Gold Magazine issue 45 by INBusiness

ISSUE 45 DECEMBER 14, 2014 - JANUARY 13, 2015 PRICE €4.95

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the international investment, finance & professional services magazine of cyprus

e e s ! n o i t c

+ DAI LINGYUN, SAVVAS SAVOURI, GEORGE & ALEXIS TSIELEPIS BANKING

Bank of Cyprus launches Premier Club

INTERVIEWS

Michael Dobbs Tim Potier Colin Wright

INVESTMENT

Record-breaking sales for alternative assets

Plus:

MONEY / BUSINESS ECONOMY TAX & LEGAL LIFESTYLE / OPINION

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Issue 45 December 14, 2014 - January 13, 2015

8 EDITORIAL 10 UP FRONT 16 FIVE MINUTES WITH…

LET’S

SEE

! N O I ACT

At the behest of the Cyprus Fiduciary Association (CFA), stakeholders gathered on November 6 to share their experiences and views in an attempt to demarcate the way forward for Cyprus, correcting the mistakes of the past, and ensuring that only deliberate, purposeful steps are taken from here on. We present their 30 proposals and more.

potential to become world-class, which is the vision of the whole university.

42 | ENRICHING CUSTOMER VALUE Chris Christodoulou, Financial Controller of Fileminders, on how the recession has affected business and how he sees the future for his company and Cyprus.

FEATURES

28 | THE CLIENT IS KING Bank of Cyprus launches its Premier Club

30 | BROTHERS IN ARMS Interview with George and Alexis Tsielepis – Managing Director, and Director, Head of Taxation – of Costas Tsielepis & Co.

34 | PERFECT PITCH More than ten Cypriot start-ups participated in last month’s Web Summit in Dublin, described as “the best technology conference on the planet”.

38 | DOING THE RIGHT THING Dr. Tim Potier, Head of the School of Law at UCLan Cyprus, says that it has the

44 | THE 5TH LIMASSOL ECONOMIC FORUM Considered by many as the best annual gathering of its kind in Cyprus, and attracting the crème de la crème of the island’s international business scene, this year’s event saw global economists, financial sector representatives and high-calibre speakers from the Government and the private sector come together to discuss the future of the European economy.

48 | SCHIZOPHRENICS, WEREWOLVES, SCREWED-UP POLITICIANS AND EUROZONE MADNESS An exclusive interview with Lord Dobbs of Wylye, best-known as Michael Dobbs, author of House of Cards, who was one of the speakers at the recent Limassol Economic Forum.

50 | STRAIGHT TALK Seemingly radical ideas, not easy answers, are what Cyprus needs if it is to recover from its present plight, says Dr. Savvas Savouri.

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

+ OPINION WHY GROWTH COULD REMAIN ELUSIVE IN 2015 By Fiona Mullen 33 TIME FOR CHANGE By Dr. George Mountis53 FROM EGGS TO BEPS By Costas Markides 61

54 | BIG IN JAPAN As the local subsidiary of a Japanese company, Furuno is a rarity in Cyprus but it has already established itself in what is a significant niche market.

56 | THE CYPRUS INVESTORS SHOW 2015 The Cyprus Investors Show 2015 presented opportunities to Cypriot investors interested in schemes designed to protect their own or their clients’ wealth.

58 | IN VINO VERITAS Would you pay €2,000 for a bottle of Commandaria? We meet a man who is confident of finding a clientele that is happy to purchase – and drink – what he is marketing in exclusive diamond-studded collector’s edition bottles.

62 | TAX ‘BADS’, NOT GOODS! Time for a Green Tax Reform in Cyprus

66 70 74 76 78

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

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EDITORIAL

welve months ago we were all looking to 2014 with a certain amount of trepidation. Cyprus was still recovering from the shock of realising that the country had been close to bankruptcy and people had not entirely come to terms with the idea that survival meant, in part, the winding-up of the second-largest bank, a sizeable ‘haircut’ of deposits in the largest, and being at the mercy of the Troika of international lenders, who were determined to see the Government take measures to ensure that its successors will be in a position to repay the €10 billion that the country was granted. Could things possibly get worse? Well, we can now see that those ‘nasty foreigners’ knew what they were doing and while 2014 is unlikely to be remembered as anyone’s favourite year, things have developed better than even the most optimistic forecasters expected, especially in the banking sector, thanks to some valuable – and massive – foreign investment. The Troika’s reports were positive (until the House of Representatives tried to fool the international lenders by passing legislation that neutralised essential changes to the law. This led, as anyone knew it would, to an immediate halt to funding. Fortunately the Supreme Court ruled that their bills were unconstitutional), the rating agencies have been upgrading the banks and the country’s creditworthiness, and all the indications are that Cyprus will exit the economic adjustment programme ahead of schedule. Of course, things are not all rosy. Unemployment remains unacceptably high, tourism is still suffering and relations with Russia have deteriorated following EU sanctions over its annexation of Crimea and its role in the Ukraine crisis, and more recently its new laws on ‘de-offshorisation’ and its call for Russian expatriates to send their money home as part of a tax amnesty. Much still remains to be done, as the outspoken (and somewhat pessimistic) economist Savvas Savouri told us (page 50). That said, this final issue of Gold for 2014 is packed with positive articles, beginning with our cover story which sets out specific proposals for improving the island’s practices and reputation as an international business centre (page 18). We have an interview in which Bank of Cyprus presents its new Premier Banking service (page 28), a piece on 10 Cypriot start-ups that created quite a buzz at last month’s 2014 Web Summit in Dublin (page 34) and we talk to the Head of Cyprus’ only university School of Law (page 38). Much has been said over the past two years about the possibility of attracting Chinese investor interest, not all of it well-founded. This month, we feature a Chinese investor who has not only purchased property (and persuaded several of his friends to do so) but is marketing Commandaria as a luxury item in his country (page 58). Last month’s Limassol Economic Forum, recognised as the most important annual gathering of key figures from the local and international financial communities, was a great success. You will find photos and information on the speakers (starting page 44) as well as an exclusive interview with one of the keynote speakers, Lord Dobbs of Wylye, better known as Michael Dobbs, author of House of Cards. Add to this interviews with executives from Costas Tsielepis & Co. (page 30), Fileminders (page 42) and Furuno (Cyprus) Ltd (page 54), and you have another excellent issue in your hands. This time last year, I also announced the launch of the Gold News website and daily newsletter as an online complement to the magazine. I am delighted to report that the response and feedback to the website has been phenomenal, showing IMH, our publishers, that its bold decision to invest in a new venture (just as it had done with Gold in 2011) was the right one. Thank you for your support over the past 12 months and here’s to a successful 2015!

John Vickers, Chief Editor

john@imhbusiness.com

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LET’S

THE INTERNATIONAL INVESTMENT, FINANCE & PROFESSIONAL SERVICES MAGAZINE OF CYPRUS

E! STE ION

30 STRATEGIC PROPOSALS

TO RESTORE CYPRUS AS AN INTERNATIONAL BUSINESS CENTRE

+ DAI LINGYUN, SAVVAS SAVOURI, GEORGE & ALEXIS TSIELEPIS BANKING

INTERVIEWS

INVESTMENT

Bank of Cyprus launches Premier Club

Michael Dobbs Tim Potier Colin Wright

Record-breaking sales for alternative assets

PLUS: MONEY / BUSINESS ECONOMY TAX & LEGAL LIFESTYLE / OPINION

PUBLISHED BY IMH ISSN 1986 - 3543

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GENERAL MANAGER

Daphne Roditou Tang MEDIA MANAGER

Elena Leontiou EDITOR-IN-CHIEF

John Vickers JOURNALISTS

Effy Pafitis, Chloe Panayides CONTRIBUTORS TO THIS ISSUE

Mariana Antonescu, Philippos Aristotelous, Eleni Hoplaros, Andrew Lumley-Holmes, Costas Markides, Dr. George Mountis, Fiona Mullen, Artemis Pnevmatikou, Stavros Supashis, Theodoros Zachariadis ART DIRECTION

Anna Theodosiou SENIOR DESIGNER

Alexia Petrou PHOTOGRAPHY

Jo Michaelides MARKETING EXECUTIVE

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ISSUE 45 DECEMBER 14 - JANUARY 13, 2015 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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UP FRONT

GEORGE STYLIANOU

DEPARTS

eorge Stylianou, Executive Director and Chief Marketing Officer of Limassol-based ForexTime (FXTM), announced his decision to leave the company last month. “I am grateful to FXTM for all I have received and feel proud of what I

FXTM have offered back. Now is the right time to move on to bigger projects as the entrepreneur in me is ready for greater personal and professional challenges,” Stylianou told Gold. Prior to his appointment at FXTM in 2012, Stylianou held a number of senior roles in several FX broker and provider firms, including Alpari, FxPro and Easy Forex.

“We can confirm that George Stylianou and FXTM have parted ways by mutual agreement,” an FXTM statement noted. “George has been an integral member of the team since the company’s launch and we are grateful for his efforts in helping to build the brand into the strong position it is in today.”

$3+52',7( +,//6 :,16 *2/) $:$5'6

n addition to its evaluation of Cyprus Best Golf Hotel at the firstever World Golf Awards ceremony which took place on November 15 in Algarve, Portugal, the Aphrodite Hills Resort’s golf course also won Cyprus Best Golf Course. The World Golf Awards celebrate and reward excellence in golf tourism, world class courses and golf destinations. The inaugural awards focused on the leading 130 nations that are perceived to be shaping the future of the industry. Golf tourism constitutes a vital segment in the

global travel and tourism marketplace. An estimated 600 million golfer visits will take place in 2014 to the 32,000 golf courses and resorts worldwide. Voting was by professionals working within the golf travel and tourism industry – senior executives, travel buyers, tour operators, agents and media professionals, as well as the golf tourism consumers.

EASYJET REVENUE

INCREASES 6.3%

1100 Gold Gooolld THE INTERNATIONAL INVESTMENT, FINANCE & PROFESSIONAL SERVICES MA G Gol MAGAZINE OF CYPRUS

rominent low-cost European airline easyJet has revealed its financial results for the year ended September 30, 2014, reporting an increase in total revenue of 6.3% The airline posted £4,527 million in yearly revenue, with profit before tax amounting to some £581 million. Total revenue per seat increased by 1.2% on a reported basis and by 1.9% on a constant cur-

Otkritie FC Bank Acquires 20% Stake in RCB Bank

CB Bank LTD has completed an equity capital increase through the issue of additional shares and the attraction of Otkritie Financial Corporation Bank as a new strategic investor, the Limassol-based bank has revealed. Otkritie FC Bank will own a 19.85% stake PU [OL ÄUHUJPHS PUZ[P[\[PVU 0U [OL JV\YZL VM the issue of additional shares, the stake of VTB Bank decreased to 46.29%. “Prior to the completion of the issue of additional shares and capital increase, RCB Bank LTD successfully passed the European Central Bank’s stress tests exceeding by almost twice the minimum requirements,” stated RCB Bank CEO Kirill Zimarin. “However, our development plans on the local and international markets imply an active assets growth, which required both the expansion of the capital base and the number of strategic partners.” Otkritie is one of the largest and most K`UHTPJ WYP]H[LS` V^ULK ÄUHUJPHS NYV\WZ Zimarin explained, with extensive expertise in developing lending projects for small and medium-sized businesses, as well as in the successful implementation of retail projects and high-quality investment banking services.

rency basis to £63.31 million. The growth in revenue per seat was driven, in part, by a number of digital and revenue management initiatives and a continued focus on capital allocation, the company commented. “easyJet has continued to execute its strategy, delivering another strong performance and enabling easyJet to deliver record profits for the fourth year in a row,” Carolyn McCall easyJet Chief Executive affirmed.

The company, she continued, is also proposing to increase the proportion of profits after tax paid in dividends from one third to 40%, reflecting its confidence in the future of easyJet. “easyJet has opened up clear blue sky between us and our competitors – both legacy and low cost - with our unique and winning combination of the best route network connecting Europe’s primary airports, with great value fares and friendly service,” McCall concluded.

THE MARSHALL ISLANDS Corporate Registry

Limassol Marina

Kickstarts the Festive Season

VTT VASILIKO

LAUNCHES OPERATIONS

F L

imassol Marina launched its first festive season on November 29, in the presence of its property and marina residents, project staff and

visitors. The event featured an extensive line-up of entertainment including London West End singer Riana Athanasiou, the percussion group Batukinio, the Diastasis Children’s Choir and the Limassol municipal band. Following the entertainment, mulled wine and treats were served in the Square.

ollowing the announcement of the completion of the first phase of construction at VTT Vasiliko, the terminal has already welcomed its first vessel last month for testing

purposes. The oil products delivered were used to test the operational system of the jetty as well as the storage areas onshore. Once the system and procedures of the terminal are successfully evaluated, the company will launch the terminal’s operation and will be ready to offer its services to oil trading companies. The company officially took delivery of the terminal from contracting company J&P on November 28. The project includes 28 tanks of 544K m³ storage capacity and a jetty with the capacity to service over 500 tank vessels per year. The second phase of the terminal, which is currently under evaluation, will include 13 additional tanks which will increase total capacity to 850K m³. This phase is expected to be completed in 2016.

PLANS for Paphos

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Tower 2017

aphos will soon have its very own skyscraper, according to architects Vangelis Mavronicholas and Anna Mavronicholas. The building, named Paphos Tower

2017, is to be funded by the private sector, ahead of the town’s role as the European Cultural Capital 2017. Expected to become a landmark in the town, the 90-metre high tower, to be located near the Alexander the

5HDO ,QWHOOHFWXDO Property Holdings Great Hotel, will operate as an observation point, VɈLYPUN \UPU[LYY\W[LK views of the sea and the town. According to local reports, both local and foreign investors have expressed interest in the development.

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UP FRONT

FACTA AGREEMENT SIGNED

yprus signed an intergovernmental agreement with the US for the implementation of the US Foreign Account Tax Compliance Act (FACTA) on Tuesday December 2, in what was described as a further step in boosting mutually beneficial economic and political ties. The agreement was signed by Finance Minister Harris Georgiades and the US Ambassador to Cyprus, John Koenig (left). Under the agreement, the Cypriot authorities will provide the competent US Authorities with financial information regarding bank accounts held by US citizens, as stipulated in the agreement. The US government has thus far signed in excess of 40 intergovernmental

agreements, in what has been described as a model in the US administration’s effort to curtail tax evasion and boost transparency. “The signing today of the FACTA agreement is another important step in this very direction,” said Georgiades. “It is also a significant development in strengthening the excellent political and economic ties between Cyprus and the US, he added. On his part, Koenig welcomed Cyprus’ commitment to intensify cooperation in the field of international tax compliance. “Today’s signing marks a significant step forward in our countries` common effort to work collaboratively to combat offshore tax evasion, an objective that benefits both or countries,” he said.

MONARCH AIRLINES EES S

TO LAUNCH LARNACA-GATWICK ROUTE

onarch Airlines has announced a new Cyprus route from the UK, to be launched during the summer 2015 season. The airline will operate a IP ^LLRS` ÅPNO[ MYVT 3HYUHJH [V .H[^PJR Airport. Monarch has also announced [OL SH\UJO VM H ^LLRS` 3HYUHJH ÅPNO[ [V Rhodes, to begin during the same sum-

mer period. “We recently underwentt a strategic review of our network, looking at ^OLYL V\Y J\Z[VTLYZ ^HU[ [V Å` [V ¹ ZHPK Marisa Blanco, a spokeswoman for Monarch Airlines. The airline conceded that the [^V YV\[LZ [V TLL[ [OL ZWLJPÄJ JYP[LYPH VM customer demand, focusing particularly on adding leisure destination to its Summer 2015 schedule.

