman, CIPA (Co-organiser)

Michalis louis CEO, Eurobank Cyprus (Gold Sponsor)

CIPA awards Celebrating International

INTERNATIONAL

INVESTMENT

Brought to you by

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Investment in Cyprus

WINDSOR BROKERS LTD. PROVIDING FOR MANY GENERATIONS AHEAD

LOUCAS MARANGOS CEO, TFI Markets Ltd. (Silver Sponsor)

G4S CYPRUS SECURING YOUR WORLD

KIRILL ZIMARIN CEO, RCB Bank Ltd.

JOHNY ABUAITAH CEO, Windsor Brokers Ltd.

ELENA LEONTIOU Head of Media, IMH (Co-organiser)

ASBIS

PREMIUM SERVICES & STRONG SUPPORT

MARLOW NAVIGATION CO. LTD. TOTAL COMMITMENT

IBM CYPRUS

RCB BANK LTD.

COMMITTED TO INNOVATION

TRUST & RESPONSIBILITY

SOTOS ZACKHEOS Special Presidential Envoy to Russia SERHEI KOSTEVITCH CEO, ASBIS

HERMANN EDEN Chairman, Marlow Navigation Co. Ltd.

SPYROS POULIDAS General Manager, IBM Greece & Cyprus

PHILIP IVESON Head of Long Haul and Rest of World, Tui Travel PLC

ANDREAS PATERAKIS Regional Managing Director for Southern Europe, G4S

TUI TRAVEL PLC MAKING TRAVEL EXPERIENCES SPECIAL

Photo by Jo Michaelides The award winners, sponsors and organisers were photographed at the Presidential Palace.

THIS PRESTIGIOUS EVENT WOULD NOT HAVE BEEN POSSIBLE WITHOUT THE VALUABLE CONTRIBUTION OF OUR SPONSORS.

SILVER SPONSOR

ORGANISERS

GOLD SPONSOR

PLATINUM SPONSOR

UNDER THE AUSPICES OF H.E. THE PRESIDENT OF THE

presents

CIPA International Investment

Awards hosted by

MAGAZINE

www.pwc.com.cy

Focus on tomorrow, starting today

We listen. We learn what you want to do and we help you create the value you are looking for. Value that is based on the knowledge that our more than 900 local professionals draw from 184.000 experts in 157 countries. We focus on the provision of Assurance, Advisory, Tax and Global Compliance Services.

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Issue 42 September 14 – October 13, 2014

8 EDITORIAL 10 UP FRONT 16 FIVE MINUTES WITH…

18

THE CEREMONY FOR THE 3RD

CIPA INTERNATIONAL INVESTMENT AWARDS,

COVER STORY

CIPA International Investment Awards 2014

HOSTED BY GOLD, TOOK PLACE AT THE PRESIDENTIAL PALACE IN NICOSIA ON 10 SEPTEMBER. WITH PHOTOS FROM THE GALA DINNER, THE SPEECHES AND PRESENTATIONS, WE BRING YOU ALL THE DETAILS OF THE AWARDS CEREMONY, TOGETHER WITH PROFILES OF THE 8 AWARD WINNERS, COMMENTS FROM THE EVENT’S SPONSORS AND MORE.

+ OPINION ON THE ROAD TO RECOVERY By John Patrick Hourican

72

BOOM AND BUST By George Mountis

78

ISLAMIC FINANCE By Nondas Cl. Metaxas

80

A NEW COLD WAR: IS CYPRUS PREPARED? By Dr Olga Kandinskaia

82

Insurance Solutions, on his ambitions for the company.

92 | DOCTOR! DOCTOR! Demetris Loizides on the island’s legal system.

74

96 | FUNDING THE RECOVERY The Cyprus investment funds industry has the potential to play a key role in creating economic growth.

98 | EMPLOYEES WOULD TRADE PERSONAL DATA FOR A BETTER WORK DEAL

56

FEATURE

44 | GET YOUR FATCA FACTS RIGHT! Everything you need to know about the US Foreign Account Tax Compliance Act.

48 | FINANCIAL INNOVATION Chelco VAT Ltd focuses exclusively on the complexities of Value Added Tax.

50 | ARBITRATION ADVOCATION

44 56 | CRYSTAL CLEAR Interview with Nicolas Nicolaides, Executive Manager of Transparency International - Cyprus.

74 | SHIPPING CONNECTS

Deutsche Post DHL study looks at how we will live and shop in 2025.

ADVERTISING SUPPLEMENT

59 | PROFESSIONAL QUALIFICATIONS AND SKILLS TRAINING COURSES IN CYPRUS 83 | LUXURY CARS

Cyprus hosts next month’s 2014 International AGM & Conference of the Women’s International Shipping & Trading Association (WISTA).

76 | A FAMILY AFFAIR As Zela Shipping starts its second half-century of business, its core values remain the same.

What needs to be done to promote Arbitration in Cyprus and to promote Cyprus 88 | STRIKE WHILE THE IRON’S HOT as a centre for Arbitration. How Israel and Cyprus may exploit the latest opportunities for cooperation.

54 | GLOBAL E-TAILING 2025

SPECIAL

90 | MAN WITH A PLAN Luke Benfield, Founder and CEO of Turnkey

6 Gold THE INTERNATIONAL INVESTMENT, FINANCE & PROFESSIONAL SERVICES MAGAZINE OF CYPRUS

102 {money} 106 {economy} 108 {tax & legal} 110 {lifestyle}

EDITORIAL

Celebrating Foreign Investment

O

n 10 September, the 3rd annual CIPA International Investment Awards ceremony, hosted by Gold, took place at the Presidential Palace in the presence of President Anastasiades and a large gathering of company executives, politicians, foreign investors, senior officials and others. The awards, which recognize foreign investment in Cyprus, are now seen as being among the most prestigious for foreign companies operating on the island. Last year, just six months after the near-collapse of the banking system and the bailout agreement with the Troika, the key message to emerge from the statements by the winning company CEOs was that they were committed to Cyprus and determined to stick by the country through thick and thin. A year later, with considerable progress having been made by the banks and the broader economy, the overall feeling was even more positive. While it might be expected that the President would tell his distinguished audience that he is confident that Cyprus will exit the Memorandum of Understanding with the Troika earlier than anticipated, the degree of optimism expressed by the representatives of the award-winning companies was impressive. From firms that have been active on the island for 50 years (IBM Cyprus) to more recent arrivals such as TUI Travel Plc, the message was the same: they are happy here, they have no intention of moving out and, indeed, in many instances, they are expanding their local operations. This is good news for Cyprus because, despite the positive reviews by the Troika of the Government’s implementation of the economic adjustment programme, the popular view continues to be that “the foreigners who destroyed us” are continuing with their diabolical plans with the approval of the Government. This is reinforced by the populist slogans of the opposition parties in the House of Representatives and by sections of the media. Luckily, the foreign companies operating out of Cyprus understand that the Government’s insistence on carrying out everything agreed with the Troika of international lenders is not a result of weakness but rather of a clear understanding of the importance of reform. It is regrettable that the opposition prefers to play political games rather than joining forces with the Government in order to ‘sell’ what are, in some cases, admittedly difficult but nonetheless essential policies if Cyprus is to regain and improve upon its past status as a thriving economy and a leading regional centre of professional and financial services. We at Gold are convinced that the sooner everyone accepts the need to improve the country’s infrastructure and, in some cases, change its very mentality, the faster the recovery will be. Those present at the CIPA International Investment Awards ceremony on 10 September indicated that they understand this very well and that they, at least, consider the Government’s approach to be the correct one. In this month’s issue, you can see and read all about the event and the companies that were honoured at this year’s ceremony, including views and opinions from the awardwinning companies’ and event sponsors’ representatives, but there is much more in the form of exclusive interviews, interesting and varied opinions on a broad range of issues. This is what Gold is all about. Enjoy this month’s magazine.

John Vickers, Chief Editor john@imhbusiness.com

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ISSUE 35 FEBRUARY 14 - MARCH 13, 2014 PRICE €4.95

THE INTERNATIONAL INVESTMENT, FINANCE & PROFESSIONAL SERVICES MAGAZINE OF CYPRUS

BANKING How Spain restructured its system

BITCOIN The Future of the Digital Currency

INTERVIEWS Peter Greenberg Matthew Kidd Alexis Tsielepis

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8 Gold THE INTERNATIONAL INVESTMENT, FINANCE & PROFESSIONAL SERVICES MAGAZINE OF CYPRUS

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Effy Pafitis, Chloe Panayides CONTRIBUTORS TO THIS ISSUE

John Patrick Hourican, Dr Olga Kandinskaia, Nondas Cl. Metaxas, George Mountis, ART DIRECTION

Anna Theodosiou SENIOR DESIGNER

Alexia Petrou PHOTOGRAPHY

Jo Michaelides MARKETING EXECUTIVE

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UP FRONT

DHL

NEW

becomes official platinum partner of FC Bayern Munich

D

HL is now an official platinum partner and the new international logistics and e-Commerce full-service partner of FC Bayern Munich. The six-year agreement running until 2020 was announced at the Allianz Arena in Munich. As logistics partner, DHL has been ensuring for years that FC Bayern Munich merchandise is reliably passed on to fans. The football club now also intends to profit from the international e-Commerce expertise of the logistics industry’s leading company. “FC Bayern Munich is now a global player whose fan base is constantly expanding in a large number of countries and on all continents,� said Karl-Heinz

MeritKapital Announces CSE Direct Clearing Membership Limassol-based 0U]LZ[TLU[ Ă„YT 4LYP[2HWP[HS 42 OHZ MVYTHSS` HUUV\UJLK P[Z HKTP[[HUJL PU[V [OL *`WY\Z :[VJR ,_JOHUNL HZ H Âş)YVRLY HUK *SLHYPUN TLTILY Ă„YTÂť ;OL KL]LSVWTLU[ ZOV\SK H[[YHJ[ JVUZPKLYHISL [YHKPUN PU[LYLZ[ HU VMĂ„JPHS WYLZZ YLSLHZL Z[H[LZ VUJL [OL UL^ )HUR VM *`WY\Z ZOHYLZ YLZ\TL [YHKPUN VU [OL L_JOHUNL L_WLJ[[LK PU [OL MV\Y[O X\HY[LY VM [OPZ `LHY ¸42 NHPULK JVUZPKLYHISL SVJHS L_WVZ\YL [OPZ WHZ[ `LHY š [OL YLSLHZL JVTTLU[Z ¸HZ P[ HJ[LK HZ [OL Ă„YZ[ IYVRLY VM )HUR VM *`WY\Z IHPSLK PU KLWVZP[Z HUK ZOHYLZ HUK OHZ ZPUJL ^VYRLK VU U\TLYV\Z V[OLY Z\JO KLHSZ VM SHYNL ^VY[O š 4LYP[2HWP[HS PZ H *`:,* SPJLUZLK PU]LZ[TLU[ Ă„YT [OH[ KLHSZ WYLKVTPUHU[S` ^P[O MVYLPNU JSPLU[Z HUK PZ WHY[PJ\SHYS` HJ[P]L PU -P_LK 0UJVTL HUK ,X\P[` [YHKPUN HZ ^LSS HZ *\Z[VKPHS HJ[P]P[PLZ ^P[OPU [OL ZWOLYL VM KLWVZP[HY` HUK ZL[[SLTLU[ ZLY]PJLZ 0[ OHZ LZ[HISPZOLK [YHKPUN SPULZ ^P[O U\TLYV\Z ^LZ[LYU JHWP[HS IHURZ HUK PU[LYKLHSLY IYVRLYZ I\[ HSZV ^P[O THQVY 9\ZZPHU WSH`LYZ

Rummenigge, Chairman of FC Bayern Munich’s Executive Board. “With DHL acting as our experienced, globally respected partner, we intend to further expand our online touchpoints with our fans around the world and thus our international merchandising.� “We are really looking forward to our strategic alliance with such a highly respected partner as FC Bayern Munich,� said Frank Appel, CEO of Deutsche Post DHL. “Our services will create a strong base that will enable the team to build on its business success both nationally and internationally. Two strong, internationally respected brands like FC Bayern Munich and DHL will also profit from each other in the sponsoring partnership they have set up.�

NEW AIRBUS A320S FOR AEGEAN AIRLINES

A

egean Airlines has announced that it has brought forward the delivery dates of five new Airbus A320s (ordered before the beginning of the economic crisis in Greece but later deferred) and has ordered two additional A320s in a new deal. Delivery of the 7 aircraft will begin in June 2015 and be completed by early 2016. The aircraft will be the first Α320s in Aegean’s fleet with an increased take-off weight capacity of up to 78 tons, allowing expansion of their flight range and offering new scope for enlargement of the Aegean network, even if the flights are operated from the most southern bases of the company (Heraklion, Rhodes, or Larnaca). Aegean Airlines, which operates daily flights from Larnaca to Athens, has expressed an interest in buying Cyprus Airways.

10 Gold THE INTERNATIONAL INVESTMENT, FINANCE & PROFESSIONAL SERVICES MAGAZINE OF CYPRUS

OPAP

CEO

D

emetris Aletraris has been named the new CEO of OPAP Cyprus, succeeding Michalis Himonas as head of the organisation, following the latter’s recent departure to continue his career in the pharmaceutical industry in Greece. Aletraris began his career in 1992 in KPMG Peat Marwick in London, later transferring to KPMG Cyprus. He has since held management positions in a range of companies. From 2004 to 2012 he served as General Manager of CP Reinsurance Co Ltd, and previously held the positions of Chief Financial Officer of General Insurance of Cyprus Pancyprian Insurance. He holds a Bachelor of Science in Economics from the London School of Economics and Political Science and is a Chartered Accountant. OPAP Cyprus is a subsidiary of OPAP Greece, with Himonas having spearheaded the foreign investment company since commencement of his contract on September 1, 2011. OPAP is a public company based in Athens, Greece that exclusively operates and manages numerical lottery and sports betting games in Greece. OPAP has five subsidiaries: OPAP Cyprus Ltd, which operates lottery agencies in Cyprus; OPAP SPORTS Ltd that operates sports betting agencies in Cyprus; OPAP International Ltd; OPAP Investment Ltd, and OPAP Services S.A

6TH STELIOS AWARDS NEXT MONTH

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PwC Cyprus Welcomes 70 Young University Graduates

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wC Cyprus recently welcomed 70 young university graduates who will join the firm’s training programmes to qualify as chartered accountants. Evgenios Evgeniou, CEO of PwC Cyprus and Philippos Soseilos, Head of Human Capital, welcomed the new members of PwC at an event during which they had the opportunity to learn more about the organisation and their training programme.

Evgeniou stressed that, “despite the challenging economic conditions, our organisation continues to invest in the future by recruiting talented young university graduates and investing in their training and professional development�. During the financial year ended on 30 June 2014, PwC recruited over 100 people, including 41 university graduates who embarked on PwC’s 2013 ACA and ACCA professional accounting training schemes.

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surpassing the previous record of $2.16 million set by another copy of the same comic in 2011. Stephen Fishler of Metropolis Comics said that the opportunity was “just too good to pass up. It’s hard to believe that a kid’s 10 cent comic could be worth that much money, but it is Superman.� The superhero was created by Cleveland writer Jerry Siegel and artist

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$3.2 million for Superman’s Debut ne of the bestpreserved copies of the first Superman comic sold for $3.2 million, a record price for a comic book, in August. Superman made his debut in Action Comics #1, which cost 10 cents in 1938. New York dealers Metropolis Comics parted with the impressive sum to acquire the mint-condition copy, far

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Π:MIT 1V\MTTMK\]IT 8ZWXMZ\a 0WTLQVO[ Joe Shuster. Around 200,000 copies of the first Action Comics were printed. One percent of the proceeds of the latest sale will go to the Christopher and Dana Reeve Foundation, the paralysis charity named after the late actor (who played the part of Superman in four movies) and his wife.

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UP FRONT

NEW AWARD FOR SAXO BANK

S

axo Bank, the online multi-asset trading and investment specialist, has been named Best White Label Solution Provider and Multi-Asset Liquidity Provider in the Global Banking and Finance Review Awards 2014. The awards recognise innovation, achievement and inspirational changes taking place within the global financial community. White label partnerships have become the cornerstone of Saxo Bank’s strategy with 10 banks adopting the service in 2013 alone, bringing the total number of partnerships to 115 across 50 countries. The firm pioneered FX white labelling for banks and brokers in 2001 and since then has continued to develop its offering, helping its partners to provide their end clients

access to trading in multiple asset classes, greater liquidity and risk management technology through a single account. Saxo Bank’s trading engine, Saxotrader, is available via desktop, web or mobile. Launched in 1998, Saxo was one of the first banks to offer online trading and has maintained its reputation of staying ahead of the curve through the ongoing development of its electronic offering. Saxo Bank was also the winner of the Global Banking and Finance Review Award for Best Mobile Trading Platform.

CITYWEALTH INTERNATIONAL

FINANCIAL CENTRE

AWARDS 2015

CYPRUS LAW FIRMS SHORTLISTED

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12 Gold THE INTERNATIONAL INVESTMENT, FINANCE & PROFESSIONAL SERVICES MAGAZINE OF CYPRUS

Arts in the Square

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Double tax agreement between Cyprus and Lithuania now in force

T

he double tax agreement between Cyprus and Lithuania, which was signed in June 2013, is now in force and will take effect from 1 January 2015. Under the agreement there is no withholding tax on dividends paid by a company resident in Lithuania to a company (but not a partnership) resident in Cyprus provided that the recipient is the beneficial owner of at least 10% of the shares in the company paying the dividend. Otherwise the maximum rate of withholding tax is 5%. There are no withholding taxes in Cyprus on dividends paid to nonresidents. Interest paid by a resident of one state to a resident of the other is taxable only in the state of residence of the recipient. The maximum withholding tax on royalties is limited to 5%. Gains derived by a resident of one contracting state from the alienation of immovable property situated in the other contracting state, or from the disposal of immovable or movable property associated with a permanent establishment situated in the other contracting state, may be taxed in the contracting state

in which the immovable property or the permanent establishment is situated. All other gains, including gains on disposal of shares in “propertyrichâ€? companies, are taxable only in the country of residence of the disponor. Meanwhile, Cyprus and Guernsey have signed a comprehensive double taxation agreement. The agreement will enter into force once the necessary ratification procedures have been completed and will have effect from the following 1 January. The agreement provides for dividends, interest and royalties paid by a resident of Guernsey to a recipient in Cyprus to be taxable only in Cyprus, and vice-versa. The 2004 agreement on taxation of savings income between Cyprus and Guernsey will continue in force, but the double taxation agreement will be much more beneficial to taxpayers once it takes effect.

UP FRONT

THE WORLD'S

RICHEST COUNTRIES

W

1

hen it comes to wealth, a country’s status in the world is best measured by its GDP per capita. The higher this is, the more disposable income its people have, allowing them access to more goods and services and a higher standard of living. Below is a list of the top 10 richest countries in the world, as analyzed recently by the International Monetary Fund (IMF) on the basis of GDP per capita. Cyprus ranks 31st on the list and 14th in the EU.

LUXEMBOURG GDP per capita: â‚Ź89,520

6HUYLFHV HVSHFLDOO\ EDQNLQJ DQG ÀQDQFH DFFRXQW IRU WKH PDMRULW\ RI HFRQRPLF RXWSXW /X[HPERXUJ LV WKH world’s second largest investment fund centre (after the United States), the most important private banking FHQWUH LQ WKH HXUR]RQH DQG (XURSHҋV OHDGLQJ FHQWUH IRU UHLQVXUDQFH FRPSDQLHV 6N\SH DQG $PD]RQ DUH MXVW WZR RI WKH PDQ\ LQWHUQHW FRPSDQLHV WKDW KDYH VKLIWHG WKHLU UHJLRQDO KHDGTXDUWHUV WR /X[HPERXUJ

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NORWAY GDP per capita: ₏75,576 1RUZD\ KDV REWDLQHG RQH RI WKH KLJKHVW VWDQGDUGV of living in the world, in part by having a large DPRXQW RI QDWXUDO UHVRXUFHV LQFOXGLQJ ÀVK IRUHVWV minerals but especially oil and natural gas, the discovery of which changed the country’s economy in the 1960s. An estimated 30% of state revenues are now generated from the petroleum industry.

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Its most important eco cialist chemicals, largely the production of spe RRGV VFLHQWLÀF DQG DO J XWLF KHDOWK DQG SKDUPDFH and musical ents precision measuring instrum H[SRUWV DUH ZLVV VW 6 JJH H EL 7K HQWV LQVWUXP s/electronics chemicals (34%), machine ruments/ (20.9%), and precision inst ices sector – watches (16.9%). The serv rance, tourism insu and king ban lly especia s – is also tion nisa orga l iona and internat important.

6

45

â‚Ź65,125

GDP per cap SWITZERLAND g, nomic sector is manufacturin

DENMARK GDP per capita: â‚Ź44,155

Once a predominantly agricultural country, Denmark KDV H[SDQGHG LWV LQGXVWULDO EDVH RYHU WKH \HDUV ,WV PDLQ H[SRUWV DUH PDQXIDFWXUHG JRRGV IXels (oil, natural gas), chemicals, agricultural SURGXFWV PHDW DQG ÀVK SURGXFWV $FFRUGLQJ to the IMF, Denmark has the world’s highest minimum wage. Among its biggest companies are Carlsberg, Danske Bank, ECCO and the /HJR *URXS

SWEDEN GDP pe

â‚Ź40,268

r capita: Timber, hydropowe r and iron ore cons titute the resource base of the Swedish econ omy, while its engineering se ctor accounts for 50 % of RXWSXW DQG H[SRUWV 7HOHFRPPXQLFDWL RQV WKH automotive industry and the pharmaceu tical industries are also of great importanc e. Sweden LV WKH ZRUOGŇ‹V QLQWK O DUJHVW DUPV H[SRUW HU and the country ran ks among the highe st for telephone and Int ernet access pene tration.

9

14 Gold THE INTERNATIONAL INVESTMENT, FINANCE & PROFESSIONAL SERVICES MAGAZINE OF CYPRUS

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QATAR GDP per capita: â‚Ź74,793

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AUSTRALIA GDP per capita: â‚Ź48,387

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SINGAPORE GDP per capita: â‚Ź40,861

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CANADA GDP per capita: â‚Ź40,283

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INTERVIEW

five minutes with...

Agis Agathocleous Partner, Tax Services, Deloitte

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he recent double taxation treaties signed with Switzerland and Guernsey are seen as important in strengthening the island’s network of trade and economic relations. Which countries should be next on the Government’s list? Cyprus’ current DTT network should be expanded to countries having emerging and diverse economic growth, such as African countries like Ghana, Nigeria, Zambia, Morocco and Tunisia, which are seeking new foreign investments. Others in Latin America (Brazil, Chile and Argentina) should also be considered, together with Indonesia, Pakistan and Malaysia and ‘strategic’ countries like Hong Kong, Australia and Mexico. Aside from drawing up new agreements, it is also important to renew existing DTTs. Which agreements are most urgently in need of renewal and why? The renegotiation of the treaty with India should be considered a priority, since recent tax law changes in India have restricted treaty benefits and created problems for structures set up through Cyprus for investments in India. The South African and Chinese treaties should also be renegotiated so as to take current economic changes into account since both countries have greatly expanded their economies in the years since concluding their current treaties with Cyprus. Additionally, the Double Taxation Treaty with the

UK was concluded a long time ago and it could be renegotiated in the light of changes to many provisions of domestic Cyprus and UK legislation. Finally, the DTT with Unites States, which was concluded thirty years ago, definitely needs to be renegotiated since today, Cyprus is a member of the European Union, in full compliance with OECD standards. What are your comments regarding Cyprus› current network of Bilateral Investment Treaties (BITs)? Since Cyprus is competing against a number of other countries in attracting foreign investments, it is imperative that it differentiates itself from its competitors by offering security of investment protection through the signing of BITs with investment host nations. BITs encourage, promote and protect reciprocal investments. One important feature of BITs, which makes them different from any other treaty, is the fact that foreign investors can take the host state before an arbitral tribunal if they believe that the treaty has been violated, challenging a wide range of government measures in a final and binding arbitral decision (no separate arbitration agreement is required to be negotiated between the investor and the state). Cyprus is currently party to 28 bilateral investment treaties, including two awaiting ratification (Italy and Russia). Compared

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to the number of BITs that five major competitors (Switzerland, the Netherlands, UK, Luxembourg and Malta) have signed, this is the second smallest number, behind Malta (22) and way behind Switzerland’s total of 127. On a positive note, Cyprus has signed BITs with developing countries attracting foreign investments such as Belarus, China, India and Russia. In addition, Cyprus has signed BITs with Iran, Israel and Jordan but it has not yet signed DTTs with these three countries. So much work still remains to be done, in your view? Yes. Cyprus should seek to ratify the BITs with Russia and Italy that were signed prior to 1 December 2009 and can be ratified without explicit permission from the EU. The Government should aim to sign a BIT with Ukraine in order to complement the recently signed DTT. Specific permission will be required from the EU for this. We need to agree on a list of ‘target countries’ for the negotiation of new BITs and consider whether it would be beneficial to sign DTTs with Iran, Israel and Jordan in order to complement the BITs already in place with these countries. Finally, it would be helpful to publicize the BITs that Cyprus has signed on websites and other media used by potential investors such as the websites of the Cyprus Investment Promotion Agency (CIPA) and the Ministry of Finance.

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Presented by PwC Gold Sponsor: Eurobank Cyprus Silver Sponsor: TFI Markets The Winners: IBM Cyprus Marlow Navigation Co. Ltd. G4S Cyprus ASBIS Windsor Brokers Ltd RCB Bank Ltd TUI Travel Plc Lifetime Achievement Award: Sotos Zackheos

THE KEYNOTE SPEAKER AT THE EVENT WAS THE WELL-KNOWN BRAND EXPERT JONATHAN GABAY WHO ADDRESSED THE 450 INVITED GUESTS ON “NATION BRANDING: THE SOUL OF A GOOD IDEA”. THE PAPAGEORGIO STRING QUARTET & SOPRANO ALIKI CHRYSOCHOU PERFORMED LIVE DURING THE GALA DINNER EVENT PHOTOGRAPHY: Philippos Christou, Harris Kyprianou, Lefteris Solomonides. PORTRAIT PHOTOGRAPHY & COVER: Jo Michaelides. Thanks to Cassoulides Masterprinters, Hilton Park Hotel, Lanitis Brothers & Photos Photiades Group.

Sevent ners. E in AsGof thethe w P o y 19h photents b

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3RD CIPA INTERNATIONAL INVESTMENT AWARDS The gardens of the Presidential Palace in Nicosia were the impressive venue for the glittering 3rd CIPA International Investment Awards ceremony which took place on Wednesday, 10 September in the presence of President Nicos Anastasiades and some 450 invited guests. With music from soprano Aliki Chrysochou and the Papageorgio String Quartet, and a keynote address by brand expert Jonathan Gabay, the evening was a huge success.

President Nicos Anastasiades

Presenters Melanie Steliou and John Vickers, Chief Editor of Gold

President Anastasiades and Sotos Zackheos

Soprano Aliki Chrysochou

Johny Abuaitah, CEO, Windsor Brokers, with Demetra Kalogirou, Chairwoman, CySEC, and Nicos Kouyialis, Minister of Agriculture, Natural Resources & Environment

Phillip Iveson, Head of Long Haul & Rest of World, TUI Travel PLC, with (r) Yiorgos Lakkotrypis, Minister of Energy, Commerce, Industry & Tourism, and Michaliss Louis, CEO, Eurobank Cyprus

Phillip Iveson, Head of Long Haul & Rest of World, TUI Travel PLC

Johny Abuaitah, CEO, Windsor Brokers

Spyros Poulidas, General Manager, IBM Greece & Cyprus, (l) with Philippos Patsalis, Minister of Health and Loucas Marangos, CEO, TFI Markets

Sotos Zackheos

Spyros Poulidas, General Manager, IBM, Greece & Cyprus Hermann Eden, Chairman, Marlow Navigation Co. Ltd

Hermann Eden, Chairman, Marlow Navigation Co. Ltd, with (l) Marios Demetriades, Minister of Comons & Works, and Christos Mavrellis, Deputy munications Chairman, n, Cyprus Investment Promotion Agency

Andreas Paterakis, Regional Managing Director for Southern Europe, G4S, with (l) CIPA Chairman Christodoulos and CCCI President Phidias Pilides

Serhei Kostevitch, CEO, ASBIS

Serhei Kostevitch, CEO, ASBIS, with (l) Costas Kadis, Minister of Education & Culture, and Christos Michaelides, Chairman, Cyprus Employers and Industrialists Federation

President Anastasiades and Sotos Zackheos

Kirill Zimarin, CEO, RCB Bank Ltd.

Kirill Zimarin, CEO, RCB Bank Ltd., with (r) Harris Georgiades, Minister of Finance, and Evgenios Evgeniou, CEO, PwC Cyprus

Andreas Paterakis, Regional Managing Director for Southern Europe

CIPA INTERNATIONAL AWARDS

IN PICTURES

George Pamboridis, Pamboridis LLC, Nicholas Tofarides, Tofarco and Alexis Nicolaou, Dias Publishing House

Nikos Shacolas and Michael Zampelas

Andreas Neophytou and Jan Meijering, ĘĽHYSV^ 5H]PNH[PVU *V

Aliki Chrysochou

Phidias Pilides, CCCI

George Flouros, NCR

Michael Spanos, Green Dot Cyprus

Christos Patsalides, Christos Patsalides LLC and Stelios Malekkos, ANT1 Stephanie Panayi and Konstantina Logotheti, PwC

Loucas Marangos, TFI Markets and Yiorgos Lakkotrypis

Nicolas Theocharides, UPM and Chrysovalantis Karagiannis, Lidl

Thomas Kazakos, Cyprus Shipping Chamber and Irena Georgiadou, Hellenic Bank

Theodoros Aristodemou, Aristo Developers

Christodoulos Angastiniotis, CIPA, Georgia Christou and (r) Angela Angastiniotis

Spyros Droussiotis, S. Droussiotis Real Estate and Marios Lanitis, Lanitis Group

Michalis Avraam, Michalis Avraam & Partners Ltd.

GALA DINNER PRAWN & SMOKED SALMON ROLL SERVED WITH GUACAMOLE AND DRESSED WITH SOUR CREAM DILL SAUCE

STUFFED CHICKEN FILLET WITH WILD MUSHROOMS, PINE NUTS & PARMESAN CHEESE SERVED WITH CAKE POTATOES, STEAMED VEGETABLES GLAZED WITH COMMANDARIA SAUCE

With their meal (see menu), the 450 guests enjoyed Petritis 2013 red and Adesitis 2011 white wines from the Kyperounda Winery. Barton & Guestier champagne was served during

CHOCOLATE SOUFFLE SERVED WITH VANILLA ICE CREAM & CHOCOLATE SAUCE

the pre-event cocktail.

Eu Eurobank Cyprus treated guests to a presentation box of Pralina macaroons while PwC Cyprus provided pens by Cerruti.

Keynote speaker Jonathan Gabay

Dinos Lefkaritis, Petrolina (Holdings)

Polys MIchaelides, Insurance Asociation of Cyprus

Glafkos Mavros and Natalia Soutakova, AS Expobank

Charis Zachariou and George Bachos (right and left), LMZ Transoil and Stefanos 2HZZPHUPKLZ JLU[LY Ęž\YVIHUR *`WY\Z

Sotos Stephanou, Aeolos Travel and Daphne Tang, IMH

:[LĂ„ +YHRV\ 0UZ\YHUJL (ZZVJPH[PVU of Cyprus and Stelios Christodoulou, General Insurance Cyprus

CIPA INTERNATIONAL AWARDS

IN PICTURES Constantinos Herodotou, Head of Privatisations

Thierry Noyer and Michalis Panayides, Carrefour

Christis Christoforou, Deloitte Anna Homenko, Fiduciana Trust (Cyprus)

Michael Leptos, Leptos Group

Walid Holmieh, Bank of Beirut

Costas Mavrocordatos, PwC

George Stylianou, ForexTime, Peter Economides, P.G. Economides & Co. and Andreas Andreou, CySEC

Odysseas Christodoulou, Globaltraining Elena Michael, Steelnet

Christos Christodoulou, Trust International Insurance Co (Cyprus)

0HPU +V^LSS Ë Ę¸Ë€ +HYPV Vitale, Halliburton Angela Mazzey, TUI Travel PLC

Marios Andreou, PwC

Abdulaziz Al-Dekhail, Embassy of the State of Kuwait

Christina Sarri, Polakis Sarris & Co LLC

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Irena Georgiadou and Marinos Yianopoulos, Hellenic Bank

CIPA INTERNATIONAL AWARDS

IN PICTURES

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Kyriakos Kokkinos, ʢʜʥ

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“ I.T. HAS THE CAPACITY TO BE A GREAT STRENGTH FOR CYPRUS” Spyros Poulidas

BM has been present in Cyprus since 1963 and has a longstanding business and technological heritage. The company is committed to innovation and helping its clients transform their businesses so as to dynamically address new opportunities, enhance flexibility, speed execution and ultimately achieve profitable growth. It draws upon the world’s leading systems, software and global services capabilities and, in all its activities, IBM focuses on creating, developing and leading in the invention, development and manufacture of the industry’s most advanced information technologies. It then translates these advanced technologies into real business value for its customers. In Cyprus, IBM in collaboration with an ecosystem of local Business Partners, focuses on the implementation and management of end-to-end Information Technology (IT) projects. IBM’s know-how has played an important role in the development of the country’s economy and significantly contributed towards the implementation of IT projects of strategic importance. According to Spyros Poulidas, General Manager, IBM Greece & Cyprus, IT can help the country address its challenges, noting that the development of Intelligent Technologies and Digital Infrastructure are key drivers of public sector transformation. “I believe that Information Technology has great potential to boost entrepreneurship and innovation in Cyprus,” he says. “Drawing on an emerging generation of highly skilled local expertise, IT has the capacity to be a great strength for Cyprus both as an enabler and as a source of competitive advantage.” IBM has established the world’s deepest portfolio in data and analytics, through significant investment on developing skills and expertise, but also through a significant number of acquisitions in the last few years. In addition, IBM has created the world’s most complete cloud portfolio and is investing 1.2 billion to expand a massive network of local cloud hubs for businesses worldwide. Along these lines, says Spyros Poulidas, “IBM Cyprus is working with organizations from Public and Private sector to leverage Data, Cloud, Social Business and Mobile Technologies in order to deliver citizen and client services more effectively and efficiently and to help transform the next generation of business”

THE INTERNATIONAL INVESTMENT, FINANCE & PROFESSIONAL SERVICES MAGAZINE OF CYPRUS

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arlow Navigation Co. Ltd was established in 1982 by Hermann Eden who currently holds the position of

“MARLOW STILL BELIEVES IN CYPRUS AS A BUSINESS BASE” Hermann Eden

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Chairman. “In the beginning, the tax regime played an important part in our decision to establish ourselves here,” he says, “but, more and more, we came to realise and appreciate how it is paramount to have the right people working with you is. Taxes, of course, are key, but, throughout the years, the number one attraction of being in Cyprus that has emerged for us is the quality of our people here in the office. That’s what counts.” Originally providing crew management services only, the company now offers the full range of ship management activities. Over the last 32 years, Marlow Navigation has grown to become one of the leading ship management companies with offices in 14 countries. The company employs more than 800 shore staff (340 of whom work at its Limassol headquarters) and in excess of 13,000 seamen on board vessels under its management at any given time. “We have a broad base of representative offices in many, many places,” says Hermann Eden, “though our business is still very much concentrated on Europe and, more specifically, Germany. “Things are changing, however, and our aim is to become more international with regard to the kind of services we offer and their geographical reach. We are currently assessing offshore markets closely and we have already started some activities. Should the occasion arise in Cyprus, we would of course be more than interested to consider how we might be involved.” The events of March, 2013 affected almost all businesses here in Cyprus and Marlow Navigation was no exception. However, they were not exactly new for the company: “The late ‘70s and early ‘80s were critical for shipping,” says Hermann Eden, “and the situation then was as severe as anything we are experiencing today. However, we came to Cyprus, at the start of a very prosperous period. Marlow still believes in Cyprus as a business base and we trust that, having taken specific measures, it will quickly regain the trust of international enterprises.”

PARTNER. SHIP. REDEFINED. For over 30 years, your requirements and needs have been defining our work, our motivation, and our commitment. In response to changing markets, we are continuously developing more cost-efficient services, stronger customized solutions, and more flexible processes. But beyond that, we are there for you. Anytime and everywhere. Contact us and let us show you what a true definition of partnership can be. 13, Alexandrias Str. marlow@marlow.com.cy P.O. Box 54077 www.marlow.com.cy Cy-3720 Limassol T: +357 2588 2588 Cyprus F: +357 2588 2599

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indsor Brokers’ history goes back to 1988 when the company began its operations with a handful of employees and a capital of just CY £10,000. It was the first Investment Firm offering financial derivatives to be licensed and regulated by the Central Bank of Cyprus – and later by the Cyprus Securities and Exchange Commission – and the first broker in the MENA region to open up the world of online trading to investors of all levels. Thanks to its conservative stance and work ethic, which have defined its finely-tuned risk management policies and internal procedures, and an eagerness to innovate, the company has received international awards for its products, services, partnership programs and customer support. Today, Windsor is a leading provider of financial services to retail and corporate investors in over 80 countries from its headquarters in Limassol, the Windsor Business Center. Employing a team of over 120 people of 20 different nationalities, its capital adequacy ratio is at an outstanding 40% – a figure that is 5 times the minimum required percentage and currently one of the highest in the FX industry. Windsor Brokers CEO Johny Abuaitah admits that the financial crisis did affect the company but he stresses: “It hasn’t altered our main strategy of maintaining our base in Cyprus.” He also believes that government policy has put the island “on the correct course” but he notes that there is still work to be done if Cyprus is to be viewed as a competitive international business centre: “Time is money and bureaucracy in Cyprus consumes much of our valuable time,” he says. The company has made a significant contribution to the development of the financial services industry in Cyprus, sustaining the local economy by generating employment and income through foreign direct investment and thanks to its longstanding commitment to supporting and promoting Cyprus as a strategic business hub. Stricter regulation, says Johny Abuaitah, will lead to Cyprus having “quality rather than quantity when it comes to financial firms, and this is positive. From my point of view as a businessman, I see a bright future for Cyprus.”

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“FROM MY POINT OF VIEW AS A BUSINESSMAN, I SEE A BRIGHT FUTURE FOR CYPRUS” Johny Abuaitah

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CB Bank Ltd is one of the best-known banks in Cyprus, one that enjoys the trust and respect of clients and partners here and overseas. Over its 20year history, it has evolved from a small international banking unit into Cyprus’s second largest bank by volume of assets, servicing thousands of local and international clients from almost 50 countries. Just 10 years ago, the Bank’s equity stood at around US$20 million and it served about 100 companies. Today, RCB Bank Ltd has more than US$400 million of equity, and assets worth more than US$10 billion. It is continuously opening new branches and offering new products and services. In Cyprus, the Bank currently operates branches in Nicosia and Limassol and is planning to expand its operations across the island through a dedicated network. So, what is the secret of RCB’s success? “Trust, responsibility and an ability to exceed expectations are what characterizes RCB Bank Ltd’s relationship with its clients,” says CEO Kirill Zimarin. “Trust is a key concept in the banking business and when choosing a bank, clients are not just looking for a chequebook and an attractive bank card; they are also seeking a partner,” he says. “A partner that will offer advice, helping them find the right financial solution, preserve what they have and make it grow. A partner that, even in times of crisis, will remain a source of stability and confidence. Trust is priceless: it is difficult to win, and even harder to retain.” Despite the turbulent months of 2013, over the past year the Bank has increased its client base by one-third and the number of client transactions grew by over 50%. Asked how the Bank views its future in Cyprus, Kirill Zimarin is adamant: “Cyprus is still attractive as an international business centre and we believe in the country’s future and huge potential”. He points out that, this year, the Bank has launched a special programme of lending to Cypriot companies. “RCB Bank Ltd is showing a glimpse of the future, which will provide the incentives for development for the rest of the country”, he says.

“CYPRUS IS STILL ATTRACTIVE AS AN INTERNATIONAL BUSINESS CENTRE AND WE BELIEVE BG MA> <HNGMKR L FUTURE AND HUGE POTENTIAL” Kirill Zimarin

THE INTERNATIONAL INVESTMENT, FINANCE & PROFESSIONAL SERVICES MAGAZINE OF CYPRUS

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4S is the worldwide leader in Security Services with a £7 billion turnover, and the second largest employer in the world, with 650,000 employees present in 120 countries. The company positions itself as strategic partner with national governments in a long- term relationship, contributing know-how and expertise in making critical infrastructure safe and secure. Major examples of this collaboration are ports, airports, power plants, border security, the national grid, pipelines, oil refineries and more. The origins of G4S Cyprus date back 30 years to 1984 when Andreas Argyrou set up Iamac Electronics, the first electronics security company on the island. Four years later, Group 4 Securitas acquired a shareholding in the local company and the organisation became Group 4 Securitas Cyprus Ltd. In 2004 the company was renamed G4S after the merger of Group 4 and Securicor. G4S Cyprus has grown from just 4 employees 30 years ago to well over 700 full-time staff today. The company’s services include static guarding services, cash logistics services, storage of art and valuables, technical security and safety installations, monitoring services and various care and justice services, including cleaning, catering and tagging. It aims to further expand in the latter as well as in the Oil &Gas sector. Andreas Paterakis, Regional Managing Director for Southern Europe says, “Looking at Cyprus as an important player in South Eastern Europe, we are ready to participate in PPP-PFI projects for the construction of prisons, detention facilities and asylum centres, for, traffic cameras, electronic monitoring of offenders, and so on.” Even though times have undoubtedly been hard in Cyprus over the last 18 months, all the indications are that G4S Cyprus will emerge stronger and healthier from the financial crisis as the country itself continues to recover. It is one of the very few companies in Cyprus that has continued to expand its workforce and to invest in future growth. “We are proud to have played a critical and stabilizing role during the financial crisis,” says Andreas Paterakis, “and today we are confident that we will continue to contribute and participate in the regeneration of the Cypriot economy.”

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“WE WILL CONTINUE TO CONTRIBUTE AND PARTICIPATE IN THE REGENERATION OF THE CYPRIOT ECONOMY” Andreas Paterakis

Static Guarding Roving Patrols Key Holding Cash Logistics and Solutions Valuables and Art Storage Solutions Integrated Security Systems and Services Home and Retail Alarms Music and Public Address Systems Alarm and CCTV Monitoring and Response Services Cleaning and Facility Management Support Care and Justice

17, Diianeiras Str. 2045 Strovolos, P.O. Box 23989, 1687 Nicosia Tel.: 22 745300, Fax: 22 424832, Email: info@cy.g4s.com www.g4s.com

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“CYPRUS PROVIDES EXCELLENT FINANCIAL AND AUDIT SERVICES” Serhei Kostevitch

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SBIS is one of the leading distributors of Information Technology products in Europe, the Middle East and Africa, Central and Eastern Europe, the Baltic States and the Former Soviet Union. It combines this broad geographical reach with a wide range of products distributed on a “one-stop-shop” basis. The Group’s IT product portfolio encompasses a wide range of components, blocks and peripherals, and mobile IT systems. It currently purchases the majority of its products from leading international manufacturers such as Intel, Seagate, Samsung, Microsoft, Toshiba, Dell, Apple, Lenovo and Hitachi but a significant part of its revenue is from sales of IT products under its own Prestigio and Canyon labels.

ASBIS started business in Belarus in 1990 and, 5 years later, moved its headquarters to Limassol. Through three master distribution centres (located in the Czech Republic, the United Arab Emirates and China), the Cyprus headquarters support s a network of 33 warehouses in 26 countries. This network supplies products to the Group’s in-country operations and directly to its customers in approximately 75 countries. As CEO Serhei Kostevitch recalls, Cyprus’s convenient geographical location, together with its favourable company legislation, tax regime and the high calibre of its people made the decision for ASBIS to invest in Cyprus a very easy one. “It is not only because it is a beautiful place to live in. Cyprus has Double Tax Treaties with most of the countries in which the company

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operates, and it provides excellent financial and audit services,” he explains. ASBIS managed to weather the events of March 2013 without having to alter its business model, thanks in part to the benefits which Cyprus offers to International companies. “As such we are much less dependent on the local market than other firms,” says Serhei Kostevitch. “At the time, insurers and creditors were questioning how we were going to manage, but in reality we hardly experienced any negative effects.” In addition to maintaining its headquarters in Cyprus, the Group also serves the local market with tablets, smartphones and other products. “Our aim, internationally, is to develop one of our key brands, Prestigio, in the Western European markets,” Kostevitch says.

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“CYPRUS IS ONE OF THE MOST IMPORTANT DESTINATIONS FOR US AND WE NEED TO MAINTAIN THAT POSITION” Philip Iveson

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UI Travel is one of the world’s leading leisure travel groups, with over 220 trusted brands in 180 countries and more than 30 million customers. “Making travel experiences special” is the slogan that underpins everything TUI Travel does and keeps its focus on providing the unrivalled choice, professionalism and confidence its customers and stakeholders can rely on, now and in the future. Philip Iveson, Head of Long Haul and Rest of World, believes that, given the events of the last 18 months, the CIPA International Investment Awards are, “more than ever, vital in recognising the achievements of stakeholders of the economy. It is important for key stake-

holders to work together – in our case, to encourage our customers to come back to Cyprus year after year – and events like this really add to that, encouraging everyone to work together.” TUI Travel is a truly global business, employing approximately 55,000 people and operating in 31 key source markets worldwide. As a dynamic, influential company, it is committed to responsible leadership in the travel sector. Its head office is in the UK and TUI Travel PLC is listed on the London Stock Exchange as a member of the FTSE 100 and FTSE4Good indices. The business is grouped into three sectors – Mainstream, Accommodation & Destinations and Specialist & Activity. From the most popular holiday brands to

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an unparalleled collection of specialist travel providers, the Group offers the breadth and depth of experiences and expertise for every conceivable type of traveller. TUI Travel continues to deliver sustainable growth through its unique holiday experiences, increasingly distributed online, whilst leveraging its scale as one organisation. Every year, TUI brings 450,000 visitors to Cyprus. Philip Iveson says, “Cyprus is one of the most important destinations for us and we need to maintain that position. There’s a lot of competition out there but Cyprus really has differentiated itself. We can really sell the key strengths of the destination and we need to continue to develop this product to ensure that it retains its competitiveness, not just now but going into the future.”

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uring an illustrious career spanning some 40 years, Sotos Zackheos has always remained faithful to his core vision of celebrating Cyprus, and ensuring the promotion of the island abroad. Born in Nicosia in 1950, he studied Law and Economic & Political Science before joining the Ministry of Foreign Affairs where he was appointed to the position of Director in various divisions, including Political Affairs and Economic Affairs. He also served as Director of the Office of the Permanent Secretary. He later spent six years in the Cyprus Embassy in Moscow and was the country’s first Resident Ambassador in China, with concurrent accreditations to the Far East. “The role of diplomacy should not be restricted to the promotion of political relations,” he says. “Throughout my career I paid particular attention to the promotion of economic relations between Cyprus and other countries.” He was Cyprus’ Permanent Representative to the United Nations in New York from 1997-2003, when he returned to Cyprus and was appointed Permanent Secretary of the Ministry of Foreign Affairs. The following year, he was honoured by the Cyprus Hotel Association in recognition of his contribution to the promotion of tourism in Cyprus, spurred, in part, by his instrumental role in changing the visa regime for Russian citizens travelling to the island. Today, as the President of Cyprus’ Special Envoy to Russia, Sotos Zackheos describes his role as that of a bridge between the Russia and Cyprus. “Through the long-term relationships I’ve built, and the trust created over many years, I have been able to contribute to the preservation

“WE STILL HAVE A LOT OF THINGS TO DO BEFORE WE CAN RELAX AND SAY THAT THE JOB HAS BEEN DONE AND DONE WELL” Sotos Zackheos

and the enhancement of this relationship, which is indeed very special.” On receiving the Lifetime Achievement Award from CIPA, he says, “I’ve never sought any public recognition but, of course, it is always welcome, especially from an organisation with which I have

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worked very closely in order to sustain economic and investment relations between Cyprus and Russia. This effort is nowhere near finished, and we still have a lot of things to do before we can relax and say that the job has been done and done well.”

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“THE PEOPLE AND ORGANISATIONS THAT ARE SUPPORTING CYPRUS THROUGH ITS CURRENT DIFFICULTIES DESERVE SPECIAL RECOGNITION” Evgenios Evgeniou

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his year’s CIPA International Investment Awards were presented by PwC Cyprus. The firm strives to offer its clients the value they are looking for: value that is based on the knowledge its teams are able to draw from 184,000 experts in 157 countries and based on experience adapted to local needs. PwC Cyprus focuses on two main areas: Assurance & Advisory Services, and Tax & Legal Services. Its position is strengthened by the 900-plus professionals working in its offices located throughout Cyprus. Evgenios C. Evgeniou, CEO of PwC Cyprus, says that, as the leading professional services firm on the island, it is committed to supporting initiatives that promote Cyprus as a place to do business and to invest.

“The CIPA International Investment Awards, organised under the auspices of the President of the Republic, mark at the highest level the importance of foreign investments for Cyprus,” he notes. “They provide an opportunity to thank and to celebrate the contribution to the Cyprus economy of people and organisations that have demonstrated their trust by investing here.” Evgeniou feels that, perhaps precisely because of the economic downturn, it is important to celebrate the contribution made to Cyprus by foreign investors. “The people and organisations that are supporting Cyprus through its current difficulties deserve special recognition,” he says. If the island is to attract essential new foreign investment, the CEO of PwC Cyprus believes that investors need a stable

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political and macro-economic environment, a stable and predictable tax system, transparent and efficient licensing and business regulation processes and more. “More importantly they are looking for innovative business opportunities with good returns. In my view these are not just incentives for foreign investments; they are the fundamental ingredients for a modern competitive country for all Cypriots.” Evgeniou is quietly confident that Cyprus will move forward and the resilience of its people will not be wasted. “The political instability in the broader region once more highlights the importance of European Cyprus as a regional business hub; natural gas discoveries open new possibilities and the innovative ideas of our young entrepreneurs give hope for a new economy to emerge.”

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he Gold Sponsor of the 3rd CIPA International Investment Awards was Eurobank Cyprus, which has been operating in Cyprus for the past seven years. Focusing on the wholesale side of business – specifically on Corporate & Investment Banking, Private Banking, International Business Banking, and Treasury Sales – its operating model is distinct from the rest of the banking industry in Cyprus. Its strong capital base, substantial liquidity, and solid financial results allow Eurobank Cyprus to continue its dynamic growth and its ongoing support of the Cyprus economy. Michalis Louis, CEO of Eurobank Cyprus describes the CIPA International Investment Awards as being of “profound importance, offering the opportunity to both private stakeholders and the community to honour foreign companies that are active in Cyprus, and, thus recognise and celebrate business as a whole. It is with great pleasure that we are supporting these awards. The key point of the event is to promote professionalism. We believe that it is our duty to honour those who have excelled in their sphere.” Cyprus has a plethora of advantages for international business. In the view of Michalis Louis, the key advantages are the country’s human resources, followed by the tax regime, the legal framework, the numerous professional service offices available, and the fact that the banking system has been recapitalised. “Overall, Cyprus offers an ideal base in which a foreign investor may build his or her company,” he says. There is always room for improvement, of course, and the CEO of Eurobank Cyprus believes that the country needs to move away from what it has known so far and develop a new model. “Tourism is one such sector where we need to update our model. Another is professional services, which need to be enriched. We could look to our competitors, such as Luxembourg, to see what they’ve already done, what has worked, and what hasn’t. Copying isn’t always such a bad thing; on the contrary, we should copy what our competitors have done, which have proven positive results. “Once we become more flexible, more efficient, and effective, we will be poised on a very profitable path for the future.”

“WE BELIEVE THAT IT IS OUR DUTY TO HONOUR THOSE WHO HAVE EXCELLED IN THEIR SPHERE” Michalis Louis

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he Silver Sponsor of the 3rd CIPA International Investment Awards was TFI Markets, whose services are mainly geared towards corporate clients with the objective of reducing the costs of international payments and transfers and the protection of profit margins from the volatility of foreign exchange market. Imports, exports, prepayments, repayments, payroll, and purchases or sales of assets/liabilities are samples of corporate payments handled by TFI for its clients. TFI is licensed by the Central Bank of Cyprus and the CySEC. Loucas Marangos, CEO of TFI Markets believes that, for small economies such as Cyprus which, due to their size, are largely dependent upon the attraction of foreign investment to secure their survival, entities such as the Cyprus Investment Promotion Agency (CIPA) and events such as the CIPA International Investment Awards are a necessity. “They are as much a means of recognising the importance of foreign investors to our island as they are an opportunity to bring together both local and foreign professionals to exchange ideas and cement relationships,” he says. TFI Markets has shown unremitting support for the CIPA Awards since their inauguration three years ago, believing that the future prosperity of the island is very much dependent upon the attraction of foreign investors. “The effort and the message inherent in the CIPA Awards are of vital importance, and we would not want to not be a part of this!,” says Marangos. 2013 was undoubtedly a difficult year but the CEO of TFI Markets believes that “Cyprus has succeeded in retaining the island’s foreign investments – winning the bet, so to speak – and has managed to slowly but steadily to encourage new investment. Now we must align our economic choices with the regulations that define our inclusion in the European Union,” he says. “Our goal should be the creation of a working foundation and infrastructure, and a small, flexible economy that can easily and quickly respond to the needs of the international economic community. Once trust has been re-established in the banking sector, I am hopeful that Cyprus will be able to regain its composure as a prime hub for foreign investment.” 40 Gold THE INTERNATIONAL INVESTMENT, FINANCE & PROFESSIONAL SERVICES MAGAZINE OF CYPRUS

“WE MUST ALIGN OUR ECONOMIC CHOICES WITH THE REGULATIONS THAT DEFINE OUR INCLUSION IN THE EUROPEAN UNION“ Loucas Marangos

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“THE FINANCIAL SECTOR HAS ALREADY SURPASSED ITS 2013 LEVELS“ Christodoulos Angastiniotis

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he Cyprus Investment Promotion Agency (CIPA) IS a registered not-for-profit company funded by the Cyprus government. Its threefold mandate is to promote Cyprus as an attractive international investment centre in key priority growth sectors, to advocate reform in Cyprus in order to improve the regulatory and business environment and infrastructure, and to provide investor support with aftercare and further development services. The Agency is a member of the World Association of Investment Promotion Agencies (WAIPA) and the Mediterranean Investment Network, ANIMA. Under the Invest Cyprus brand, CIPA takes the lead in promoting Cyprus as an attractive FDI destination. CIPA Chairman Christodoulos Angastiniotis sees the significance of the Agency’s annual International Investment Awards as “a tradition – a crucial one at that – which sends the message around the world that foreign investors trust the prospects for the island’s economy and believe in its future prosperity.” He notes that, despite the events of March 2013, Cyprus still retains its prime advantages with regard to attracting foreign investors and, as proof of this, he cites the continuous stream of investments being made in the island. “The financial sector, in fact, has already surpassed its 2013 levels,” he notes, “but the advantages extend to all sectors, including energy, shipping and construction. Cyprus provides a stable tax regime and supremacy with regard to the calibre of professionals working here, as well as many other opportunities.” Christodoulos Angastiniotis acknowledges that “We still have a long road to travel. Foreign investors need to know that they can come to Cyprus and, within a specified timeframe, can acquire the licences they require and everything else they need in a timely and efficient manner, devoid of delays and redundant red tape. The Government is working hard on this.” “Working with the investor, for the investor” is CIPA’s defined mission statement and part of this strategy, says the Agency’s Chairman, is honouring those who have contributed to the economy and shown their trust and confidence in Cyprus, with a CIPA International Investment Award, presented under the auspices of the President of the Republic at the annual Awards ceremony hosted by Gold.

CYPRUS - USA

Panayiotis Tziongouros (l) Tassos Yiassemides (r)

GET YOUR FATCA

FACTS RIGHT! 44 Gold THE INTERNATIONAL INVESTMENT, FINANCE & PROFESSIONAL SERVICES MAGAZINE OF CYPRUS

A NEW CHAPTER IN THE US TAX CODE, THE FOREIGN ACCOUNT TAX COMPLIANCE ACT (FATCA) MAY JUST EVOLVE INTO THE OPENING LINE OF AN ENTIRELY NEW GLOBAL STORY AS TO HOW TAX TRANSPARENCY IS

PRACTISED. BUT AS TASSOS YIASSEMIDES, BOARD MEMBER, AND PANAYIOTIS TZIONGOUROS, SUPERVISOR, INTERNATIONAL TAX & CORPORATE SERVICES AT KPMG CYPRUS EXPLAIN, ENSURING THAT EVERYONE IS PAYING THEIR FAIR

SHARE OF TAX IS NO EASY FEAT. INDEED, GETTING YOUR FACTS RIGHT ABOUT FATCA MAY JUST BE THE DIFFERENCE BETWEEN BEING ABLE AND UNABLE TO ACCESS THE US MARKET. LOOKING FOR A HAPPY INVESTOR ENDING? READ ON…

By Chloe Panayides | Photograph by Jo Michaelides

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old: What exactly is FATCA? Tassos Yiassemides: The US Foreign Account Tax Compliance Act (FATCA) was enacted on March 18, 2010, falling under the Hiring Incentives to Restore Employment (HIRE) Act and it creates a new Chapter in the US tax code. The main rationale behind its enactment was to enable the Internal Revenue Service (IRS) to access information regarding the income of US individuals who maintain accounts and assets outside the US. Panayiotis Tziongouros: In essence, FACTA is a means of enforcing a global standard of information reporting and withholding compliance for Americans and, specifically, those who wish to invest through or in non-US entities. Gold: So how does FATCA – as a piece of US tax legislation – actually affect non-US entities and, specifically, Cyprus-based structures? T.Y.: Over the last year or so that we have been actively involved with FATCA- related projects through discussions with clients and other industry professionals, we have noticed a lack of awareness with respect to the true extent of FATCA. There is a common misconception that FATCA only covers banking institutions and entities with US investors or clients. In fact, FATCA’s scope of application is remarkably broad and may cover any Cyprus entity that is engaged in an investment or commercial relationship with the US and anticipates receiving payments of US-sourced income. P.T.: Due to its remarkably wide scope, FATCA impacts virtually all non-US entities, directly or indirectly, receiving types of US-sourced income, which is not confined to dividend, interest or royalty payments, and may well include the gross proceeds from the sale or disposition of US property, which can potentially produce interest or dividends. It is worth noting that FATCA

may apply to both financial institutions and non-financial operating companies with, of course, differing compliance levels. Gold: How are “financial institutions” defined in this case? T.Y.: A Foreign Financial Institution (FFI) is any non-US entity that is classified as: a credit institution, which accepts deposits in the ordinary course of banking or similar

FATCA IMPACTS VIRTUALLY ALL NON-US ENTITIES, DIRECTLY OR INDIRECTLY, RECEIVING TYPES OF US-SOURCED INCOME business; a custodial institution that, as a substantial portion of its business, holds financial assets for the account of others; and an investment entity engaged (or holding itself out as being engaged) primarily in the business of investing and reinvesting, in trading – or any such interest – in securities, partnership interests, commodities, or, finally, in a specified insurance company. Gold: How is FATCA actually enforced? T.Y.: Instead of providing for a penalty regime, FATCA is actually enforced through practice. It imposes a duty on the so-called ‘withholding agents,’ that is the US entities, both financial and non-financial, that make payments of most types of US-sourced income to non-US persons, and will withhold a 30% tax on that income paid. P.T.: The enforcement mechanism of FATCA reveals its true compliance effect, since it imposes quite a heavy duty on US

entities to maintain appropriate documentation and ask for the FATCA entity classification of their international counterparties, in order to ensure their respective compliance. Gold: Given its international scope, how practical is compliance with the obligations imposed by FATCA and who are the competent authorities for reporting? T.Y.: Given the potential applicability across the globe – and in an effort to streamline compliance – the US government has entered into Inter-Governmental Agreements (IGA) with several jurisdictions. Under an IGA, FATCA-affected entities are still required to register but are not obliged to enter into a specific agreement with the IRS. They will, however, be required to comply with the respective domestic implementation of FATCA rules issued by the contracting state of the IGA. The majority of countries have concluded a Model 1 IGA under which a framework is set for FATCA-compliant entities to report the FATCA relevant information to the respective tax authority of the FATCA partner jurisdiction. The FATCA partner tax authority then transmits the relevant information to the IRS. P.T.: The conclusion of an IGA serves to address legal impediments to compliance and simplifies the whole procedure as it provides for local reporting and consequently reduces the costs of compliance to a great extent. Up to date, 39 countries have signed an IGA with the US. Furthermore, the US Treasury and the IRS have announced that they will treat a jurisdiction as having an IGA ‘in- effect’, provided that an agreement was made before July 1, 2014. According to this, 62 states are treated as having an IGA ‘in-effect’. Gold: Has Cyprus concluded an IGA with the US? T.Y.: With regard to Cyprus, a Model 1 IGA between the US and Cyprus has been treated as ‘in-effect’ by the US Treasury