ARISTO DEVELOPERS SHOWCASES PORTFOLIO TO RUSSIAN BUYERS

rominent Cyprus development and real estate firm Aristo Developers has continued its contacts with Russian buyers, participating in yet another property investment event in the country. The firm participated in one of the largest property events held throughout the Autumn ’14 exhibition season in Russia, the St. Petersburg International Property Show. The event, which took place in November, attracted some 70 companies from 25 countries, showcasing over 3,000 available properties located internationally. Aristo Developers, together with Sunterra Homes, a permanent exhibitor at the St. Petersburg International Property Show, presented its portfolio to potential buyers. In addition to promoting the island’s real estate market, Aristo Developers also informed attendees about the Government’s residency and citizenship scheme, as well as the educational opportunities available to foreign students on the island both via public and private educational institutions.

CAESARS ENTERTAINMENT TO OPERATE CYPRUS’ FIRST CASINO RESORT?

aesars Entertainment, one of the most prominent gaming companies worldwide, is reportedly interested in the operation of a casino resort in Cyprus. The American public gaming corporation owns and operates over 50 casinos and hotels, as well as seven golf courses, under several brands. According to international sources, representatives of Caesars have already visited the island to discuss the investment opportunity with local authorities. The bill for casino operations in Cyprus stipulates that each casino must have at least 1,000 gaming machines, 100 tables, and must feature a hotel of at least 500 rooms. A 15% tax rate on all gross revenues is to be implemented, HZ ^LSS HZ HU HUU\HS NHTPUN SPJLUZL MLL VM Á TPSSPVU MVY [OL ÄYZ[ MV\Y `LHYZ VM VWLYH[PVU PUJYLHZLK [V Á TPSSPVU MVY [OL UL_[ MV\Y ;OL ZLSLJ[PVU VM [OL ^PUUPUN IPK MVY [OL ÄYZ[ JHZPUV YLZVY[ PZ L_WLJ[LK [V IL ÄUHSPZLK I` (\N\Z[

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

UP FRONT

THE WORLDâ&#x20AC;&#x2122;S C

BIGGEST EMPLOYERS 1

WAL-MART STORES Employees: 2.2 million Country: United States Industry: Retail Sales: $476.3 billion Market value: $245.8 billion Wal-Mart Stores is the worldâ&#x20AC;&#x2122;s largest retailer, with nearly 11,000 stores in 27 countries. The company was founded in 1962 by Arkansas businessman Sam Walton; the Walton family remains one of the richest families in the world, with a 50% stake in the company. Out of its 2.2 million employees worldwide, about 1.4 million work in the US. International revenues amounted to $136.5 billion, 29% of its total revenue.

COMPASS GROUP Employees: 506,699 Country: United Kingdom Industry: Food Services Sales: $27.4 billion Market value: $27.0 billion Compass Group is the worldâ&#x20AC;&#x2122;s largest contract food service company, generating 90% of its revenue from more than 50 countries outside the UK. It serves four billion meals a year at ZP[LZ PUJS\KPUN VÉ&#x2030;JL buildings, schools, and sports venues. Compassâ&#x20AC;&#x2122;s operations in North America account for 40% of its workforce and 47% of total revenue. The company has increased its workforce by more than 30% over the WHZ[ Ă&#x201E;]L `LHYZ

an you imagine a single company with a workforce that is more than twice the population of Cyprus? Well, there are at least two on Fortune PDJD]LQHÂˇV Ă&#x20AC;UVW HYHU OLVW RI WKH ZRUOGÂˇV ELJJHVW HPSOR\HUV 2I WKH WRS HPSOR\HUV VL[ KDG UHYHQXHV DERYH ELOOLRQ LQ WKHLU PRVW UHFHQW Ă&#x20AC;VFDO \HDU 7KHVH JOREDO JLDQWV KDLO IURP D YDULHW\ RI LQGXVWULHV LQFOXGLQJ UHWDLO EXVLQHVV VHUYLFHV HQHUJ\ DQG EDQNLQJ VRPH RI ZKLFK DUH PRUH ODERXU LQWHQVLYH WKDQ RWKHUV WKXV GLFWDWLQJ D QHHG IRU PRUH HPSOR\HHV 7KH OLVW ZDV FRPSLOHG DPRQJ SXEOLFO\ OLVWHG FRPSDQLHV EDVHG RQ ODWHVW Ă&#x20AC;VFDO \HDU HQG Ă&#x20AC;JXUHV IURP FactSet Research Systems, annual reports, and other SXEOLFO\ DYDLODEOH LQIRUPDWLRQ S DLODEOH LQIRUPDWLRQ

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VOLKSWAGEN GEN

PETROCHINA

Employees: 618,000 Country: United Kingdom Industry: Security Services Sales: $11.6 billion Market value: $6.3 billion

Employees: 572,800 Country: Germany Industry: Motor Vehicles Sales: $261.5 billion Market value: $101.3 billion

Employees: 544,083 Country: China Industry: Oil & Gas Sales: $351.0 billion Market value: $225.6 billion

Hon Hai Precision is the parent company of Foxconn Technology, the worldâ&#x20AC;&#x2122;s largest electronics manufacturer. Founded in 1974, the Asian tech giant now assembles everything from smartphones to display panels for Apple, Cisco, Dell and Sony. Apple contributes about 40% of the companyâ&#x20AC;&#x2122;s revenue. Earlier this year, Hon Hai hired 100,000 people in mainland China to help meet production demands for Appleâ&#x20AC;&#x2122;s iPhone 6.

G4S is the worldâ&#x20AC;&#x2122;s largest security company with a massive global footprint spanning 125 countries (including Cyprus). It is now the largest publicly traded employer in Europe, and boasts a strong and consistent track record of WLYMVYTHUJL 0[ VÉ&#x2C6;LYZ H combination of personnel, project management, risk management and technology solutions to commercial and government organisations, which of hich account for 75% o its revenue.

Volkswagen reported sales of 9.73 million vehicles worldwide in 2013, putting the company in second place for the year, well behind Toyota and slightly ahead of General Motors. Volkswagen is the biggest employer of the three, though in terms of productivity measured by revenue per employee, Volkswagen lags behind both of its rivals. Every weekday, 572,800 employees worldwide produce some 39,350 vehicles.

PetroChina is Chinaâ&#x20AC;&#x2122;s largest oil and gas company and the worldâ&#x20AC;&#x2122;s second most valuable LULYN` Ă&#x201E;YT HM[LY ,__VU Mobil. Founded in 1999, it is the publicly traded arm of the China National Petroleum Corp., which V^UZ VM [OL Ă&#x201E;YT Half of its employees work in exploration and production, while the rest are responsible for marRL[PUN HUK YLĂ&#x201E;UPUN ;OL company has increased its workforce by more than 13% over the past Ă&#x201E;]L `LHYZ

HON HAI PRECISION INDUSTRY Employees: 1.1 million Country: Taiwan Industry: Electronics Sales: $133.2 billion Market value: $47.3 billion

AGRICULTURAL BANK OF CHINA Employees: 496,365 Country: China Industry: Banks Sales: $115.4 billion Market value: $150.4 billion

Agricultural Bank of China is one of Chinaâ&#x20AC;&#x2122;s â&#x20AC;&#x153;big fourâ&#x20AC;? commercial banks and the biggest employer of the MV\Y YHURPUN Ă&#x201E;YZ[ PU THYRL[ presence with 23,547 domestic branches serving the largest population in the world. The massive lender went public in 2010, pulling in $22.1 billion from Hong Kong and Shanghai in what was the worldâ&#x20AC;&#x2122;s largest IPO until (SPIHIHÂťZ IPSSPVU VÉ&#x2C6;LYPUN this year.

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

ISS A/S Employees: 464,183 Country: Denmark Industry: Commercial Services Sales: $14.0 billion Market value: $5.1 billion The worldâ&#x20AC;&#x2122;s largest cleaning company was founded in Copenhagen in 1901 as a small security company with 20 night watchmen. Since then, it has expanded [V VÉ&#x2C6;LY H M\SS YHUNL VM services, including cleaning, catering, and property and facilities management. The Danish company is notable for having an employee turnover rate of only 52% versus the average 65% seen in the facility services sector.

9 INDUSTRIAL AND COMMERCIAL BANK OF CHINA Employees: 441,902 Country: China Industry: Banks Sales: $148.8 billion Market value: $230.7 billion Industrial and Commercial Bank of China (ICBC) is the biggest China bank by sales, WYVĂ&#x201E;[Z HZZL[Z HUK THYRL[ value, as well as the leader in productivity. With business coverage across the six continents, ICBC provides L_[LUZP]L Ă&#x201E;UHUJPHS WYVK\J[Z and services to 4.7 million corporate customers and 432 million personal customers through its network of 19,000 locations worldwide.

MCDONALDâ&#x20AC;&#x2122;S Employees: 440,000 Country: United States Industry: Food Services Sales: $28.1 billion Market value: $91.9 billion

The McDonaldâ&#x20AC;&#x2122;s workforce total includes employees PU P[Z JVYWVYH[L VÉ&#x2030;JLZ HUK company-owned restaurants, but excludes workers at its 29,179 franchiseeowned restaurants. McDonaldâ&#x20AC;&#x2122;s has faced problems across the globe but one element of its turnaround strategy is a plan to install self-ordering kiosks and mobile ordering at its restaurants â&#x20AC;&#x201C; a move that should improve operating LÉ&#x2030;JPLUJ` I\[ ^PSS YLK\JL P[Z headcount.

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INTERVIEW

five minutes with...

Colin Wright Partner, Executive Vice President, Buena Vista Hospitality Group

onsidering your heavy workload – a consequence, no doubt, of your executive position within Buena Vista Hospitality Group (BVHG) – what are your core reasons for having visited Cyprus recently? We believe that the economy of Cyprus has bottomed out and is now heading for better days. This has created opportunities for strategic investments from offshore and BVHG wants to be involved in that. At what developmental stage is the ambitious Fortune Health Resort project? The Resort Masterplan is going through some adjustments due to updated Governmental approvals. This should be completed in early 2015, at which time the funding process can be formalised. What is your vision for Fortune Health Resort? It will be one of the most complete health resorts in Europe. It will be designed as a place to stay in an ultra-luxurious setting whilst receiving many different choices of life-enhancing treatments, delectable nutritionally designed meals and state-ofthe-art exercise programmes. It will also feature a clinic where non-invasive or minimally invasive beauty and age diminishing treatments will be performed by some of the most highly respected professionals in the world. It is a place to spend a short period of time to relax and regenerate the

body or to stay for a lifetime in a variety of luxury residences, some with assisted living capabilities. What encouraged BVHG to establish offices in Cyprus, which will serve as a base for other markets? I was introduced to Cyprus back in 1970 and remember it fondly from then as a peaceful place with a great climate in which to relax, and wonderful friendly people. From a business standpoint, the laws are based on those found in the UK and English is spoken very frequently in the business community, which makes working in Cyprus very comfortable. It is also strategically situated for ventures into the Middle East and into the Balkans, which are target markets for BVHG. Over the years, airline service has opened up to many European and other countries so commuting is relatively easy. Furthermore, its membership of the EU is a great enhancement as is its tax code. There are numerous media reports indicating BVHG’s investment interest in other projects in Cyprus, namely, Venus Rock and the Ledra Palace Hotel. Are these two projects – or any others for that matter – truly under consideration as an investment? I love the old Ledra Palace and it has great potential to become a catalyst to help draw Greek Cypriots and Turkish Cypriots together again as I recall they were when I first came to Cyprus. Unfortunately the

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time is not right just now for this to happen. I have had meetings with the UN heads and with the US Ambassador and his staff and we will continue our discussions with the Archbishop and wait until the time is right. There are a number of potential opportunities for our involvement which we are studying. What growth trajectory do you imagine for BVHG in Cyprus? What will your presence here look like in five years time? It’s hard to forecast and a lot depends on Cyprus really making a turn economically because that will encourage more investment from outside this country. Certainly, the Government is very pro-business and the Ministers I have met with have shown total support and taken the time to discuss our plans. That is extremely encouraging since similar meetings with prior Government officials were not so well received or responded to. Remember, I have been involved with Andreas Kaisis and his team since 2005. By what criteria are you selecting partners and collaborators in Cyprus? We formed a Joint Venture with Andreas Kaisis and his company, Business Global, BV-BG Hospitality Group, and it is through this entity that we carry out our business here. Andreas has become a great friend and I enjoy working with him, his daughter Maria, and their very professional staff. Everything we look at here is carefully vetted by Andreas and his people.

S ’ T LE COVER STORY

E E S

I T AC A

t the behest of the Cyprus Fiduciary Association (CFA), professional and financial services stakeholders convened on November 6 at the Four Seasons Hotel in Limassol to share their experiences and views in an attempt to demarcate the way forward for Cyprus, correcting the mistakes of the past, and ensuring that only deliberate, purposeful steps are taken from here on. The question on everybody’s minds: What practical, tangible steps – action points – does the island need to take to ameliorate its status as an international business hub? When Delia Velculescu, former IMF mission chief for Cyprus, likened the island to Icarus – the mythological figure who flew (daringly, foolishly or even thoughtlessly) too close to the sun – gasps of dismay echoed across the island. For some, their consternation was in reaction to what they perceived as an of-

fence; for others, it stemmed from a difficult confrontation with the truth. Whether wellintentioned or not, Cyprus did proverbially fly too close to the sun and if, like Icarus’ wings, the country’s foundations had not been made of wax – a mercurial substance – the mythological figure’s fate would have been wildly different, and so would that of Cyprus. Velculescu might have chosen another parable (Aesop’s The Ant and the Grasshopper) to provide a better understanding of how Cyprus came to find itself in difficulty, bearing in mind that the moral of the story is “It is best to prepare for the days of necessity.” Indisputably, worldwide developments are changing the landscape of international business. According to PwC’s annual ‘Cities of Opportunities’ report, a city or locale’s fecundity is measured by a plethora of factors, cutting across business, cultural and educational opportunities.

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The latest release notes that the most consistent ﬁnding in 2014, echoing previous results, is what has now been termed the “virtuous circle of social and economic strengths”. When great quality of life factors are balanced with strong business factors and solid infrastructure, the resulting formula – or “network of reinforcing advantages and assets” – creates and sustains resilient cities with high standards of living. In short, attractive tax-related advantages alone will not stand the test of time as a distinguishing feature of a business hub, and if Cyprus persists in resting on this laurel, it will fail to sustain its position and reputation as an international business centre. So, where do we go from here? It is a question bursting at the seams with disparate answers, depending on who you ask. Quick to emerge at the CFA Forum was the consensus that for an industry that com-

S L A S O P O R P C I G E T A 30 STR

to restore Cyprus as e r t n e C s s e n i s u B l a n o i t a n r an inte

! N IO By Chloe Panayides

mands some 70%-80% of the island’s tax revenue, it is inconceivable that a single, united voice has yet to be raised in championing the industry’s causes; as Andreas Athinodorou, CEO of Aspen Trust Group noted: “If we want to change things, we must make them personal.” Indeed, “personal” extends beyond calling individuals to the frontline of battle, to mobilising the stakeholders directly involved in the sector into instigating change. Making things personal is also very much about engaging in self-reﬂexivity. Upon hearing the assertion that Cyprus is faced with a reputational challenge, I couldn’t help but wonder: do we even know what our identity as an international business hub is, and thus what our reputation should be? How can we restore our reputation, if we don’t know who we are? Despite lacking a concerted, coherent pic-

ture, most people are nevertheless certain as to what their clients want: accessibility, stability and security, access to high quality products and services, consistency of treatment, quality risk management, and high ethical standards. Surely this is a prime place to start in designing the island’s identity as an international business centre, raising standards, promoting interests, and working towards a common goal. Like the Grasshopper in Aesop’s fable, who, for as long as the sun shone, revelled in his good fortune (or, rather, the good fortune that surrounded him: warmth and food aplenty), Cyprus has been subjected to changing external conditions (from the global economic downturn to the reactive demands for compliance and transparency) and must now ﬁnd a way to survive: it must deal head-on with the threats facing it and turn them into advantages. The reality is that Cyprus has developed

thus far with a destitute business model; imagine the unfettered potential, participants proclaimed during the Forum, borne by coherently strategising the island’s make-up as a business centre. The client of the future will have real operations, people, and assets. As such, Cyprus’ stakeholders must ask: what reforms should we enact to attract these companies to the island’s shores? Recognising that engendering governmental change is a time-consuming and sometimes ineffective process, the private sector is getting its affairs in order. By developing a speciﬁc and detailed action plan tasked with enhancing Cyprus as an international business centre, stakeholders are harmonising their voices and their informed, knowledgeable ideas – as presented on the following pages – will be presented to the state, leaving no room for excuses. They are themselves being the change they want to see in Cyprus, and they intend on doing it very well.