THE INTERNATIONAL INVESTMENT, FINANCE & PROFESSIONAL SERVICES MAGAZINE OF CYPRUS

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CYPRUS - USA

TAX TRANSPARENCY IS AN INCREASINGLY GLOBAL TREND and the IRS as of April 22, 2014. The US and Cyprus governments have reached an agreement in substance in relation to the terms of the agreement and Cyprus has expressly consented to be included on the relevant ‘in-effect’ list. However, it is important to expedite the process for its formal signature and the issuance of implementation guidelines as this will provide the requisite legal certainty to FATCAcovered entities so that they design and effect their FATCA compliance models in a timely manner. Gold: In a nutshell, what are the steps that a Cyprus entity should take in order to clarify whether it falls within or outside the scope of FATCA? T.Y.: It is imperative for Cyprus entities that interact with the US to engage their advisers and to review their FATCA status in order for their obligations to be crystallised. Using the IGA as a legal basis, entities must classify themselves according to their FATCA status, which will eventually determine their registration and reporting obligations. If obligations arise, each entity must register with the IRS using its FATCA registration portal so as to receive a Global Intermediary Identification Number (GIIN). P.T.: Cyprus entities should complete their classification exercise and examine whether to register by December 31, 2014. Gold: What is your assessment of the practical impact of FATCA? T.Y.: The consequences to the financial services sector cannot be ignored and we expect that the implementation of FATCA will indeed affect the compliance landscape and investor behaviour. FATCA compliance will be a pre-requisite for access to the US market and this is something that no investor in the world wishes to lose. All entities that have relationships with the US will need to safeguard the successful performance of their investments through FATCA. What we have witnessed in a number of cases is that world- renowned financial institutions, as part of their FATCA compliance procedures, are now actively asking for the GIIN of their Cyprus based counterparties. This ‘chain reaction’ clearly shows that FATCA is not restricted to the borders of the US but has the ability to reach every country in the world. P.T.: Upcoming FATCA obligations may raise the need for amendments to

the Know Your Customer/Anti-Money Laundering procedures of affected entities as well as changes to their respective legal systems. Furthermore, as FATCA operates on various playing fields, affected entities should engage in discussions with their service providers and counterparties as to whether they comply with their FATCA obligations and possibly revisit their fee arrangements. Gold: What are the global implications of FATCA? Should Cyprus adopt a similar system? T.Y.: The crisis and the significant investments that the US government was making to support the economy and the massive public debt led it to use its ability to collect more information concerning US taxpayers and to ensure that everyone is paying a fair share of tax. It is a common view amongst industry professionals that FATCA is just a first step. The idea that exchanging account information can combat tax evasion and curb the effects of the crisis is popular beyond the US. The OECD Global Standards (accurately nicknamed “OECD’s FATCA”) on this topic have now been finalised and approved by the G20. P.T.: FATCA is a tax transparency initiative originating from the US. Tax transparency is an increasingly global trend and is expected to continue developing over the coming years. Therefore, FATCA will allow financial institutions to become more aware of the process of exchanging information and pave the way for regulations that are expected to be implemented in the future. Gold: How is Cyprus faring as a tax destination for US corporations? What opportunities are there to enhance this? T.Y.: Cyprus has never been a well-known

THE PROVISIONS OF THE CURRENT US-CYPRUS DOUBLE TAX TREATY ARE CLEARLY OUTDATED

46 Gold THE INTERNATIONAL INVESTMENT, FINANCE & PROFESSIONAL SERVICES MAGAZINE OF CYPRUS

investment destination for US corporations. The main impediment to making the country an investment destination for US corporations is the outdated Cyprus-US double tax treaty, which dates from 1984 and the terms of which were actually been agreed in the 1970s. However, we have recently witnessed increased interest on the part of US institutional investors such as investment funds in directing their investment strategies into Cyprus. This is due to a number of factors. The discovery of considerable natural gas reserves in Cyprus’ Exclusive Economic Zone with the involvement of US oil and gas companies, along with the potential entry of US investors in the banking sector and the frequent expressions of interest in other investments in sectors such as leisure and tourism, lead one to safely conclude US corporations’ perception of Cyprus is currently improving. P.T.: Further to the changing attitude of US investors towards Cyprus, it is also worth mentioning that recent regulatory amendments to Cyprus legislation – such as the introduction of the Alternative Investment Fund Manager Law and the Alternative Investment Funds Law – can act as a platform to welcome US investment funds and fund managers wishing to use Cyprus as a gateway to their European operations. Gold: Does Cyprus now need to reassess and negotiate its DTT with the US? T.Y.: Yes. The provisions of the current USCyprus double tax treaty are clearly outdated. Occupied with the provisions of the offshore companies regime, which was applicable in Cyprus at the time of the conclusion of the treaty, the US sought to introduce a strict and “catch-all” Limitation of Benefits clause. This acts as a disincentive to investors to direct their investments to or from Cyprus with regard to the US market. We have to keep in mind that the conclusion of a Double Tax Treaty is often an outcome of political will. Nevertheless, Cyprus should continue to express its interest in the conclusion of a modern double tax treaty with the US. P.T.: The need to modernise the existing treaty has become a pressing issue due to the fact that the DTTs concluded between the US with other EU jurisdictions with comparable tax systems to Cyprus, such as Luxembourg and the Netherlands, include more sophisticated but less strict Limitation of Benefits provisions that accommodate any US investments made through Luxembourg and Netherlands entities.

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CHELCO VAT LTD FOCUSES EXCLUSIVELY ON THE COMPLEXITIES OF VALUE ADDED TAX. ByJohn Vickers

t the simplest level, Value Added Tax (VAT) is that elusive little percentage that settles at the bottom of invoices or requests for payment, taking the total to considerably more than the agreed – or anticipated – final price. It sneaks up and spooks consumers and businesses alike every time a transaction is completed, whether that be a purchase of a bottle of fine wine, a new office building, or the intellectual property rights to a consumer brand. At a more complicated level, when entering into a transaction, businesses may not even be aware of an obligation to pay VAT, especially with chain transactions involving more than one country. There are instances where a business may have to register in – and charge the VAT of – a different country. There are also cases of businesses that have been happily claiming VAT on certain expenses for a number of years and are suddenly faced with the fact that they were not, in fact, eligible to do so, with penalties and interest accompanying the repayment. Moreover, VAT compliance alone constitutes a major project for any operation. Keeping the full set of documents required by the legislation, maintaining appropriate books, preparing invoices to contain all the information as dictated by law, generally adhering to the plethora of regulations, legislative provisions and decrees and much more must be adhered to, otherwise businesses risk having to pay penalties, additional tax and interest or having their claim to deduct VAT refused. It was in this environment that Chelco VAT

Ltd was formed, with the aim of offering dedicated, specialist, customised and practical VAT advice to businesses in Cyprus and abroad, and to help them plan for, comply with and regulate all their VAT matters. Based in Limassol, Chelco VAT is thought to be the only VAT-dedicated firm on the island and is steadily being recognised as an authority on VAT matters in Cyprus. From the simplest local transaction to the most complex cross-border ones, Chelco VAT works alongside its clients and professional intermediaries to maximise VAT planning efficiency and ensure compliance. The firm maintains strong and durable relationships with the island’s key public and private organisations, including the Cyprus VAT authority, as well as professional bodies and decision-makers and is frequently consulted on VAT and other industry policy-making decisions. Moreover, Chelco VAT also works closely with an alliance of similar indirect tax specialists in jurisdictions around the world, allowing it to offer a wide range of VAT solutions to a local and international clientele. One of the two founders of Chelco VAT, Managing Director, Alexis Tsielepis, a Fellow Chartered Accountant with over 10 years of experience in tax, quotes Oxford scholar Beryl Smalley as saying that “the history of learning amounts to a history of specialisation” by way of explaining that “in today’s complex, demanding and highly competitive business environment, true in-depth knowledge and dedication to a subject, any subject, is essential.” Elaborating on Chelco VAT, Tsielepis says that against this fluid and ever-changing backdrop, it operates as a boutique service provider and specialises in strategic VAT planning

48 Gold THE INTERNATIONAL INVESTMENT, FINANCE & PROFESSIONAL SERVICES MAGAZINE OF CYPRUS

and VAT consulting. It is also a leader in the organisation of high-level VAT seminars and workshops. He adds: “Our philosophy is simple and straightforward. We follow a client-centric approach, we are dedicated to analysing the detail and to meeting deadlines. Similarly, our like-minded associates in Cyprus, across the EU and beyond, are being carefully chosen to reflect our core values. At Chelco VAT, we strongly believe in developing long-term relationships with our clients and associates and tirelessly and methodically working alongside them as partners to produce tangible and measurable results. After all, it’s not what we put into it that matters. It’s what they get out of it.” With more and more governments turning towards indirect taxes as a means of revenue and at a time when cross-border selling of goods and services is rising, the importance of VAT planning and compliance is now greater than ever. Yet the many complexities involved in interpreting legislation mean that solving VAT problems requires in-depth and continuous knowledge of a plethora of legislation, directives, regulations and interpretations, including the VAT Directive itself, how the different member states have transposed the Directive’s provisions into their national legislation and the practical application of the national legislation by the VAT authorities in each country, the binding interpretive regulations issued by the European Commission, derogations for which member states have opted and European Court of Justice decisions on interpreting the Directive.

STRATEGIC VAT SERVICES Given the complexities of VAT and the everchanging dynamic environment that regulates this tax, VAT planning is seldom a simple task. Despite the fact that ‘neutrality’ is a fundamental concept of any VAT system for businesses, ensuring the maximum reclaim of input VAT

at ion is essential in order to remain competitive, and not always a given. For any business, the deduction of VAT constitutes a right, which entails adherence to all the provisions that the VAT system can throw at it. By contrast, the payment of VAT is an obligation, which will be enforced. Chelco VAT works closely with its clients, associates and its network of professionals to devise solutions and develop strategies that will maximise benefits. It also continuously researches Cyprus common law as well as European Court of Justice case law in order to incorporate the latest developments in successfully advising its clients or their professional consultants on defending their businessesagainst aggressive VAT practices from VAT Authorities. The need to undertake VAT planning is of paramount importance.

Services include: • Development of VAT planning strategies • Internal VAT audits • VAT opinions on proposed business ventures or specifictransactions • VAT opinions on assessments raised by the Cyprus VAT authorities, or other member states • Expert support on VAT recourse through the Cyprus courts and the European Court of Justice • Coordination of VAT audits at a national and European level • Internal VAT seminars and training courses • Advice on changes in VAT legislation and other VAT related matters

SPECIALISED VAT SERVICES Many jurisdictions have developed specific schemes that could translate into important VAT savings, while certain VAT services require a high degree of specialisation in order to execute correctly and efficiently. Services include: • Purchase of yachts under the Cyprus VAT

VAT COMPLIANCE ALONE CONSTITUTES A MAJOR PROJECT FOR ANY OPERATION

Alexis Tsielepis

leasing scheme • Registration and advice on use of Mini One Stop Shop (MOSS) for businesses offering telecommunications, broadcasting and eservices to consumers (B2C) • Filing of VAT refunds in Cyprus and other EU member states • VAT representation in Cyprus

GENERAL VAT SERVICES The Chelco VAT tax consultants are trained to look at the detail behind transactions and highlight any areas that warrant further analysis or discussion. The purpose is to constantly monitor whether there is further scope for VAT planning, whilst ensuring that the business is VAT compliant. The subject of VAT compliance is of the utmost importance, not solely because of the high penalties but also because of the high importance of compliance in the general context of a business. The compliance process also aims at checking on the correct and efficient application of VAT legislation. Services include: • Registration/Deregistration with VAT authorities in Cyprus and other EU member states • Group registration with VAT authorities in Cyprus and other EU member states • Preparation and filing of VAT returns in Cyprus andother EU member states

• Registration, preparation and submission of VIES declarations • Monitoring of transactions to ascertain scope for further VATplanning • Negotiations with national and international VAT authorities One of Chelco VAT’s core competencies is the organisation of training seminars and workshops for businesses and professionals alike. Seminars can appeal to dedicated professionals dealing with indirect tax, businesses in need of better educating their internal staff or industry professionals at large interested in strengthening their vocational skills. The scope of such seminars is tailored made to the needs of the business and could be as wide, e.g. covering basic principles of VAT, or as topic-specific, as requested and required. The firm’s professional development programme includes general conferences, specialised training seminars and in-house technical courses and workshops.

THE INTERNATIONAL INVESTMENT, FINANCE & PROFESSIONAL SERVICES MAGAZINE OF CYPRUS

Gold 49

ARBITRATION

ADVOCATION AHEAD OF NEXT MONTH’S 2ND CYPRUS DISPUTE RESOLUTION FORUM, GOLD TALKS TO THE CHAIRWOMAN OF CIARB CYPRUS BRANCH, ANNA IACOVOU STYLIANOU, ABOUT WHAT NEEDS TO BE DONE TO PROMOTE ARBITRATION IN CYPRUS AND TO PROMOTE CYPRUS AS A CENTRE FOR ARBITRATION. By John Vickers

50 Gold THE INTERNATIONAL INVESTMENT, FINANCE & PROFESSIONAL SERVICES MAGAZINE OF CYPRUS

ARBITRATION

INTERNATIONALLY RECOGNISED QUALIFICATIONS PROVIDE PRACTITIONERS WITH A POWERFUL MARK OF QUALITY ASSURANCE Gold: Given the frequent complaints that the wheels of justice turn much too slowly in Cyprus, arbitration would appear to be a perfect form of Alternative Dispute Resolution (ADR). Why is it not used? Anna Iacovou Stylianou: I absolutely agree that Arbitration could be a perfect form of alternative dispute resolution since it can be much quicker than litigation under certain circumstances but I do not agree that Arbitration is not already being used. Traditionally, Arbitration is used in nearly all Construction, Shipping and Insurance Contracts in Cyprus. Moreover, it may exist following referral by a civil court in accordance with the provisions of law 14/1960 or by operation of certain laws that provide for specific disputes to be settled by Arbitration, for example, the Cooperative Society Law and Law 781/2011 for the settlement of disputes that concern Commercial Trading Disputes. So Arbitration is used in Cyprus and, as opposed to other forms of Alternative Dispute Resolution, it is a legally binding method for resolving disputes. Under the Cyprus legal system, the decision of an Arbitrator, once registered in court, is capable of being enforced in the same manner as a court judgment. Gold: So what are the advantages of Arbitration? A.I.S.: First of all, there are circumstances, especially in the business world, where one of the two parties wishes their dispute to be resolved without publicity. This can be provided through Arbitration. In some countries this is indeed the primary advantage that Arbitration offers but there are several others. These include: Flexibility as regards the procedure, the language, the tribunal, the timetable and physical location of the proceedings and the law governing Arbitration in cases of International Arbitration. Speed, provided that the arbitral process is controlled and managed correctly from

• •

the outset. Privacy and confidentiality. Arbitration is a private process. Hearings are not in public and awards are generally given only to the parties. Neutrality. Arbitration provides a neutral choice of procedure, language, tribunal and venue. This is particularly advantageous in contracts involving parties from different countries who do not wish to submit to the jurisdiction to the National Courts of the other parties. The opportunity for the parties to select and agree upon their Arbitrator. This allows for the appointment of an Arbitrator, who has specialist expert knowledge of the subject matter of the dispute. In complex financial and technical disputes, this is a significant advantage over the court process. Finality, as in most jurisdictions there is no right of appeal and if there is a right of appeal under the law and seat of arbitration, it is often limited. Enforceability. This is probably the greatest advantage of Arbitration. Provided that the award complies with the requirements of the 1958 New York Convention, it will be directly enforceable in the court of the signatory countries, subject to certain limited exceptions. There is no comparable international treaty which provides for the recognition of foreign court judgments, to such an extent.

• •

•

• •

Gold: So, why is it under-used in Cyprus? A.I.S.: In order to have all these advantages in arbitration you need to have a Modern Arbitration Law for both Domestic and International Arbitration and rules to support the arbitration procedure. Unfortunately, in Cyprus as far as domestic Arbitration is concerned, a primitive Arbitration Act is used and the special rules for Arbitration were never enacted as envisaged by the Arbitration Law itself with the result that civil procedure rules apply to Domestic Arbitration. Consequently, we have lost all

A

nna Iacovou Stylianou is the Chairwoman of CIArb Cyprus Branch. She is a Chartered Quantity Surveyor, a Registered Chartered Arbitrator, a CEDR Accredited Mediator and Negotiator. She has been a Chartered Surveyor since 1988 and a Chartered Arbitrator since 2001. She has extensive experience in Quantity Surveying, Project Management, Project Monitoring , Arbitration, Mediation and Negotiation. She is the founder and Managing Director of AISM Management Ltd, a Chartered Surveying Firm, specialising in dispute resolution services and surveying services associated with the built environment and property. She Stylianou is also on the Board of AIPSD Ltd, a development company.

the advantages and ended up with a procedure similar to that of the courts. Domestic Arbitration has become expensive and slow, the privacy aspect has been lost and respect towards arbitration and the arbitrator has similarly been lost. Arbitrators do not have the power to be able to carry out their service to justice. Gold: Obviously, the law needs to be updated before Cyprus can promote itself as an ideal location for international arbitration... A.I.S.: First of all, Arbitration Procedural Rules have to be prepared and updated for both the Domestic and International Arbitration Acts. The Arbitration Procedural Rules will support the Arbitration procedure. Secondly, the Domestic Arbitration Act has to be updated in order to reflect modern trends in Arbitration and to instil a modern approach to Arbitration in the country. Thirdly, the Arbitrators have to be very well qualified in order to ensure that the Arbitration Procedure manages time and cost effectively. Fourthly, there has to be good management and monitoring of the Arbitration undertaken by any Arbitration Centre in order to ensure transparency. The Arbitration Centres have to

THE INTERNATIONAL INVESTMENT, FINANCE & PROFESSIONAL SERVICES MAGAZINE OF CYPRUS

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ARBITRATION

Cyprus Branch

CIArb

IN CYPRUS, WE HAVE LOST ALL THE ADVANTAGES AND ENDED UP WITH A PROCEDURE SIMILAR TO THAT OF THE COURTS develop Code Of Ethics for the Arbitrators and there has to be support by commercial users and other International Organisations, like the ICC and the LCIA. Gold: What does the Cyprus Branch of The Chartered Institute of Arbitrators (CIArb) do? A.I.S.: The Chartered Institute of Arbitrators (CIArb) is one of the worlds’ leading centres of excellence for the development of arbitration, mediation and other forms of dispute resolution at all levels and this is the reason for the existence of CIArb in Cyprus. The CIArb Cyprus Branch has been established in Cyprus since 1987 and it currently has 95 members. Our members come from several sectors of the economy and they include lawyers, engineers, surveyors, shipbrokers and others. Gold: How does the CIArb intend to support the effort of establishing Cyprus as an International Arbitration Centre? A.I.S.: First of all, CIArb provides education and training for Arbitrators, Mediators and Adjudicators. The Cyprus Branch is an approved provider of the Institute’s courses. So it provides education for International Arbitration, Mediation and Adjudication. To date, the Branch has organised all the Modules for International Arbitration of the CIArb Pathway to Fellowship and this October is organising Module 1 in Mediation as well. Moreover the Branch organises CPD lectures in order to update its members about the latest developments in ADR and provide training. In association with other organisations, CIArb is trying to promote ADR through seminars, articles and discussion meetings by sharing experience through excellence. One of the CIArb Cyprus Branch’s important contributions is the draftng of the new Domestic Arbitration Act.

THE CHARTERED INSTITUTE OF ARBITRATORS - CYPRUS BRANCH

presents

7+( $/7(51$7,9( ',6387( 5(62/87,21 )2580 Wednesday 15 October, Hilton Park Hotel, Nicosia

Gold: There have been attempts in the past to set up organisations dealing with arbitration but they appear to have failed. What are the reasons for this? A.I.S.: In Cyprus there have been several attempts to set up Arbitration Associations in the form of private institutions. We consider this very positive because it seems that a number of professionals recognise that Cyprus is ideal as a centre for ADR. However, what concerns us is that there is no control over these institutions as regards their efficiency and integrity and this is potentially very dangerous since Arbitration and Arbitration Awards are legally binding worldwide. However, there are centres that are very serious and well established. They abide by strict ethical rules and have their Arbitration Rules. I agree with you, though, that all the centres we presently have in Cyprus are not frequently used for Arbitration. I believe that the main reason for this is that Arbitration and ADR are not very well-known in Cyprus but also as a non-court dispute resolution method,

THE MODERN TREND IN RESOLVING DISPUTES IS THROUGH ADR they need the support of lawyers, the judiciary and the Government. However, other realities must be faced. For ADR to be used there has to be trust in the procedure. Trust is only gained through transparency and correct procedures. We need to “set our own house in order” first by changing and updating laws, by adopting the right form of Arbitration and by training our Arbitrators. Once trust is gained, I am sure that all the rest will follow since people will be able to enjoy the full advantages ADR has to offer.

52 Gold THE INTERNATIONAL INVESTMENT, FINANCE & PROFESSIONAL SERVICES MAGAZINE OF CYPRUS

Gold: What are you hoping to achieve at the forthcoming 2nd Cyprus Dispute Resolution Forum? A.I.S.: First of all we are hoping to provide a worthy and enjoyable conference for all the participants. We have very high calibre speakers from Cyprus and abroad who will present the latest developments in International Arbitration in the area and who will provide a unique opportunity for interaction with Cypriot counterparts. Moreover, the president of CIArb will be present as well as the presidents from Arbitration centres in Cyprus and abroad. Through the conference we also hope to identify what needs to be done in order for Cyprus to become an Effective International Arbitration centre. Gold: Are you confident that Arbitration and other forms of ADR will eventually become accepted and recognised in Cyprus? A.I.S.: Yes I am. The modern trend in resolving disputes is through ADR. Europe has adopted ADR as a form of dispute resolution in several situations and to this end has issued directives and legislations. Cyprus, as an EU member state, will have to follow that trend and it has already started that by recently adopting legislation for the conduct of Mediations. Gold: What is the benefit for someone becoming a qualified Arbitrator in Cyprus? A.I.S.: Arbitration has been used in Cyprus for many years now. The trend is for ADR to increase so for somebody who is using arbitration as a means of dispute resolution or for someone who is a professional practitioner, it is clearly necessary to be well-qualified. Through qualifications, practitioners can be updated as regards the changes in the legal environment and can develop their knowledge and skills. Internationally recognised qualifications provide practitioners with a powerful mark of quality assurance.

COVER STORY

Visit us at Savenergy 2014, Booth 618A 38 Gold THE INTERNATIONAL INVESTMENT, FINANCE & PROFESSIONAL SERVICES MAGAZINE OF CYPRUS

ELECTRONIC RETAILING

GLOBAL E-TAILING 2025

Deutsche Post DHL Study Looks at How We Will Live and Shop in 2025 By means of four future scenarios, the Global E-Tailing 2025 study by Deutsche Post DHL describes the role which electronic retailing is expected play in people’s lives in the year 2025, how international online retailing will change

THE SCENARIOS The scenario method is an ideal means of developing alternative visions of the future. The objective is to spur people’s imagination and give them new perspectives. Accordingly, the

consumer behaviour and thus the world of retailing as a whole, and what challenges the logistics industry will then be faced with. The four exploratory future scenarios have been developed on the basis of a global, medium-term

scenarios do not simply carry the current situation forward into the future: they consciously reckon with upheavals and discontinuities. With this description of very diverse development paths, the future scenarios generate an awareness of possible changes in the business

54 Gold THE INTERNATIONAL INVESTMENT, FINANCE & PROFESSIONAL SERVICES MAGAZINE OF CYPRUS

perspective; they are not intended to be precise forecasts of the future. Rather, with the description of these future scenarios for 2025 the study aims to initiate a dialogue about the future of electronic retailing and the implications for the logistics industry.

environment. They invite the reader to consider the risks and opportunities involved, as well as the strategies and possible courses of action. The result is a valuable mental exercise and a thought-provoking assessment of possible future developments.

SCENARIO 1:

Hybrid Consumer Behaviour in Convergent Worlds of Retailing Against a background of moderate economic growth, the achievement-oriented society has been firmly established worldwide. In many of the developed economies, such as Australia, France or the United Kingdom, social contrasts have increased. Technological progress has only been moderate. Smartphones and tablets are still people’s constant companions. They have flexible screens which can be rolled out, folded and flipped up. Interactive displays are everpresent in city streets, serving as interfaces to the virtual world. Retail companies offer their goods online and in stationary stores – multichannel retailing has become established. In many cases stores merely have the function of showrooms where customers can “experience” the goods. Prompt delivery to any specified location is a standard service. For all who can afford it, convenience is a decisive factor as far as shopping is concerned. But for the vast majority of people, it is still price which ultimately matters most.

SCENARIO 2:

Self-Preservation in Virtual Communities People are prospering. For the first time in history, a middle class with a comparatively strong purchasing power has developed worldwide. This has been accompanied by a shift in values, with the focus on leisure time rather than on work. Self-fulfilment and individual lifestyles are more important than success in one’s job. Trends are mainly set by international lifestyle communities. They have a strong influence on the shopping habits of broad sections of the public. Small, innovative online retailing platforms serve the different communities, while large online retailers and platforms take care of the mainstream market. Stationary retailing is principally focused on “experience” shopping. So-called wearables are a standard feature of everyday life. One of the main purposes of this portable technology is to measure and optimize one’s own actions – in relation to nutrition or fitness, for example – and to continually exchange information and experience within the community. As a result of the boom in online retailing, the volume of goods transported by the logistics companies has increased substantially. To prevent complete gridlock, a number of conurbations have brought in stricter regulations for the delivery of goods.

NEW SOLUTIONS FOR THE LAST MILE

T

here is no contradiction between the delivery of parcels and packages with TH_PT\T ÅL_PIPSP[` VU [OL VUL OHUK and environmentally friendly and sustainably organized logistics on the other. A good example of this is MyWays. DHL Solutions & Innovation has developed this innovative concept for the so-called “last mile” of deliveries. The principle: parcels can be delivered by private individuals. The private deliverer and the recipient “meet” beforehand on the MyWays online Platform. After an online order has been placed, the recipient can specify the time and place of delivery and also the delivery fee. Meanwhile, the package remains ready for delivery in one of the DHL centres and is visible for all users on the MyWays app. Users can then decide which package they wish to deliver to a particular HKKYLZZ H[ [OL [PTL ZWLJPÄLK ;OL HK]HU[HNL! ;OL YLJPWPLU[ ILULÄ[Z MYVT [OL ÅL_PISL TL[OVK of delivery, while the person who delivers the package uses his or her daily journey across the city to earn a little extra money. This new ZVS\[PVU MVY [OL SHZ[ TPSL ZH]LZ H ZPNUPÄJHU[ number of unnecessary journeys. It can play a key role in helping to ease the strain on innercity areas and in conserving the environment. A pilot project to test MyWays has been under way in Stockholm since autumn 2013.

SCENARIO 3:

(Y[PÄJPHS 0U[LSSPNLUJL PU [OL Digital Retailing Sphere The main driving-force behind the global economy is the dynamism and innovative flair of information technology. People are living in a highly developed digital culture. Data glasses, smart contact lenses and other wearables have become indispensable parts of everyday life. Intelligent avatars serve as virtual shopping advisers. Often they act independently and “purchase” everyday goods, for example. Web shops adapt their offerings to customer profiles in real time; the avatars present supposedly interesting

THE FUTURE SCENARIOS GENERATE AN AWARENESS OF POSSIBLE CHANGES IN THE BUSINESS ENVIRONMENT products to their users in “personal shopping hubs”. Stationary retailing and the showrooms of the online shops also operate with simulations which are tailored to customer’s requirements. Same-day delivery is standard practice in major cities. Retailers and logistics companies can often predict requirements on the basis of precise customer data. They send off the goods – in some cases via automated solutions such as drones – even before the customer has ordered them.

SCENARIO 4:

Collaborative Consumption in a Regionalised Retailing Landscape The global economy is stagnating. Trade barriers and high energy and raw material prices have led to a regionalization of the economy. People buy locally, as a rule. Sustainability and energy efficiency are the pivotal factors in shopping. Leasing and sharing models are therefore very common. The importance of personal possessions has diminished significantly for many people. Availability is what really matters. Major online portals are mainly involved in the leasing business. At regional and local level, a large proportion of swapping transactions are organised via smaller online platforms. Electronic equipment and consumer goods are modular in design so that their useful life can be prolonged. This facilitates both repair and maintenance. In addition to the traditional delivery solutions, the majority of logistics firms offer spare parts logistics as well as repair services.

THE INTERNATIONAL INVESTMENT, FINANCE & PROFESSIONAL SERVICES MAGAZINE OF CYPRUS

Gold 55

IN AN EXCLUSIVE INTERVIEW WITH GOLD, NICOLAS NICOLAIDES, EXECUTIVE MANAGER OF TRANSPARENCY INTERNATIONAL – CYPRUS, EXPRESSES, WITH ADAMANTINE RESOLVE, THE BELIEF THAT THERE CAN BE NO GREY AREA WHEN IT COMES TO CORRUPTION AND TRANSPARENCY, AND BY OVERHAULING OUR THINKING, THE ISLAND MAY JUST BLOSSOM INTO THE PROVERBIAL ROSE THAT GREW FROM A CRACK IN THE CONCRETE. By Chloe Panayides | Photo by Jo Michaelides

A

s azure waters lap the shore, verdant grass grows tenaciously toward the prickly sun, and cars whizz by in a blur of heat and humidity, I take my seat at a small café along Limassol’s shorefront. I am here to meet with Nicolas Nicolaides, Executive Manager of Transparency International – Cyprus (TI-Cyprus), and we are here to talk about combating corruption. Nicolaides takes his seat in the shade and proceeds, in a turn of interview events, to ask me with clarity and conviction just what I think constitutes corruption. “Do you know?” he presses. Simple though it may be, it’s an exceedingly good question. The only thing necessary for the triumph of evil is for good men to do nothing, I think, and am quite confident that this concept is a protagonist in the theatre of corruption. “You’re not wrong,” Nicolaides says with a laugh. “At one point, transparency became a fashion of sorts – politically, it was everybody’s motto! And, yet, nothing was tangibly being done to address the issue.” No doubt, I suggest, this was TI-Cyprus’ cue; and, sure enough, the organisation has taken centre stage, capturing audiences’ attention since its inception.

CRYSTAL 56 Gold THE INTERNATIONAL INVESTMENT, FINANCE & PROFESSIONAL SERVICES MAGAZINE OF CYPRUS

TRANSPARENCY

Even though

“synergy” is a Greek word, we don’t know what it means here

“TI-C was established in January 2011,” Nicolaides begins, “And we started off as a team of a mere 6 or 7 people. “Dr. Maria Krambia-Kapardis is an Associate Professor at the Cyprus University of Technology. This was her brainchild. She is maybe the only person who has such a plethora of knowledge regarding economic crime.” So how, I wonder, did Nicolaides become involved? “We had collaborated previously on a number of research projects on economic crime,” he recalls. “And we started investigating corruption: What can we do to ameliorate both the action and the repercussions of it? We realised that whilst the theory was there, there was no practice.” And so it was that the dynamic duo – intent on enacting change in a state overcome by indifference and indolence – approached Transparency International: “We were conscious of the fact that there was no Cyprus chapter of TI,” Nicolaides explains. “Having displayed our interest, TI gave us the go-ahead, along with the so-called roadmap of steps to be taken in achieving our goals as TI-Cyprus.” Filling in the details of the process of establishing the entity, Nicolaides stresses: “Of

course, we had no – and still have no – funding. We are an independent entity, a nonprofit NGO, and politically non-partisan. It goes without saying that an entity proponing transparency cannot have any association with any government organisation or otherwise that may have its own agenda. In fact, we’re not allowed to take more than 10% of our annual income from more than any one source; we’d lose our independence if we did.” The conversation turns to the issue of membership and how volunteering in such a capacity is clearly a commitment of some magnitude: “It certainly is. All of our work is done on a voluntary basis, utilising our own resources,” Nicolaides says. Does the organisation’s financial independence extend to membership, as well, I probe? Ardently, Nicolaides answer: “Definitely. There can be no conflict of interest whatsoever with regards to membership. We have a zero tolerance policy when it comes to this. As we say: easy come, more easy go! “By this,” he clarifies, “I mean that our rules dictate that if you are a member of TI-Cyprus, and you obtain a Government position of any kind, you must resign your post immediately and will not be allowed to be reinstated for 24 months (until the next Board is elected).” And what of those who, despite aspirations, fail to acquire the Government positions they seek? “It doesn’t matter,” he assures emphatically, “Even if someone merely ran for a position and was not elected, they would still be disbarred for the designated time frame.” If extricated from Government activities, there are few impediments to acquiring membership, Nicolaides guarantees: “It’s not a tedious process. In essence, prospective members submit an online application, and make contact to explain what they have to offer. So far, we have never said no to a prospective member and we have members from all areas and back-

clear

grounds of high academic calibre: everyone is highly qualified, knowledgeable, and cares about combating corruption.” So with the lights and camera at the ready, what will be the first action TI-Cyprus will initiate in calling to arms all those opposed to simply doing nothing, permitting corruption to creep into every crevice of Cyprus’ societal – and thus economic – make up? Nicolaides explains: “TI Cyprus – together with TI Chapters in Slovenia, Portugal, Italy, Bulgaria, and Romania, as well as the TI Secretariat and the TI Liaison Office to the European Union – is participating in the implementation of the Speak Up II Project. The project establishes Advocacy and Legal Advice Centres (ALACs), which provide free and confidential legal advice to victims and witnesses of corruption and wrongdoing. “In Cyprus, the official launch of our ALAC – called I Demand Transparency – will take place on September 29, with operations commencing as of October 1.” The ALAC, Nicolaides confirms, will be available to anyone – whether from the private or public sector – who wishes to honestly and confidentially report concerns regarding corruption, or who seeks expert and peer support and information. “Unfortunately, there is no legislation in Cyprus to protect good faith reporters –so-called ‘whistle-blowers’ – within an organisation. “So if, for example, someone should witness a colleague taking money or a gift in exchange for issuing documents, the person in question needs to be informed of the most effective way to handle this situation; otherwise they may be facing repercussions, from being ostracised in the work place to being made redundant.” And are there any other plans in the pipeline, I wonder? “Many; and then some!” Nicolaides exclaims. “One example is that we hope to draw

There is no legislation in Cyprus to protect good faith reporters –socalled ‘whistleblowers’ – within an organisation

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TRANSPARENCY

Our efforts today up a ranking of companies according to how corrupt – or not – they are. We will look at areas where they could improve with regard to this issue. The idea is that the ranking will be made public and companies won’t have an opportunity to see it beforehand. However, the ranking will change according to amendments made. “In essence, our core, innate goal is to encourage all entities to attract clients and collaborators, based purely on the merit of their work: exclusively and absolutely.” In spearheading these initiatives, what, I wonder, are the key issues that TICyprus sees arising? With a sigh and a seemingly heavy heart, Nicolaides confides: “One of the biggest problems is that of semantics and short-sightedness. By this I mean that many people don’t fully comprehend just exactly what corruption means; they easily confuse it with fraud and vice versa. We’re working hard to make this distinction clear.” But surely this is no easy task considering the subtleties of corruption and the fine line drawn by people’s intentions? “For sure,” Nicolaides relates. “Consider: if someone is going to the doctor for tests and he/she takes along a gift – a cake, let’s say – does this constitute corruption? If this person expects that this gesture will ensure that their results ‘jump’ the line and are processed more quickly than everybody else as a consequence, then, yes, it is. It’s a very fine line and it’s so deeply embedded without our mentality and practice in Cyprus.” And, yet, there is also an overriding sentiment in Cyprus – perhaps, even, it’s a global phenomenon – that we are all exempt from this kind of negativity that scorches sincere efforts, disallowing advancement and just development. “We are, indeed, crippled by this kind of thinking in Cyprus. But imagine that a company has been commissioned to build a key road in a city – vital to engendering functional infrastructure – and this company has the luxury of overcharging by some €2 million because of its political associations: who will pay for this extra cost? The obvious answer is: the Government. But who pays the Government? We do: all of us; every valuable member of society.” Worse still, it seems, is that corruption is the progeny of, precisely, individuals – some unassuming, some brazen: “It’s a vicious cycle,” Nicolaides concedes. “It

probably won’t be seen for another two generations

from now

passes back and forth between the Government, companies, and the community. “I’ve realised that it’s in our culture to assume that someone always wants something from you and that you can always get something from them as a consequence. It is our responsibility to iron out these creases in our culture. At the end of the day, it’s all about economies of scale. We are a small island, and, therefore, punishment and repercussions must be high to balance out the nepotism rife within our communities.” When pressed as to what such punishments might look like, Nicolaides is ready with a case scenario: “A perfect scenario is parking in disabled spaces when you are not in need of this benefit. Universally, it is considered taboo and, in some cases, abhorred for its lack of consideration and self-centeredness. And, yet, we still see this happening time and time again in Cyprus – partly because the fines are minimal, and partly because people feel they have a safety net: surely someone they know could pull some strings to exonerate them from the burden of paying a fine? “But what if there was a €3,000 fine to punish this thoughtless act? Not even the richest person on the island would dare be so flippant so as to park in a disabled space devoid of the legal right.” Nepotism is, undoubtedly, a cankerous practice, we agree, and one that impedes the flourishing of both individuals and society. “What we need,” Nicolaides suggests, “is what I call ‘360 Evaluation’. Currently, evaluation is done from the top downwards. This is highly ineffective. “The upper level should evaluate the employee, but so should the employee evaluate the upper level. Likewise, the customer should have a say, evaluating both accordingly. All of this should be done by an independent committee, so that there are no unjust ramifications for truthfulness. In the current system – in particular regarding public service – people are moved from one department to another when they are performing below par, and there is no risk of losing one’s job or of not en-

58 Gold THE INTERNATIONAL INVESTMENT, FINANCE & PROFESSIONAL SERVICES MAGAZINE OF CYPRUS

joying a well-above-average salary compared with the rest of society.” Above all, Nicolaides believes that there must be adequate training for employees and managers alike on what exactly constitutes transparency and corruption. “Knowledge is power. We can’t move forward otherwise.” Nor can we change the status quo in one day. “Our efforts today probably won’t be seen for another two generations from now. But we must take the first step without delay. Raising our children with the right knowledge will change their mentality and, therefore, their actions. We are at present developing a programme for schools, offering teacher-training accordingly.” Are we, I ask, losing prospective foreign investors due to this idiosyncratic cultural practice of nepotism? “Well,” Nicolaides begins, “If we cannot prove that we are transparent, then we will be more likely to attract organisations that are not concerned with transparency. And why should we aim for this mediocrity? We need to combine right thinking and practice to create an ideal destination. Will foreign nationals feel that they are safe here when going to the police or hospital? Will they fell that they are being treated fairly when getting a quote for construction work, or that they are not being taken advantage of when paying for services? If we treat companies right on every level, no matter how subtle, they will not only establish an office here, but bring 40 employees with them, who will need to rent a house, buy a car and furniture, employ plumbers, electricians, mechanics and more.” This, surely, however, requires a united effort, I press. “Of course. And even though synergy is a Greek word, we don’t know what it means here! Egoism and greed get firmly in the way.” So is learning from our mistakes the way forward, I ask? Here, Nicolaides laughs involuntarily, and, with a smile, explains: “Cyprus is an experiment. People in the future will study us as a model to learn from our mistakes. “We are a middle-aged democracy, and that comes with all the good and bad of what it means to be a middle-aged person. We’ve made mistakes and acquired the wisdom, but still have the strength and dynamism to move forward with grace and integrity. We need to reach the ripe old age of 100, like other countries, and then undergo a rebirth as the next generation inherits what we’ve created. “But,” Nicolaides stresses in his concluding thought, “It is the meek, as they say, who shall inherit the earth.”

SPECIAL SUPPLEMENT

PROFESSIONAL

QUALIFICATIONS AND SKILLS TRAINING

IN CYPRUS

I

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n today’s rapidly changing, competitive world, the necessity for Continuous Professional Development (CPD) is becoming greater than ever. As industries evolve, it is vitally important that employees keep their skills and abilities up to date in order to stay ahead of the curve. At the highest level, some courses accredited by professional bodies can lead to you becoming registered as a member of the body with a certain level of knowledge and skill. By VI[HPUPUN PUK\Z[Y` ZWLJPÄJ X\HSPÄJH[PVUZ `V\

will not only gain new skills but also recognition from your peers, better contacts in your sector and, hopefully, a higher salary. Other courses allow you to progress in your career by helping you make the most of your HIPSP[PLZ 7YVMLZZPVUHS X\HSPÄJH[PVUZ HYL VM[LU offered as part-time courses and can also be completed through distance learning and elearning, as many study for them while working full time. On the following pages, six organisations WYLZLU[ [OL JV\YZLZ TL[OVKZ HUK X\HSPÄJHtions they provide in Cyprus.

SPECIAL SUPPLEMENT

CIArb Cyprus Branch The Cyprus Branch of the Chartered Institute of Arbitrators (CIArb) plays a key role in the global promotion of Cyprus as a training centre for Alternative Dispute Resolution (ADR) methods. It is an approved provider of the Institute’s Courses. The diversity of cultures and practices across the continent and other countries around Cyprus enables the Branch to bring together a unique mixture of dispute resolution methods, practices and experiences. CIArb provides education for Arbitration, International Arbitration, Mediation and Adjudication. Through P[Z JV\YZLZ *0(YI VɈLYZ ZL]LYHS pathways for membership.

TRAINING COURSES

;OL *`WY\Z )YHUJO VɈLYZ ;YHPUPUN Courses for International Arbitration and Mediation as well as CPD WYVNYHTTLZ 6\Y *V\YZLZ VɈLY a progressive education ladder to newcomers to ADR right through to those with advanced levels of knowledge and skills. These courses enable members to keep abreast of changes to the legal environment and to develop their knowledge and skills. To this end, the CIArb Cyprus Branch, in cooperation with the SICA-FICA Foundation, continues to organize training courses for all levels of education of CIArb membership for International Arbitration. Moreover, the CIArb Cyprus Branch, in cooperation with the Headquar[LYZ PZ UV^ VYNHUPaPUN MVY [OL ÄYZ[ time Module 1 and Module 2 for Mediation. ;OLYL HYL KPɈLYLU[ SL]LSZ VM TLTbership to the Chartered Institute

of Arbitrators, depending on the knowledge and experience of each Arbitrator: Associates, Members, Fellows and Chartered Members. As regards the International Arbitration Pathway in order to become an Associate Member, one has to attend the Introductory Course on International Commercial Arbitration and successfully pass the examination. In order to become a Member, one has to attend Module 1 and Module 2 and successfully pass the examination. In order to become a Fellow, one has to attend Module 3 and Module 4 and successfully pass both the written and oral examination and an interview. In order to be considered a Chartered Arbitrator, one must have approved experience, which will be examined by the Board of CIArb, and pass a peer interview. This October, the Cyprus Branch is organizing Module 1 for Mediation. ;OPZ PZ [OL ÄYZ[ Z[LW MVY [OL 0UZ[Ptute’s Pathway for Mediation and you can become an associate member of the Institute. Module 2 will take place later on this year. This course is aimed for candidates who wish to become CIArb Members and Accredited Mediators. It is HSZV ILULÄJPHS [V [OVZL ^OV ^PZO [V use mediation skills in their current profession.

positive impact on personal relationships. This course provides candidates with the appropriate skills set and can lay the foundation for building an independent ADR practice. It is, therefore, suitable for:

This course comprises of 5 full days of skills-based learning delivered by practising and experienced mediators. Mediation has been shown to IL HU LɈLJ[P]L TL[OVK VM ZVS]ing complex commercial disputes as well as a skill that can have a

This is also a six-month course (3 September 2014-2 February 2015) and it will provide an opportunity for Members of the Institute to move on to the third step for becoming Fellows of the Institute. The course consists of self-study, answering

Individuals looking to improve their communication skills, including building rapport and listening skills Arbitrators/adjudicators looking to IYVHKLU [OLPY (+9 WYHJ[PJL VɈLYPUN *VUÅPJ[ YLZVS\[PVU WYVMLZZPVUHSZ Aspiring mediators;

THE TRAINING COURSES FROM SEPTEMBER 2014 TO JUNE 2015 ARE AS FOLLOWS: Module 2 – The Laws of Arbitration

It is a six-month course (3 September 2014-2 February 2015) and it will provide an opportunity for existing associate members to acquire the second step for becoming members of the institute. The course consists of self-study, answering questions and assignments in association with three -day meetings with the Tutors, which will be held in Cyprus. At the end of the course there is a written examination. Successful candidates may apply to become members of the Institute and proceed with Module 3.

Module 4 – (International Arbitration) Award Writing

questions and assignments in association with two-day meetings with the Tutors, which will be held in Cyprus. At the end of the course there is a written examination, the successful completion of which will enable candidates to apply to become Fellows of the Institute.

Module 1– Commercial Mediation Training

;OPZ PZ H Ă„]L KH` JV\YZL 6J[VILY 2014). Introductory Course in International Commercial Arbitration It will take place on 3 December 2014. Its main purpose is to provide professionals with little or no experience in international arbitration the opportuUP[` [V WYVJLLK [V [OL Ă„YZ[ Z[LW VM [OL Institute on the pathway to fellowship programme. On successful completion of the examination, participants will be able to apply to become Associate Members of the Institute.

Module 1 – Laws of Obligations and Civil & Commercial Evidence

;OPZ PZ H ZP_ TVU[O JV\YZL +Lcember 2014-1 June 2015) and it will provide an opportunity for Associate 4LTILYZ [V HJX\PYL [OL Ă„YZ[ Z[LW [Vwards becoming Members of the Institute. The course consists of self-study, answering questions and assignments in association with three-day meetings with the Tutors, which will be held in Cyprus. At the end of the course there is a written examination. Successful candidates will be able to proceed with Module 2.

Module 3 – Arbitration Practice, Procedure & Drafting Commercial Evidence

0[ PZ HSZV H ZP_ TVU[O JV\YZL December 2014-2 June 2015) and will provide an opportunity for Members VM [OL 0UZ[P[\[L [V TV]L VU [V [OL Ă„YZ[ step towards becoming Fellows of the Institute. The course consists of self-study, answering questions and assignments in association with twoday meetings with the Tutors, which will be held in Cyprus. At the end of the course there is a written and oral examination. Successful candidates will be able to proceed with Module 4.

CPD courses are programmed throughout the year.

CONTACT INFORMATION

CIArb Cyprus Branch Tel: (+357) 22779840 Fax: (+357) 22779780 e-mail: training.ciarbcybranch@gmail.com Website: www.ciarb.org/cyprus/

SPECIAL SUPPLEMENT

Cyprus Institute of Marketing

The Cyprus Business School UNDERGRADUATE PROGRAMMES (Nicosia – Limassol)

OUR VISION

To be a Leading Business School that enhances knowledge and nurtures future leaders

OUR MISSION

To develop, provide and maintain the best knowledge programmes, at affordable prices and in a learning environment that makes it possible for the business education of individuals who aspire to lead in tomorrow’s world. We HPT [V LUHISL V\Y Z[\KLU[Z Z[HɈ HUK faculty to discover their true talent and reach their utmost potential

HISTORY

The Cyprus Institute of Marketing (CIM) has been operating in Nicosia since 1978 and in Limassol since 1984. The 0UZ[P[\[L ^OPJO PZ [OL Ă„YZ[ )\ZPULZZ School in the country, was set up in order to promote the science of marketing in Cyprus and abroad. During the past 36 years CIM has evolved into a major international centre for the development of business education including many KP]LYZL Ă„LSKZ Z\JO HZ 4HUHNLTLU[ Accounting & Finance, Shipping, Tourism, Banking and many others. CIM has provided the opportunity to more than Z[\KLU[Z [V HJX\PYL X\HSPĂ„JH[PVUZ of the highest standards and to excel both personally as well as professionally. Ever since its establishment, CIM has been a pioneer in the teaching of in-caYLLY HK\S[Z 6ɈLYPUN L_JS\ZP]LS` L]LUPUN classes to working individuals, it especially attracts those who, for one reason or another, missed out on the opportu-

nity to study right after graduating from high school but who have always had the will to learn and further their careers. CIM has thus rightly been characterised as a ‘Second-Chance Institution’; as we like to say here, Learning Never Ends. The CIM programmes are unique in that they combine theory and practice, giving students the necessary tools for securing employment or for getting promoted at their existing job. CIM offers high-quality education and expert training which is tailored according to your individual needs, be they your personal career, family or any other commitments. CIM’s distinguished lecturers and tutors begin with an initial evaluation and then structure a learning proNYHTTL HYV\UK `V\Y ZWLJPĂ„J Z[YLUN[OZ and weaknesses, guiding you towards pre-set and pre-agreed goals. In an increasingly competitive market, *04 VɈLYZ L_JLSSLU[ OPNO X\HSP[` LK\cation that combines theory and practice, helping you jumpstart or further your career.

GLOBAL PARTNERSHIPS

The Cyprus Institute of Marketing is the ÄYZ[ 0UZ[P[\[PVU PU *`WY\Z [V LUQV` 0UZ[Ptutional Approval by two leading British Universities: The University of West London and The Cyprus Institute of Marketing are collaborative partners in the delivery of: 1. BA (Hons) Business Studies with Marketing (3 years) 2. BA (Hons) Accounting and Finance (3 years) – with 9 ACCA exemptions Degree programmes.

‹ +PWSVTH PU 4HYRL[PUN :[\KPLZ `LHY ‹ +PWSVTH PU 4HYRL[PUN 4HUHNLTLU[ 2 years ‹ ):J )\ZPULZZ (KTPUPZ[YH[PVU 3 years ‹ ):J 0UZ\YHUJL `LHYZ ‹ ):J )HURPUN `LHYZ ‹ ):J ;V\YPZT 4HUHNLTLU[ `LHYZ ‹ ):J -PUHUJPHS HUK *VTW\[LYZ Studies - 3 years ‹ ):J ,\YVWLHU :[\KPLZ `LHYZ ‹ ):J :OPWWPUN `LHYZ ‹ ):J )\ZPULZZ :[\KPLZ ^P[O 4HYRL[PUN - 4 years ‹ ):J :OPWWPUN 4HUHNLTLU[ ^P[O Marketing - 4 years (Limassol) ‹ <>3 )( /VUZ )\ZPULZZ :[\KPLZ ^P[O Marketing (3 years) ‹ <>3 )( /VUZ (JJV\U[PUN HUK Finance (3 years) – with 9 ACCA.

POSTGRADUATE PROGRAMMES (Nicosia – Limassol)

‹ 4:J *VYWVYH[L :[YH[LN` `LHY -; 2 years PT ‹ 4)( `LHY -; `LHYZ 7; The CIM MBA has been included in the Tier 1 MBAs according to the CEO Magazine - 2011 Global MBA Rankings and in 2012 it was ranked 16th in Europe by ^^^ ÄUK`V\Y4)( JVT 9PZPUN :[HYZ ‹ 3:)< 4)( 5VU ,_WLYPLUJL TVU[OZ -; TVU[OZ 7; ‹ 3:)< 4:J 4HYRL[PUN *VTT\UPJH[PVUZ TVU[OZ -; TVU[OZ 7; ‹ 3:)< 4:J 0U[LYUH[PVUHS 4HYRL[PUN TVU[OZ -; TVU[OZ 7;

HSZ ^P[O H [HYNL[LK HUK ÅL_PISL TLHUZ [V advance their career development goals and position their organisations for future growth. London South Bank University and The Cyprus Institute of Marketing are collaborative partners in the delivery of : 1. MBA (Non-Experience, 15 months -; TVU[OZ 7; 2. MSc Marketing Communications (15 TVU[OZ -; TVU[OZ 7; 3. MSc International Marketing (15 TVU[OZ -; TVU[OZ 7; CIM has achieved world-wide recognition and is considered as a leading Business School in Cyprus and the region. CIM is the Exclusive Accredited Study Centre for the Chartered Institute of Marketing; Europe’s largest Marketing Professional Body and has institutional approval by the University of West London and London South Bank Universities. CIM is a Member of many European and American Marketing Associations and its representatives represent Cyprus in many global forums and Conferences. CIM enjoys wide recognition from UK and US Universities thus giving the opportunity to its graduates to continue their studies abroad.

EXECUTIVE EDUCATION

CIM Executive Education programmes are designed for senior executives and high-potential managers from around the world. All of our programmes are customised around the needs of individual organisations. From intensive one-day courses focused on a particular area of interest to executive programmes covering a range of management topics and custom engagements addressing the ZWLJPÄJ I\ZPULZZ JOHSSLUNLZ VM H WHYticular organisation, our portfolio of nondegree, CIM executive education programmes provides business profession-

How do we create our customised programmes with our corporate partners?

CIM works closely with major corporations, small businesses and government agencies alike to design the right executive education programme by following [OLZL Ä]L Z[LWZ! Step 1: (ZZLZZ JVTWHU` 0UZ[P[\[L Ä[ Step 2: Preliminary programme design Step 3: Design evaluation meeting Step 4: Programme delivery Step 5: Follow-up on programmes

PROGRAMMES WE CAN DELIVER:

- Marketing, Sales & Innovation The purpose of business is to create a customer. Marketing, sales and innovation are key as only they produce results; all the rest are costs. They are the distinguishing, unique function of the business. Examples: 1. Digital Marketing 2. Basic Principles of Marketing in Cyprus 3. Merchandising 4. Customer Service 5. Sales Skills 6. Retailing 7. (K]LY[PZPUN ,ɈLJ[P]LULZZ 8. ,ɈLJ[P]L \ZL VM 0; PU ZHSLZ HUK 4HYRL[PUN

CLIENTS

In the past 36 years, CIM has delivered over 300 executive training programmes in more than 15 countries around the world. Its clients include leading Cypriot ÄYTZ Z\JO HZ *;* :JHUKPH -YV\ -YV\ Eureka, MetLife ALICO, Christodoulides Bros, HERMES Airports, KEAN and many others, as well as organisations such as the Cyprus Chamber of Commerce & Industry.

THE CHARTERED INSTITUTE OF MARKETING

The Cyprus Institute of Marketing has been an exclusive partner of the Chartered Institute of Marketing since the 1980s, giving the opportunity to hundreds VM *`WYPV[Z [V HJX\PYL WYVMLZZPVUHS X\HSPÄcations from Europe’s premier Marketing Professional Body. The Cyprus Institute of Marketing is currently the only CIM (UK) Accredited :[\K` *LU[YL VU [OL PZSHUK HUK P[ VɈLYZ the opportunity to graduates to acquire WYLZ[PNPV\Z WYVMLZZPVUHS X\HSPÄJH[PVUZ I` studying for the Professional Diploma in Marketing. ;OPZ X\HSPÄJH[PVU PZ PKLHS MVY THYRL[LYZ who are concerned with managing the marketing process at an operational level, as well as those who are looking to build on the knowledge gained at Professional *LY[PÄJH[L SL]LS ^P[O H M\[\YL THYRL[PUN management role in mind. The content of the course has been put together following consultation with employers to ensure that they gain relevant competencies for various stages of their marketing career. The focus moves from the theoretical aspects of marketing towards the many skills needed to manage the function itself - including elements ranging from channel management to communications, along with specialist areas like new product development.

CONTACT INFORMATION

Cyprus Institute of Marketing Nicosia: 25, Zannetos Street, Ayios Andreas, 1100 Nicosia Tel: +357 22778475 Fax: +357 22779331 Limassol: 7, Stelios Kyriakides Street, 3080 Limassol Tel: (+357) 25343556 e-mail: info@cima.ac.cy Website: www.cima.ac.cy

SPECIAL SUPPLEMENT

Cyprus International Institute of Management

HISTORY

The Cyprus International Institute of Management, known as CIIM, is H JVTWSL[LS` KPɈLYLU[ LK\JH[PVUHS institution. It is the only one in Cyprus and one of a few in the world, which goes beyond education and training to the transformation of the individual’s distinct personality with unlimited customization features and recognition in an ever-changing and highly competitive environment. Since its establishment in 1990, CIIM’s educational programmes of international status have always adapted to rapid market changes HUK HYL IHZLK VU X\HSP[` LɉJPLUJ` and relevance to the most up-toKH[L PZZ\LZ HɈLJ[PUN ZVJPL[` HUK [OL economy. The CIIM Executive Education arm of the Business School has developed a wide range of programmes and solutions to meet the developTLU[ ULLKZ VM HSS Z[HɈ MYVT VWLYHtional level to Chief Executive. Fully aligned with delivering CIIM’s mission ‘To create a learning environment that brings together innovative ideas and practices from around the world’, CIIM’s programmes focus on equipping participants with key competencies in areas such as management, entrepreneurship, leadership, stratLN` PUUV]H[PVU ÄUHUJL THYRL[PUN and operations.

CIIM Executive Education training and development programmes give professionals the opportunity to acquire new skills, increase their knowledge and know-how and be updated on the latest business trends through practical hands-on training. The programmes are carefully designed, based on market research in the areas of emerging needs and opportunities and new areas of knowledge and recent discovery. The trainers are carefully chosen for their deep knowledge of the subject and practical experience in the business environment. CIIM’s Executive Education is a CFA partner institute, an ICAEW partner in learning, a Digital Marketing Institute (DMI) Education Partner, a Chartered Institute for Securities and Investment (CISI) Accredited Training Provider, and an Institute of Directors (UK) Accredited Regional Training Centre. Each year, world-renowned companies and more than 2,000 professionals join the CIIM’s Executive Education programmes. Participants have described the programmes as, among other things, “well-structured”, “stimulating”, “most useful and important”, and also as “the best investment for up-to-date content”. CIIM is an approved HRDA Training Centre (licence no.K000254) with

HRDA-approved training facilitiesin Nicosia (licence no. D000278) and Limassol (licence no. D000279). The majority of CIIM’s training programmes are subsidized by the Human Resources Development Authority (HRDA) of Cyprus, thus organisations pay only a fraction of the cost.