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COVER STORY

PUBLIC SECTOR

COMPLIANCE

PUBLIC-PRIVATE SECTOR PARTNERSHIP – ESTABLISH A JOINT BOARD: Further to contributing in an advisory capacity, considering that private sector professionals are on the front line and closely in touch with what international businesses want and need from a jurisdiction, an entity should be created that would afford interactions on an almost daily basis and possess tangible powers to enact change. The private sector’s input is invaluable in designing action points.

PRIVATE SECTOR – IMPLEMENT AND APPLY ANTI-MONEY LAUNDERING (AML) DIRECTIVES: With an ever-increasing need to homogenise a global approach to preserving and protecting the integrity of financial institutions, EU-approved AML directives are undergoing amendments and updates. The risks of failing to apply measures are monumental, including penalties, loss of licences, exposure to terrorist activities and an overall deterioration of reputation. Thus, practical steps for the implementation of AML procedures are of paramount importance, including but not limited to: establishing AML manuals, appointing compliance officers to meet the requirements of the law, employing staff well-trained in AML, maintaining documented knowledge of clients and business activities (record transactions, client profiles, memos of meetings, etc.), and keeping updated records. Better-developed AML cultures with applied procedures will allow Cyprus to strengthen its client base and enable the engendering of a safe environment for all, free from exposure to money laundering or terrorist financing activities.

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CHANGE THE MEANS OF ALLOCATING GOVERNMENT RESOURCES: Public Financial Management to aid allocation of budget is closely interrelated with growth. The allocation of Government resources has traditionally been affected by lobbying, election cycles, and other factors. Instead, country-specific priorities should be demarcated, to which the allocation of money is then inextricably tied, according to infrastructural and other needs.

TAX – STRENGTHEN THE DEPARTMENT DEALING WITH EXCHANGE OF INFORMATION REQUESTS: Exchange of information is not something fulfilled once and thereafter neglected: it needs to be an ongoing, continuous process, tended to by dedicated personnel. If increased personnel – and overall resources – are required, this is something that needs to be addressed.

TAX – ENGENDER ENHANCED COOPERATION WITH OTHER TAX ADMINISTRATIONS: Interrelated with point 3, engendering enhanced cooperation with other tax administrations – whether this is achieved by streamlining resources and processes or widening the scope of activities – is key in reestablishing trust and confidence in Cyprus as a jurisdiction.

PUBLIC SECTOR – STREAMLINE PROCEDURES: The public sector should be a facilitator but with certain outdated policies in place – from a lack of meritocracy, inflated pay, and unwarranted job security – inefficiencies abound. Overall, the public sector needs to be overhauled, with all outdated policies addressed and corrected, to ensure that it can meaningfully contribute to the establishment of Cyprus as an international business hub.

PUBLIC SECTOR – WEBSITE UPDATES: The state of public websites – which, in an ever-digitalised age, are the windows to the soul of a country – needs an immediate and drastic overhaul. Besides not being visually engaging, or expressive in any capacity of Cyprus’ brand (an issue unto itself), the websites often lack information, are not user-friendly and, more often than not, are largely in Greek. This constitutes an immediate denial of the opportunity for foreign professionals to garner deeper knowledge of the Government’s make-up, and is not conducive to a business environment of international standards.

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APPLY TO THE OECD’S GLOBAL FORUM FOR TRANSPARENCY AND EXCHANGE OF INFORMATION FOR TAX MATTERS FOR A SUPPLEMENTARY EVALUATION BEFORE THE END OF THE YEAR: Having been found non-compliant by the Global Forum based on past peer reviews, Cyprus has enacted numerous corrective measures. Now, with a whole year having passed since its non-compliant rating, the island is entitled to request a supplementary peer review, which should be done without fail by the end of the year. The Peer Review Group, a technical sub-group of the Global Forum, will launch the review accordingly, with the results expected to be published in the second half of 2015. If merited, this will include a revised rating.

IMPLEMENT THE STANDARD FOR AUTOMATIC EXCHANGE OF FINANCIAL INFORMATION: At the recent annual meeting of the Global Forum, Cyprus committed to implementing the standard for automatic exchange of financial information in tax matters by 2017. One of few jurisdictions to do so, it is considered an ambitious commitment, though one that will reinforce the image of Cyprus as a reliable and responsible business jurisdiction. Ensuring that implementation is fulfilled requires the alignment of domestic legislation and practices.

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PRIVATE SECTOR – INVEST MORE IN KYC POLICIES AND PROCEDURES: The demand for banks everywhere to unequivocally know their clients, as well as their clients’ businesses, will not abate. Banking secrecy will become obsolete, as transactions become fully transparent and easily identifiable between parties, and the anonymity of beneficial owners is dissipated. Clients will also be more and more frequently turned away, as

Christos Michael,

MANAGING DIRECTOR, First Names, and Founding Member of CFA

banks and fiduciaries are held accountable for understanding their clients and their clients’ businesses. In order to ensure that a cloud of confusion and opaqueness does not return – risking the credibility of a jurisdiction – institutions will inevitably have to invest both more time and resources in adhering to Know Your Client (KYC) policies and procedures.

PRODUCTS/ SERVICES

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PRIVATE & PUBLIC SECTOR ENTITIES – WHERE NECESSARY, ESTABLISH SPECIALISED DIVISIONS: In a world where clientcentricity is demanded, as is stability, ease of access to products & services and more, specialised divisions may be key in ensuring excellence of service, and thus customer/client satisfaction. Moreover, specialised divisions – dealing exclusively, for example, with international clients, funds or private wealth – are empowered to stay ahead of developments pertaining to their sphere, thus delivering trust and results.

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IMPORTATION OF NEW SKILLS: Accounting and legal skills can be enhanced to a level where they are an attraction unto themselves. Facilitating the evolution of this vision to fruition, however, is very much dependent upon the importation of new skills. Whilst Cyprus’ workforce is often praised for being highly-educated, many young professionals and graduates are becoming refugees of this economic war, fleeing to greener pastures. Encouraging specialisation in underserviced areas may be a fecund opportunity for growth for all. Islamic products, for example, are now well-developed in other financial centres, as are the instruments for their management, which are not difficult to replicate. Cyprus should look to such opportunities, especially considering the island’s position at the crossroads of three continents, otherwise, it will truly struggle to position itself as a gateway to the Middle East. There are now some 30 courses on Islamic finance in the UK, providing an ideal foundation. Incentivize, invest, and encourage: education is a lifelong endeavour.

“Every business and every Government needs a strategy in order to survive in a changing world. Cyprus is at a critical turning point right now, facing a reputational challenge following the events of 2013 and the subsequent allegations of weak and ineffective Anti Money Laundering (AML) procedures and practices, the threat to be blacklisted by the OECD after the negative evaluation of its transparency obligations in 2012, and the possible threat to lose significant business from Russia after the enactment of the De-offshorisation legislation just a few weeks ago. Cyprus should manage these threats and then aim to enhance its international position with the right approach/ strategy, and sufficient collective will from all stakeholders (Government, authorities and private sector professionals). Much of the strategy is about all the stakeholders getting their act together to define and put all the necessary processes in place to ensure coordination of all relevant activities to have the highest standards across the financial sector, and enact the necessary legislative changes. The main priorities are, therefore, to: address the issues related to the transparency obligations, including strengthening the Tax Department’s capacity to deal with exchange of information requests and to cooperate with the private sector to provide relevant information and achieve higher rates of prompt tax and annual return fillings; the enactment of non-domicile status legislation to facilitate the change in the tax residency of Russian individuals who would like to avoid the Controlled Foreign Corporation (CFC) rules; and other relevant changes to our tax legislation in response to these CFC rules. If we secure our position as an OECD-compliant jurisdiction and the preferred one for the Russian market, we then need to address the issue of our overreliance on a relatively narrow range of services and clients and aim for diversification into a wider range of services, like wealth management to enhance the Private Clients offering or Custodian and Fund Administration services to enhance the Fund offering and look for new markets through a coordinated effort by the Government and the Private sector like the establishment of a single promotional authority.”

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REFORM THE COURT SYSTEM: The problems of the court system – namely, its vast delays – need not evolve beyond their current state. Considering that companies not only want, but demand, a modern and efficient judicial system, solutions must be sought and their resolution found imminently. The creation of administrative courts is a viable option, is are the establishment of specialist courts for high-value transactions. Moreover, encouraging a changing of culture towards the commercial use of arbitration as a quicker way to resolve disputes could help.

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LOOK TO MORE MATURE JURISDICTIONS FOR GUIDANCE: The value of learning from one’s peers should not be underestimated, and is, rather, part of the natural order of evolution. Coming second in the race has its advantages should stakeholders prudently look to the qualities that engendered the acquisition of first place, and integrate them accordingly into their makeup. In fact, Malta has famously borrowed from Cyprus’ shipping practices in a bid to enhance its jurisdiction, whilst Japan is credited as having developed an entire industry by copying practices of the West. Thus, should Cyprus want to become an established international business centre, perhaps it should be looking to the likes of Singapore, Hong Kong and New York, in a bid to understand their steps to success. Of course, geographical size, geostrategic positioning and more can influence such developments and must be heeded accordingly: what works for one jurisdiction will not necessary work or be relevant for another. However, by remaining faithful to the old adage that ‘knowledge is power’, the codification of what more mature jurisdictions have done and how they have achieved success can only bring about a competitive advantage.

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TAX – UPGRADE THE QUANTITY & QUALITY OF DTTS: The importance of Cyprus’ double taxation treaty (DTT) network often comes under the lens of what is needed to

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COVER STORY

THE CYPRUS FIDUCIARY ASSOCIATION FORUM: RECOVERY IN THE MAKING

n the morning of November 6, at the Four Seasons Hotel in Limassol, stakeholders representing fiduciary, corporate, legal, and accounting services and others congregated to discuss how Cyprus can move forward from its current state of stagnation, ensuring that the professional services sector continues to grow and thrive. Having listened to key speakers from both Cyprus and abroad presenting the latest institutional policy trends and changes, as well as developments in servicing international investors, the participants thereafter vociferously shared their views in an attempt to devise, agree on, and commit to a strategy tasked with reestablishing Cyprus as an international business centre. “The main purpose of the conference,” says George Savvides, Partner, Fiducenter & CFA President, was to discuss, analyse and decide on the way forward in relation to the role of Cyprus as an international business centre and provide input to the Government in coming up with its strategic plan for the sector and the overall economy of our country.” The first part of the conference was devoted to an assessment of where we stand from all respects – “There is no better starting point when deciding on the way forward than making an honest assessment of where we stand today,” says George Savvides, explaining, “The second part was a brainstorming session, aided by a panel discussion and with the active participation of the audience. I am really glad that many interesting points came out of this, which will form the basis of the draft plan that we will deliver to the government. Before doing that we will provide the draft to the participants for comments and further input, putting in practice what has been mentioned before about this being a truly collective effort.” It was unanimously agreed that proper planning will enable the island to focus on its core competencies, leading to the faithful promotion of Cyprus as a reputable and attractive international business centre and investment destination, which should be the result of a common and concerted effort by all stakeholders, including government ministries, public authorities and professionals in the sector. The Cyprus Fiduciary Association was founded in 2011 on the initiative of a handful of fiduciary firms who believed that an organised body would assist in developing their sector, raise the quality of services provided, and promote Cyprus as an international business centre. The Association acts as a representative body of Administrative Services Providers (ASPs) operating in Cyprus, promoting professionalism and high standards through networking, support, and training. It also aims at developing and coordinating the common interests of its members in relation to other ancillary providers, for the purpose of creating an agreed and common protocol regarding compliance with regulatory authorities. Last but not least, it aspires to strengthen Cyprus’ reputation as an international business centre for the provision of corporate and fiduciary services.

enhance the island as an international business jurisdiction. A comparison of how Cyprus is faring compared with its competitors highlights substantial discrepancies in numbers, as well as strategy. With DTTs aiding the promotion and enhancement of commercial and economic interaction between states, setting a framework within which it is defined where tax arises, and taxing rights are allocated, DTTs are often the outcome of a combination of factors, such as cultural closeness, political cooperation and even religious commonalities. A positive observation of Cyprus’ DTT network is that what Cyprus is lacking in numbers, it often makes up for in quality, with select treaties truly exemplifying superiority. However, other treaties, such as the one in effect with the US, are in need of an upgrade to reflect the ever-evolving relationship between the two states. Diversifying one’s network, signing treaties with nations of, for example, rising importance (namely, African nations and Kazakhstan) is no easy feat. Often, time and money must be spent on investing in a country with which one is pursuing a DTT, building hospitals, setting up academies, and more. The Netherlands has adopted this approach with great success and it is perhaps indicative of a strategy that Cyprus should adopt in moving forward.

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DEVELOP BILATERAL INVESTMENT TREATIES: Contrary to abandoning a sound DTT strategy, remaining competitive equates with widening the island’s scope of products. With Bilateral Investment Treaties (BITs) rising in prominence, whereby an agreement establishes the terms and conditions for private investment by nationals and companies of one state in another state, Cyprus would do well to pursue a more proactive stance in developing such agreements.

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BETTER DEFINE TAX RESIDENCY RULES: With clients requiring predictability of treatment, and demanding transparent processes, tax residency rules need be better defined, thus dissipating the possibility of misinterpretation. Corporate income tax in Cyprus notes that a company is tax resident in Cyprus if it is managed and controlled in Cyprus, and where a company is tax resident, tax is imposed on income accruing or arising both from sources in and outside Cyprus. Whilst this seems clear, there are numerous exemptions dependent on so-called “certain criteria”, and gaps regarding substance. As such, it has been suggested that legislation should aid the better definition of a company’s governance, composition of its board, the keeping of records in Cyprus, and more.

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ENACT NON-DOMICILE STATUS LEGISLATION: Further to better defining tax residency rules, Cyprus would do well to look to successful structures in place abroad and adopt them accordingly. The UK has famously implemented a tax status geared primarily towards High Net Worth Individuals (HNWIs), known as ‘non-domicile’. Questions of domicile can be complex but the status is premised on the idea that an individual has his or her domicile in the country that is their ‘real’ or permanent home which, even if they have left, they nevertheless intend to return to. An individual cannot be without a domicile, and can only have one domicile at a time. The UK defines three types of domicile: origin, dependence and choice. Importantly, domicile and residence are considered separate, with it being perfectly possible and plausible to be resident in one country and domiciled aboard. For HNWIs, this bodes well for preserving their wealth. If the stipulations of nondomicile status apply, individuals in the UK will be taxed as normal on their UK income and UK capital gains, but will be able to choose how they are taxed on their foreign income and capital gains, either on the ‘arising basis’ or on the ‘remittance basis’.

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ENACT FAMILY OFFICE LEGISLATION: Interrelated with nondomicile status – and the rise of HNWIs – family offices are flourishing worldwide. A family office is a private company that is exclusively concerned with investment advisory and personal financial planning for HNWIs, acting as their personal chief investment officers. Cyprus is currently home to a mere handful of family offices, and whilst the latter can be created under the existing legislation, Luxembourg has developed specialised legislation, enacted in early 2013. One of the first countries to implement a specific and coordinated legal and regulatory framework for the activity of family offices, Luxembourg has gained a competitive edge by enacting a law that clearly identifies the scope of a family office and defines the advice and services related to private wealth.

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REFORM WORK PERMIT VISAS: As Cyprus strengthens its ties with various countries, and spearheads the development of budding sectors, the importation of new skills – whether related to language or industry – is an ever-increasing necessity. Companies may want to employ third country nationals in this quest and, thus, the island must unequivocally reform the process of issuing work permit visas so as to effectively and efficiently facilitate this necessity. In particular, the process must be streamlined, eliminating delays: companies should be able to employ experts easily, regardless of their country of origin.