QUALIFICATIONS

,_LJ\[P]L +L]LSVWTLU[ Programme (EDP): The EDP is an allinclusive management enhancement programme for today’s managers and supervisors. Regarded as a “mini” MBA, the EDP is an opportunity to develop your skills and know-how for a successful managerial career. 7YVMLZZPVUHS +PWSVTH PU +PNP[HS Marketing: The Professional Diploma is a practical course designed to help you improve your business’s online lead generation and customer engagement. It carries the coveted Digital Marketing Institute (DMI) accreditation and associated brand recognition which ensures that you are receiving the most up-to-date information available on Digital Marketing. +PWSVTH PU *VYWVYH[L -PUHUJL! Developed by the Institute of Chartered Accountants in England and Wales (ICAEW) and the Chartered Institute of Securities and Investments

*0:0 [OL +PWSVTH VɈLYZ H WYHJ[PJHSS` grounded, transactions-oriented leadPUN X\HSPĂ„JH[PVU PU JVYWVYH[L Ă„UHUJL The Diploma will ensure your recogni[PVU HZ H JVYWVYH[L Ă„UHUJL L_WLY[ HUK a leading industry specialist. ‹ 0UZ[P[\[L VM +PYLJ[VYZ 0V+ +L]LSVWment Programmes: A creditable and YLJVNUPZLK KL]LSVWTLU[ X\HSPĂ„JH[PVU [OH[ PZ ZWLJPĂ„JHSS` KLZPNULK [V OLSW `V\ improve your personal and professional LɈLJ[P]LULZZ MVY Z\JJLZZM\SS` KPYLJ[PUN an organisation. With more than 43,000 registered members, the IoD is the longest standing organisation to serve and support business leaders, with over 100 years of service in raising professional standards worldwide. ‹ *OHY[LYLK 0UZ[P[\[L VM :LJ\YP[PLZ HUK 0U]LZ[TLU[Z *0:0 *LY[PĂ„JH[LZ! By

preparatory seminars: The CFA is a globally recognised standard in the Ă„UHUJL PUK\Z[Y` [OH[ TLHZ\YLZ [OL competence and integrity of investment professionals. Once you become a CFA charterholder, you can enrol in the CFA Society of Cyprus, an organisation with around 100 members representing all major banks. ‹ 747 *LY[PĂ„JH[PVU *V\YZL! The Project Management Professional (PMP) JLY[PĂ„JH[PVU JV\YZL PZ KLZPNULK I` [OL Project Management Institute (PMI) and P[Z ^VYSK YLUV^ULK TL[OVKVSVN` VɈLYZ a well-structured project management HWWYVHJO [OH[ ^PSS ZPNUPĂ„JHU[S` PUJYLHZL your projects’ success. ‹ =P[HS 0TWVY[HUJL 7YVNYHTTLZ! These WYVNYHTTLZ VɈLY [OL VWWVY[\UP[` [V organisations to train in areas of top

acquiring these practical and analytiJHS ÄUHUJPHS X\HSPÄJH[PVUZ `V\ NHPU recognition and acceptance as a career WYVMLZZPVUHS I` [OL [VW ,\YVWLHU ÄUHUJPHS THYRL[Z HUK [OPZ X\HSPÄLZ `V\ [V join the CISI as Associate member. CISI topics include Global Securities, Wealth and Investment Management, and Risk in Financial Services. ‹ *OHY[LYLK -PUHUJPHS (UHS`Z[ *-(

priority for up to zero cost. Few of the topics include International Business Development and Promotion for Service Firms, Strategies for Improving Productivity by developing and managing an innovate performance system, Strategies for upgrading Cyprus tourism by shifting from mass tourism to experiential hospitality tourism, and Strategic Planning for Small Enterprises

for fast track innovation based growth. ‹ )P[L :PaL ;YHPUPUN! These three-hour wholly interactive and fast-paced workshops help you advance your career by learning new skills. Engaging you with real-life examples, the Bite Size Training LUZ\YLZ H WLYMLJ[ Ă„[ [V I\Z` WYVMLZZPVUals from various backgrounds. ‹ 6WLU LUYVSTLU[ HUK 0U OV\ZL ;YHPUing Programmes: *004 VɈLYZ H ]HYPL[` of open-enrolment training workshops and seminars in management, leadership, operations, sales, marketing, cus[VTLY ZLY]PJL Ă„UHUJL HUK JVTWSPHUJL that can be also tailored to meet the needs of your organisation. CIIM Executive Education training programmes VɈLY ZVS\[PVUZ [OH[ JYLH[L UL^ ]HS\LZ behaviours and knowledge for achieving lasting. Over the years, CIIM has worked very closely with many sucJLZZM\S VYNHUPZH[PVUZ HUK [OL LɈLJ[ VM their training had an immediate impact to their achievements.

CONTACT INFORMATION

Cyprus International Institute of Management (CIIM) 21, Akademias Avenue, P.O. Box 20378 2151 Aglandjia, Nicosia, Cyprus Tel: (+357) 22462246 Fax: (+357) 22340383 e-mail: execedu@ciim.ac.cy >LIZP[L! ^^^ JPPT HJ J` L_LJ\[P]L LK\JH[PVU

SPECIAL SUPPLEMENT

ICAEW

DEVELOP YOUR FUTURE FINANCE TALENT

Making sure you have professionals with the ability to think strategically, problem-solve and add value right across the organisation is vital for long-term success. So, as the competition between graduates for top positions continues, have you considered how you can ensure you entice the right candidates WR \RXU EXVLQHVV" 7KH TXDOLðFDWLRQ \RX RIIHU FRXOG EH WKH NH\ ¸)LPUN HTVUNZ[ [OL ÄYZ[ ÄYTZ to be approved to provide ACA training in Cyprus, we have been very pleased with the calibre of our people holding and training [V^HYKZ [OL (*( X\HSPÄJH[PVU HUK the excellent relationship we have formed with the ICAEW over the years. ¸>L JVUZPZ[LU[S` ÄUK [OH[ 0*(,> Chartered Accountants, due to the multi-faceted, dynamic nature of [OL X\HSPÄJH[PVU KLSP]LY [OL X\HSP[` service levels required by both our global and local clients. By speaking the right language, with the right levels of personal and soft skills intertwined, our professionals are globally mobile, with the ability to help us to achieve our aspiration to be the undisputed leaders in service provision.” Janet Ioannou +PYLJ[VY (\KP[ :LY]PJLZ Deloitte Ltd, Cyprus

(*( [YHPUPUN OHZ ILLU VɈLYLK PU Cyprus for over 20 years. During this time it has become increasingly ÅL_PISL [V [YHPU NP]PUN Z[\KLU[Z [OL opportunity to qualify as ICAEW Chartered Accountants in business or practice. The ability to train for [OL (*( PU KPɈLYLU[ JVTTLYJPHS environments suits the needs of students and employers alike; giving NYLH[LY ÅL_PIPSP[` HUK JOVPJL ^OPSZ[ retaining quality and prestige. As a result, thousands of organisations of all sizes globally attract and retain talented individuals I` VɈLYPUN VUL VM [OL TVZ[ advanced learning and professional development programmes available. So, if you’re looking to ensure

your organisation can achieve its ambition, join the growing number of employers in Cyprus training ICAEW Chartered Accountants.

ATTRACT AND DEVELOP TALENT

Our reputation for leading the way in the development and delivery of WYVMLZZPVUHS X\HSPÄJH[PVUZ ^PSS H[[YHJ[ talented and ambitious individuals to your organisation. Talented graduates are highly sought after; they bring fresh ideas and enthusiasm and [OL (*( X\HSPÄJH[PVU ^PSS LUHISL you to harness their potential by providing a framework that will create HJJV\U[HUJ` ÄUHUJL HUK I\ZPULZZ professionals.

GLOBALLY RECOGNISED EXPERTISE

As a world leader of the accountancy HUK ÄUHUJL WYVMLZZPVU ^L Z\WWVY[ over 142,000 members in more than 160 countries around the world. Our JOHY[LYLK HJJV\U[HUJ` X\HSPÄJH[PVU is also globally recognised, with thousands of organisations across JOHYP[` UV[ MVY WYVÄ[ ÄUHUJPHS services, professional services, industry and commerce, authorised [V VɈLY (*( [YHPUPUN [V [OLPY UL^ recruits. Our authorised employer model THRLZ [OL (*( X\HSPÄJH[PVU completely portable, meaning standards are the same from Cyprus to China. All employers sign up to

the same universal training standards, requiring ACA students to achieve a consistently high benchmark. We support our authorised employers throughout the process. Help is on hand MYVT 0*(,> Z[HɈ ^OV JHU HYYHUNL a visit if needed, or our dedicated helplines are always there to answer ad-hoc training queries.

FLEXIBILITY TO SUIT YOUR BUSINESS NEEDS

The modular structure of the ACA and ÅL_PISL [\P[PVU VW[PVUZ JSHZZYVVT distance, online) allow employers to tailor students’ training around their business needs. Modules can be studied and sat in any order and frequent exam sittings (computer based for six modules) enable ultimate ÅL_PIPSP[` MVY [PTPUN L_HTZ Authorisation is straightforward and free, with our dedicated Business Development team on hand for support when w wh en you need it. Student reviews a ar e carried out on a six-monthly basis are

and training records are hosted online and can all be accessed in one place. Students take the responsibility for \WKH[PUN Ă„SLZ ^P[O LTWSV`LYZ VUS` ULLKPUN [V JVTWSL[L H ZPUNSL ZPNU VɈ at the end of ACA training.

DEVELOP ACCOUNTANCY, FINANCE AND BUSINESS PROFESSIONALS

The ACA is one of the most advanced learning and professional development programmes available. It is carefully structured to test not only candidates’ academic skills, but also their understanding of business. The integrated approach of the ACA means students develop a combination of technical knowledge, professional skills and practical experience throughout their training. This approach results in JVUZPZ[LU[S` OPNO ÄYZ[ [PTL WHZZ YH[LZ HUK equips our members with the skills they need to perform at the highest level in HJJV\U[HUJ` ÄUHUJL HUK I\ZPULZZ

FIND OUT MORE

+PZJV]LY OV^ (*( [YHPUPUN JHU ILULÄ[ your organisation at our breakfast seminar Date: Thursday 23 October 2014 Time: 08.30-10.00 Venue: Carob Mills Restaurant, Vasilissis Street, 3602 Limassol RSVP to: kate.holroyd-smith@icew.com If you can’t make our event and would like [V L_WSVYL [OL (*( X\HSPÄJH[PVU PU TVYL KL[HPS ]PZP[ PJHL^ JVT [YHPU(*(

CONTACT INFORMATION

ICAEW

Phone: +44 (0)1908 248 250 Email: Kate.Holroyd-Smith@icaew.com Fax: +44 (0)1908 248 260 Address: ICAEW, Chartered Accountants’ Hall, Moorgate Place, London, EC2R 6EA, UK

SPECIAL SUPPLEMENT

KPMG Limited KPMG in Cyprus traces its origins back to 1948, and today is one of the largest Audit and Advisory organizations in the Cyprus market. With KPMG Cyprus, new graduates and X\HSPĂ„LK Z[HɈ TLTILYZ OH]L [OL VWportunity to develop their business understanding and broaden their skills and knowledge, by pursuing any WYVMLZZPVUHS X\HSPĂ„JH[PVUZ YLSL]HU[ [V their area of work. KPMG provides support for a variety of professional X\HSPĂ„JH[PVUZ YHUNPUN MYVT HJJV\Utancy (i.e. Association of Chartered Accountants - ACA, Association VM *LY[PĂ„LK *OHY[LYLK (JJV\U[HU[Z - ACCA [V Ă„UHUJL P L *OHY[LYLK Financial Analyst - CFA, Corporate Finance - CF) or even more specialist X\HSPĂ„JH[PVUZ P L *LY[PĂ„LK 0U[LYUHS Auditor - CIA *LY[PĂ„LK 0UMVYTH[PVU Systems Auditor - CISA *LY[PĂ„LK 0Uformation Security Manager - CISM, *LY[PĂ„LK 0UMVYTH[PVU :`Z[LTZ :LJ\rity Professional - CISSP). Combining the knowledge attained through WYVMLZZPVUHS X\HSPĂ„JH[PVUZ ^P[O [OL superb work experience gained at KPMG due to our diverse portfolio of clients, employees have the opportunity to develop a prosperous career with enormous opportunities. KPMG provides the hands-on experience and professional training to assist employees in developing their skills and to help them realize their potential. Apart from the Professional QualiĂ„JH[PVUZ [OH[ ZVTLVUL JHU W\YZ\L within KPMG Cyprus, our KPMG (JHKLT` VɈLYZ H ]HYPL[` VM ZLTP-

The Academy’s main areas of training are: Financial reporting and Accounting, Taxation, VAT, Corporate Finance, Financial Risk Management, IT Advisory, Organizational Strategy, Restructuring and Soft Skills. The Academy’s seminars may contribute to Continuing Professional Development requirements (CPD units). At the end of the seminars, WHY[PJPWHU[Z YLJLP]L H JLY[PĂ„JH[L of attendance on which the total duration of the course is stated. For the period of September+LJLTILY [OL (JHKLT` VɈLYZ a selection of 12 open seminars ^OPJO YLĂ…LJ[ J\YYLU[ THYRL[ needs and training priorities, 8 of which have been approved by the Human Resource Development Authority (HRDA). Suitable subsidies will, therefore, be available to all HRDA qualifying participants. The attendees of the Academy’s seminars are also entitled to other discounts and VɈLYZ

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KPMG Academy Upcoming Seminars: September-October 2014

CRR: Changes in the Basel II, Pillar 1 Framework Language: English Date: 26/09/14

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Grasp knowledge into your hands

OPINION

On the Road to Recovery Placing the survival of Bank of Cyprus beyond doubt

By John Patrick Hourican

E

nsuring the recovery of Bank of Cyprus following the events that crystallized during 2012 and 2013 is a slow and incremental process. There are no quick fixes. The sustainable path to recovery is a deliberate and painstaking one that involves implementing a large number of changes, on many fronts at the same time. We need to constantly recalibrate our actions and take into account an evolving regulatory environment as well as a tough operating environment. We have taken clear action to address our cost base, to sell unprofitable overseas businesses, to stabilize our deposit base, to reduce our reliance on Euro-system funding and to get a grip of and manage our very high non-performing loans. We are making incremental and steady progress on improving our capital adequacy and de-risking our business. We are fighting the constant tide of a rising underperforming domestic loan book which, of course, transmits the continuing recessionary conditions in the Cypriot economy today. We believe that all of the actions we are taking (and have taken) are slowly re-building confidence with each of our stakeholder groups. We have worked closely with the Government of Cyprus, the Central Bank and the Troika to ensure that the implementation of our restorative measures is being done in tandem with the important policy objectives of the country. This good cooperation has resulted in, among other things, the complete lifting of domestic restrictive measures, the early release of blocked time deposits and good progress on deleveraging our own balance sheet – making the Bank safer. There remains much for the management team to do but the path to completing the journey is now very clearly set out and we will continue to work to deliver the Bank to safety and make it valuable for our shareholders. The Board and the Management are extremely conscious of the Bank’s fragile reputation with the people of Cyprus and we are genuinely working hard to recover society’s trust. We recognize the financial pain that many of our customers suffered as a result of this crisis and the fact that there are continuing recessionary

We are genuinely working hard to recover society’s trust

conditions in Cyprus. We have implemented a number of measures such as reducing lending rates across a range of products, offering assistance to vulnerable citizens and proactively trying to protect viable businesses that are in need of debt restructuring. We will continue to do all we can to alleviate the short-term financial distress of our customers and we will work with each of them to see how they can meet their financial obligations. One year ago our Bank was staring down the barrel of great uncertainty. We suffered the indignity of being the only Bank and eurozone sovereign nation to bail-in its depositors and impose capital controls. We lost the confidence of our customers, our investors, our staff and all stakeholders. Today the picture is much more positive. A year ago we devised a restructuring plan. We picked up the broken pieces and we set out to reshape the bank so that it could have the best chance of success. We have begun to deleverage the balance sheet. We have completed the integration of the two predecessor banks. We have shrunk the cost base. We have made progress in selling overseas assets. We have stabilized the deposit base and we have improved the solvency of the company. But the world requires more of us. The Bank is one of Europe’s systemic banks and it must stand the comparison against its new peer group despite the continued economic difficulties in Cyprus. We continue to carry a large level of risk on the asset side of our balance sheet which manifests itself in our non-performing loan statistics. We continue to have an excessive reliance on Eurosystem funding and a lower level of deposits than we would naturally wish. It is prudent and right to raise capital to protect against the inherent risks in our business and to ensure that we can move the debate from survival to value. Strengthening our bank now and placing its survival in no doubt will allow us accelerate its recovery. We will be able to engage with the wholesale markets more easily. Our stock will shortly be relisted and hopefully become a desirable and improving investment. We will be better positioned to play our part in rehabilitating the Cyprus economy and we will have a much better platform from which to create a future for our employees, customers, investors and Cyprus more generally.

info: John Patrick Hourican is Group Chief Executive Officer, Bank of Cyprus. The above text is an extract from his address to the recent EGM of the bank’s shareholders. 72 Gold THE INTERNATIONAL INVESTMENT, FINANCE & PROFESSIONAL SERVICES MAGAZINE OF CYPRUS

SHIPPING

CONNECTS

THE WOMEN’S INTERNATIONAL SHIPPING & TRADING ASSOCIATION (WISTA) IS HOLDING ITS 2014 INTERNATIONAL AGM & CONFERENCE AT THE FOUR SEASON HOTEL, LIMASSOL ON 8-10 OCTOBER. WISTA CYPRUS WAS CHOSEN TO BE THE ORGANISER OF THIS MAJOR CONFERENCE AND CHAIRWOMAN DESPINA PANAYIOTOU THEODOSIOU TOLD GOLD WHAT THIS MEANS FOR HER AND THE LOCAL BRANCH OF THE ORGANISATION. By John Vickers | Photograph by Jo Michaelides

Gold: As a relatively new member of the WISTA family, how does it feel to have WISTA Cyprus hosting the 2014 WISTA International AGM & Conference? Despina Panayiotou Theodosiou: It is a great honour that Cyprus won the bid to host the WISTA International AGM & Conference 2014, not only because we are one of the newest members to the WISTA family but also because this year WISTA is celebrating its 40th anniversary, making this event a milestone in the Association’s history. The Organising Committee and the Members have all worked very hard to bring together a high-calibre event with exceptional panelists, an interesting programme as well as networking events. We are expecting approximately 250 members from abroad in addition to the local audience. It is important to note that, unlike the AGM, the Conference is not member-exclusive, so people from the shipping industry may register if they wish, whether they are members or not. We feel that, in this way, we can promote networking and the development of new business relationships, which is one of the Association’s main objectives. We are looking forward to October!

establishment of the Association in Cyprus. During the preparations we have had the full support of the International Executive Committee and, even after last year’s events, there has always been a strong belief that we would carry this through. We are extremely proud of the way we have risen to the challenge, though we will only be satisfied once the Conference has been completed successfully. Gold: What do you expect this year’s Conference to achieve? D.P.T.: Members from over 26 countries have already registered; it will be a multicultural gathering of shipping executives coming together to brainstorm, to discuss the issues that concern our industry, to share ideas on innovation initiatives and welcome new perspectives. We want the participants to feel that attending the conference was a rewarding experience.

Gold: How significant is the choice of Cyprus as this year’s venue? D.P.T.: When we submitted our bid to host the conference two years ago, WISTA Cyprus had just been founded. We regarded winning as both a vote of confidence from the other National Associations and also a great opportunity to prove that we are committed to the growth and

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THE TTH HEE IN H IINTERNATIONAL NTERNAT ATTIONA ONA NAL NA AL IN INVESTMENT, NVEST VES ESST EST STME MEN EN NTT, FFI FINANCE IN NANC ANCE & PPRO PROF PROFESSIONAL ROF RRO OOFFES EESSI SSSI SSIIONA ONA OONAL ON NAALL SSE NAL NA SER SERVICES EERRVVICE ERVICE VIC VI IICE CES CE ES M MA MAGAZINE AGA GAZ GAZ GAZI AAZI ZZIIN ZIN NEE OOFF CY CCYPRUS YPR PRUSS

Gol G Go Gold oolld 7744

SHIPPING

Gold: What are the main topics of discussion? D.P.T.: There are six main topics: An Overview of the Current Shipping Industry; The Future of Ship Finance; An Update on Chartering and S&P Markets; Innovation in Networks in the Maritime Industry; Offshore Energy and Shipping; and ShippingRelated Services. We have tried to draw up a programme that looks at the main points of interest for our industry. There will be moderated discussions on all topics and the active participation of the audience will be encouraged. We have over 30 confirmed prominent panelists and moderators from around the world to make sure that the discussions are intense and substantial and we are confident that they will provide new insights and ideas for all delegates. Gold: You have already had the experience of organising one major WISTA event (the 2012 WISTA Med conference). How does the work for that compare with what you are doing for the WISTA International Conference? D.P.T.: Quite frankly, it does not! WISTA Med is a regional conference as opposed to the international character of the one we are organising now. The Med was the first major event that WISTA Cyprus organised so it was an exciting learning experience. We enjoyed hosting the members from Mediterranean countries immensely and, at the time, it was a great achievement for us. Two years on, and having had the experience of organising many local events I can say that with the help of our conference organisers we have managed this huge project very well. Only for reasons of comparison, the delegates to the International conference are expected to be three times those we hosted in 2012 and from more diverse backgrounds; the duration of the event is three days instead of one and half and this time we have to organise 8 different social events/activities, compared to two for the WISTA Med conference. Gold: During the past 18 months, which have been difficult for Cyprus as a whole, the shipping industry appears to have survived extremely well. As more of an ‘insider’, is this your impression too? D.P.T.: Shipping is a global and highly cyclical industry and so it was heavily affected by the global economic crisis some years before Cyprus got into this difficult financial situation. The decline in demand resulted in a capacity glut, which hit charter and cargo rates severely. Even worse, this crisis has been so deep that, six years on, the industry has not recovered although there are now signs of improvement. Facing this situation

for so many years, shipping companies were already in “survival mode”, a factor that contributed to the local maritime cluster handling last year’s events well. Furthermore, due to the economic crisis, shipping companies focused on innovative solutions, structural changes and alternative sources of financing. Another factor is that the majority of shipping and shipping-related companies in Cyprus are well-established, key industry

T

he Women’s International Shipping & Trading Association (WISTA) is an international organisation for women in management positions involved in the maritime transportation business and related trades worldwide. It counts 2,000 members in 33 WISTA National

SHIPPING HAS TRADITIONALLY BEEN

MALEDOMINATED BUT THINGS ARE SLOWLY CHANGING

players, managed by highly capable and experienced people. They operate based on a strategy and long-term planning which makes their business sustainable. And let us not forget that the global character of the industry means that Cyprus shipping does not rely exclusively on the local financial system. Gold: Shipping is traditionally a maledominated industry and Cyprus business in general is also male-dominated. How difficult has it been to raise awareness of WISTA here? D.P.T.: Shipping has indeed traditionally been male-dominated but things are slowly changing. On an international level we see many more women at the helm of shipping companies or choosing seafaring as a career. The local shipping industry has accepted and embraced WISTA; I believe we are more open-minded than we give ourselves credit for. The essence is to be professional, active and effective and I believe that, as an Association, we have proven that this is what we are. From the beginning we have aimed for quality over quantity and this has paid off with reference to our growth and being recognised as a reputable organisation. Today I am happy to report that WISTA Cyprus has 80 members, all management-level professionals from over 20 nationalities. Compared to other National WISTA Associations, we are medium-sized with regard to membership and growing steadily every year.

Associations. WISTA Cyprus was created PU 6J[VILY HUK VMÄJPHSS` incorporated in February 2012. It currently has 80 members. WISTA Cyprus’ vision is to be acknowledged as a professional and highly reputable shipping organisation and aims to be a major player in attracting more women to the industry and in supporting women in management positions. Through networking, education and mentoring, it aims to enhance members’ competence and empower career success.

Gold: You are the first (and only) woman to be elected to the Board of the Cyprus Shipping Chamber. How has the experience been so far? D.P.T.: The Cyprus Shipping Chamber is an influential body that represents the local shipping industry. Being on the Board of Directors gives me the opportunity to serve an industry that I am passionate about. Now, more than ever, the local maritime cluster needs support and it is our responsibility to safeguard and protect an industry that is a pillar of Cyprus’ economy, helping the country towards economic recovery with its significant contribution to our GDP (7%) and employing 5,000 shore based employees and 55,000 seafarers. I am very fortunate to be cooperating with esteemed professionals and business people like my colleagues on the Board and the Chamber secretariat. Gold: Once the 2014 WISTA International AGM & Conference is over, what will your next project as WISTA Cyprus be? D.P.T.: WISTA Cyprus is constantly active, organising Member Meetings every one to two months. These events are mainly presentations of industry updates, educational in the form of seminars and sometimes purely social. A long-term project that WISTA Cyprus is undertaking is the collaboration with CYMEPA (Cyprus Marine Environment Protection Association) on the Akamas Marine Environment Interpretation Centre. WISTA will be helping CYMEPA raise funds for the initial study expenses and to equip and run the Centre efficiently. This collaboration will begin with the WISTA AGM & Conference 2014 at which the book by Andreas Papadopoulos The 33 Beaches of the Limassol District will be sold with all proceeds going towards the Project.

THE INTERNATIONAL INVESTMENT, FINANCE & PROFESSIONAL SERVICES MAGAZINE OF CYPRUS

Gold 75

SHIPPING

S

A family

AFFAIR

AS ZELA SHIPPING STARTS ITS SECOND HALF-CENTURY OF BUSINESS, ITS CORE VALUES REMAIN THE SAME. By Effy Pafitis | Photograph by Jo Michaelides

76 Gold THE INTERNATIONAL INVESTMENT, FINANCE & PROFESSIONAL SERVICES MAGAZINE OF CYPRUS

low and steady wins the race, dictates Aesop’s oft-quoted fable. Despite the tale’s wisdom, many companies still insist on trying to emulate the overzealous hare, expanding excessively in an attempt to double their money. Those that imitate the enlightened tortoise, however, recognize that continuity is the essence of success. The continuation of certain unique corporate philosophies and practices – from the past into the present and future – can create a company that is able to transcend the unfortunate predicament of enjoying success that is limited to one time period. This is clearly evidenced by Zela Shipping, says George Mouskas, General Manager of the London-based shipping company. Established in 1963, the company has succeeded in navigating the treacherous waters of the shipping industry for more than 50 years. Continuing the legacy of its founder Kyriacos Mouskas, Zela Shipping has maintained its unique operations and its reputation of integrity, protected now by the second generation of the family (to which George Mouskas belongs), whilst its third generation will be the architects of its future success and survival. “Maintaining the involvement of family members in the company is of principal importance for us, particularly in terms of the trust it inspires,” Mouskas confides. “I can always trust my own family members to do what it takes to maintain the firm’s leading position in the maritime industry, constantly considering its prospects for the future.” He believes that what he calls the “steadfast family ethos and dedicated work ethic”

has, almost involuntarily, been passed on to the next generation as it “witnesses first-hand the development of the company as well as the hard work that goes into achieving it. And so when they join the company as adults, they will – perhaps without even realising it – carry on in the same way we have always wanted to run our business.” This is crucial for its long-term survival and success, he stresses. Indeed, it is difficult to argue with the Mouskas philosophy, considering the impressive milestones of Zela Shipping; the firm celebrated 50 years in the maritime industry just last year, surpassing many of its accomplished competitors. Were the family firm to introduce thirdparty, independent partners into its management, Mouskas explains, the possibility that their ideas and vision for the business would differ from the Mouskas family’s and create conflicts of interest would linger in the air like an ominous breeze warning of more stormy conditions on the horizon. “For example,” Mouskas states proudly, “we maintain a very high quality of operations at Zela Shipping. It costs us more money to run our company in this way, but we believe that it benefits us in the long-term. Not only do we save money on the maintenance of our fleet, we preserve our reputation for superior quality, which only adds value to our vessels. “Having cultivated this reputation,” he continues, “when we want to sell a vessel, it simply sells. An independent partner might overlook these benefits and focus on the many advantages of reducing day-to-day costs,” Mouskas muses warily. Such precise policies of the company are not limited to its short-term, daily operations, he explains; they are also applicable to its long-term expansion strategy. “We’ve been working in the industry for 50 years now, and you can only do that in shipping if you are conservative. This doesn’t mean that you don’t expand; you merely have to do so in the appropriate way.” Citing an important lesson in fiscal prudence, Mouskas explains that Zela Shipping steadily reinvests in its fleet, ensuring that even whilst embarking on expansion, available funds are safeguarded for unforeseeable circumstances, should some ill fate befall the market in which it operates. “Being financially secure is imperative,” he continues emphatically. “The markets within the maritime industry are difficult to predict; they have been known to collapse just when you expect them to rise. This is why we like to build slowly and strategically,” he explains, “continuously renewing our fleet.” Zela Shipping builds two new ships every

four years, concurrently selling its two oldest vessels, thereby revitalising its fleet and maintaining an average vessel age of six years. “Organic growth is much wiser if your goal is long-term survival. If you go for big expansion and manage to get your timing right, you can make a lot of money. However, if luck is not on your side, you may end up bankrupt – there are no two ways about it.” The maritime industry is influenced by many and varied factors, Mouskas explains, ranging from political conflicts and government policies to natural disasters and fluctuating energy prices. The market is both very sensitive and unpredictable. “Though we can’t foretell the performance of the market, we can plan conservatively. This strategy has served us well in our 50 years and we are hoping that, through its implementation by the next generation, Zela Shipping will enjoy another 50 successful years.” Despite the vast success of the firm, a glance back at its origins reveals that its prospects were not always so optimistic; founder Kyriacos Mouskas faced a plethora of challenges before establishing the company, beginning with the obstacles he faced following his departure for London at the tender age of 19 from his home town of Famagusta. The issue of Turkey’s unilateral ban on Cyprus ships holds significant relevance for Zela Shipping. “Yes, resolving the Turkish embargo is a top priority for us,” Mouskas says with gravity. “Though the ban doesn’t affect our business at Zela Shipping – we haven’t conducted business in Turkey in all our years of operations and have never sought to do so – it does hinder the development of the Cyprus flag, which certainly concerns us.” The embargo not only prohibits Cyprusflagged ships from calling at Turkish ports; it also prevents vessels with a non-Cyprus flag from doing so, even if they are merely serviced by a Cyprus ship management firm. “This is a major disadvantage for those bearing our flag and a deterrent for those considering its adoption,” Mouskas elaborates, “and it particularly relates to tanker ships carrying oil. Turkey has many pipelines – from Iran, Iraq and Egypt – and these vessels would not dare host a Cyprus flag, as to do so would prohibit them from making use of this source.” Turkey’s embargo acts as a double-edged sword, however, since it also dictates that Turkish shipyards may not profit from the abundance of Cyprus-flagged and Cyprus-managed vessels active in the region. “Turkey’s maritime services, provisions and equipment are cheap and its location is con-

MAINTAINING THE INVOLVEMENT OF FAMILY MEMBERS IN THE COMPANY IS OF PRINCIPAL IMPORTANCE FOR US venient for Cyprus ships. The politics of the situation don’t alter these facts,” Mouskas reflects. Despite this pressing matter, it is not the only problem facing the shipping industry, Mouskas tells me. “The Chinese market,” he begins, “has become of great importance to us. The country has recently been plagued by problems arising from the trend of shadow banking in the region, affecting many sectors, including shipping.” The sinister-sounding term shadow banking refers to the issuing of credit by financial intermediaries that are not subject to regulatory oversight, as well as the unregulated facilitation of such credit access by regulated institutions. In either scenario, the debtor can obtain a loan on a commodity he has purchased from more than one banking institution, effectively picking up multiple times its value should he choose to do so. Even worse, some debtors purchase the cargo and obtain these loans before the shipment has even landed in China, selling it immediately to another party whilst in transit. “This has been causing huge inflation,” Mouskas says, “and the Chinese government has responded by suddenly clamping down on the practice. Following this change in policy, our business has been affected, as there have been very low levels of imports by independent Chinese parties, with only government bodies continuing their regular orders.” Despite this ongoing struggle, the negative effects are not expected to last: “The experts are telling us that by the last quarter of 2014, the effects of shadow banking will have eased in China,” Mouskas notes, adding with a half-smile, “In any case, 2015 is predicted to be a good year, so my optimistic outlook hasn’t been shaken.” His vision of a promising future for Zela Shipping that will take it well into the second half of the 21st century remains crystal-clear. The late Kyriacos Mouskas would surely have been proud of his legacy.

THE INTERNATIONAL INVESTMENT, FINANCE & PROFESSIONAL SERVICES MAGAZINE OF CYPRUS

Gold 77

OPINION

Boom and Bust

How banks in Cyprus underestimated the credit risks implicit in mortgage loans

T

he financial stability of the Cypriot banking system is highly correlated to the real estate sector, since the lending criteria applied by the banks reinforced the real estate crisis. The large credit expansion of the years 2006-2008, especially to the real estate sector, led to a property “bubble”. As a result, prices collapsed, causing a large increase in non-performing loans (NPL) that were collateralised by real estate. Loan origination currently remains at extremely low levels and, consequently, the ability of buyers to buy property is also low and property prices remain depressed This is due to the “cyclical” effect of the lending criteria and policies of Cypriot banks during the boom years. Many times, and particularly during the inexorable rise in property prices in 2004-2008, banks in Cyprus “underestimated” the credit risks implicit in mortgage loans. This could be attributed to the lack of both sophisticated risk assessment systems and reliable data and information. The main reason, however, is that the continuous increase in property prices created a false sense of security among the Cypriot banks and led to further credit expansion. This behaviour is one of the main reasons why property prices were constantly increasing and it led to the subsequent deterioration of the domestic banks’ loan portfolios. Today, the sharp decline in property prices and the depreciation of mortgaged properties has increased credit risk and the banks’ capital requirements even further. The shortage in the supply of credit by the banks has reduced the demand for properties, commercial investments etc., inevitably reinforcing the downward trend of real estate prices. The Central Bank of Cyprus (CBC) and the banks have to consider the consequences of the decline in property prices and the restructuring

The sharp decline in property prices may have a ZPNUPÄJHU[ impact on the banking sector

info: Dr. George Mountis is Director, Business Development, Emergo Wealth.

78 Gold THE INTERNATIONAL INVESTMENT, FINANCE & PROFESSIONAL SERVICES

By George Mountis

of their portfolios and adapt their policies accordingly. In order to do this, data needs to be collected for all mortgaged properties and then analysed using statistical/econometric models and chartographic tools. By using such tools they can, for example, calculate the geographical concentration of properties/mortgages, the risk assessment to the sale/ divestment of specific properties in specific areas, etc. The purchase of properties has become more vulnerable to fluctuations in prices because of the banking system’s influence. Theoretically, the decision to grant a loan is based on long-term projections regarding the future value of the financed property until repayment. The repayment ability of the borrower also has to be assessed and seriously considered. The lack of adequate information on the evaluation of prevailing market trends and possible future prices, however, prevents a correct evaluation from being made. As a result, funding decisions are primarily based on the prices of similar properties during that period. Experience from international markets indicates that property prices are subject to considerable fluctuations, which may or may not coincide with “economic cycles”. Under certain circumstances, these fluctuations may be reinforced and become much more intense due to the credit policy applied by credit institutions, when it is of a cyclical nature. In any case, monitoring the evolution of property prices should be of direct interest to the monetary and supervisory authorities. As recent experience of the domestic financial crisis shows, the sharp decline in property prices may have a significant impact on the banking sector and, thus, on the real economy of the country. It is no big surprise that both the authorities and the banks are now reviewing their credit rating systems and their methods of monitoring mortgages/ properties so as to better manage their portfolios.

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OPINION

Islamic Finance The prospects of promoting it in Cyprus

O

ne of the areas on which the Cyprus Stock Exchange (CSE) has recently focused its efforts – and included in its strategic plans – is the development of the Funds Industry, so as to extend the range of products offered to investors and, consequently, facilitate the further development of the financial market in Cyprus. Very recently, along with other interested authorities and market participants, the CSE has started examining the possible development of Islamic Financial Instruments. Everybody considers this sector as extremely important and views in a favourable light the efforts that are being undertaken with the aim of promoting Cyprus as an effective jurisdiction for Islamic Finance and for promoting its listing on the CSE. Islamic Finance is considered internationally as a credible alternative source of funds that has contributed significantly to economic growth throughout the Muslim world. There has been a growing need in recent years to secure finance for projects supporting many industrial sectors. Islamic Finance products must always comply with Sharia Law, which sets out the framework regarding permissible investments in various assets. It includes restrictions on the charging of interest, on uncertainty (there must always be full disclosure), on excessive speculation or gambling, as well as the avoidance of unethical investments, given the fact that Islam is intolerant of certain products. Therefore, such investments must be licensed in advance, and they are constantly monitored by independent bodies of internationally recognised experts, namely Sharia Scholars, who verify compliance with Islamic Law. A number of financial products classified as Sharia-compliant entities permit investment in a wide range of sectors, including equities, real estate, infrastructure for development, private equity, etc. The sukuk is one of the commonly used Islamic structures in project finance, classified in various forms such as, among others, istisna’a ijara, wakala ijaras, etc. Other forms of Islamic Funds include Parallel Islamic Funds, Equity Investment Funds, Real Estate Funds (REITs), etc. Sukuks are certificates representing ownership of an underlying pool of assets

The CSE is ready to discuss listing Islamic ÄUHUJPHS investments

info: Nondas Cl. Metaxas is Director General & CEO of the Cyprus Stock Exchange 80 Gold THE INTERNATIONAL INVESTMENT, FINANCE & PROFESSIONAL SERVICES MAGAZINE OF CYPRUS

By Nondas Cl. Metaxas

and most of them are asset-based. Sukuks are frequently used for developing new big projects. Therefore, given all the above, it is obvious that there is potential for Cyprus with regard to Islamic Finance products. Cypriot projects can be wholly or partly financed by Islamic funds and. on the other hand, sukuk listings for various projects and for the shipping industry present a clear opportunity for the CSE. In the case of interest from Cyprus or abroad, the CSE could facilitate the listing of Islamic Finance products (sukuks) as follows: (a) By listing such products that have been established/ issued by other Sovereigns or organisations on the CSE. (b) By listing Cyprus sovereign or other organisations’ sukuks. This initiative could take place within the framework of major economic development projects that could be financed via such Cyprus schemes. For Cyprus to become an advanced Islamic Fund domicile worldwide, it must be competitive in terms of listing procedures, backed by the authorities and the private sector, as well as providing an efficient and speedy listing process. Cypriot law should be fully compatible with Sharia principles and Cyprus should always be a cost-effective low tax jurisdiction and listing centre. A range of vehicles available to address the specific needs of investors and promoters should also be provided. As regards the CSE, it should be noted that it adequately provides all these credentials, in relation to its listing process, as well as to the cost and speedy process factors. The development and promotion of CSE initiatives such as the Funds Industry, new markets, Islamic Finance projects, bonds, etc, could bring significant benefits to the Cyprus economy, as well as to the CSE. They can also contribute to a significant extent to the process of fundraising for major development projects, the creation of new jobs and the expansion of partnerships with various professional investment groups. Such initiatives should therefore contribute to the efforts aimed at attracting further investment in Cyprus. Last but not least, it should be underlined and stressed that the CSE is ready to discuss listing Islamic financial investments with interested parties. We very much welcome such initiatives and we are here to work with anybody wishing to see them materialise as fast as possible.

opinion

A New Cold War: Is Cyprus Prepared? It is time to start planning proactively and anticipating bad luck.

I

am not an expert on international politics, neither am I a historian. I am an economist who happens to be Russian and who grew up during the Cold War era. The fundamental distrust between the USA and the Soviet Union, which had been brewing since before the World War II, culminated in more than 45 years of extreme hostility between the two superpowers which effectively divided the whole world into the two opposing camps. That was the original Cold War 1945-1991. Coined by George Orwell in 1945 and picked up by politicians in 1947, the term “cold war” has nevertheless stayed as part of history for 23 non-confrontation years, reminding us of that dark period when suspicion penetrated all levels of international relations, from politics to culture. It has become evident in the last few months that this term is no longer just part of history. It is increasingly being used by journalists and now also politicians to describe the escalating tension between Obama and Putin. From the point of view of an economist, this type of confrontation will be highly damaging because it will waste resources, erode economy and undermine the well-being of people. In a world which is splitting once again into two opposing camps, Cyprus has suddenly found itself in a rather awkward position. Despite its historical ties with Russia and an economy which is highly dependent on income from Russian tourists and Russian offshore companies, Cyprus is obliged – as an EU member – to support the official EU line of sanctions. This has already resulted in a loss of €13.5 million worth of agricultural exports due to the Russian embargo on EU food products. Yet this loss is nothing compared to the damage which may occur should the confrontation escalate further. As reported on July 29 by the pro-Kremlin daily newspaper Izvestia, Russian lawmakers have drafted amendments to introduce a new legal term “aggressor country”. The document describes as an “aggressor country” a state that has “imposed sanctions on the Russian Federation, Russian citizens or Russian companies.” The new bill would give “the government the right to approve a list of aggressor countries in order to defend the foundations of

Our most recent past shows that we have run out of luck

By Dr Olga Kandinskaia

constitutional order, to ensure the state’s defence and security, to protect the domestic market of the Russian Federation and the development of the national economy.” Izvestia quoted Yevgeny Fyodorov, a deputy from the ruling United Russia party, saying the new proposals would allow the Russian government to restrict auditing and consulting companies registered in “aggressor countries” in their operations in Russia. Fyodorov, who is one of the main advocates of the new amendments, named six major international auditing and consulting firms – Deloitte, KPMG, PwC, Ernst &Young, Boston Consulting Group, and McKinsey – that the government would be able to restrict. Such legislation would mark a significant escalation in Moscow’s response to sanctions and would upgrade the current confrontation to an entirely new level. As bizarre as it may sound at the moment, it may be our reality in the not-so- distant future. To say that Cyprus’ financial sector and tourism will be affected is an understatement. Is the Government prepared for such a scenario? For many years, the economy has been drifting without any strategic plan and solely relying on luck. Our most recent past shows that we have run out of luck, and that twice in the last three years the Government has stepped into the negotiations room totally unprepared. The first critical mistake happened on October 26-27, 2011, when the EU summit adopted the decision to force private investors accept a 50% haircut on Greek government bonds. The second time the Government was caught by surprise was in March 2013 at the infamous Eurogroup meeting, which resulted in the massive deposit haircut destroying one major bank and crippling the other. Being prepared for an adverse scenario is an essential part of any managerial strategy – be it of a company or a whole country. It is time for Cyprus to start planning proactively – anticipating bad luck. Being in the EU camp and standing up for democratic values together with other countries is the right course, but we also need to anticipate the cost. Focusing on strategic planning to diversify Cyprus economy should be an immediate priority.

info: Dr. Olga Kandinskaia is Assistant Professor of Finance and Director of MSc Management Programme at the Cyprus International Institute of Management (CIIM). 82 Gold the international investment, finance & professional services magazine of cyprus

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STRIKE WHILE THE IRON’S HOT

S

ami Abu Janeb, Deputy Head of Mission of the Israeli Embassy in Cyprus, shares his insights with Gold regarding the ways in which Israel and Cyprus may strike while the iron’s hot (to quote the internationally known Jewish proverb) and exploit the latest opportunities for cooperation. Gold: What are the prospects for developing stronger bilateral relations between Cyprus and Israel? Sami Abu Janeb: There is considerable potential for closer cooperation between the countries in many sectors and it is of utmost importance to expose areas that don’t currently gain much attention – particularly now that we appear to be caught up in the animated frenzy surrounding the hydrocarbon developments in

THE ISRAELI-CYPRIOT RELATIONSHIP OF PEACE, TRUST AND COOPERATION DATES BACK SEVERAL MILLENNIA. FROM THE SETTLING OF JEWS ON THE ISLAND DURING THE HELLENISTIC PERIOD, CONTRIBUTING TO ITS HISTORICAL DEVELOPMENT, TO CYPRUS’ STATUS AS A SANCTUARY FOR HOLOCAUST SURVIVORS BOTH DURING AND FOLLOWING WORLD WAR II, INNUMERABLE EXAMPLES OF PAST COLLABORATION EXIST. NOW, THE DISCOVERY OF NATURAL GAS RESERVES BENEATH THE TWO COUNTRIES’ SHARED SEABED AND THE PROSPECTS FOR DEVELOPING FURTHER AREAS OF ECONOMIC INTEREST ARE GIVING A NEW IMPETUS TO EFFORTS FOR STRENGTHENING THE AGE-OLD ALLIANCE FURTHER. By Effy Pafitis | Photograph by Jo Michaelides

the region. Although the media in the Mediterranean region has been abuzz with incessant reports about energy developments, speculating endlessly on possible strategic partnerships between the countries involved, there are in fact many other sectors that may provide opportunities for lucrative collaboration. Gold: What are these other sectors? S.A.J.: To begin with, Cyprus and Israel already enjoy great cooperation in water; there is a desalination plant in Cyprus that is operated by two large Israeli companies, though the potential in this area far exceeds the current project. There is ample room for partnership regarding the development of waste water solutions, particularly as new technologies are now being developed in Israel to recycle water which is crucial for Cyprus as an island without natural water resources. The field of academia also offers great promise. There is currently

88 Gold THE INTERNATIONAL INVESTMENT, FINANCE & PROFESSIONAL SERVICES MAGAZINE OF CYPRUS

a joint venture between Cyprus, Israel and Britain, through which medical students are taught their first year of studies at the University of Cyprus, following which they go to Israel to the Chaim Sheba Medical Center at Tel Hashomer for another two years in order to choose and develop their medical specialisation. Other such ventures will surely allow for the development of our respective educational facilities, as well as enhancing the professionalism of our soon-to-be medical experts, thus facilitating abundant advantages such as medical and health tourism. The Erasmus Plus student exchange programme has also enabled the intensification of cultural collaboration between Israel and Cyprus, through the further education and mobility of our young people. Research and Development (R&D) is another significant component of development between the countries. We currently publish reports on common projects, under the R&D

CYPRUS-ISRAEL

agreement signed between the two states. Gold: Israel has frequently been referred to as a ‘startup nation’ and, according to Business Insider, is second only to Silicon Valley as a hub of tech innovation. How has this been accomplished? How might Israel’s successful experience in the industry aid Cyprus’ development as a startup jurisdiction and similarly attract investment from venture capitalists worldwide? S.A.J.: Israel has indeed achieved great success in this field; we now have more high-tech startups and a larger venture capital industry per capita than any other country in the world. In 1969, Israel’s Office of the Chief Scientist (OCS) of the Ministry of Economy was formed, the support arm of the Israeli government charged with fostering the development of industrial R&D within the State. Its mission is to assist the advancement of Israel’s knowledge-based science and technology industries in order to encourage innovation and entrepreneurship while stimulating economic growth. Israeli entrepreneurs pitch their ideas to the OCS and, if successful, receive funding for the development of the first phase of their project. Following the first two or three years of development, they seek external investment for its continuation. This encouragement of – and investment in – the country’s highly educated business community has seen successful projects increase exponentially, ultimately to the great advantage of the country’s economic growth. There is enormous potential for collaboration between Cypriots and Israelis in this respect. Cypriots are similarly very well-educated and, considering that collaboration on the development of high-tech startups doesn’t require particularly demanding infrastructure or investment, such cooperation should be very straightforward. Though the adoption of a Research & Development model similar to Israel’s is at the disposal of the Cyprus government, we are currently working at the Israeli Embassy to try and adjust the relevant legislation to allow for the promotion of common startup projects, as this could benefit both the Cypriot and Israeli markets. Gold: Can you give an example of such a common project? S.A.J.: Certainly. The recent sale of the instant messaging application Viber offers an exemplary illustration. Created by Israeli entrepreneur Talmon Marco, the application’s R&D centre is based in Cyprus, with the company’s operation also being run from the island. Starting as a simple idea focusing upon the ease of communication, it was recently sold to the Japanese electronic commerce giant Rakuten for $900million. There are many other such ex-

amples. The beauty of these projects lies in the fact that they began with such small amounts of investment. Two or three years after their establishment, they can be sold for some 300% to 400% of profit. Initial investors, therefore, reap huge financial gains and impressive returns on investment in an inordinately short period of time. Gold: Tourism is a traditionally large market that has developed significantly in recent years. Is there still further potential between the two countries or has it perhaps reached its peak? S.A.J.: Tourism is crucial for us, too. Today there are three airlines operating flights between Israel and Cyprus, and according to data released by Cyprus Statistical Service, there was a 30% increase in tourists from Israel to the island during the first five months 2014, compared with the corresponding period of last year. There is, as ever, room for more airlines to add such flights to their schedules. The two countries are a mere 290 miles from each other, which means less than an hour in the air. For somebody from Larnaca seeking a change of scenery, it could be quicker to go to Tel Aviv than, say, to Paphos! Gold: You began by saying that the recent focus on the hydrocarbon discoveries in the region has been somewhat over the top. Why do you believe this to be so? S.A.J.: Developments in the energy sector throughout the Mediterranean are incredibly important for all countries involved. However, I must stress that the opportunities arising from these developments are limited to the country and the particular large companies involved in the process. Though the oil and gas reserves found in the region are important for the progression of the individual countries themselves, they are not really a game-changer in the context of the world market. Israel’s hydrocarbon reserves, for example, have given us energy independence for many years but we cannot use them to assume a role in the international hydrocarbon market. Collectively, I estimate that the energy reserves of the region could supply approximately 10% of the EU’s needs per year. Though such developments may aid the respective economies of the countries involved, while facilitating the enhancement of

bilateral relations between them, it remains just one area through which cooperation may be improved between Israel and Cyprus. Gold: What is your vision for regional cooperation in energy? S.A.J.: My hope is that all the players choose to look at the ‘big picture’ of the region’s potential, rather than focus on their specific country alone. Collaboration between all countries is the goal – this includes Cyprus, Israel, Lebanon and Egypt – as it provides a win-win situation for all involved, maximizing their individual benefits through the collaboration. It is crucial that this is understood, as the energy potential in the area could work both ways; though providing clear motivation for the enhancement of relations between the countries in the area, it could also be a source of tension or provocation between them. The hope is that the geopolitics of the situation will facilitate a strengthening of regional unity. Whether the developments will indeed be used in this way, however, remains to be seen. Gold: At what stage is current cooperation between Israel and Cyprus regarding natural gas? S.A.J.: At the moment, an agreement pertaining to the confidentiality and exchange of information regarding our hydrocarbon discoveries has been signed. We recently exchanged information regarding the materials collected by the companies conducting assessments of the respective reserves, to evaluate the reservoirs. Once the analysis is completed and all the assessments are evaluated, we will decide what the next appropriate step is to be. It is a process that takes time and cannot be rushed. I can assure you, however, that we are achieving progress. Gold: What are your hopes for Cyprus and Israel in the coming months? S.A.J.: Our two countries don’t have many alternatives in the area. The potential is there, the will is there, the process has already begun and I think we are on the correct course. I would like to see this process continue, and witness wider and greater collaboration in a diverse selection of areas, fields and sectors, between our two governments and also among our citizens.

I ESTIMATE THAT THE ENERGY RESERVES OF THE REGION COULD SUPPLY APPROXIMATELY 10% OF THE EU’S NEEDS PER YEAR. THE INTERNATIONAL INVESTMENT, FINANCE & PROFESSIONAL SERVICES MAGAZINE OF CYPRUS

Gold 89

MAN with a Plan INSURANCE

L

By Effy Pafitis | Photograph by Jo Michaelides

uke Benfield’s confident stride and firm handshake as he ushers me into his immaculate office indicate that he is very much a man with a plan. Soon he is telling me how, every so often, a firm contrives to break the rules of its industry, acting alone against the tide of its fellow service providers, thereby overcoming the alarmingly ubiquitous presence of banality in its area of practice. As I soon discover, Turnkey Insurance Solutions, of which Benfield is the Founder and CEO, is one such firm. In an exclusive interview with Gold, Benfield explains the thinking behind his niche insurance consulting firm, which is about to embark upon an ambitious expansion plan. Gold: Although it’s a relatively young firm, Turnkey Insurance Solutions has gained a strong footing in the local insurance industry. What was your original concept for the company? Luke Benfield: I decided to found Turnkey Insurance Solutions in 2000 because I had identified a significant gap in the insurance market – not only in Cyprus, but also internationally. In this industry, “insurance (agents and) consultants” usually act as agents for insurance companies and are, therefore, sometimes biased as to the advice they offer clients, steering them towards particular insurance companies. In creating Turnkey Insurance Solutions I decided to break that cycle and offer clients independent advice, providing them with a truly professional insurance consulting service. We concentrate solely on our clients and their specific needs, focusing our expertise on advising and obtaining not only the best coverage for them at the most economic terms

but also assisting them during the period of insurance should any operational changes take place in their business activity which dictate amendments to their insurance coverage. In addition, at a time of a claim, we stand by them and can even take over the handling of claims, assisting them in ensuring that they obtain the correct indemnity under their insurance policies whilst, at the same time, allowing them to concentrate on carrying on with their day to day business activities. As independent consultants we are not tied to any insurance company and can thus offer unbiased advice. We work in our clients’ best interests and we place the insurance covers required with insurers approved and appointed by our clients. Gold: What else makes you unique in the insurance sector? L.B.: Our independence and professionalism, coupled with the fact that we do not obtain any compensation or other benefits from Insurers; I believe this successful combination makes us unique. Insurance is a promise to provide an indemnity by the Insurer to the Insured following the occurrence of an insured event as stated in a legal document, which one has to understand and appreciate its intention. Unfortunately, I have seen cases where the intention of cover was not expressed correctly in the insurance policy, resulting in ambiguities and other problems arising. Sometimes what is written and what is intended may not always be the same. When advising clients, I firstly need to understand their business activity and ascertain the risks to which they are exposed. I

90 Gold THE INTERNATIONAL INVESTMENT, FINANCE & PROFESSIONAL SERVICES MAGAZINE OF CYPRUS

then examine the insurance policies in force to ensure that the required covers are in place. In the event that either no insurance is in place or the existing Policies are inadequate, I provide a report as to what should be done. In addition, our services extend – if required by the client – to issue “tender documents” to insurers on behalf of our clients, so as to obtain the best possible terms for cover. I do not believe that there is “small print” in insurance policies; however, having had 27 years’ experience in the insurance industry I am capable of reading insurance policies and understanding where issues may arise between what the insured believes he is covered for and what is actually provided, without, of course, blaming the insurers! Sometimes, due to the insureds lack of knowledge, they may not be able to explain their needs or identify their potential exposures to risk, and so they may not be able to provide adequate details to insurers for them to issue the correct policies. Our concept of providing professional and honest advice, coupled with our status as independent advisers, has no limitations. We provide the missing link between the insured and the insurers. Gold: And are you planning on capitalizing on that? L.B.: At the moment in Cyprus, not only the construction business but also the general business environment is not particularly thriving and prospects for a turnaround of the economy in the near future are not exactly overwhelming. The Middle East, however, offers quite the opposite. It is the perfect location for Turnkey

AS INDEPENDENT CONSULTANTS WE ARE NOT TIED TO ANY INSURANCE COMPANY

I

Luke Benfield

n addition to being the Founder and CEO of Turnkey Insurance Solutions, Luke )LUÄLSK PZ H *OHY[LYLK 0UZ\YLY H -LSSV^ of the Chartered Insurance Institute and a Member of the Chartered Institute of Arbitrators. He is also a Council Member of the Gerson Lehrman Group, a Director of SARE Public Company Ltd, and a Research *VUZ\S[HU[ ^P[O *HW =PZPVU 0U[LYUH[PVUHS HZ ^LSS the Honorary Consul of the Republic of Croatia to Cyprus.

to expand its operations and continue its services. Turnkey has enormous potential for success overseas, and so, yes, I’m certainly planning to take advantage of that. I’ve targeted the Middle East as the next stepping-stone for the company and we are proud to inform you that we have established our first overseas 100% owned subsidiary and commenced operations in Dubai. Our offices are situated in Jumeirah Lakes Towers in the Dubai Marina area, from where we can service our clients throughout the Middle East. Due to our wealth of experience we can service our clients in any part of the region, not only focusing on construction where our expertise lie, but also providing services to retail, trading and hoteliers operating there. We know the legal system of the majority of countries in the Middle East, as well as the minimum legal insurance covers which should be in place. Gold: How do you anticipate the competition in the Middle East to differ from Cyprus, and how will Turnkey position itself within this new Insurance Market? L.B.: The industry in the region is very large compared to Cyprus, so it is unsurprising that competition is tough. However, for a professional entity like Turnkey, there is always a market for a quality professional insurance consultant. The Insurance requirements in the Middle East are very stringent as large construction projects usually involve major contractors as well as multinational financiers who, in turn, demand extensive and broad insurance covers in order to protect not only the Contractors but also their own financial interests. Again, this is where our clients benefit – our extensive expertise, experience and professionalism are second to none. Our focus

is on independent, professional and unbiased advice. This is our selling point. It is the reason we obtain new clients as well as retaining existing ones. Our professionalism and honesty are our key selling points. As I said, we want to concentrate on what we are good at, which is insurance of construction projects and related insurances, which include but are certainly not limited to professional negligence, plant and equipment, marine, motor and group personal accident and medical insurance. In addition we can extend our services to include the personal insurances for personnel. We have the knowledge, expertise and experience to ensure that our clients can rely on us to provide them quality, professional and unbiased insurance consultancy services. Gold: The insurance industry, like so many others, has been affected by the global financial crisis. How have clients’ needs – and expectations – altered since the crisis? L.B.: All businesses today are cutting back on costs, whether they were directly affected by the crisis or not. In relation to the insurance industry, this has resulted in companies reducing their insurance expenditure. This, in itself, is not wrong. However, when they are not experienced insurance buyers they may not be able to differentiate between “must buy” and “not necessary” insurance covers. They obviously want the best at the lowest possible cost but without expert and unbiased insurance advice, mistakes often happen and instead of obtaining insurance at a reasonable cost, they may end up uninsured and having to erode their potential profits and investments in order to cover uninsured losses. Unfortunately, many companies do not have their own internal insurance office; instead, the person charged with dealing with insurance is normally within their own accounting team, or some other member of staff who knows little about insurance. So, in effect, a company may be relying on someone’s limited knowledge, which may not be up to date or even accurate. It is for this reason that our independent professional services are even more crucial. This is why it is imperative for us to communicate clearly with our clients, explaining to them and, indeed, training them, to understand the various insurance covers available and how best, within the economic parameters they may have, to cover their po-

tential exposures. Gold: So how does Turnkey address these adjusted needs? L.B.: As I mentioned earlier, the industry is full of insurance agents working on commission or insurance brokers obtaining commission from insurers for insurance which they place on behalf of their clients. We are not in this game; we are professional insurance consultants and we are paid by our clients, we obtain a fee from them irrespective of the height of their premium cost. We provide value added service throughout the duration of our services and are not influenced by insurance companies. Depending on the client and the type of services required, we can just advise on the adequacy of existing insurance cover or we can begin from scratch, issuing tender documents to insurers on behalf of our clients indicating the cover required. Once the insurers provide their quotations we will go through them and report to our client as to the best coverage they should take and with which insurer(s). On issue of the policies, we check to ensure that they are based on the agreed terms. Our services do not finish there however, as we provide further assistance throughout the term of the insurance covers; business circumstances change over a period of time which may dictate the amendment of insurance covers, and claims arise requiring tremendous time and effort – not to mention insurance expertise – in order to deal with the claim with the insurers, appointed loss adjusters and lawyers. Our aim is to carry out in the best interests of our clients all their insurancerelated business tasks whilst at the same time letting them get on with their important dayto-day, successful business activities. Gold: What is your overall vision for Turnkey Insurance Solutions, as it embarks on its ambitious expansion plan? L.B.: I want to see Turnkey Insurance Solutions become the insurance consultant of choice for every client but my particular vision is for Turnkey Insurance Solutions to become the “go-to” insurance advisor not only for contractors but also for all business entities in Cyprus and throughout the entire Middle Eastern region. This is our vision. For more information, visit www.turnkeyinsurance.com

THE INTERNATIONAL INVESTMENT, FINANCE & PROFESSIONAL SERVICES MAGAZINE OF CYPRUS

Gold 91

LEGISLATION

DOCTO THE PARADOX INTERWOVEN IN THE GREEK WORD PHARMAKON (WHICH, CURIOUSLY, MEANS BOTH ‘DISEASE’ AND ‘CURE’) IS PERHAPS MOST APTLY EPITOMISED VIA A MEDITATION ON THE LEGAL SYSTEM IN CYPRUS. BOTH THE DISEASE AND THE CURE LIE WITH THE PEOPLE WHO ARE RESPONSIBLE FOR CONSTRUCTING THE SYSTEM STEP BY STEP, AND LAW BY LAW. AND, SO IT IS THAT, WHEN POSED WITH WHAT HIS LEGISLATIVE WISH-LIST WOULD LOOK LIKE, DEMETRIS LOIZIDES, MANAGING PARTNER – CYPRUS, HARNEYS ARISTODEMOU LOIZIDES YIOLITIS LLC HAS A MULTITUDE OF THOUGHTS TO SHARE AND POINTS TO MAKE, IN A BID TO DISCOVER A PANACEA FOR THE ISLAND’S LEGAL AILMENTS. By Chloe Panayides, Photo by Jo Michaelides

92 Gold THE INTERNATIONAL INVESTMENT, FINANCE & PROFESSIONAL SERVICES MAGAZINE OF CYPRUS

OR! DOCTOR! “T

There is a lot of potential for Cyprus, but we hinder ourselves,” Demetris Loizides, Managing Partner – Cyprus, Harneys Aristodemou Loizides Yiolitis LLC, muses contemplatively. “And a big part of this weight holding us back could simply be lifted if we had a more developed system of lawmaking in place,” he says. Loizides has taken time to share with Gold his thoughts on what legislative changes he would like to see enacted. “In Cyprus, we all too easily endure inefficiency, a lack of coordination, and often inadequate responses to big problems. However, this is not because we are not making an effort to resolve the issues burdening the island, but rather because we do not have a lawmaking system in place that is sophisticated enough to respond to our needs,” he begins. Delving deeper into the issue, Loizides stresses that in Cyprus we do not actually lack regulation as such. “There are many laws out there directed at regulating, for example, credit provision and commerce in general,” he says. “However, what we do lack is the proper infrastructure to develop effective laws.” What might this infrastructure look like? “This means an infrastructure with the capacity to research, on the given set of facts, what the best response to a situation is, with input from specialists in all relevant sectors. It is also imperative to make use of trained technocrats who are able to set out the exact manner in which these laws and regulations will be implemented.