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SIMPLIFY SOCIAL INSURANCE LEGISLATION: In Cyprus, the Social Insurance System applies compulsorily to every person gainfully occupied in Cyprus either as an employed person or as a self-employed person. Persons working abroad in the service of Cypriot employers and persons who interrupt their compulsory insurance are allowed, under certain conditions, to be insured voluntarily. Current legislation is felt to be convoluted, thus inhibiting the free movement of people coming from other countries into Cyprus. As the latter has been demarcated as a clear necessity in aiding the evolution of Cyprus into an international business hub, simplification of the legislation would be prudent.

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ENACT LEGISLATION FOR PRIVATE FOUNDATIONS: In the last decade or so, private foundation legislation has been introduced at a dizzying pace in both common-law and civil-law jurisdictions. Many existing foundations internationally – philanthropic in nature, and usually established by an individual or group, and whose funds and programmes are managed by a trustee or director – have had to be examined to ensure that they are fit for purpose, in light of the many new tax information exchange agreements signed around the globe. The Bill & Melinda Gates Foundation is an example of the largest private foundation in the US with over $38 billion in assets. While foundations have steadily gained in profile in the quest for robust yet flexible asset protection and succession planning, and the comparative lack of authoritative case law on the subject means that, for

THE STATE of public websites – which, in an everdigitalised age, are the windows to the soul of a country – needs an immediate and drastic overhaul. Besides not being visually engaging, or expressive in any capacity of Cyprus’ brand (an issue unto itself), the websites often lack information, are not user-friendly and, more often than not, are largely in Greek.

AT THE RECENT annual meeting of the Global Forum, Cyprus committed to implementing the standard for automatic exchange of ÄUHUJPHS PUMVYTH[PVU PU tax matters by 2017. One of few jurisdictions to do so, it is considered an ambitious commitment, though one that will reinforce the image of Cyprus as a reliable and responsible business jurisdiction

WHILST it is not feasible to integrate everything, there has, nevertheless, been a global push to this end. And combining the efforts in Cyprus of the multiple authorities may engender bountiM\S ILULÄ[Z )LZPKLZ uniting industries with a single voice and vision to speak for their constituent parts, integration streamlines procedures and processes.

HOWEVER much regulation there may be, it is utterly undermined and negated if it is not complied with and faithfully implemented. In ensuring perpetual compliance, the authorities need to adopt a zero tolerance policy towards incidents of ULNSPNLUJL JVUÅPJ[Z of interest, and slacking in the adoption of certain criteria.

many, the private foundation is still an untested and unknown area of planning. Comparatively few countries have an established legislative framework for foundations (the US, Liechtenstein, Austria, the Netherlands, and the Seychelles are prime examples of those that do) and, as such, Cyprus would gain a substantial competitive advantage should it develop and enact sound private foundation legislation accordingly.

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STREAMLINE FUNDS AND CORPORATE SERVICES LEGISLATION INTO ONE BODY: Ambition is key in spearheading changes. Considering that a redevelopment of products is necessary in repositioning the island’s competitiveness, stakeholders should be raising their game to ensure that solid foundations are laid for long-term growth. We should invest time into streamlining legislation in relation to the funds and corporate services industry into a single body of legislation. Ambitious as it may be, this will unequivocally lend a competitive advantage: not only will professionals considering our jurisdiction have a clearer and less ambiguous image of how things work in Cyprus, they may also enjoy the benefits of there being a specialised court under one codified law for funds and corporate services.

REGULATION

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KEEP UP WITH DEVELOPMENTS: Electronic knowledge sharing; continued education; attending of relevant conferences and seminars; a designated public body to oversee and ensure implementation: whichever method is adopted, keeping up with global developments must be nurtured. The list of global developments – such as FATCA and BEPS – is seemingly endless, with professionals ever more pressured to honour and maintain the new standards that are being implemented worldwide. As both current and prospective professionals active within a jurisdiction are concurrently becoming more demanding, with initiatives displaying transparency and compliance graduating from providing a competitive edge to being essential to stay in the game of international business, both private and public stakeholders inherit a new duty and responsibility.

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COVER STORY

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FINE-TUNE REGULATION…: As displayed via the plethora of ideas for increasing or enhancing products and services available in Cyprus, the associated regulation will either need developing or fine-tuning. In many cases, legislation is in place pertaining to a variety of subjects. However, when it comes to developing effective new laws – or indeed implementing existing ones – Cyprus lacks the proper infrastructure, meaning that it lacks the capacity to research (an absence of case files and academics) and garner the input of specialists and trained technocrats. As such, many new laws developed are generic, with the means of implementing measures being unclear: different lawyers could all follow different policies and practices, and all could very well possibly be right. Moreover, the current case allocation procedure discourages the development of judicial specialisation: judges take on all types of cases in civil litigation, regardless of their expertise. These discrepancies need to be addressed imminently.

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…OR EVEN REDUCE REGULATION: Whilst regulation is understood as the means of dissipating doubts and demarcating clearer lines within which entities may practice and be active, there are certain cases requiring 60 steps that must be taken via 60 authorities, compared to just five in other counties. In such instances, it has been suggested that deleveraging the system to reduce distortions could be beneficial.

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ESTABLISH A PROFESSIONAL AND FINANCIAL SERVICES BOARD TO ADVISE ON THE COMMERCIAL REALITIES OF AML STANDARDS: Whilst no-one doubts the imperativeness of implementing AML standards, there are commercial realities to be heeded. A combination of professionals from the banking and professional services sectors could unite as an advisory board to offer guidance as to how an entity might strike the right balance: this will most likely mean adopting a risk-based approach alongside substance.

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SPEARHEAD A SINGLE FINANCIAL AUTHORITY: Iceland is a case in point with a single financial authority. The single supervisory authority for the financial sector in Iceland encompasses and regulates commercial banks, savings banks, insurance companies, insurance brokers, credit institutions (investment banks and credit card companies), securities firms, securities brokers, mutual funds and pension funds management companies and other entities authorised to receive deposits. Whilst it is not feasible to integrate everything, there has, nevertheless, been a

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Andreas Athinodorou, CEO, Aspen Trust Group

“As a whole, the industry is fragmented, displaying inward-looking tendencies, as opposed to being outwardlooking in a bid to realise ambitions. Accountants, lawyers, ASPs: they all have their own representative organisation; just as there is an organisation for international business, and services. Nobody possesses a vantage view of the whole picture and, as a consequence, there is no single voice with which the industry may be represented. I truly believe that there should be one single body acting as a regulator. This way, foreign companies and professionals active in Cyprus will feel secure knowing that there is one place they have to go to, which may tend to all of their needs within the ﬁnancial services sector. Consider it a ‘one-stop-shop’ if you will, which will be tasked with dealing with the ﬁnancial services’ national strategy. Concurrent to which, there should be one body to act as the voice of the industry, infused with the power of promotion, and lobbying on behalf of the industry. At present, we have disparate entities. They are all well-intentioned, but they are simply not targeted enough. In this capacity, we simply cannot portray ourselves in the right way. Of course, the “right way”, the idea of our “identity”, is also somewhat of a novelty in Cyprus. We missed an opportunity when the crisis came to a head in March 2013, failing to commission the expertise of a crisis management company to turn the negative attention on its head. We might have missed the original opportunity, but it’s not too late. Our clients are still here, there’s still trust: as a country, we might be susceptible to change, but our providers have proven beyond doubt their impeccable service in times of need and their devotion in standing by their clients, walking them through thick and thin. Surely this in itself is a brand in the making. Considering the changes evolving worldwide, there has been a distinct increase in the number of wealthy families. We can use our location and expertise to support this increase, providing global solutions. Our capacity to offer tailor-made solutions means we can diversify risk, which is a unique advantage. If you go to centres that have already established worldwide renown, such as Switzerland, you will get exclusively Swiss solutions. In contrast, if you come to Cyprus, you will get the world.”

global push to this end. And combining the efforts in Cyprus of the multiple authorities may engender bountiful benefits. Besides uniting industries with a single voice and vision to speak for their constituent parts, integration streamlines procedures and processes. Singapore and Ireland are examples of other jurisdictions with a single financial authority and this is not by accident. By establishing a single authority, these countries have ensured that everything works as smoothly as possible, that there is no duplication, and that costs are as low as possible. This is how they attract business. It also makes it simpler to explain the structure of the country to foreign firms what. Having three different regulators in Cyprus at present, with three different sets of obligations and rules, leads to confusion and subjectivity. Single supervision, on the other hand, is a means to an end: raising standards.

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PUBLIC SECTOR & SUPERVISORY AUTHORITIES – ADOPT ZERO TOLERANCE POLICY: However much regulation there may be, it is utterly undermined and negated if it is not complied with and faithfully implemented. In ensuring perpetual compliance, the authorities need to adopt a zero tolerance policy towards incidents of negligence, conflicts of interest, and slacking in the adoption of certain criteria. A case in point is the Department of the Registrar of Companies and Official Receiver. Cyprus used to boast about having 300,000 companies registered and active in Cyprus, without wondering (or being concerned with?) how many were actually compliant. The number of compliant companies barely broke the 40,000 barrier. Not only should real substance be demanded without fail, there should be repercussions for those entities that do not adhere to the standards the island sets: legal action should be taken against non-compliant taxpayers.

PROMOTIONAL ACTIVITIES

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ESTABLISH A SINGLE PROMOTIONAL AUTHORITY: Akin to a single financial authority, a similar single authority – representing all segments of the professional services industry – should be established to aid the marketing of the island. Further to detailing those aspects of the jurisdiction that have long been in place, the said authority should also focus on faithfully portraying and relaying reforms enacted in recent years. If there is a coherent story to tell, then having a single, integrated promotional body to represent the industry can be invaluable. The Jersey model may be considered for guidance: Jersey has an integrated regulator and an integrated body charged with promotion of all sectors. It’s a model laden with advantages, and one that may be transposed anywhere in the world.

E O R A P M O C TRAST T N O C D N A

Best practices from other

jurisdictions

VISION, TARGETS, PLANNING · In the UK, a target has been set to make the UK tax system the most competitive of the G20.

· Some years ago, the Maltese government set a target of 2015 for the jurisdiction to become one of the most important financial centres in the region (“Vision 2015”). A dedicated website was been developed (www.vision2015. gov.mt) with all the specific targets as part of the plan. · In the British Virgin Islands (BVI), a strategic review of financial services

was conducted by the government in order to protect, diversify and strengthen financial services, so that the long-term sustainability of the public finances is maintained.

The Isle of Man has a strategic plan ·named “Vision 2020”. BUSINESS ACUMEN AND INVESTMENT INCENTIVES · Malta has developed over the last few years quality cross-border Call Centre services, even daring to compete with India, one of the biggest and more traditional players in the international Call Centre industry. One of its success stories in this race is related to the hosting of HSBC’s call centre to service customers in the UK. The centre in 2013 was handling around 65,000 calls per week and employing close to 500 people. The geographical location of Cyprus combined with its convenient time zone, the fact that a majority of the population speak English fluently and the quality of related infrastructure such as IT and telecommunication services, provide Cyprus with the major ingredients needed to become a reputable international Call Centre location. Indeed Cyprus could take advantage of the current wave of companies looking to migrate back to Europe from Asia in search of higher quality levels. Also in Malta, a huge effort is made to ·promote the country as a corporate tourism

By George Savvides,

PRESIDENT, Cyprus Fiduciary Association

destination. Organisations such as the European Commission, Microsoft, IBM, BP, Coca Cola and Toyota have already chosen Malta as their meeting place and helped the country to achieve a high ranking on the list of major business tourism destinations. Relevant to the above is the fact that nearly all public spaces can be used for events and other social gatherings.

· In the Isle of Man, the aerospace cluster, created in 2006 currently employs around 900 members of staff. It registered its 700th aircraft in May 2014. Luxembourg recently issued its first ·Schengen Bond for China in Renminbi. Guernsey, an Image Rights Register ·wasIn launched in 2012 and was the first of its

kind in the world. This public registry offers the opportunity to register image rights affording greater legal protection, ease of transfer, and possible taxation benefits.

was one ·ofLuxembourg the first countries to introduce special legislation governing the operation and administration of Family Offices and it has since managed to attract a good number of them. In Malta, a specific law for Family Offices has been included in the Budget for 2015.

· Cyprus was removed a few years ago from the list of approved Qualifying Recognised Overseas Pension Schemes (QROPS) by the UK Tax Authorities (HMRC), together with some other countries offering such approved schemes, leaving the field of active promotion of such schemes to very few countries, including Malta. The

ne of the points raised during the Panel Discussion at last month’s CFA Conference was that, instead of always trying the reinvent the wheel, there is nothing wrong with looking at what the competition is doing. At the same time, it was stressed that this should always be done with caution and due care, to ensure that only the best and relevant practices are adopted and that their implementation takes factors specific to Cyprus into account. Furthermore, copying another jurisdiction’s service or practice should not be done in a way that we deem easier and quicker to put into action – all relevant compliance and other procedures must be adopted and fully adhered to. It is often argued that regular changes to legislation are required in order to keep abreast with the latest global developments in the industry and to enhance the overall offering of Cyprus. Although this could not be truer, it should not be forgotten that it is not enough simply to create new laws or update existing ones; it is more important to be able to enforce such legislation and monitor its application. It is also essential to show that the country cares about international investors and does everything possible to enhance concepts such as ease of doing business and investor friendliness. Indeed, it could be argued that such practices have a much lower actual financial cost than any other action, which is significant considering the country’s present hampered financial situation. On this page and the next are some practices which are followed in this industry at an international level and some of which, at least, can hopefully be adopted by Cyprus in its effort to raise its standards as an international business centre. It is important to understand that, in order to survive and succeed in attracting international business and investments in an increasingly competitive environment, we have to keep up with developments and practices and, wherever possible, lead the way. Indeed, a thorough examination of the “success factors” of all the countries competing with Cyprus on the international business scene should form part of the whole exercise of coming up with a strategic plan. We still have plenty to learn.

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In order to succeed we have to keep up and, s e c ti c ra p d an ts n e m p lo e with dev

COVER STORY

wherever possible, lead the way

latter ensured that it would still qualify as a provider of QROPSs even following the stricter regulations implemented by HMRC, by spending a whole year before the regulations came in to force on discussions with them in order to understand where it needed to change its practices.

UK, Luxembourg and Ireland have attrac·tiveTheincentive schemes in place for foreign filmmakers to use the

countries for shooting even parts of a movie. In the UK, Disney was handed nearly £170million in tax credits from the local Tax Authorities (HMRC) for agreeing to make films (including the next Star Wars titles) in Britain under the Film Tax Credit Scheme. In Luxembourg, the benefit comes in the form of exemption from personal income tax for actors and other performers for the part of their remuneration generated in the country, whereas in Ireland, the incentive is in the form of a tax allowance of up to 100% of the amount invested in the production of films locally. Only considering its sunny weather and the plethora of landscapes, Cyprus could indeed become a prime location for film production, if it had the relevant incentives in place.

· An issue currently under discussion in Cyprus, as a measure to also deal with Russian “De-offshorisation” measures, is the “resident but not domiciled” status for persons who wish to relocate to Cyprus. The UK and Malta offer such a status, which allows persons who relocate to their territory to be assessed for tax purposes only on income generated in or transferred to the country. EASE OF DOING BUSINESS AND INVESTOR FRIENDLINESS · In Belize, the Public Registry can accept an application for a formation of a company in Chinese, including the Memorandum and Articles of Association and with even the Certificate of Incorporation issued in Chinese. At the same time in Cyprus, the Tax Authorities are not willing to issue Tax Circulars in English. They will not confirm translations made by professional associations. In the UK, the Tax Authorities have issued smartphone applica·tions to help people with calculating their tax liabilities.

· In Hong Kong, the body responsible for investment promotion (InvestHK) announced in October 2014 the launch of a dedicated team to assist start-ups.