“We do not have this set-up in Cyprus, and this means that often our laws are generic and unclear on how the measures provided will be implemented.” As a consequence, Loizides notes, significant uncertainty and inconsistency are created, leaving room for legal interpretations, which vary widely. “As a result, you end up with different lawyers following different policies and all of them could very possibly be right – the law simply does not provide a clear answer.”

JUDGES ARE ASSIGNED TO CASES ACCORDING TO THEIR YEARS OF

SERVICE RATHER THAN THEIR SPECIALISATION

This gap could be effectively bridged if Cyprus had extensive case law to fall back on or academic literature to refer to, Loizides notes. “These too, however, are lacking in Cyprus,” he adds, elaborating how, “With respect to case law, individuals will often avoid pursuing their rights in court due to high costs and time-consuming procedures. There is no legal aid to encourage cases being taken to court, creating a far more extensive source of case law to draw on. As for academic discourse, there is a very limited range of academic books, which practising lawyers can use for guidance to resolve the uncertainties created by the law.” Further to this issue, Loizides turns to the current case allocation procedure, which he describes as discouraging the development of judicial specialisation. “A case in point is the fact that judges are assigned to cases according to their years of

service rather than their specialisation,” he says. “Within civil litigation, judges take on all types of cases, irrespective of where their own expertise lies. Instead, more specialised courts – or at least a procedure by which relevant experience is taken into account – would have experts who understand the topic judging important cases, leading to significantly more accurate judgments and, therefore, certainty.” In its current state, Loizides laments, Cyprus is left with a large number of laws which respond to the symptoms of a problem without tackling the problem itself. Despite this disorder in the system, efforts made to address problems in Cypriot society have been made with the best of intentions, Loizides notes, with the honest aim of helping Cypriot citizens by granting them the rights and protection the law is able to afford them, to restore confidence in the market, and to encourage growth in the commercial sector. “However, these good intentions often go wrong, with our inadequate laws creating more problems than they purport to resolve,” he adds. And Cyprus’ tendency to delayed reaction surely exacerbates the situation, I suggest. “Certainly,” Loizides agrees. “Part of the problem lies in the fact that we wait until problems become intolerable before we react to them, instead of proactively looking to close loopholes in the system. This is both a reason for, and a symptom of, our lack of infrastructure: there is no system in place to be proactive and diligent about regulation and it does not exist because we wait until there is a problem in order to consider the implications, and even then we often regulate the consequences instead of the activity itself.” A classic example of this, Loizides explains, is the law proposed some time ago aiming to reduce rents. “The laudable idea behind this was to protect tenants from high rents in this time of crisis so as to ensure that the average person would not be hit so hard. However, a

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LEGISLATION

blanket ban would have interfered with the right to contract freely, undermining the idea of allowing private parties to agree to terms which they are expected to follow. It would also mean that many landlords were unable to pay mortgage instalments, further leading to the property market spiraling downwards.” And the result? “A general backlash on the economy was engendered, and on the average person, far worse than the initial problem. Other policies addressing this concern could be looked at, rather than coming up with such a head-on response with significantly problematic consequences,” Loizides suggests. Considering the clamour surrounding the recent foreclosures bill, it seems prudent to raise this issue in the context of Loizides’ thoughts. “I have not reviewed the contents of the proposed law, so I am not equipped to comment on its current form,” he states. “But I may refer to it merely in the context of a lawyer who has seen good intentions go awry before. It is not generally a bad thing to enable a bank to enforce its rights. After all, loans contribute positively to an economy and lenders should not be discouraged from granting them. In addition, the right of the bank to do so already exists in our law – it is the excessive delays in the procedure which the proposed law seeks to rectify. “A possible concern with the law could be that, whereas with all good intentions we are looking to implement a law to make the procedure faster and unblock the economy, we may, in the process, unwillingly grant excessive powers to the banks to pressure solvent (and not insolvent) borrowers by threatening them with foreclosure. This should be addressed carefully, perhaps within the regulatory framework I previously suggested, in order to balance the rights of individuals without deterring lenders.” And so it is that Loizides believes that any panacea for Cyprus’ legal ills is very

much dependent upon passing more laws and making them more effective, ensuring, furthermore, that the very system of lawmaking itself is amended. He cautions that it would be inefficient to keep on making inadequate laws until we finally develop an infrastructure of our own: “New laws should be addressing these issues now, while the infrastructure slowly develops.” The fastest, cheapest and safest way to do this, he suggests, is to follow the example set by the UK or Ireland. “These are legal systems very similar to our own, but which have the infrastructure to make laws in the manner previously explained. As such, instead of going through an extensive trial and error process and bearing all the consequences that go with it, we can take a tested approach and benefit from their more developed systems to create our own.” We already have the system in place to do this, Loizides adds, as we share the same legal system with these countries – common law – and many of our laws and case precedents are, in fact, derived from English law. “This means that where there are gaps in our law, we can look at what interpretation was given to this in English and Irish case law. Where we lack the capacity to transpose specialised EU directives in a manner compatible with our legal system, we can refer to the way in which the UK and Ireland have proceeded for guidance. As our systems are very similar, we can also refer to the academic literature for in-depth analysis of concepts still under-developed in Cyprus.” Will the idiosyncratic country make-up and needs of Cyprus not act as an impediment to this, I wonder? ”We are, of course, a different country with different needs,” Loizides states, “But it is a fact that these countries’ legal sectors are more developed and mature than ours. It has been proven, time and time again, that we are not experienced enough to create comprehensive laws, and that we need to establish an infrastructure. However, we are lucky enough to have a blueprint of what should be done from the English and Irish system, meaning that we can avoid many mistakes and proceed faster.”

INVESTORS DO NOT WANT TO BE STUCK IN A FOREIGN COUNTRY WITH A SLOW-MOVING PROJECT THAT THEY CANNOT GET RID OF 94 Gold THE INTERNATIONAL INVESTMENT, FINANCE & PROFESSIONAL SERVICES MAGAZINE OF CYPRUS

WE LACK IS THE PROPER INFRASTRUCTURE TO DEVELOP

EFFECTIVE LAWS “Beyond this,” Loizides continues, “We could also use the law to enable international investment locally.” Elaborating, he explains: “Currently, Cyprus is only a stopover for much of the money that is moving our economy. It comes, for example, for the low taxes or for access to the EU market. It would be good to see the island become an investment destination instead, with these sums of money being injected into the actual Cypriot economy to create projects on the island itself. Making laws with this principle in mind can significantly assist efforts to attract investment to Cyprus.” Pressed as to how this might be done, Loizides says that besides using the law to create favourable circumstances attracting investors to Cyprus, it may also be utilised to create more minor institutions or procedures, which will make investors feel that there is certainty in their investment: “The commercial risk is something these investors are willing to take, but they do not want to be stuck in a foreign country with a slow-moving project that they cannot get rid of. Procedures to address such concerns will make Cyprus more competitive.” An example of this, he says, could be the casino licences being considered. We could make ourselves even more attractive by providing logistical support, such as a central service that is responsible for obtaining all necessary licences, permits, and other government approvals for big projects. “Targeting specific industries and making the island a destination for a specific niche will make Cyprus more independent and in control of its own circumstances, rather than depending on external factors for economic success,” Loizides states. The process of making laws is not something we hear about often, but it can have a significant impact. “In doing the above,” Loizides concludes, “Cyprus can become a place for everyone – both socially and commercially. It can improve the circumstances for locals, foreign investors, and visitors to the island alike.”

FUNDING A THE RECOVERY The Cyprus investment funds industry has the potential to play a key role in creating economic growth. By John Vickers

WE ARE CONFIDENT THAT WE CAN BE A DRIVING FORCE FOR SUSTAINABLE ECONOMIC GROWTH AND A SOLID EU FINANCIAL SECTOR

s the industry representative of the fastest-developing segment in the field of financial services, the European Fund and Asset Management Association (EFAMA), represents its members to policy makers and EU stakeholders. Agathi Pafili, a Senior Regulatory Policy Advisor at EFAMA, gave one of the keynote addresses at last month’s inaugural event of the Cyprus Investment Funds Association (CIFA) at the Presidential Palace in Nicosia. Here she tells Gold about the European funds industry, the role of EFAMA, and how she sees the future of asset management in Cyprus. Gold: What are the objectives and role of EFAMA? Agathi Pafili: As the representative of the European investment management industry, EFAMA’s mission is to support investor confidence in it through the promotion of governance standards, integrity, professionalism and performance throughout the industry. EFAMA’s key goal is to highlight the role of the asset management industry in the financing of the real economy and in boosting economic growth. As a principal stakeholder in the EU lawmaking process, EFAMA is focused on delivering a balanced and efficient regulatory framework regarding existing products, requirements on transparency and investor protection and the creation of new products able to adapt to the changing needs of investors. Moreover, building initiatives to strengthen investor education and financial literacy is an important priority of our Association. Gold: How significant for Cyprus is the fact that CIFA has been given observer status with the Association? A.P.: The participation of the recently created Cypriot Association will give the national industry valuable access to the long experience and expertise of the EFAMA members, along with a broad visibility at EU and global level. EFAMA membership enables its members to become a part of the decision-making process at EU level and to contribute substantially to shaping the industry’s profile for the years to come. With the decision of the EFAMA General Assembly on 13 July 2014 to grant CIFA observer status, we welcome CIFA to the “EFAMA family” and look forward to the active involvement of the Cypriot asset management industry.

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Gold: The European Investment Fund industry has enjoyed a couple of years of growth recently. What has been responsible for the upturn since 2012? A.P.: According to the data collected by our members and the Facts and Figures for Asset Management in Europe report published by EFAMA in June 2014, total assets under management in Europe increased by 11% in 2012 and close to 9% in 2013 to reach an estimated €16.8 trillion at the end of the year. This growth was driven by improved financial market conditions compared to previous years and significant progress in the strengthening of the euro area governance, as well as renewed investor confidence. At the end of 2012, asset managers held 23% of the securities other than shares and 31% of the shares and other equity issued by euro area residents. This underlines their increasing economic function as a link between investors seeking appropriate savings vehicles and borrowers in need of capital to finance their activities. In that way, the EU asset management industry, which currently ranks as the second largest market globally, makes a significant contribution to the overall development of the real economy. Gold: Does the state of the economy have a direct effect on the industry? If so, that would suggest that perhaps it is too early for Cyprus to see the growth that CIFA is hoping for. A.P.: An environment of sustainable economic growth and enhanced competitiveness is, of course, a crucial factor for the asset management industry’s development. On the other hand, a healthy financial sector, ready to assume its role for financing the needs of the real economy and to promote innovation while at the same time not jeopardising investor protection, is pivotal for promoting economic growth. It is for that reason that the industry is an integral part of the response to the current challenges of the EU economy and not on a “waiting list” to catch up once economic recovery is fully restored. Apart from the ongoing recovery of the European economy, still under pressure, Europe currently faces important challenges, such as demographic changes, technological innovation that brings new trends in consumer behaviour, high unemployment and inefficiencies regarding its global competitiveness. The asset management industry has now a key role to identify the right solutions as regards savings for retirement, to create a long-term savings culture that can become an important pillar for supporting investment in European firms and long-term projects and to promote investor education and financial literacy that will

enable consumers making responsible choices. In the same context, CIFA has a similar role to play in the economy of Cyprus. A robust asset management sector has all the potential to become part of the solution and of the recovery of the economy of Cyprus. Gold: From what you have seen and learnt during your recent discussions in Cyprus, are you in a position to say what chances the island has of developing a successful investment funds sector? A.P.: As I have said, the potential for a robust asset management sector is there but it will, of course, depend on the support received at both public and private level. CIFA is making an important effort in that direction and EFAMA has acknowledged that by giving it

A ROBUST ASSET MANAGEMENT SECTOR HAS ALL THE POTENTIAL TO BECOME PART OF THE RECOVERY OF THE ECONOMY OF CYPRUS observer status. We hope to see the results of its efforts in the next few years. Gold: Do all the various jurisdictions that make up EFAMA’s national membership operate within the same or similar regulatory frameworks? If yes, this presumably makes your task of representing them all “with one voice” much easier. A.P.: EFAMA represents 27 national associations and 63 corporate members, the majority of which are based in EU Member States. As the regulatory framework for the single market for services is a competence lying with the EU Commission and financial services legislation is a part of it, our members are subject to the same EU regulatory framework and requirements for a large part of their activities. At the same time, as is the case for the European Union and the internal market altogether, our association does represent a diverse group of interests and people. This diversity can be perceived both as a challenge and also as a unique

feature of multipluralism and of putting together the best qualities and ideas from different parts of the EU. Through our common priorities and goals, good governance structures and efficient leadership, we manage to speak with one voice when representing our members to policy makers and EU stakeholders. Gold: What are the main issues that EFAMA will be dealing with over the next year or so? A.P.: EFAMA and our members will be facing the same challenges that the EU economy is currently facing: how to restore investor confidence in the markets, how to provide adequate solutions to consumers looking for the right savings plan for their retirement, finding alternative ways to finance long-term projects of the real economy and the needs of firms – especially SMEs – due to credit institutions’ lending difficulties and to cuts in public spending, how to make sure investors are making informed financial decisions, how to boost the industry’s competitiveness within a very challenging global environment... For that reason, we are going to be working closely with all the relevant legislators, regulators, supervisors and stakeholders, at EU and national level, to make sure that our industry’s voice is fully taken into account and to contribute to the drafting of balanced legislation and to its proper implementation. There is a large number of legislative proposals and texts that we will be called to work upon: European long-term investment funds, money market funds, benchmarks, level 2 measures of MiFID II/MiFIR, banking structural measures, shareholders’ rights and a number of other key files that will allow the realisation of the key goals. Gold: Do the current trends across Europe make you optimistic about the future of the industry and of EFAMA? A.P.: As I have already said, the trends in 2013 have been encouraging, with investment fund assets worldwide standing at an all-time high and showing an important increase of total assets under management in Europe in both 2012 and 2013, compared to the previous years. EFAMA hopes to build upon these promising figures and to strengthen the industry’s competitiveness and its role in the European economy. Even more, within the general context of the promising signs of recovery of the economy, we are confident that we can be a driving force for sustainable economic growth and a solid EU financial sector.

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WORK

EMPLOYEES WOULD TRADE

PERSONAL DATA FOR A BETTER WORK DEAL WORLDS OF WORK

T

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he type of data profiling used by retailers and advertisers could soon become common in the workplace, according to the second in PwC’s Future of Work series. The report: The future of work: A journey to 2022 reveals that 36% of so-called Generation Y workers would be happy for their employer to have access to their personal data, such as social media profiles. This data could be used by employers to understand what motivates their workforce, reasons why people might move jobs, and to improve employee well-being. PwC predicts that this kind of data monitoring of employees is set to rise over the next decade as Generation Y enters the workforce – by 2020, this generation will form half of the global workforce and bring with them their different attitudes to technology and personal data. The research reveals that the younger generation are more open to sharing their personal data with their employees. PwC’s report reveals a number of projections for what the future of work might look like, based on a survey of 10,000 workers and 500 HR professionals globally. Tech-

59% OF PEOPLE ARE PREPARED TO BE AVAILABLE AT ANY TIME AND CONTACTABLE VIA TECHNOLOGY IN RETURN FOR SECURE EMPLOYMENT nology is seen by both workers and HR professionals as the biggest factor that will transform the workplace over the next five to 10 years, ahead of shifts in demographics, the economy and availability of resources. 58% of HR professionals said they are already preparing for this shift, while a further quarter said they were already prepared. Michael Rendell, Global HR Consulting leader at PwC, said: “Just as advertisers and retailers are using data from customers’ online and social media activity to tailor their shopping experience, organisations could soon start using workers’ personal data (with their permission) to measure and anticipate performance and retention issues”. While the research reveals that the majority of workers (64%) view technology

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advances as improving their job prospects, 12% are worried about the impact it will have on their jobs. For example, a quarter of workers are concerned that automation is putting their job at risk. Digital transformation is also disrupting the traditional nine to five office environment as people are now contactable 24/7. While for some people, this shift brings them the flexibility they desire, for others, they feel their work-life balance is being invaded. PwC’s research reveals that over half (59%) of people are prepared to be available at any time and contactable via technology in return for secure employment. This rises to nearly two thirds (64%) of Generation Y workers. PwC’s report The future of work: A journey to 2022 is based on a survey of 10,000 people in China, India, Germany, the UK and the US who expressed their views on how they think the workplace will evolve and how this will affect their employment practices and future working lives. Further input comes from 500 HR professionals across the world. Rohit Talwar, global futurist and the CEO of Fast Future Research also contributed to the report along with the James Martin Institute for Science and Civilisation at the Said Business School in Oxford. More information and a copy of the report are available at www.pwc.com/futureofwork

{ September 14 – October 13, 2014}

ISSUE

42

110

+ BOOK REVIEWS

102

MONEY: Heaven’s Bankers: Inside the M Hidden H World of Islamic Finance BBy Harris Irfan

{money}

104

E ECONOMY: Bad Banks: Greed, Incompetence aand the Next Global Crisis

102 Revisiting Financial Regulation Extracts from KPMG’s recently published reportt New Commission, New Parliament: An Αgendaa for Financial Services in the European Union.

BBy Alex Brummer

107

T & LEGAL: Democracy in Decline: Steps in TAX the Wrong Direction th BBy James Allan

109

LLIFESTYLE: Adultery BBy PPaulo Coelho

106

{economy}

106 Africa: Growth is on the horizon but where should you look? CEOs around the world are increasingly recognising the untapped potential of Sub-Saharan Africa (SSA).

108

{tax&legal} l}

108 New Double Tax Agreement between een Cyprus and Switzerland.

110

113

{lifestyle}

110 Medal Detecting Investing in the medals market. Inv 114 A Day In The Life Olg Olga Rybalkina

THE INTERNATIONAL INVESTMENT, FINANCE & PROFESSIONAL SERVICES OF CYPRUS

Gold 101

regulation

{MONEY}

Revisiting

Financial Regulation

K

PMG recently published a report entitled New Commission, New Parliament: An agenda for Financial Services in the European Union, in which it proposes that the formation of a new Commission and Parliament provides an opportunity to re-evaluate the work programme within the current political and economic context, and to build for the future. “The last European Commission and Parliament were formed as the full scale of the financial crisis was still unfolding,” the authors state. “As a result, they focused on post-crisis repair, the resilience of individual financial institutions and wholesale markets, and the stability of the financial system. Five years on, the impacts of the crisis – and indeed of the regulatory reform agenda itself – are still working their way through to financial markets and the wider economy.” KPMG identifies four key imperatives: 1. The agenda needs to change to delivering jobs and growth, underpinned by competitiveness, competition and innovation. 2. Positive action is required to promote the contribution that the financial sector can make to jobs and growth. Long-term financing needs to be facilitated and encouraged; European capital markets need to be developed; and

banks need to restore their role as providers of loans, trade finance and risk management services. 3. The regulatory reform agenda needs to be revisited and rebalanced. Although many of the individual measures were necessary, the number of measures and the severity of their calibration has resulted in a negative impact of regulation on economic growth in Europe. 4. Greater certainty is required about the endpoint of regulatory reform, to enable financial institutions and their customers to plan more effectively for the long term. In addition, banks in particular need to restore trust and confidence, through decisive improvements in their culture and behaviour. What follows is KPMG’s take on financial regulation and what needs to be done in Brussels. Delivering Regulatory Reforms Waves of regulatory reforms have been introduced since the financial crisis, to make financial institutions safer, to make the financial system more stable, and to shift the costs of failures from taxpayers to the creditors of, and shareholders in, failing institutions. Seven years after the financial crisis began, the flurry of EU legislative activity on financial services

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in April this year was not the end of the road for regulatory reform but merely an artificial break point necessitated by European Parliament elections and the appointment of a new Commission. The Commission’s comprehensive review of the financial reform agenda, published in May this year, claimed that the benefits of the regulatory reform measures introduced since the financial crisis will far exceed their costs.

BANKS NEED TO RESTORE THEIR ROLE AS PROVIDERS OF LOANS, TRADE FINANCE AND RISK MANAGEMENT SERVICES However, KPMG’s financial sector regulation experts have argued that the relentless introduction of more and more regulation may already have taken many economies, especially in Europe, beyond the ‘tipping point’ to a position where the costs of regulation exceed the benefits. The introduction of more and more regulation has increased the cost, reduced the availability of financial services and reduced innovation in financial services.

{MONEY}

Its negative impact on economic growth has been seen most powerfully and immediately in the downward spiral of bank deleveraging and weak or negative economic growth in Europe over the last few years. Banks have exited many markets, shrunk their balance sheets, sold capital- and liquidityintensive assets, and pulled back from the provision of risk management services to their customers. KPMG believes that three actions are required to deliver regulatory reforms that are compatible with the jobs and growth agenda: halting some proposals; rebalancing some existing regulations; and providing greater certainty Calling a Halt and Providing Greater Certainty • The EU legislative proposals on banking structural separation should be dropped. They will not add significant value in addition to other regulatory reforms already under way on capital and liquidity, market resilience, recovery and resolution, and the more intensive supervision of systemically important banks. And national requirements on structural separation have already been introduced in the key jurisdictions of France, Germany and the UK. • The long-running and confused proposals for a Financial Transactions Tax should be dropped. They are too focused on taxing banks for their past misdemeanours, and will

Regulation versus

Economic

Growth The relationship between regulation and economic growth may be illustrated by a simple chart, plotting these two variables.

THE LONG-RUNNING AND CONFUSED PROPOSALS FOR A FINANCIAL TRANSACTIONS TAX SHOULD BE DROPPED have only negative impacts on jobs and growth in the wider economy. • A cap should be placed on the cumulative impact of the multiplicity of additional capital requirements – current and prospective – especially on banks. Although EU legislation recognises that capital requirements should not be additive where they address the same risks, many regulators have seized the opportunity to regard these requirements as being purely additive. For example, Sweden and Norway have introduced both a large systemic risk buffer on their banks and capital surcharges on systemically important banks. Recent advice to the Commission from the European Systemic Risk Board also argues in favour of an additive approach. • The Enhanced Disclosure Task Force proposals for greater disclosure and market discipline should be adopted as an alternative to ever-tougher and less risk-sensitive capital requirements, not simply as an addition to them. • Provide a more certain environment in which financial institutions – and their cus-

There is general agreement that beMVYL [OL ÄUHUJPHS crisis we were at point A, where too little regulation contributed to the JVZ[Z VM ÄUHUJPHS crises on economic NYV^[O 6ɉJPHS LZtimates of the Basel 3 capital and liquidity reforms moved regulation up to point B, leaving scope for additional regulatory reforms before reaching the ‘optimal’ point C. However, the evidence in Europe – in particular the extent of deleveraging by banks

tomers – can operate. • Ruthless prioritisation of what needs to be done to complete the regulatory reform agenda, and then taking these priorities forward as rapidly as possible. • Alternatively, call a pause to the regulatory reform agenda, with a stock-taking and re-assessment in 2017/18. • Make macro-prudential policy more certain and more predictable, to avoid banks having to hold precautionary buffers against the prospect of macro- prudential instruments being utilised. •Clarify the division of responsibilities between the ECB and national macro-prudential authorities in operating macroprudential policy within the banking union. • Achieve greater global consistency to avoid the complexity, cost and distortions of inconsistent regulations globally and across sectors. Rebalancing and recalibration • Financial services are not zero-risk businesses – failures will occur from time to time and regulation should focus on recovery where possible, and if not possible, then on orderly exit with minimal disruption to the wider economy. • Regulators should pay careful consideration to the cumulative impact of existing and proposed regulatory reforms, and should take a more proportional view, especially when considering the long list of ‘unfinished business’.

– suggests that we have moved beyond point C to point D, where excessive regulation is so damaging to the wider economy that the net impact of regulation on economic growth has become negative.

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{MONEY}

• Assess carefully the proposals for constraining the use of banks’ internal models in calculating capital requirements (through higher risk weightings on exposures and through a minimum leverage ratio) to avoid disproportionate increases in capital requirements and a regulatory framework that is insufficiently risk sensitive. • Avoid automatic capital add-ons in response to the proposed creation of early warning indicators in relation to insurers’ Solvency 2 internal models. • Take a proportional view when setting requirements on banks to hold additional gone concern loss absorbing capacity, and when imposing corporate structures to facilitate preferred approaches (single or multiple points of entry) to bail in. The evolution of resolution regimes for non-banks will also need to be proportionate, taking account of their different risk profiles. • Reduce the extent to which regulatory requirements and the increased supervisory focus on business models act as barriers to entry in banking, insurance and asset management. • Recognise the risk that over-regulation in consumer and investor protection will take us towards the “stability of the graveyard” rather than to a position in which consum-

FINANCIAL SERVICES ARE NOT ZERO-RISK BUSINESSES – FAILURES WILL OCCUR FROM TIME TO TIME AND REGULATION SHOULD FOCUS ON RECOVERY WHERE POSSIBLE ers and investors make adequate provision for saving, investment and protection. A better approach would be to introduce a more consistent framework across sectors, to reduce overlaps and inefficiencies. • Macro-prudential policy makers should take more account of the progress already made in improving the resilience of banks when considering the use of macro-prudential tools. They also need to take greater account of the potential impact of these tools on the wider economy. Take a broader view of where regulation needs to adjust to market realities • The post-crisis approach to ‘shadow banking’ should focus primarily on risks to financial stability, not – as in the EU – on imposing bank-like regulation on anything that looks vaguely banklike, in the name of addressing ‘regulatory arbitrage’. This fails to recognise the importance and value of some alternative channels of finance, both for consumers and for facilitating economic growth. • The quest for ever-greater harmonisation may already have gone too far, imposing costs that exceed the benefits. The focus here should shift more towards what is necessary for competition to thrive. A smaller set of minimum standards would in many areas provide sufficient equivalence and sufficient protections for consumers. Similarly, the single market should not necessarily be “one size fits all”. Smaller financial institu-

104 Gold THE INTERNATIONAL INVESTMENT, FINANCE & PROFESSIONAL SERVICES MAGAZINE OF CYPRUS

BOOK REVIEW HEAVEN’S EAVEN’S BANK BANKERS: INSIDE BANKERS THE HIDDEN WORLD OF ISLAMIC FINANCE BY HARRIS IRFAN (CONSTABLE, 2014)

R.R.P. £20 (£13.60 FROM AMAZON.CO.UK)

G

overnments and corporations across the Islamic world are inJYLHZPUNS` [\YUPUN [V ÄUHUJL [OH[ complies with Sharia law in order to fund economic growth. Even in the West, 0ZSHTPJ ÄUHUJL PZ YHWPKS` ILJVTPUN HU PTportant alternative source of funding at a [PTL ^OLU [OL JVU]LU[PVUHS ÄUHUJL PUK\Z[Y` PZ YLLSPUN MYVT [OL LɈLJ[Z VM [OL ÄUHUJPHS crisis. From its origins in the seventh cen[\Y` 0ZSHTPJ ÄUHUJL OHZ ZV\NO[ [V KL]LSVW JVYL L[OPJHS WYPUJPWSLZ [OH[ HYL IHZLK PU [OL foundations of Islam and Sharia. By engaging critically with the complexities of interUH[PVUHS ÄUHUJL P[ OHZ L]VS]LK HUK HKHW[LK into a world emerging from the economic HUK TVYHS HM[LYTH[O VM H NSVIHS ÄUHUJPHS JYPsis. But with an increasing Western interest, PZ P[ HISL [V YLTHPU [Y\L [V [OL WYPUJPWSLZ VM its faith? Can it maintain its ideals of social Q\Z[PJL& 6Y PZ 0ZSHTPJ ÄUHUJL N\PS[` VM [OL very dangers it seeks to avoid? Irfan gives unparalleled insight into the heart of this secretive industry and analyses its greatest in a fascinating study of money, ethics and ÄUHUJL

tions face disproportionately high costs of regulation. • European authorities need to play an active role in achieving workable global cross-border resolution. The EU legislation on bank recovery and resolution planning makes cross-border resolution possible within the EU, and provides one possible basis for a global solution. • Focus more on the potential causes of the next crisis be this from different threats to banks such as fraud, systems failures and cyber security, or from non-bank activities (for example, insurance or securities firms, or financial market infrastructure) within the financial sector, rather than imposing everincreasing measures to prevent a recurrence of the current financial crisis.

%3#/ê3OLUTIONêBYê,ANITISê'REENê%NERGYê'ROUP &ULLYêFUNDEDêSAVINGêENERGYêSOLUTIONS FORêINDUSTRIES aniƟs Green Energy Group (LGEG) shows the way to integrated energy saving solu ons, for the sustainability and profitability of businesses in Cyprus. LGEG is ready to meet the great challenge of upgrading buildings into zero energy class and, soon, as the first registered Energy Service Provider in Cyprus, it will be funding energy saving projects. An Energy Services / Saving Company (ESCo) offers a wide range of energy saving solu ons including consul ng in energy conserva on, renewable energy, passive design, energy saving proposals, monitoring and logging systems and economic evalua ons. An ESCo can also be the founder of the project on the total ini al and opera ng and maintenance cost. Payback is given from the project’s savings, and part of the savings goes to the customer. The energy saving projects start with ideas that might lead to energy saving and energy cost reduc on. This task is a responsibility of ESCo and the project consultant. A proposal is set up and ESCo approaches a poten al client to present the energy performance contract. At the same me, the ESCo surveys the site and with the coopera on of the project consultant determines systems and areas where energy saving measures are feasible. This is the energy audit leading to proposals and feasibility of each saving measure. Engineering and design phase comes next, defining ini al cost and saving es mates. Once we have the energy performance contract signed, the project development

starts in parallel with measurement and verifica on (M&V). Frequently reviews of short term verifica ons take place during the payback period and un l the termina on of the energy performance contract. The review includes monitoring, logging, analysis and informa on of energy performance rate on a 24 hour basis through specialised so ware and hardware equipment. The ESCo procedure can be carried out by LGEG Enercon ConsulƟng, member of Lani s Green Energy Group. We offer a wide range of products and services for energy saving and management needs of modern businesses. Our focus is on Energy performance contracts, Zero Energy class buildings and upgrade of buildings, project management of RES and EC applica ons, implementa on, monitoring, saving analysis, case studies through energy

audit, dimensioning design of alterna ve and renewable energy systems, and ESCo financing. In no more than five months we have already proposed three energy performance contracts including ESCo financing scheme for energy performance upgrades on air condi oning systems, lightning, hea ng and hot domes c water. With our in-house experts on all energy domains, we are here to help companies and consultants to pursue their goals on energy saving and energy cost reduc on, and at the same me contribute towards the implementa on of the na onal energy strategy. LGEG Enercon ConsulƟng LaniƟs Green Energy Group

sub-saharan africa

{ECONOMY}

Africa:

Growth is on the horizon but where should you look?