Jersey Finance, the promotional agency for the island’s ·financial services industry, has recently increased its promotional activities in Asia, with a series of events planned in different countries on the continent. Jersey is experiencing real interest in the listing of equity and dim sum bonds, for the structuring of offshore renminbi products, for structuring property investments in the UK and for Islamic Finance products. In Malta, Identity Malta is an authority which was set-up to ·handle all aspects of immigration. In the Isle of Man, a new position has recently been cre·ated, that of Business Development Manager, High Net Worth Individuals in order to promote the island’s tax incentives for affluent persons. REGULATION, SUPERVISION AND PRIVATE-PUBLIC COOPERATION In Malta, there is a committee (Joint Committee for the ·Prevention of Money Laundering and Funding of Terrorism) for discussion and exchange of ideas on enhancing measures against money laundering and terrorism financing. Still in Malta, there is a single regulator and supervisor for ·financial services (investment funds, banks, insurance providers, trustees, investment service providers, etc.), the Malta Financial Services Authority (MFSA), which also manages the Registry of Companies and the Stock Exchange.

· In the UK, theFinancial Intelligence Unit received 240,582 Suspicious Activity Reports in the period 2009-2010. · In the Isle of Man, a merger was recently announced between the island’s Insurance and Pensions Authority and the Financial Supervision Commission to take place next year.

In Malta, the International Tax Unit of the Inland Revenue is ·based · In the UK, an HMRC employee was seconded for some time on the premises of Malta Financial Services Authority (MFSA) to the Tax Faculty of the Institute of Chartered Accountants in for better coordination and improved efficiency.

· Again in Malta, companies with share capital and accounts in a foreign currency can pay their tax liabilities and can receive any tax refunds to which they may be entitled in that foreign currency in order to minimise foreign exchange risks. the UK, Alternative Dispute Resolution methods are becom·ingInmore and more popular in resolving tax differences. In the UK, the maximum response time to statutory clearance ·requests is 30 days. An acknowledgement of receipt, together with a reference number and an estimated date for provision of an answer, are provided upon submission.

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England and Wales (ICAEW) in order to gather feedback from its members (agents for tax purposes) on specific aspects of service. This person was working with a member of the Tax Faculty who had herself been seconded to the HMRC the previous year. In Malta, the Management Efficiency Unit is situated in the ·Office of the Prime Minister in order to provide feedback and advise the Prime Minister on a timely basis. In Guernsey, the Commerce and Employment Depart·ment responded in September 2014 to feedback received during a consultation on changes to the regime governing the island’s financial services regulator, the Financial Services Commission.

BANKING

THE CLIENT

IS KING BANK OF CYPRUS LAUNCHES ITS PREMIER CLUB By John Vickers

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EVERY

PREMIER CLUB CLIENT HAS HIS/HER OWN DEDICATED BANKER

aving successfully recapitalised, with a new Board of Directors in place and ahead of an imminent re-listing on the Cyprus Stock Exchange, Bank of Cyprus (BoC) is now entering a new phase in its illustrious 115-year-long history. Part of its optimistic new start is the recent launch of its Premier Club for its elite clients. The term ‘Premier Banking’ typically refers to an exclusive banking and financial service that is personalized to cater to the needs of certain individual clients of the bank whose account balances meet with certain minimum specifications. Stella Mourouzidou Damtsa (picture left), Manager, Premier Banking at Bank of Cyprus, is responsible for the Bank’s new Premier Club: “The Premier Club is an exclusive new club for those clients who have chosen to honour us by maintaining their deposits in Bank of Cyprus,” she says. “We know that many of them have been through difficult times and we want to show our gratitude to them for keeping their money with us. The whole idea behind the Premier Club is to thank our loyal clients in tangible ways through various privileges and benefits.” To be eligible for membership and enjoy these benefits, a client should have at any given time deposits of €75,000 or more. BoC is the first bank in Cyprus to launch premier banking but it is a concept that has proven very successful in many countries including the UK and the US. “It’s akin to the business class of an airline where you receive certain benefits and an enhanced

quality of service,” says Stella. “In fact, some foreign banks have Premium Lounges with a number of tellers where clients can carry out financial transactions.” She acknowledges that, for the moment, such a development may not appeal to the members of the Bank of Cyprus Premier Club who already have a close relationship with their bankers, and therefore other benefits and privileges come with membership. These include lower charges for certain banking services, a free annual subscription for any American Express card of the client’s choice, priority when contacting the Call Centre on 800 00 800 (the system recognizes Premier Club clients and their calls are given the highest priority) and in the assessment of loan ap-

“Everybody we have spoken to is very happy about this gesture on the part of the Bank. We have received a great deal of positive feedback from those whom we have contacted so far, and we have also started receiving calls from clients who have not yet been approached but have heard about the Premier Club from others and wish to join as well.” Although technology has brought about drastic changes to how people do their banking the world over, the relationship between bankers and their clients in Cyprus has always been very close and, says Stella Mourouzidou Damtsa, this is something that BoC intends to maintain. “It’s very important to us and we aim to provide an even more personalised service in which every Premier Club client has his/her own dedicated banker. It’s true that many people now carry out many simple transactions online or electronically but we shall nonetheless encourage them to visit their bank branch. We want to reinforce our personal relationship with clients. We intend to be especially vigilant when it comes to confidentiality issues and, with this in mind, all staff where possible hold any meetings with premier clients behind closed doors.” Stella Mourouzidou Damtsa and her team are working hard to bring additional value to their Premier Club clients and, she says, they are all very positive about the future. Those who play chess will recognise that the logo of the Premier Club features a chess piece – a bishop, in fact, which is reflected as a king, the latter being the most important piece on the chessboard. “This signifies the importance of our clients to us,” Stella notes. The client is King indeed.

WE WANT TO REINFORCE OUR PERSONAL RELATIONSHIP WITH CLIENTS plications. Premier Club members pay lower fees at the Bank’s two sporting clubs and receive discounts on purchases from the Bank of Cyprus Cultural Foundation. A dedicated website is already live at www.bankofcyprus. com.cy/premier. The Premier Banking Manager notes that “This is not something that will remain static. We intend to enhance it continuously and see it grow.” The Premier Club concept has been greeted with enthusiasm by BoC clients, she tells Gold:

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PROFILE

As Cyprus is embroiled in trials and tribulations beyond its professional community’s control, George and Alexis Tsielepis – Managing Director, and Director, Head of Taxation – of Costas Tsielepis & Co. brilliantly display how brothers in arms can emerge triumphant.

BROTHERS By Chloe Panayides

IN ARMS

owling, the wind spurs me along Limassol’s seafront as I seek out the abode of Costas Tsielepis & Co. Leaves shiver on their branches, some falling helplessly to the ground or being swept into the path of oncoming traffic. I am grateful when, having rung the bell, the large wooden door creaks open and I take cover in the company’s expansive, inviting offices. Suddenly, stillness sets in: serenity; a feeling of safety within, in contrast to the meteorological onslaught taking place without. Enter the Tsielepis brothers. George and Alexis, contrariety incarnate, take their seats around the conference room table. The dynamic energy held between their opposing yet complementary forces is tangible. George, I’m told, is the older and “more sensible” brother, who is meticulous in dotting his ‘i’s’ and crossing his ‘t’s’. He handles the operations and finances of the company, safeguarding its future. Alexis, meanwhile, is all passion and expertise. Whilst lending knowledgeable tax advice by day, he is often found taking clients out to dinner by night, dancing alongside them come the evening’s end. Light and dark; earth and fire; sense and sensibility: brothers in arms.

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Getting straight to the core of things, George explains the company’s origins: “Our father, Costas, founded the company in 1978, at a time of sweeping changes in the island’s tax regime to provide incentives for investment. We started with just two clients and worked incredibly hard to build our reputation from there.” Come the 1980s, the company enjoyed its first exposure to international clients (“mostly located in Lebanon and Kuwait”) who were gravitating to Cyprus in search of acquiring properties and establishing trading companies to operate in the Middle East and Europe. “In 1989,” George continues, “We came into contact with someone from the Bank of Foreign Trade in Russia who wanted to establish a branch in Cyprus: this eventually evolved into RCB Bank Ltd.,” he reveals. “This actually constituted one of our first entries – our gateway – into the Russian market. We’ve built upon this internationality (with many of our clientele now crediting their origins to Russia and the CIS), and we have expanded our services to meet our clients’ demands.” Having conceded so, George is quick to clarify with the following insight: “That being said, talking about where our clients are

IF AN INVESTOR IS WILLING TO PART WITH OVER €200 MILLION, THEN HE SHOULD REALLY BE AFFORDED THE COURTESY TO CALL THE SHOTS! from has become diluted of late. A lot of Russian nationals now live in Austria, Switzerland, the UK, and Cyprus, even, and these countries have become home. As such, there is a rising universality in ensuring that substance and transparency is adhered to. It’s now more important where our clients’ core businesses are, or where their other structures are located.” Isn’t evolution over 30 years arduous and terribly strategic, I wonder, to which George notes: “In truth, we’ve merely evolved with the times: the advent of international business in Cyprus demanded that regulations intensify alongside ever growing professional requirements, and we responded accordingly.” With a company philosophy balanced on the premise of “quality over quantity” applying, I’m told, to clients and staff alike, the loyalty experienced by both groups has been distinguished, to say the least. “We’ve had clients with us since the 80s!” George explains, adding that the company is also well known for the calibre of its local clientele. “Overall, they really appreciate our client-centric approach and the fact that we’ve stood by them through all the tumultuous external changes going on. We bring continuity in addition to good service.” Pressed for examples of those “external changes”, George offers the following: “When Cyprus joined the EU and our tax regime increased from some 4% to 10%, clients and associates alike expressed concerns that we’d become an expensive jurisdiction. But, as an island, we implemented a clever tax regime overall, which provided for advantageous extensions. What we were afraid of turned out to be a very positive development.” This, of course, is premised on the idea of embracing changes, as opposed to challenging them. “That’s right,” George agrees. “For example, there have been a lot of legislative changes in Russia recently, as well as further proposals for change, meaning that the state is looking intensely at the way companies are working. Cyprus and Russia renegotiated their tax treaty accordingly in 2010, and we started telling our clients that governments will become more aware and interrogative overall in the light of global initiatives (such as the OECD’s ‘effective management’ push). As such, we stress to our clients that they absolutely must have a structure in place with substance and transparency. We’ve always been happy to be transparent, and people coming to Cyprus were looking at the island as a long-term base anyway; we don’t want to encourage the other end of the spectrum.” At the mention of change, Alexis steps in to elaborate on his new venture (dubbed by George as “Alexis’ baby”), Chelco VAT. Incorporated this year, Chelco VAT came about, I’m told, out of pure necessity. Alexis notes: “Up until now, company structure in Cyprus was simple: the wolf looked after the wool factory! It worked well, but Cyprus has never taken its destiny into its own hands, resting,

rather, on its good fortune. “But as legislation has become more stringent worldwide, and governments are looking for money in times of crisis (and striving to tackle tax evasion) there has been an increase in VAT, changing the way people are taxed.” When VAT was introduced in 1992, it was simply accepted by both people and professionals alike. The expertise wasn’t there to advise entities, and a lot of confusion ensued. “People have come to realise that they need to pay more attention,” Alexis states. At the time of joining the EU, evasion was still rife (“we still had too many secret bank accounts,” Alexis adds), and legislation has aspired to correct this. “But creases in mentality are harder to iron out.” Still, there’s no harm in trying, Alexis says. “I’m currently undertaking a Master’s Degree in VAT, the duration of which is two years: one year down, one to go! I have dealt with a lot of VAT experts Europe-wide and, together with networking, I have realised how below par Cyprus is when it comes to VAT knowledge.” As the only Cypriot professional to undertake this course (which has been in place since 2000), Alexis is keen to spread his growing knowledge base: “I currently give seminars on behalf of the Institute of Certified Public Accountants, and the more in touch with people I get, the more I realise that key knowledge is truly missing, meaning that the overall level in Cyprus regarding VAT practice is poor.” At present, Chelco VAT deals with the local market, has links with EU international law and accounting firms, and does back office work for SMEs. “Going forward, I believe that people will realise, more and more, that specialisation is not only important, but vital,” Alexis muses. Otherwise – the conversation’s sentiment agrees – we run the risk of becoming victims of our own success. Firing up, Alexis states: “We experienced a boom in Cyprus without actually being ready to experience it, and properly handled it. We don’t really function that well as a society and this applies even more so to the Government sector. The public sector isn’t yet fully oriented towards the citizen.” The post EU-entry boom meant we found ourselves, Alexis continues, in a situation devoid of effective corporate governance (“like grown-up countries such as the US and UK have,” George adds), without effective monitoring, and without accountability. “With hindsight,” George interjects, “this is very clear. A lot of people put a lot of money into banks that didn’t have corporate structures to effectively manage the money, and so it was used flippantly. This isn’t necessarily fraudulent, but it is definitely negligent. It equates to poor investment decisions.” What resulted is described by George as being one of the harshest wake-up calls we could have experienced, and resulted in a loss of credibility. “Now, we have to start from scratch in rebuilding our image,”

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PROFILE

FOREIGN CEOS ARE NOT A PART OF THE NEPOTISTIC SYSTEM RAMPANT IN CYPRUS AND ARE THEREFORE UNAFFECTED BY POLITICAL PARTIES Alexis adds. “As a firm, we’re actually being very honest and upfront. We’re not painting a rosy picture, precisely because we feel that deceit takes a long time to recover from, and that’s not something we want to associate ourselves with. “So instead,” George says with conviction, “We’re focusing on the good things. For example, the fact that the tax regime is still good, and Cyprus is doing a lot more to improve upon it. We’re ever strengthening our professional structures and are thus developing an increasing reputation as a foreign tax jurisdiction.” George adds: “On a side note, other jurisdictions have to be convinced of our transparency, otherwise whatever double taxation treaty we have with them will be negated.” To combat what Alexis refers to as an “ego problem” rampant in Cyprus, Costas Tsielepis & Co.’s survival is being balanced on keeping focused on what the company is doing, being self-reflective, and assessing both strengths and weaknesses. “This is our recipe for success,” George notes, to which Alexis adds, “It’s very easy to put a lot of nice adjectives in a sentence. But it’s all superficial. You need to know yourself to be able to effectively go out and bring in new business, targeting specific types of clients. We say no to clients a lot more than we say yes, which some people are incredulous about considering we’re in the middle of a crisis. “But we do this to protect and to preserve the precise capacity of what we can provide. To do this, we need to be selective.” Incredulity, it seems, extends further than Costas Tsielepis & Co.’s selectivity, Alexis reveals: “We don’t actually try to sell Cyprus. Believe it or not, if Cyprus is the wrong jurisdiction for our clients, then we won’t recommend it. After the crisis came to a head in March 2013, we told our clients that if they wanted to leave, they could count on us to help facilitate that! A lot of big firms regrettably push new businesses in the path of a jurisdiction in which they already have other structures, as opposed to what is best for this particular entity” George explains: “But we’ve developed trust and integrity, and we were disappointed by how our tireless hard work could be jeopardised by factors out of our control.” Alexis notes with a smile: “There are so many battles to fight, but if you’re smart, you’ll pick your battles.” Talking of battles, George credits the Troika of international lenders as having done “a lot of good” despite some people’s resistance to their presence here. However, Alexis adds, political parties are often at the core of the island’s problems. “The problems in the public sector are vast. And the legislation that made inequalities possible was voted in, precisely, by parliament. So until the latter changes, we can’t change as a country.” With too many proverbial cooks in the Cypriot kitchen, bringing in non-native executives may be a way forward. George agrees: “We actually supported the appointment of John Hourican with the Bank of Cyprus. Overall, non-Cypriot leaders could have valuable necessary experience, and, more importantly, bring international credibility, which often makes all the difference to our clients.