C

EOs around the world are increasingly recognising the untapped potential of Sub-Saharan Africa (SSA). This is driven by Africa’s unparalleled demographic edge as, by 2040, it is expected to have the biggest labour force in the world and be experiencing faster economic growth than any other region, according to a new PwC report. The projections are contained in the latest edition of PwC’s Global Economy Watch, which puts the spotlight on the largest cities in SSA. Most major corporations are already active in at least one of the three largest cities in SSA – Lagos, Kinshasa and Johannesburg. But PwC economists believe it’s the ‘Next 10’ biggest cities in SSA that should also be exciting foreign investors. The population of these cities is projected to almost double by 2030, growing by around 32 million people. In fact, latest UN projections show that by 2030 two of the ‘Next 10’ – Dar es Salaam and Luanda – could have bigger populations than London has now. Cities are the typical entry points for businesses trying to expand into new overseas markets, because they enable closer interaction with customers in a relatively

Fig 1: Population trends in the ‘top 3’ and ‘Next 10’ cities in Sub-Saharan Africa (SSA) ‘Next 10’ cities

Ibadan (Nigeria) Addis Ababa (Ethiopia) Ouagadougou (Burkina Faso) Dakar (Senegal)

Kano (Nigeria) Nairobi (Kenya) Abidjan (Cόte d’Ivoire) Khartoum (Sudan) Luanda (Angola) Dar es Salaam (Tanzania) Johannesburg (South Africa)

‘Top 3’ cities

Kinsasa (Congo)

5 10 15 20 Urban area population (milions)

2014e

25

2030p

Source: UN Urbanisation Prospects 2014 revision

small geographic space, which in turn helps contain distribution costs. Says PwC senior economist Richard Boxshall: “We estimate that economic activity in the ‘Next 10’ cities could grow by around $140 billion by 2030. This is roughly equivalent to the current annual output of Hungary. Urban population growth is expected to lead to more eco-

106 Gold THE INTERNATIONAL INVESTMENT, FINANCE & PROFESSIONAL SERVICES MAGAZINE OF CYPRUS

nomic activity. Figure 1 shows that, on average, the ‘Next 10’ cities are expected to almost double their population and triple their economic output by 2030. Specifically, we estimate that economic activity in the ‘Next 10’ cities could grow by around $140 billion dollars by 2030 (at constant 2012 dollars). This is roughly equivalent to the current annual output of Bangladesh.”

BY 2030, DAR ES SALAAM AND LUANDA COULD HAVE BIGGER POPULATIONS THAN LONDON HAS NOW.

Investment Opportunities in Europe

However, there are three problems that could slow the pace at which the ‘Next 10’ grow. These are issues that most SSA countries have been trying to tackle for many decades with limited success: • Low quality of ‘hard’ infrastructure like highways, airports and trains, which increases the cost of doing business, eats away at business profits and discourages investment. Most SSA economies have sub-standard roads compared, for example, to countries in the Middle East and North African (MENA) region • Inadequate ‘soft’ infrastructure like schools and universities, which could lead to a persistent skills gap that hampers long-term business growth. This is a real risk in countries like Burkina Faso, Mali and Ethiopia where literacy rates remain low • Growing pains stemming from the inability of regulators and policymakers to manage effectively a larger and more complex economic system as growth proceeds. These problems could, for ex-

ample, manifest themselves in the form of credit or property bubbles developing as a result of rapid economic growth, or a failure to tackle issues relating to corruption and excessive bureaucracy that deter international investment. “The challenge that policymakers face is to convert Africa’s demographic dividend into economic reality by overcoming these hurdles. History suggests this will not be a quick or easy process. However, investors should form their own plans to mitigate these problems by supporting infrastructure skills and development programmes,” saysRichard Boxshall. The estimates of population growth and economic activity in the report are based on the following key assumptions: • National GDP growth rates follow those projected by the IMF in its latest World Economic Outlook report (which do not take into account the latest Nigerian GDP rebasing) • City GDP per capita grows in line

Ouagadougou (Burkina Faso)

350%

Addis Ababa (Ethiopia)

250%

Dar es Salaam (Tanzania)

Kinshasa (Congo)

300% Abidjan (Cόte d’Ivoire)

Lagos (Nigeria) Nairobi (Kenya)

200%

Kano (Nigeria) Ibadan (Nigeria)

Luanda (Angola)

150% 100%

Dakar (Senegal) Khartoum (Sudan)

50% 20% 40% 60% 80% 100% 120% 140% % change in city population (2014-2030)

Note that size of bubble reflects estimated city GDP as 2030 Source: PwC anlysis

B BOOK RREVIEW BADD BANKS: BANKS GGREED, INCOMPETENCE AND THE NEXT GLOBAL CRISIS BY EDWARD CASTRONOVA BY ALEX BRUMMER (RANDOM HOUSE BUSINESS, 2014) R.R.P. £14.99 (£10.49 FROM AMAZON.CO.UK)

Fig 2: Bigger cities lead to bigger economic opportunities...

400%

with the rest of the country (which may be a conservative assumption) • Constant real exchange rates, which could also be a relatively conservative assumption given that real exchange rates might be expected to rise in the long run in dollar terms for emerging economies with relatively rapid productivity growth. The report on Sub-Saharan Africa in PwC’s Global Economy Watch can be found at www.pwc.com/gew

I

n Cyprus we have seen for ourselves how problems and scandals have not only bedevilled the banking system but affected the economy so badly. Here, Alex Brummer, City Editor of the Daily Mail, follows the fortunes and misfortunes of individual banks in the UK, from RBS to Lloyds. He exposes instances of misselling, money laundering, interest rate Ä_PUN HUK PUJVTWL[LUJL HUK JVUZPKLYZ the bigger picture, dissecting each British, American and European scandal of the last 10 years and showing how the failings of the world’s banking system are threatening to undermine the future economic security of all of us. Thanks to his access to all the major players, the result is an insightful – and in some ways terrifying – account of institutions once renowned for their probity, but now all too often a byword for incompetence and worse. This is the story of how the economic crisis continues to haunt us, and why the unchecked recklessness of some banks PZ Z[PSS H [OYLH[ [V V\Y ÄUHUJPHS M\[\YL 0[ PZ H gripping and sobering account.

THE INTERNATIONAL INVESTMENT, FINANCE & PROFESSIONAL SERVICES MAGAZINE OF CYPRUS

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double tax treaty

{TAX&LEGAL}

NEW DOUBLE TAX AGREEMENT

BETWEEN CYPRUS AND SWITZERLAND

O

n July 25 2014 Switzerland and Cyprus signed a new agreement for the avoidance of double taxation. It is the first double tax agreement between the two countries and will contribute to the development of bilateral economic relations. The agreement will come into force once it has been ratified by both countries. The new agreement closely follows the 2010 Organisation for Economic Cooperation and Development (OECD) Model Convention, with only minor modifications, and the protocol to the agreement clarifies certain detailed provisions. The agreement covers all taxes on income and wealth levied by a contracting state or by any of its subdivisions or local authorities, including taxes on capital appreciation and on gains from the alienation of property. Income taxed at source and lottery winnings are excluded from the scope of the agreement. As well as being one of the world’s most important financial centres, Switzerland is the base for many ultra-high net worth individuals with business and personal interests in Cyprus. The new double tax agreement will be a valuable addition to Cyprus’s extensive treaty network and it is hoped that the remaining steps required to bring it into effect will be completed soon. Income from immovable property As in the OECD Model Convention, income

from immovable property may be taxed in the contracting state where the property is situated. Business profits Business profits are taxable only in the contracting state in which the taxpayer is resident, unless it carries on business in the other contracting state through a permanent establishment there, in which case the profit attributable to the permanent establishment may be taxed in the contracting state in which it is located. International shipping and transport Business profits from the operation of ships or aircraft (including income from containers, trailers and related equipment) in international traffic are taxable only in the contracting state in which the enterprise is resident. While the OECD Model Convention grants taxation rights to the state in which the effective management of the enterprise is located, in practice the outcome is the same, since residence is defined by the location of management and control. Dividends Cyprus does not impose withholding taxes on dividends paid to non-residents. In Switzerland, dividends paid to non-resident shareholders are generally subject to withholding tax at a rate of 35%.The double tax agreement exempts dividends paid by a company resident in one contracting state to a resident of the

108 Gold THE INTERNATIONAL INVESTMENT, FINANCE & PROFESSIONAL SERVICES MAGAZINE OF CYPRUS

SWITZERLAND IS THE BASE FOR MANY ULTRA-HIGH NET WORTH INDIVIDUALS WITH BUSINESS AND PERSONAL INTERESTS IN CYPRUS other from withholding taxes in the contracting state from which they originate, as long as the beneficial owner of the dividend is a company (but not a partnership) resident in the second contracting state that has held at least 10% of the capital of the company paying the dividend for at least a year without interruption. Article 2 of the protocol makes clear that the shares need not have been held for a year before the dividend is paid, but that the minimum holding period may be completed after the payment of the dividend. Dividends paid to pension funds or to government bodies (including a central bank) in the other contracting state are also exempt. Otherwise, the dividend may be taxed at up to 15%. Interest and royalties Interest and royalties are taxable only in the country in which the recipient is resident, provided that the recipient is the beneficial owner. Cyprus-resident natural persons who receive interest from Switzerland will be subject to a lower tax charge by disclosing the interest and opting for taxation in Cyprus, rather than imposition of withholding tax in Switzerland under the taxation of savings income agreement between Switzerland and the European Union. In any event, the current renegotiation of the taxation of savings income agreement is expected to result in automatic information exchange.

Capital gains Gains derived by a resident of one contracting state from the alienation of immovable property situated in the other contracting state, or from the disposal of property associated with a permanent establishment situated in the other contracting state, may be taxed in the contracting state in which the immovable property or the permanent establishment is situated. Gains from the disposal of ships and aircraft used for international traffic are taxable only in the disponor’s country of residence. Gains made by a resident of one contracting state from the disposal of shares that directly or indirectly derive more than 50% of their value from immovable property situated in the other contracting state may be taxed in that other state, with the following exemptions: • Shares listed on a stock exchange established in either contracting state or agreed upon by the competent authorities of the contracting states. • Shares of a company the majority of whose assets comprise real estate used for its normal business activities. • Disposals in the course of a reorganisation, merger, demerger of companies or similar transaction. Article 3 of the protocol provides that the entities concerned must be members of the same group in order to qualify. Gains derived from the disposal of all other property are taxable only in the contracting state in which the disponor is resident. Offshore activities Like other recent Cyprus double tax agreements, the Cyprus-Switzerland agreement includes an article dealing specifically with offshore activities. It provides that a Swissresident enterprise undertaking activities on the continental shelf of Cyprus will be treated as conducting a trade or business in Cyprus through a permanent establishment in respect of the activities concerned, unless the aggregate duration of the activities is no more than 30 days in any 12-month period. Associated companies are treated as one for the purpose of assessing the duration of their activities. Taxes on capital Capital represented by immovable property owned by a resident of one contracting state and situated in the other may be taxed in the state in which the property is located. The same applies to movable property forming

part of the assets of a permanent establishment which an enterprise of one contracting state has in the other contracting state, or of a fixed base for the performance of independent personal services. All other elements of capital of a resident of a contracting state are taxable only in the state of residence. Exchange of information The exchange of information article reproduces Article 26 of the OECD Model Convention verbatim and adds a proviso allowing information received by a contracting state to be used for wider purposes than the determination of tax liabilities if this is allowed under the laws of both states and the competent authority of the state that supplied the information authorises such wider use. However, the protocol to the agreement provides robust safeguards against abuse of the information exchange provision by requiring the contracting state that requests information to fulfil specified procedures to demonstrate the foreseeable relevance of the information to the request. No request is to be submitted unless the state making the request has exhausted all reasonable means available in its own territory to obtain the information, and every request must be accompanied by detailed information to justify it. The protocol also makes clear that: • Information requested must be foreseeably relevant. • ‘Fishing expeditions’ are not permitted. • Neither state is obliged to provide information spontaneously or automatically – all information exchange is to take place on a mutual and equitable basis.

THE NEW DOUBLE TAX AGREEMENT WILL BE A VALUABLE ADDITION TO CYPRUS’S EXTENSIVE TREATY NETWORK These provisions are in line with the robust safeguards against abuse of the information exchange provisions contained in Cyprus’s Assessment and Collection of Taxes Law. Requests for the exchange of information are dealt with by a specialist unit and informal exchange of information between tax officers bypassing the compe-

tent authority is prohibited. When making a request, a detailed case must be made, with the criteria set out in a formal, reasoned document. In effect, this means that the authorities requesting the information must already have a strong case before they request the information, and it will not be possible to undertake ‘fishing expeditions’ without first gathering significant evidence. As a final safeguard, the written consent of the Attorney-General must be obtained before any information is released to an overseas tax authority.

BBOOK O RREVIEW DEMOCRACY IN DECLINE: STEPS IN THE WRONG DIRECTION BY JAMES ALLAN

(MCGILL-QUEEN’S UNIVERSITY PRESS, 2014) R.R.P. £18.99 (£17.16 FROM AMAZON.CO.UK)

P

art lament, part provocative callto-action, this book charts how democracy is being diluted and YLZ[YPJ[LK PU Ä]L VM [OL ^VYSK»Z oldest democracies (USA, Canada, UK, Australia, and New Zealand) and targets ^OH[ [OL H\[OVY ZLLZ HZ MV\Y THPU PU[LYJVUULJ[LK JH\ZLZ VM KLJSPUL! Q\KPJPHS HJ[P]PZT [OL [YHUZMVYTH[PVU HUK NYV^[O VM PU[LYUH[PVUHS SH^ [OL KL]LSVWTLU[ VM Z\WYHnational organisations, and the presence VM \UKLTVJYH[PJ LSP[LZ (SSHU WYLZLU[Z H convincing argument that the same trends are occurring whether or not the country OHZ H JVUZ[P[\[PVUHS VY Z[H[\[VY` IPSS VM YPNO[Z 0KLU[PM`PUN [HJ[PJZ \ZLK I` SH^`LYZ Q\KNLZ HUK PU[LYUH[PVUHS I\YLH\JYH[Z [V deny that any decline has occurred, Allan SVVRZ HOLHK [V ^OH[ OL JVUZPKLYZ M\Y[OLY KL[LYPVYH[PVU JH\ZLK I` H[[HJRZ VU MYLL speech, intolerant worldviews, internationalisation through treaties and conventions, HUK PSSLNHS PTTPNYH[PVU /L WYLZLU[Z H JSLHY ^LSS Z[H[LK HJJV\U[ VM [YLUKZ [OH[ have been undermining democracy over the past three decades, examining the [OYLH[Z [V YLHS MYLLKVT HUK YLWYLZLU[H[P]L NV]LYUTLU[ HUK JOHY[PUN Ä]L MYLL UH[PVUZ» beguiling seduction into what has been KLZJYPILK HZ ºZVM[ [`YHUU`»

info: Information courtesy of Andreas Neocleous & Co LLCof Andreas Neocleous & Co LLC THE INTERNATIONAL INVESTMENT, FINANCE & PROFESSIONAL SERVICES MAGAZINE OF CYPRUS

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{LIFESTYLE}

Medal

DETECTING INSPIRED BY THIS MONTH’S CIPA INTERNATIONAL INVESTMENT AWARDS, WE CONSIDER THE FECUNDITY OF THE MEDALS MARKET – AN INDUSTRY THRIVING ON THE RECOGNITION AND CELEBRATION OF PEOPLE’S PROUDEST ACHIEVEMENTS, EXEMPLIFYING COMMITMENT, AND, SOMETIMES, SHEER BRILLIANCE. By Chloe Panayides

(Left) The George Cross (Right) The Victoria Cross

I

n the throes of World War I, in 1917, Lance-Corporal J Collins would make a rash decision that would define his life. When a comrade, mentally and physically degraded by the surrounding horrors, escaped, armed, from his ‘dressing station’ – a mobile medical station – Collins chased him down, hoping to lead him

back to safety. The man, the London Gazette reported a year later, turned on Collins with a grenade in hand, and words of warning at his lips to come no closer. Met with Collins’ resolve, the man – depicted, then, as an “armed lunatic” – withdrew the pin and let the grenade fall in the trench. “In an endeavour to save the patient and two other soldiers who were nearby,” the Gazette reports, “Collins put his foot upon the bomb, which exploded, killing the lunatic and injuring Collins severely. Fortunately,” it adds, “the soldiers were not hurt.” Thankfully, Collins’ story does not end there. He went on, despite the shrapnel embedded in his leg, to captain Swansea AFC football team for 15 years, leading them to victory in the third division championship of 1924. Gripping, grievous, and gallant, Collins’ story is one of sacrifice, courage, and overcoming adversity: the pinnacle of the human condition. In recognition of his commendable actions, Collins was honoured with the Albert Medal for Lifesaving, the British medal that preceded the George Cross. When the medal came up for auction in April of this year at Spink London, it tri-

THE VALUE OF A MEDAL IS HEAVILY LINKED WITH THE STORY OF HOW IT WAS AWARDED pled its pre-sale estimated value, realising £21,600. Oliver Pepys, an Auctioneer with Spink, explains: “The value of a medal is heavily linked with the story of how it was awarded and not just its intrinsic value.” Whether bestowed in honour of military power or sporting prowess, the medals industry is blooming and it is uniquely positioned thanks to the amalgamation of three components: there is a limited supply but uncapped demand and yet the market remains in the shadows compared to its more brazen contemporaries (think of the stamp market). Pepys assures accordingly: “The medal market is truly buoyant and yet there are still plenty of bargains out there.” Founded in 1666, Spink has been buying and selling war medals since they first appeared after the Napoleonic Wars. The Bloomsbury-based auction house currently holds three medal auctions a year, in April, July, and November, reflective of the rising demand. To date, it has sold over 45,000 lots at auction for a combined total of over £37 million, crediting its highest total for a medal sale as having taken place on November 25, 2010, which realised £1,539,672. Indeed, rising demand has seen auction values invigorated over the years. Paul Fraser, of Paul Fraser collectibles explains that there are over one million medal collectors worldwide, with numbers having peaked significantly over the last few years. By comparison, good condition pieces

THE INTERNATIONAL INVESTMENT, FINANCE & PROFESSIONAL SERVICES MAGAZINE OF CYPRUS

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Investing in the medals market Commodore Ronald Berry was revered as one of the finest fighter pilots of his era

are few and far between. The revered Victoria Cross – bestowed for “conspicuous bravery” – has only been granted 1,356 times since its introduction in 1856. Compare, now, to the number of collectors and the potential for investment in the market becomes clear. In fact, Paul Fraser draws attention to the flourishing prices by comparing a Victoria Cross that sold in 1990 for $158,000, to the record price held today for a Victoria Cross, registering an impressive $1.1 million in a 2011 sale. Besides the rarity factor that assists in driving market values, the bestowing of medals – being a commemorative affair –

means that anniversaries serve as a welcome intermittent boost, catalysing values to stratospheric proportions. This year, it is expected that medal values will rise, as a consequence of 2014 marking the centenary of the start of World War I. Further to the Victoria Cross – for which there are numerous examples of how fervently it is coveted (the only Victoria Cross and Bar bestowed in World War I sold in 2009 for £1.5 million) – other notable medals, industry insiders explain, include the George Cross, and the Conspicuous Gallantry Cross. A George Cross – whilst a near equivalent to the Victoria, recognising gallantry

CYPRUS GOLD C yprus has been sending athletes to every Olympic Games held since 1980. Still, it was only 22 years later, at the 2012 Summer Olympics in London, that CyWY\Z LHYULK P[Z ÄYZ[ 6S`TWPJ medal, when Pavlos Kontides was honoured with a Silver medal in the men’s sailing event. 0U[LYLZ[PUNS` [OL ÄYZ[ *`WYPV[ athlete to win an Olympic medal was Anastasios Andreou. Born in Limassol in 1877, he competed at the 1896 Summer Olympics in Athens. /L ^HZ Z\JJLZZM\S PU [OL ÄYZ[ Pan-Cypriot games in 1896, winning the 100 metres and 110 metres hurdles. He also YLWYLZLU[LK *`WY\Z PU [OL ÄYZ[ Pan-Hellenic Games in the 110 metres hurdles. Despite his Olympic success, this honour has not directly been associated with Cyprus, as he was competing under [OL .YLLR ÅHN The recent Glasgow 2014 XX Commonwealth Games

also resulted in two Cypriots emerging victorious with medals, namely George Achilleos, and Demetris Minasides. Georgios Achilleos won the gold medal in the Men’s Skeet shooting competition, whilst Minasides earned Cyprus its ÄYZ[ NVSK TLKHS PU ^LPNO[SPM[ing. The island, moreover, has an honours system, demarcated into the Order of Makarios III, and the Order of the Merit of the Republic of Cyprus. The Order of Makarios III is comprised of 6 medals: the Grand Collar, Grand Cross, Grand Commander, ComTHUKLY VM [OL 6YKLY 6MÄJLY of the Order, and Knight of the Order. Meanwhile, 5 medals comprise the Order of the Merit of the Republic of Cyprus, commencing with the Grand

Cross, then the Grand Commander, Commander of the 6YKLY 6MÄJLY VM [OL 6YKLY and Knight of the Order.

(though not “in the face of the enemy” – is still acquirable at a fraction of the price of its superior contemporary. King George VI instituted the cross on September 24, 1940. The Blitz was at its height, and there was a strong desire to reward the many acts of civilian courage. Since its inception in 1940, the George Cross has been awarded 406 times. Today, it is still possible, according to Pepys, to acquire a George Cross at auction for anywhere between £12,000 and £25,000. Meanwhile, the Conspicuous Gallantry Cross – described by Pepys as being a “notch below in terms of bravery” – has been awarded only 29 times since its inception in 1993. Though just over 20 years old, examples of such medals would still command five-figure sums, Pepys states. Industry experts tease, moreover, that the discovery of a notable medal conferred on a hero of particular fame and distinction – whether due to being populised via cultural media or having been instrumental to a story of victory –may mean that an investor has unearthed a diamond in the rough. Pepys explains: “The Zulu War of 1879 is a great example. Everyone received special service medals worth £400. The medals were named and if you find one bearing the name of someone who was depicted in the 1964 film Zulu showing the Battle of Rorke’s Drift, it could be worth £30,000.” Another prime example is Ronald Berry, a Spitfire pilot during World War II. Air Commodore Berry was revered as one

Jesse Owens’ Berlin 1936 Olympic gold medal sold in December 2013 for almost $1.5 million 112 Gold THE INTERNATIONAL INVESTMENT, FINANCE & PROFESSIONAL SERVICES MAGAZINE OF CYPRUS

Nine of Commodore Berry's medals came up for auction in 2014. They sold for £120,000

of the finest fighter pilots of his era, dominating the skies over Britain and North Africa. He was also one of the handful of officers chosen to lead Winston Chuchill’s funeral procession in 1965. Nine of his medals came up for auction at Spink London in 2014, including an OBE, and a variety of flying crosses. They were sold alongside a range of documents that tell the story of his phenomenal wartime career. And the final selling price? £120,000, despite a pre-sale estimate of some £80,000. And then there is Special Constable Brandon Moss, who – as German bombs rained down on Coventry during one of the most intense raids of the Blitz – refused to take cover and instead dug through the night to rescue civilians trapped beneath the rubble of houses destroyed by the onslaught. Moss succeeded in freeing 4 people trapped in the rubble, never ceasing his digging through the rubble until dawn broke the following morning of November 15, 1940. For what were later described as his “superhuman efforts and utter disregard for personal injury”, Special Constable Moss became one of the first recipients of the George Cross.

THERE ARE OVER ONE MILLION MEDAL COLLECTORS WORLDWIDE AUTHENTIC MEDALS HAVE BECOME THE HOTTEST PROPERTIES

The medal, which was purchased by Lord Michael Ashcroft – the former Conservative Party deputy chairman – for a conjectured £50,000, has been featured alongside the peer›s collection of 164 Victoria Crosses, built up since 1986 and estimated to be worth £30 million, at a new gallery championing bravery at the Imperial War Museum London. Further to military-related memorabilia, it would be foolhardy to overlook medals infused with the historical import of other industries and events. A set of medals presented to the doctor on the 1907-09 Nimrod Expedition – the first of three expeditions to the Antarctic of geographical and scientific objectives led by Ernest Shackleton – took the industry by storm last year, selling for $77,237, a massive 867% over their estimate of $8,000. And who could forget Jesse Owens’ Berlin 1936 Olympic gold medal selling in December 2013 for almost $1.5 million? Indeed, eBay Spokesman, Kevin Pursglove explains: “There are close to 5 million items on eBay and, increasingly, a significant amount of these items are associated with sports, including Olympic medals.” The frenzy over Olympic memorabilia has become so intense that several online memorabilia sites have appeared. Ingrid O’Neil, who has conducted auctions for the US Olympic Committee, adds: “Authentic medals, as well as team participation medals, have become the hottest properties because of their rarity and their sense of history.” She concludes: “Everyone would like to have a medal, but they are very expensive.

Lance Corporal J Collins' Albert medal sold for £21,600 at auction

ANNIVERSARIES SERVE AS A WELCOME INTERMITTENT BOOST, CATALYSING VALUES TO STRATOSPHERIC PROPORTIONS

BOOK REVIEW ADULTERY BY PAULO COELHO (HUTCHINSON, 2014) R.R.P. £14.99 (£8.00 FROM AMAZON.CO.UK)

I

n this brand-new novel by bestselling author Paulo Coelho, a woman attempts to overcome midlife ennui by rediscovering herself in a passionate relationship with a man who had been a friend in her youth. The main character, who is in her thirties, begins to question the routine and predictability of her days and, although in everybody's eyes she has a perfect life – a happy marriage, children and a career – what she herself feels is enormous apathy. All that changes when she encounters a successful politician who had, years earlier, been her high school boyfriend. As she rediscovers the passion missing from her life, she will face a life-altering choice of what to do about it. Coelho cannot be faulted for his mastery of the written word which is beautifully eloquent and frequently poetic. However, not all his books have been received with equal enthusiasm. If you enjoyed The Alchemist, you may be disappointed by this one but if you liked Eleven Minutes, his latest work will probably please you even more.

THE INTERNATIONAL INVESTMENT, FINANCE & PROFESSIONAL SERVICES MAGAZINE OF CYPRUS

Gold 113

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“I have never been D ÂśPRUQLQJ SHUVRQ¡ but recently I decided to change my routine and for the past 6 months I have been getting up at 6.15am. Within half an hour I’m by the sea doing exercises with a personal trainer. An hour of this leaves me very focused and full of positive energy. By 7.45 I’m back at home and getting ready for work. Now that I do the training I also need breakfast! I get to work around 9.15 and I try to schedule interviews in the morning so that my afternoons are free for work that needs a lot of concentration. I was in my final year at university, studying economics, when I heard about an internship in a company working on a new foreign exchange product which required a lot of technical analysis. These were like magic words to me! The company was Alpari and that internship was the start of a 15year career. I consider myself a very dynamic person – I thrive on challenges and finding ways to overcome obstacles – and my work is so exciting, challenging, varied and fast-paced that I have never regretted my choice of career. At one stage I left Alpari for a year and a half because I thought that I owed

to it to myself to try other things, including working for the government. I have never been so bored in my life! I also worked in a consultancy which taught me a lot about differferent management styles and nd businesses ranging from heavy industry to financial services. ces. Most importantly, it showed wed me that what I had left was as actually what I wanted to do! o! It’s true that you won’t find many female CEOs in this sector or – I know only one other – but ut I would say that being a woman oman in this industry is an advantage. antage. In a male-dominated world rld there is often a clash of egos gos whereas with women it’s all about flexibility, listen-ing and making the most of a situation. I think onee of the secrets of happinesss is self-realisation. Knowing that I can get things done, that I am respected and I can support ort my mporextended family is very important to me and it’s what makes me happy. If I had to identify ntify a negative aspect of my work, it would be the heavy workload rkload and the stress it can causee but when you are a leader in any area, you take such thingss for em. granted and deal with them. I usually try to have lunch h our because I need that one hour ble to to clear my mind to be able cond concentrate during the second ually part of the day which usually

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114 Gold THE INTERNATIONAL INVESTMENT, FINANCE & PROFESSIONAL SERVICES MAGAZINE OF CYPRUS

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lasts until 7-7.30pm. I find myself thinking about work 24/7, 365 days a year, even when I’m on vacation. However, I have come to understand that to have passion, energy and a clear mind, and to be a good leader, I have to let it go for a while. A friend of mine introduced me to Kundalini yoga, which helps release and clear the mind and I try to do it at least 4

times a week, usually outdoors since Cyprus is perfect for that. Since I get up early, I also go to bed early, usually not later than 10pm. I wouldn’t say that I am a big fan of music but I do need it in my life. I listen in the car; I have music on my iPad. Nowadays I prefer jazz and blues though sometimes it’ss roc rock or pop, depending it on my mood. As an outdoor person I would rather be in garden or hiking in the my gar mountains than sitting in front mount of the TV, which I often feel waste of time. Reading is is a wa a bit oof a luxury and I tend to choose self-development books such as Finding the Space suc to Lead: A Practical Guide to Mindful Leadership by Janice Marturano which Ja shows how to integrate the show practice of mindfulness – prac meditation and self-awaremed ness – with the practical tools management. of man Eventually, I would like Even to use my experience to help young women understand what tthey can do and how. I have th thought about writing a book of my own but it’s too ear early for that. Maybe when II’ve had enough of financi financial services! I think that everyo everyone’s mission should be to gain knowledge and then transfe transfer it to others to take life to another level. We need to mak make sure that the next genera generation gains from what we have le learned – they will still make ttheir own mistakes but it is im important for us to know that w we will eventually leave this wo world in good hands.�

presents

IMH & CIPA WOULD LIKE TO CONGRATULATE THE WINNERS OF THE 3 rd CIPA INTERNATIONAL INVESTMENT AWARDS AT THE CEREMONY HELD AT THE PRESIDENTIAL PALACE ON 10 SEPTEMBER 2014.

LIFETIME ACHIEVEMENT AWARD TO SOTOS ZACKHEOS

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