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“We have hopes that Hourican will instil corporate governance ethics into the Board. Wilbur Ross and Josef Ackermann are amongst those who have been proposed for the Board, and this, in large part, is thanks to Hourican’s efforts. Should they be elected, this will help to restore credibility in Cyprus’ banking sector more than anything else we can do.” And what’s the most gracious inherent quality of non-native leaders? Alexis has the answer to this question: “Foreign CEOs are not a part of the nepotistic system rampant in Cyprus and are therefore unaffected by political parties. Appointing a foreign CEO more often than not will mean that we will have someone working for the wider interest of the citizens of Cyprus as opposed to being directed by ulterior motives.” Knowing that the brothers have been involved in major investment transactions over the last year (namely, the sale of the Alexander the Great Hotel and Le Meridien Spa & Resort), I can’t help but turn the conversation to the subject of foreign investment in Cyprus. “Investors are as happy to buy as owners are to sell!” Alexis states. “We’re grateful that these deals came so soon after the bailout of March 2013. That’s a real sign of success. And one of our 2013 deals that saw a foreign investor acquire 50% of a hotel’s shareholding has actually been updated, for the investor to acquire 75% plus 1 share,” George explains. “But why are we not seeing more investment?” Alexis asks rhetorically. “Because we have a strange way of valuing property in Cyprus, and far too much red tape. The restrictions on building (how, where, what, with whom etc.) are ridiculous,” he adds. “Consider the casinos. A major Las Vegas-based group came to Cyprus with the intent of committing themselves to investing some €200-300 million to build a sizeable casino. Understandably, this interested faded because the group was being told where to build the casino, who to work with in building, and how to run it. I should think that if an investor is willing to part with over €200 million, then he should really be afforded the courtesy to call the shots!” Noting that their clients are divesting, with ‘X’ amount of wealth that they want to invest in certain areas, George credits – further to the tourism industry – the services sector as being a key area of potential investment (Costas Tsielepis & Co. also oversaw the sale of the Kanika International Business Centre). “Basically,” Alexis says with a chuckle, “as long as we don’t blow it, there is investor interest. And I imagine we will see this increase as we become more realistic about the prices we ask for (which will be aided once the foreclosures legislation is in place).” Lamenting sub-par work having been allowed to exist for “the longest time”, with select firms still failing to exercise due diligence, neglected AML procedures, and more, both brothers agree that even more stringent regulation should be put in place. “The problem is,” Alexis notes, “All it takes is a few rotten apples to spoil the picture in Cyprus.” After the harsh lessons of March 2013, we can only hope that the good ones prevail.

OPINION

Why growth could remain elusive in 2015 Recession in Russia and a weak eurozone will weigh on demand

ccording to official forecasts, 2015 is supposed to be the year when, in the words of the finance minister, Harris Georgiades, Cyprus moves from stabilisation to growth. The latest Troika forecast projects real GDP growth of 0.4% in 2015, from an estimated decline of 3.2% in 2014. Troika forecasts (not just for Cyprus) are produced with a long lag, presumably because they have to go up the hierarchy for approval. Thus, the forecast for Cyprus was already out-of-date as soon as it was published. It became even more out-of-date with the third-quarter figures. To get to a 3.2% decline for the whole of 2014, you would need to see a quarterly decline of around 3.6% in the fourth quarter – twice as bad as the second quarter of 2013, which was also the worst. I revisit my forecast every month. In November I revised the decline for 2014 down to 2.4% from 2.7% previously. This assumes a slight relative improvement over the third quarter. Although I am more optimistic than the Troika for 2014, I am less optimistic for 2015. One reason is that in the third quarter, the turnaround seems to have stalled. According to the official “flash” estimate, real GDP declined by a seasonally adjusted 0.4% over the previous period in the third quarter – the same pace as in the (revised) previous quarter. This is significant because it was the first time since the crisis that the seasonally adjusted quarterly growth rate had not improved relative to the previous period. The lack of improvement has much to do with Russia, where the collapse of a number of tour operators and a 30% decline in the rouble in JanuaryNovember have taken their toll. Overall tourism arrivals dropped by 11.5% in September as visitors from Russia fell by 16.2%. The Russian market worsened in October when arrivals from the country tumbled by 29.3%.

Falling international oil prices will give an indirect boost to spending power

By Fiona Mullen

There are also other signs that the improvement is slacking off. Retail sales growth rose by just 2.2% over the year earlier in July-August, compared with an increase of 5.5% in the second quarter, while plastic card spending by locals dropped year-on-year by 3% in October according to JCC Payment Systems, compared with an increase of 6% in September. Growth in the euro area is also expected to be weak in 2015, although this could be offset to some extent by stronger growth in the UK, which remains Cyprus’ largest tourism market. Nevertheless, there are a few reasons why I expect an improvement in quarterly growth rates despite these recent trends. The first is an increase in the University of Cyprus Economics Research Centre’s economic sentiment indicator, which leapt to 103.6 from 100.5 in November, possibly as a result of the successful conclusion of the bank stress tests at the end of October. The second is my assumption that Bank of Cyprus successfully places its covered bond with institutional investors. If this happens, the full lifting of capital controls could come shortly thereafter, and will give a significant boost to sentiment. A third reason is the delay in the full implementation of the foreclosure and insolvency legislation. While this is a negative development for the banking sector, it could have a positive impact on demand, as incentives to service bad loans rather than consume remain weak into early 2015. Finally, falling international oil prices will give an indirect boost to spending power via lower costs for heating and car transport. But even if one expects a gradual improvement in quarterly growth rates from the fourth quarter, this will not translate into positive year-on-year growth rates until the end of 2015. To reach the Troika’s forecast of 0.4% for the whole year, we need to see consistently positive growth rates from now. In the current circumstances, this seems unlikely.

info: Fiona Mullen, Director of Sapienta Economics Ltd, is the author of the monthly Sapienta Country Analysis Cyprus providing in-depth analysis of the politics, policy,

banking, gas and the macroeconomy.

THE INTERNATIONAL INVESTMENT, FINANCE & PROFESSIONAL SERVICES

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PERFECT START-UPS

PITCH By Artemis Pnevmatikou

More than ten Cypriot start-ups participated in the 2014 Web Summit in Dublin last month, taking the opportunity to network, exhibit and pitch their ideas to some of the biggest tech brains in the world at the three-day event that has been described as “the best technology conference on the planet”. 34 Gold THE INTERNATIONAL INVESTMENT, FINANCE & PROFESSIONAL SERVICES MAGAZINE OF CYPRUS

he emergence of the local start-up community has been sounding an optimistic note amid the devastating financial disaster that Cyprus countr y has gone through over the past 18 months. The fact that the island had such a stro ticipation in this year’s We ng parb Summi Dublin indicates not only how much talent the island t in has but its potential to develop int o an innovative Tech Hu b thanks to some brilliantly inventive young people who are on the verge of introducing innovative new ind “A French entrepreneur cam ustries in the island. e up to me and asked how big the start-up scene was in Cyprus because she had seen so many booths with start-u ps from here,” says Georg e Vou, CoFounder of Funifi “Peopl e had already heard of som e of us so we weren’t there with tha t “little island” inferiority complex with soujouko and zivania for them to try! We were pitching and showing real products and businesses made in Cy prus and were being met with intrig ue and respect.” The Web Summit is an int ernational annual tech con attended by CEOs and fou fer nders of companies like Tin ence Kasperksy, Dropbox and der, Evernote, media like The Huffington Post, Business Insider and The Financial Times and tech startups from around the world . They come together in a thr technology-related confer ence, which has become on ee-day e of the best networking opportun ities a young entrepreneur could ask for. Since its launch in 201 0, the Dublin Web Summi t has grown immensely, attractin g over 20,000 visitors fro m over 100 countries. “It is an invigorating exp erience as you never know who you are walking next to. It cou ld be an entrepreneur try ing, much like you, to get their idea off the ground, or a multim illionaire investor who has the jet fue l to launch your dreams,” says Paris Thomas, Co-Founder of Enermap.

rielides, CoHis enthusiasm is echoed by Yiannis Gav get such a close to t grea is “It s, Founder of Covve, who note growing and it’s fast how e, scen tech al glob insight into the our lives. This of cts aspe rent the effects it has on so many diffe opportuninew ing open e, valu g ratin is an industry that is gene ” kets. ties and, in some cases, creating new mar one. After all, they The Cypriot teams’ task was not an easy s of other startsand thou from s selve them had to differentiate attention of the grab ups from all over the world in order to feedback, tive truc cons with back e big investors. They all cam -ups and start r othe having had the chance to share ideas with to talk to “the big boys”. billionaires. In Cy“At the summit we were chatting with anos Lambrou, Founder prus no one listens to you,” says Styli ortant things that was imp t mos of Social Airways. “One of the is not a bad thing. re failu that was mit sum emphasised at the not good. In realis re In Cyprus unfortunately we think failu the more your fail, you r faste the ity, the more you fail and l.” essfu succ y reall chances to be

CYPRIOT START-UPS B SUMMIT AT THE 2014LSWE OF 10 OF THE CYPRIOT

HERE ARE DETAI T IN THIS START-UPS THAT TOOK PARBLI N. YEAR’S WEB SUMMIT IN DU orm, which allows any

Athlete’s Base: A sports recruiting platf to create their own profile athlete between the ages of 13 and 21 athletes. “Participating elite st and benchmark themselves again opportunity to get the us ed offer only not in the WebSummit other entreprewith t exposure within the tech world and mee ated companies, t-rel spor with neurs; it enabled us to cooperate rus and, more importantand broaden our network both in Cyp der of Athlete’s Base Foun ly, abroad,” says Xenios Polydorou, for all types of services At your Service: An online Marketplace ymen to tutors and hand and in Cyprus, from photographers they are looking for ce servi the ribe desc ly lawyers. Users simp

At the summit we were chatting with billionaires. In Cyprus no one listens to you to receive offers from over 7,500 professionals. in Cyprus. At your Service helps users find the best price and provides customer ratings and reviews, allowing them to choose the best one for their particular purpose. Covve: An online application that reinvents the professional address book. Through a highly intuitive interface for contact network visualisation, Covve enables professionals to better understand the reach and power of their address book. Covve’s innovative tools make sure it is always as complete and up-to-date as possible. Recognising the sensitivity of the personal address book, Covve was designed with privacy and data protection as a top priority. Diyful: An online platform that offers useful and innovative information for DIYers. Users can calculate costs, figure out what kind of tools and material they need and locate stores where they can buy everything they require for a particular job. In addition, the platform provides useful guidelines for users lacking DIY know-how, and expert listings in case they want to hire someone to assist them or undertake the task. Antonis Poupazis, CMO of Diyful, says that the Web Summit enabled Diyful “to do some hard-core networking that led to some important partnerships that we will be announcing soon.”

THE INTERNATIONAL INVESTMENT, FINANCE & PROFESSIONAL SERVICES MAGAZINE OF CYPRUS

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START-UPS

Enermap: An online ope n-source mapping platform that allows viewers to access Energy Performance Certificates (EPC) of buildings in Europe and use this information toward s enhancing their own energy-savin g practices and even makin g better decisions as to which busin esses to support. Business es with the EPC can proudly display the Enermap energy rating symbol in an effort to brand and bra g about their energy-savin g practices. EventApe: An event manag em breaking technology to pro ent platform, which uses groundvide the most complete, affo and easy-to-use software rdable for successful event plann ing. A hightech and powerful online system, EventApe is the mo st effe software of its kind that ena bles you to organize, stream ctive execute truly world-class line and events around the globe. “We ended up meeting wit h the holy grail of our ind ustry, the founder of events.com and act Allhyani, Founder of Event ivenetwork.com” enthuses Bashar Ape. “The hour spent wit h him was life-changing for us. We also had the opportunity to meet with many potential clients fro m around the world, includ ing South Korea, the USA, France, England and Ireland.” Funifi: An online platform used to motivate children to get their chores done while tea ching them responsibility and allowing them to be independent . Parents assign chores to their on a mobile application and the kids accumulate points kids chore, which they can late for each r exchange for digital goo ds, mobile apps or games, mobile cre dit or popular subscription s. It helps parents to communicate better with their children in a fun and educational way. Social Airways: An onlin e platform that connects people who are on the same flight or at the same airport, assisti ng them in finding a useful method of uti tively and providing option lising their flight time construcs that make travelling mo re social, economic and pleasant. Th e platform provides travel lers with social networking tools and features to make arrangem ents with other travellers, for examp le to share a ride home or connect with people attending the same event, festival or con ference. Viridom: A cloud-based platfo ment and data analytics for rm providing energy managebuildings, especially those involving local electricity productio n systems (e.g. photovoltaic s) and/ or battery storage. Virido m puts nanogrid electricit y users in real-time control of their consumption, production and storage, while facilitating automate d demand-side managem ent and fuels customer engagement for the utility companies. In Dublin, says Vasos Vasiliou, Foun der of Viridom, “We met with a lot of people and have already ma de contact with potential partners and investors.” Yo!Phuzzle: A photo-sharin g mobile app with a twist, Yo!Phuzzle allows you to puzzlify your personal ph otos, select the difficulty level with the opt send it to a friend. Your frie ion to hide a phuzzle piece and nd has to complete the ph uzzle on your terms in order to kee p the photo in its original format. By solving phuzzles users ear n YOs (credits) that they can use later on to reveal hidden phuzz le pieces. According to Ph ilip Papadopoulos, Founder of Yo !Phuzz presence felt at the Web Sum le, the team really made their mit with the strategic dir ector of Mediahead describing it as “genius” and the found er of InnStyle calling it “by far the quirkiest app at the summi t”.

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We were pitching and showing real products and businesses made in Cyprus and were being met with intrigue and respect

Info: Artemis Pnevmatikou is a PR Account Manager at Action Global Communications.

Doing the right By John Vickers, Photograph by Jo Michaelides

THING

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EDUCATION

UCLan Cyprus is the only university in the country that can offer students the advantage of an honours or postgraduate degree that is recognised both in the UK and in Cyprus. Moreover, it is the only one with a School of Law and, as Dr. Tim Potier, Head of the School, tells Gold, it has the potential to become world-class, which is the vision of the whole university.

It has to be said that the impressive, ultramodern buildings of UCLan Cyprus appear somewhat incongruous when they finally come into view down a narrow road in – of all places – the small mixed village of Pyla. The location of the Cyprus campus of the University of Central Lancashire (UCLan) would certainly not be most people’s choice, though it might make much greater and more obvious sense in the context of a settlement of the country’s longstanding division. And while that may have been one factor behind the university’s decision to set up its first overseas campus in this particular place, it has not led to a mixed Cypriot student community. “Obviously it was in the back of people’s minds, though not the prime consideration,” says Dr. Tim Potier, Head of the School of Law, “but being in Pyla, one would have expected a certain level of students from the occupied areas. That hasn’t

materialised – we’ve never had more than a handful of Turkish Cypriots. While the longer-term objective is for the student population to be 50% local and 50% international, at the moment we have about 85% Greek Cypriot and 15% international.” UCLan Cyprus is now in its third year and, for many reasons, is doing extremely well but, Potier acknowledges, it was difficult at first. “Although we had a fine infrastructure and everything was ready on time, we had no background in Cyprus,” he says. “Also, we have strict entrance requirements for the university, which is something we’re very proud of but we were, in a way, further limiting our potential market at the start.” However, by doing the right thing, things have begun to bear fruit. “Doing the right thing is always the hardest and it takes the longest time,” he says, “but by doing the right thing, you’re establishing a name and a reputation for yourself which, in turn, creates confidence in the eyes of your market. When we started we had 147 students, which is a tiny number compared to what some of the other private universities established over the last 30 years have but we now have over 500 students and they’re very good students. Our reputation, helped by the quality students we have, means that we are now a very serious option for people who might otherwise have gone to other good universities in the UK.”

The primary objective is to make this a world class university British universities have been expanding overseas over the past 20 years and UCLan is certainly not the first. It is, however, a very ambitious university wishing to develop a global reach and, as one of the wealthiest British universities, has an opportunity to do that. The Cyprus campus is its first venture overseas and there are others projected in the coming 10-15 years. “There are plans to open a campus in China, and studies are being undertaken for campuses in Latin America and Africa,” explains Tim Potier, noting that they are long-term plans. “UCLan in the UK does not want to set up additional campuses until its first child is on its feet, so to speak. The university wants to make a success of this one and, for now, the primary objective is to make this a world class university.”

Doing the right thing is always the hardest and it takes the longest time THE INTERNATIONAL INVESTMENT, FINANCE & PROFESSIONAL SERVICES MAGAZINE OF CYPRUS

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EDUCATION

We want students to graduate with a good degree and with what we believe is the right character as well UCLan describes itself as the only university in the country that can offer students the advantage of an honours or postgraduate degree that is recognised both in the UK and in Cyprus. This is an important distinction, as Potier is keen to point out: “One thing that is unique about us is that we are not a franchise. Our students, our staff and our courses are regulated in precisely the same way as their equivalents at UClan UK. That means the students’ work is ultimately taken before the same assessment boards as those in the UK. This is not the same as other universities and colleges in Cyprus which, under a franchise arrangement, are running courses of certain UK universities but they have been given autonomy on a quality assurance level. We are much more strictly controlled.” Tim Potier is especially proud of the fact that UCLan Cyprus has the only School of Law on the island. “I believe that what is being established here is a truly world-class Law School and that is reflected in the quality of the teaching staff, the students and the courses,” he says. “It’s good that Cyprus finally has a Law School and I’m very proud to be the Head of it.” He is also understandably proud of the Moot Court Room, which is also unique to Cyprus: “In late summer 2012, we were thinking about the facilities that the new building would require and the obvious one for me was a moot court room. Cyprus doesn’t have one anywhere else and it’s a fine facility which we use a lot. One of the reasons why I believe the law students are so happy here is because of this kind of infrastructure that we have. You can’t participate in a debate or a moot in there and not feel engaged. It’s wonderful for them.” The Moot Court Room looks exactly like a real court and it is easy to imagine that many students will be inspired to choose criminal law or civil litigation as their speciality. However, Tim Potier encourages students to investigate other areas of the law in order to find the one that truly interests them. “Law is always a popular course because it has high levels of employability, it’s a degree that has good prospects, good income potential and opens many doors beyond the confines of the legal profession,” he tells me. “But I always make the point that they don’t have to use their degree simply to become lawyers. Of course, most of our students aspire to practise

law and ultimately it’s down to the individual, but we guide them in the way we think is best. It’s essential that they find their own niche. Our job is to support and encourage them to reach their destination.” Dr. Potier should understand the significance of the word niche. He teaches the LLB students Roman Law, a compulsory module which they study, in considerable detail, over three years. And, Potier says, studying law at a university like UCLan Cyprus is about much more than obtaining a degree. “I tell our students that we are moulding and shaping a particular type of person and that when they graduate with their law degree they are not the same people who entered the university. We are teaching them to think and even to speak in ways that are different from those they were used to at school or at home.” This broader education is not only a key aspect of the UCLan philosophy but, says Tim Potier, “the extra-curricular activities are, for me, as important as the curricular. I place enormous emphasis on the extra-curricular for the students because, as I always say to them, ‘There are so many people going to university now, getting good degrees from good universities, so what makes you special?’ I want them to have additional skills and qualificationswhich they can not only put on their CV but which will stand them in good stead later in life.” Among the extra-curricular activities is the annual debating competition which, during the second-half of the academic year, is succeeded by a mooting competition. Law students are taken on wine tasting courses (including a range of courses at advanced level) and are asked to take a course in savoir vivre. “I think it’s very important that our students know how not only to hold a wine glass properly but also know how to dress, stand, listen, engage in polite conversation, and gain all the social skills they will need to impress people. We get them invited to social events, we have a weekly round table series where a prominent lawyer comes and talks about a given subject and we expect them to take notes and write a report on it. These are not compulsory but the culture that we are creating here means that they want to participate and they do. We want students to graduate with a good degree and

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with what we believe is the right character as well.” The link between the university and the community is one on which UCLan Cyprus is working systematically and, in the case of the School of Law and the local legal community, one that the Head has encouraged from the start. “We haven’t been able to establish contact with everyone, of course, given the size of the legal profession here,” he explains, “but the feedback we’ve been getting so far has been very good. This cooperation is very important, not only for our university but for Cyprus. This is a Cyprus Law School so I want the community, including the local professional community, to be fully engaged. One way I am doing that is by organising the weekly round tables. Today we were talking about an aspect of criminal law, last week it was on maritime zones and tomorrow’s research seminar is on shipping law. We’re trying to get local professionals in both the private and public sector engaged in the work of the university. That’s what a university should be. It’s not only a repository of knowledge for those who are members of that community but it’s also there to serve the wider community. It’s the responsibility of people like me and institutions such as this one to make sure that this happens.” Looking to the future of the School of Law, Tim Potier’s medium-term aim is to establish what he calls “sectoral expertise” in fields such as European Law, Conflict Settlement, Shipping Law. Aviation Law and Alternative Dispute Resolution. Besides the existing LLB, LLM and PhD (in Law) courses available, there will also be two new courses next year: an MA in Security and Diplomacy Studies, and a graduate-level diploma for non-law graduates and those who have a law degree from another jurisdiction which is not professionally recognised in the UK. “I’ll also be creating a pool of visiting fellows who will perhaps come and spend a month here. We have the facilities, infrastructure and resources to be able to do that so we’re really quite well-placed. It’s a matter of constant progress and expansion, as we develop individual areas of expertise and begin to internationalise the School. I am confident that the Law School at UCLan will one day be recognised as one of the best in the world.”

r e m o t s u C Enriching

E U L VA FOUNDED IN 2003, FILEMINDERS LTD IS THE LEADING COMPANY IN RECORDS AND INFORMATION MANAGEMENT (RIM) IN CYPRUS. THE COMPANY HAS BUILT A REPUTATION AS A TRUSTED PARTNER FOR MOST OF THE LEADING BUSINESSES IN CYPRUS IN MANY DIVERSE INDUSTRIES SUCH AS BANKS, COOPERATIVE BANKS, INSURANCE COMPANIES, LAW FIRMS AND FIDUCIARY, SHIPPING, COMMERCIAL CONSUMER GOODS AND MANY MORE. CHRIS CHRISTODOULOU, FINANCIAL CONTROLLER OF THE COMPANY, SPOKE TO GOLD ABOUT HOW THE RECESSION HAS AFFECTED BUSINESS AND HOW HE SEES THE FUTURE FOR FILEMINDERS AND CYPRUS. By John Vickers

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

COMPANY PROFILE

Gold: As a company that aims to assist other companies to be more efficient, has your business been positively or negatively affected over the past two years? While companies are doing everything they can to reduce costs, do they fear that outsourcing means additional expense? Chris Christodoulou: To be honest, I feel that most companies in the Cypriot market have been adversely affected over the last 2 years, given the Eurogroup’s decision in March 2013. On the other hand, however, with the crisis there also came an opportunity for companies to redirect their focus and restructure their business plans, budgets and so on, in an effort to mitigate the prevalent uncertainty in the local market. At Fileminders, this allowed us to find new ways to enrich our customer value and further improve our service lines to accommodate our customers’ own redirection.

cords management in order to ensure a smooth transition throughout. Gold: In this sense, don’t you feel that, in some way, yours is a high-tech company that is actually encouraging others to remain low-tech by offering them paper document storage solutions? C.C.: On the contrary, we assist our customers in adapting to the solution that is most suitable for their business. As mentioned previously, we offer both physical and digital storage solutions. Gold: Are there plans to move into the provision of cloud services, for example? C.C.: We already offering such services to our clients via our Document Management Software Solution.

WE ARE STILL FAR FROM THE CULTURE OF A “PAPERLESS OFFICE” On the matter of outsourcing, I believe it is not only a matter of cost but, most importantly, the added value that the service provides to a company. Fileminders’ service lines focus on company processes, particularly those related to Records and Information Management. With this comes performance enhancement, through giving companies time to focus on what they are actually good at. Ultimately, delegating business processes to Fileminders provides companies with a competitive advantage by realizing the benefits of low labour costs, better quality and improved business processes. Fileminders facilitates the transition from Records Management to Information Empowerment. We transform company documents into an information system – indexed, searchable and visual. We advise clients on Business Process Optimization by using analytics to understand their processes. We turn our clients’ information into insight. Gold: Do you feel that the local business community is now recovering? What kind of feedback are you getting from your clients about this? C.C.: I feel that the economy will continue to be in recession in 2015 as it struggles to grow with little or no capital. Cyprus may return to low growth in 2016. Despite the promise of the offshore hydrocarbon discoveries, I do not expect significant growth in the short-term. However, I do believe that we are on the right path to recovery. As regards the feedback from our clients, some, who feel that Cyprus will experience growth, are proceeding with an optimistic approach while others are rather more pessimistic and they believe that things will get worse before they get better. Gold: Fileminders is a document storage company but isn’t new technology changing the way firms deal with their records and encouraging them to deal electronically rather than in the traditional way with paper? C.C.: Most certainly. However, Fileminders is more than a document storage company. It is a Records and Information Management company which specializes in the management of the document life cycle from “cradle to the grave” both physically and electronically. We have moved to an era where we have achieved mastery in technology and this, in turn, has forced companies to adapt to these technological advances in order to avoid losing their competitive edge or even the socalled “technology race”. Among the greatest value we offer our clients is a comprehensive and sustainable blend of physical and electronic re-

Gold: The concept of the “paperless office” is already several decades old but while traditional letters have probably been rendered obsolete by e-mail and many payments are now carried out electronically, there is still a lot of paper being used. Is this inevitable? C.C.: I believe that we are still far from the culture of a “paperless office”. We are now experiencing a “less-paper office” culture, either because companies have adopted a CSR framework or they have used our services. In the long run, I do feel that this is inevitable due to globalization, which will lead to a uniform way of operating. Gold: Where does Cyprus stand in terms of keeping up with the rest of Europe and the wider world when it comes to replacing paper with electronic processes? C.C.: The private sector is on board, with Fileminders following international standards of best practices to further assist the private sector in keeping up with the rest of Europe. The public sector, however, is still adapting to this change; the effort is there but, in comparison with the rest of Europe, there is still progress to be made. Gold: I would imagine that for many companies, the most difficult concept is that of entrusting a firm such as Fileminders with their confidential and important documents. How difficult is it to convince them that their property is safe and secure? C.C.: It’s not difficult at all as the main reasons why companies entrust us with their documents are our confidentiality and security measures. Most companies do not meet the minimum requirements for secure records storage and management in order to ensure that their information is safe and accessible at all times. By visiting our facilities and reviewing our security processes and procedures, in addition to seeing our ISMS certification and our bespoke secure facilities, companies are convinced that Fileminders provides the level of service and security they expect for their information. Gold: Last year you celebrated the company’s 10th anniversary in a year that some observers have described as the most difficult one in Cyprus’ modern history. How do you see the second decade of Fileminders developing? C.C.: Interesting, challenging and focused on enhancing customers’ value. Fileminders has been servicing the market with its records and information management solutions for ten years and will continue to do so for another ten.

THE INTERNATIONAL INVESTMENT, FINANCE & PROFESSIONAL SERVICES MAGAZINE OF CYPRUS

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5TH LIMASSOL ECONOMIC FORUM

CURRENT CHALLENGES

AND THE FUTURE OF THE EUROPEAN ECONOMY

he 5th Limassol Economic Forum, which took place on November 28 at the Four Seasons Hotel in Limassol, saw global economists, financial sector representatives and high-calibre speakers from the Government and the private sector come together to discuss current challenges and the future of the European economy. Considered by many as the best annual gathering of its kind in Cyprus, and attracting the crème de la crème of the island’s international business scene, the event welcomed more than 400 attendees from the executive divisions of the country’s most prominent institutions and firms, as well as prestigious guests from around Europe. Minister of Finance Harris Georgiades dealt with the present state of the Cyprus economy, focusing particularly on the ongoing challenges caused by the financial crisis and on efforts to resolve the challenging fiscal situation in the country. As happened last year, the Minister remained after his presentation and responded to questions from Forum Chairman, Tony Barber, Europe Editor of the Financial Times. Georgiades’ was followed by Professor Iain Begg from the London School of Economics and Political Science, who focused on the economic prospects of the EU in the wake of the crisis. Begg spoke on the three stages of recovery, stagnation and relapse, as well as outlining the most important steps needed to restore growth and reduce unemployment during Europe’s most fragile period. Henk Potts, Director of Global Research and Investments at Barclays, presented the risks and opportunities of investment strategies in Europe, exploring the role that Europe is expected play in the global markets in 2015. Dealing with the overall economic state across the EU, Potts identifed both strengths and weaknesses. Bestselling author and Former Deputy Chairman of the Conservative Party UK, Lord Dobbs of Wylye (Michael Dobbs) discussed the detrimental effect of political uncertainty on economic recovery. Dobbs explained the role that political leaders must assume in the light of deteriorating regional economic circumstances and citizens’ changing governance demands. The following presentation, delivered by Graham Bishop, Selected Member of the European Commission’s Expert Group by President Barroso, delved into an exploration of the capital market union in the eurozone. Bishop commented upon both the opportunities and challenges of funding and investment-led EU recovery. In an address with a strictly Cypriot theme, Constantinos Herodotou, Commissioner for Privatizations, revealed the progress to date in Cyprus’ privatization programme and explained in detail the steps that remain to be taken regarding Cyta, the Cyprus Ports Authority and the Electricity Authority of Cyprus. Herodotou also discussed the various obstacles to the privatization programme and explained what is being done to overcome them. Additionally, the 5th Limassol Economic Forum featured two panel discussions with well-known participants from all over Europe. The first featured senior business and financial editors who debated the European economy, while the second focused investment opportunities and strategies in the Eastern Mediterranean.

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

THE FORUM IS CONSIDERED

BY MANY AS THE BEST

ANNUAL GATHERING OF ITS KIND IN CYPRUS,

ATTRACTING THE CREME DE LA CREME OF THE ISLAND’S INTERNATIONAL

BUSINESS SCENE

THE 5TH LIMASSOL

THE FORUM IN PICTURES:

Prof. Iain Begg, LSE Henk Potts, Barclays Tony Barber, Financial Times Eder Florian, Die Welt Elias Neocleous, Jason

Karaian, Quartz UK, Tony Barber, Financial Times, Eder Florian, Die Welt

Jason Karaian, Quartz UK Harris Georgiades, Minister of Finance

Lord Dobbs of Wylye (Michael Dobbs)

4 5

7 8

Forum Sponsors

Organisers

Communication Sponsors

Supported by

In Association with

THEUM FORIN S URE T C I P

Chrysemily Psilogeni Kenevezou, Association of Tourist Enterprises & Christos Mouskis from Muskita Hotels

Nicolas Sparsis, Bank of Cyprus

Marios Lanitis, Lanitis Group

Constantinos Kazakos, Jordan Kuwait Bank

Nicolas Theocharides, UPM Ltd

Elizaveta Elistratova, Alfa Capital Holdings

Nicos Kyriakides, Deloitte

Takis Phidia, CNP Insurance Holdings Ltd

Michalis Sarris

Frixos Savvides, Hive Management Ltd

Athina Apostolidou-Yiallourou, Trident Trust, Savvas Constantinou, Barclays PLC & Petros Livanios, Trident Trust Ltd

Andreas Christodoulides, Limassol Marina

Alisa Beloshitskaya, Barclays Plc & Olga Bodina, Novatek Equity (Cyprus) Ltd

Christis Christoforou, Deloitte & Antonis Antoniou, IN Business magazine

Polakis Sarris, Polakis Sarris & Co LLC

Maria Iacovidou, Barclays Plc

Michalis Konnaris & Nikos Antoniades, Easy Forex

Phidias Pilides, CCCI

Elias Neocleous, Neocleous & Co LLC & Christos Mouskis, Muskita Hotels

Michalis Papapetrou, Scordis, Papapetrou & Co LLC

Dmitry Popov, Korpus Prava

Chris Koufaris, CIBA, Marios A. Klitou, Baker Tilly Cyprus & Thomas Kazakos, Cyprus Shipping Chamber

Maria Kyriacou, Andreas Neocleous & Co LLC

/HUZ >VSÉ&#x2C6; )HYJSH`Z 7SJ & Bram Breukink, Vistra

Konstantin Yasinov, Metropol Cyprus

George Sofocleous, Paramount Logistics & Alexis Couvas, Barclays Plc Costas Afxentiou, HLB Afxentiou Irene Michael & Vangelis Pteroudis, Columbia Shipmanagement

Capt. Eberhard Koch, Oesterreichischer Lloyd Seereederei & Erato KozakouMarcoullis

5TH LIMASSOL ECONOMIC FORUM

SCHIZOPHRENICS, WEREWOLVES, SCREWED-UP POLITICIANS AND EUROZONE

MADNESS

LORD DOBBS OF WYLYE, BEST-KNOWN AS MICHAEL DOBBS, AUTHOR OF HOUSE OF CARDS WHICH HAS TWICE BECOME A HIT TV SERIES, WAS ONE OF THE SPEAKERS AT THE RECENT LIMASSOL ECONOMIC FORUM. IN AN EXCLUSIVE INTERVIEW WITH GOLD, HE TALKS ABOUT THE CURRENT STATE OF EUROPE, POLITICS, HIS BOOKS AND CYPRUS. By Effy Pafitis

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

Gold: Your presentation at the forthcoming 5th Limassol Economic Forum in Cyprus was about the ways in which political uncertainty acts as a roadblock to economic recovery. What, in your view, is the root of this corrosive effect on economic growth? Lord Michael Dobbs: Economics is a people business. Political uncertainty saps confidence. So businesses are reluctant to invest, consumers won’t spend, entrepreneurs are unwilling to take risks – and these are the drivers of economic recovery. Uncertainty also undermines a government’s competence, placing shortterm necessities above long-term objectives. As Commission President Juncker recently stated, “We all know what to do. We just don’t know how to do it and get re-elected after we’ve done it”. Gold: How do you interpret this in the context of the current economic instability throughout Europe? L.M.D.: The eurozone requires fundamental restructuring. It is a cliché to suggest that it is impossible to run a single currency without having a single fiscal and monetary authority behind it, but nevertheless it is true – and corrosive. To bring that about requires political leadership and consensus to an exceptional degree, yet that consensus is lacking. The current failures of the eurozone are breeding uncertainty and division, and euroscepticism is on the rise – this is precisely the opposite of what is required to make the eurozone work effectively. The financial and political realities of Europe are pulling in opposite directions, making the future outlook all the more uncertain. The scene outside Europe is also overflowing with uncertainty – Russia and the Ukraine, the Middle East, Obama’s lame duck presidency, worries about the future health of China. Yet even if these were resolved, the underlying structural problems of the eurozone would still be an immense challenge. London’s Mayor Boris Johnson claims that London is now the “fourth largest French city on the planet” because of the number of French citizens fleeing political uncertainty and the eurozone’s fiscal rules. This is madness! Gold: How do you propose that the region’s political leaders should respond to the unique challenges of the present economic climate so as to promote recovery rather than hinder it? L.M.D.: The current strategy is ‘ever closer union’. This is beginning to seem more like a stranglehold. But what is the alternative? Perhaps to remember that the Treaty of Rome talked about an ‘ever-closer union among the

peoples of Europe’ rather than among the institutions. The question that Brussels keeps asking is how to bring the people closer to the institutions of Europe. Instead, it’s time to start asking how to bring the institutions closer to the people. That would mean more flexibility, less centralisation, a weaker Commission and more acceptance of cultural differences – seeing strength in diversity rather than uniformity. This would go against the core principles that many see as central to the EU but since the people show little inclination to accept a United States of Europe, particularly one dominated by Germany, I would argue that the present course is bound to end in failure. The institutions of Europe must be built through the peoples of Europe, not despite them. Which brings me back to my opening point. Economics is a people business. And so is politics. Gold: You have widely discussed your inspiration for writing the enormously successful House of Cards. Other than your personal experience in the Conservative Party, were there historical influences that aided the novel’s composition? L.M.D.: I remember reading Shakespeare’s Julius Caesar as a kid, all about this most powerful of men who was brought low and betrayed by his friends. That’s always been a central warning of politics and was one of the main inspirations behind House of Cards. I also witnessed the Watergate scandal at close quarters while working as a journalist in the United States. One moment Richard Nixon was the most powerful man on the planet, winning the 1972 election in a landslide and reshaping the world; the next minute he was forced to crawl away from it all, the only US President in history to resign. And we all remember Margaret Thatcher’s tears as she was forced out of Downing Street. It’s just when they think they are safe that politicians are in most danger. Gold: Though set and written in the 1980s, the key themes presented throughout House of Cards are inherently timeless. Do you perceive power struggles to be of particular significance in today’s challenging global economic climate? L.M.D.: There is a huge lack of leadership in the world today. Mr. Juncker’s words, about knowing what to do but being afraid to do it, epitomise all that is weak and wrong. Perhaps it was easier during the Cold War when ideology was so important, when we all knew what we were fighting for. But nowadays we have moved into an era of politics that emphasises management rather than ideology, and we politicians are proving to be pretty awful man-

agers. But I am still an optimist. I believe that the fundamental cultural values that underlie Western society have far more staying power than Russian authoritarianism or Chinese Communism, for instance. Gold: House of Cards was a trilogy of political thrillers, followed by a sequence of TV series and miniseries adaptations. Which elements of the Machiavellian tale and its sequels do you believe have inspired such a dedicated following and the accompanying commercial success of the story? L.M.D.: We are schizophrenic. On the one hand we want our politicians to be noble and selfless, even as we are forced to recognise that the most powerful figures of history have often been pretty screwed up! Innocence has rarely been a good qualification for leadership. And I think it is a mistake for politicians to want to be loved. Very few people loved Margaret Thatcher but she kept being elected again and again because she wore a pair of hobnail boots that she used very effectively on behalf of United Kingdom PLC. The schizophrenia comes out in our TV viewing habits, too. We love to watch the good guys in The West Wing but viewers seem to lust even more after the darkness of House of Cards. I have always regarded House of Cards as being The West Wing for werewolves! Gold: Finally, the intriguing plot of the final book of the trilogy, The Final Cut, involves a treaty resolving the Cyprus Problem as well as a scheme to manipulate the control of offshore oil reserves, both topics that are perhaps even more relevant in Cyprus today than they were at the time of the novel’s publication. What are your comments regarding the recent developments of both issues? L.M.D.: I don’t recall any real discussion of these oil rights when I wrote The Final Cut in 1990. I relied on my imagination more than inside knowledge, yet nowadays life has come to resemble fiction. One of my enduring sadnesses is to see the divisions in Cyprus. Cypriots have a well deserved reputation for warmth and forgiveness – you even forgave the British for what was, after all, a pretty nasty colonial war (which was another theme of the book). It is not for me to pick sides in the current disputes but, as a friend of Cyprus, I do hope that the promise of the huge rewards that are predicted from the oil and gas reserves enable the islanders to overcome their recent difficulties and look to a future of prosperity and progress.

THE INTERNATIONAL INVESTMENT, FINANCE & PROFESSIONAL SERVICES MAGAZINE OF CYPRUS

Gold 49

ECONOMICS

STRAIGHT

TALK SEEMINGLY RADICAL IDEAS, NOT EASY ANSWERS, ARE WHAT CYPRUS NEEDS IF IT IS TO RECOVER FROM ITS PRESENT PLIGHT, SAYS DR. SAVVAS SAVOURI. By John Vickers

s torrential rain pours on the deserted patio outside his hotel lobby, economist Dr. Savvas Savouri muses on the fact that Cyprus is still trying to promote year-round tourism. “I’m not sure who would want to be outside in this,” he says with a wry smile. Savouri is in Cyprus to speak at the 2015 Cyprus Investors Show on the subject “Global investment realism – what returns does Europe offer?” but right now his main concern is whether the afternoon conference will be well attended despite the inclement weather. “It’s a shame to come all this way just to speak for 20 minutes and then for rain to prevent people from coming!” Another smile. He need not have worried. The event is well-attended and his sometimes outspoken and pessimistic views lead to a lively discussion with some of the attendees. Savouri is Chief Economist with Toscafund Asset Management, a hedge fund that was formed 12 years ago to invest primarily in banks and insurance companies. It currently manages about £3 billion of assets. As often happens, he would never have been in this position if he had been allowed to choose his field of study: “I originally wanted to study history but my dad, being a Cypriot and quite pragmatic, said that I should become an accountant,” he recalls. “It was the classic London Cypriot family scenario of the early ‘80s! In the end we reached a compromise on economics, which I saw as a combination of numbers, historical context and political economy and although I wasn’t particularly happy with the idea at first, I had

actually hit upon something that I found genuinely interesting. I spent my undergraduate years combining the more quantitative and mathematical aspects of economics which were developing back then: game theory and behavioural science, which was also in its formative years and relied more on statistics than economics and on the laws of Monte Carlo gambling more than on the laws of supply and demand. I later did my Master’s and was encouraged to pursue a PhD and then the City beckoned. I’ve been very lucky: I do something that I would do as a hobby and I get paid very well for doing it.” With a Greek Cypriot father (and a mainland Greek mother), Savouri was encouraged to visit the island as often as he could and as he grew older, the visits became more frequent. Did he ever consider working here? “Yes, I did,” he reveals. “I’d been to the London School of Economics where people like Charlie Bean and Chris Pissarides were the academics that taught me and they were linked to the University of Cyprus when it opened. I was interviewed to become an Associate Professor, offered the job and it was agreed that I’d come back in four months at the start of the academic year. But when I went back to England, I just hit a rhythm in commercial finance, I suddenly had a momentum in Britain and so I didn’t take up the role. That was 20 years ago. Do I regret it? No. I would have had a fantastic time here but what I have experienced in commercial finance was extraordinary.”

For an economist, he says, to be living through events such as those that you have studied in textbooks is a remarkable thing. “Every year from that point there was a big currency crisis somewhere in the world: Asia in 1997, the rouble crisis in 1998, there was 9/11, there were earthquakes and tsunamis in Japan, the Brazilian crisis, the Mexican crisis. I can’t think of a piece of economic theory that hasn’t been tested in ‘live fire’ terms in 20 years.” In his newsletters and the opinion pieces published in Gold, Savvas Savouri is frequently outspoken and not afraid to put his reputation on the line with economic and market forecasts. What sort of a success rate can he claim? “As we know,” he says, “capital markets are inefficient and manipulated but the fact that I’m still gainfully employed after all these years suggests that I get things right more often than I get them wrong. So I’m sitting here, feeling relatively relaxed about my so-called bold predictions!” Not all economists are as accurate with their forecasts but Savouri is not entirely convinced by the credentials of many people who describe themselves as economists. “I have met men and women whose business cards say that they are Head of Economics or Chief Economist and, in the course of conversation, I discover that they read humanities, ancient languages or engineering. Frankly, I wouldn’t be confident in the company of a surgeon who had studied physics instead of medicine! And I’d be very surprised if the next 10 economists you meet have an Economics degree.”

Savouri spends a lot of time observing the eurozone and, I tell him, he seems to be very pessimistic about its prospects for economic recovery. Are things really as bad as he would have us believe? Unfortunately, yes they are, he says: “The eurozone cannot escape deflation. Like it or not, wages and prices will continue to fall nominally. The currency is the traditional mechanism by which a country can reflate but the euro isn’t performing that role. And while the euro may be falling against the dollar, it’s going up against the Russian rouble, the Turkish lira, the Swedish krona, the Czech koruna, the Serbian dinar – some of these countries are in the EU and some aren’t but they all have access to the European markets, they trade and compete with eurozone economies. I began working in commercial finance in 1991 and so I can still remember when Europe last faced its big series of currency shocks with the Exchange Rate Mechanism. That looms again. Poland and Romania and Croatia haven’t seen their currencies fall more dramatically against the euro because their interest rates are so much higher. But no central bank in its right mind will continue to keep interest rates high in the face of weak demand and when they cut interest rates in those countries, their currencies will lose that yield support and the eurozone’s problems will get a great deal worse.” If you ask the authorities in Dublin, Lisbon, Madrid, Paris, Rome, Athens and Nicosia what they want, says Savouri, they’ll tell you they want reflation. “People want to see their wages and their asset prices going up. Deflation creates paralysis. Nobody buys things when they are

IF CYPRUS HAD HAPPENED BEFORE IRELAND, GREECE, SPAIN AND PORTUGAL, IT WOULDN’T HAVE BEEN TREATED SO PUNITIVELY THE INTERNATIONAL INVESTMENT, FINANCE & PROFESSIONAL SERVICES MAGAZINE OF CYPRUS

Gold 51

ECONOMICS

I CAN’T THINK OF A PIECE OF ECONOMIC THEORY THAT HASN’T BEEN TESTED IN ‘LIVE FIRE’ TERMS IN 20 YEARS going down in price because they can wait for longer. The big story in Russia is that there is a mad rush to buy things because of inflation. The news media may have us believe that there is a crisis but the shops are full of people buying things, and it’s not bread but big fridges and washing machines and cars and they are providing the economy with that monetary traction. Now look at Cyprus, Spain, Greece and Ireland; when deflation happens, investing becomes all about capital preservation. If you end up preserving your capital you end up being caught up what Keynes called ‘the paradox of thrift’. Thrift is bad. It creates economic decay and the economy is about the movement of money.” As someone who prides himself on interpreting events correctly and who has a personal interest in Cyprus, can we assume that he foresaw the events of March 2013? “Yes, but I wasn’t the only one who saw what was going to happen. Everyone did. As exceptional as those events were, there was no escaping the fact that something was going to happen. If Cyprus had happened before Ireland, Greece, Spain and Portugal, it wouldn’t have been treated so punitively. The sequence of events played a large part. Those around the situation had lost patience. Cyprus should have acted sooner. It’s always best to cut your losses early. If you’re asking for more like Oliver Twist, you need to make sure you’re first in the queue.” And following those events, Savvas Savouri’s views are at odds with much of the seemingly good news that we have all seen during 2014. Indeed, he describes it as “so many false hopes being offered” and elaborates thus: “What appears to be an endorsement of the country is not exactly that. How will you fund those high interest rates? And selling passports to the Chinese or relying on energy coming to the rescue or is absurd. Natural gas is not an immediate solution. No-one seems to have looked at oil and gas prices recently. Demand for gas for industrial and commercial purposes in the eurozone is going to go down because of the contraction of the economy. If you were to ask me to lend you money today on the basis that you would provide me with natural gas revenues going forward, I couldn’t be at all sure that the price would be enough. It’s very convenient to say that we’ve got gas and it’s going to help us out but I’ve seen nothing to justify such optimism.” Surely, I suggest, he can see that Cyprus will emerge better and stronger from the situation. While he grudgingly admits that “it may be the case that the same mistakes won’t be repeated”, he then asks, “What about new mistakes?” He makes the point – not for the first time – that economics is about more than just numbers: “Ultimately an economy has a demographic element and Ireland, Portugal, Spain, Greece and Cyprus have gone from being net exporters of human capital to net importers. They began to grow in terms of population at an extraordinary rate but now they are all depopulating. It may not appear that way right now but what’s happening is that the young are leaving and in the case of Ireland, Greece and Cyprus, those who left in previous generations are coming back to retire so the age mix is deteriorating. That doesn’t make for a good economy.” If the Government were to ask him for answers to the present difficul-

ties, what, then, would he propose? This is where he answers become particularly interesting. Noting that eurozone membership precludes the use of interest rates and monetary policy as the two levers that a sovereign nation would otherwise normally have at its disposal for reflating the economy, he says that Cyprus is left with diplomacy – looking around to see where its interests lie. “Cyprus needs a ‘diplomatic shock’ to get back to some kind of monetary and fiscal autonomy,” he suggests, noting: “I went to the London School of Economics and Political Science and the political science element is that a united Cyprus offers the potential for a new currency regime. Cyprus could not leave the euro unilaterally because it would continue to circulate as a ‘black currency’ but it could justify a separate relationship. It would be in the interest of the unified Cyprus to have a currency that is neither the euro nor the lira. To my mind, the only means of escape from its present problems is through reunification. Here’s a prediction about somewhere else: I am sure that North and South Korea will reunite in my lifetime. So far, China hasn’t put a foot wrong economically and China will see that it is in best interests to get rid of the regime in North Korea and replace it with a compliant one that presents itself to Seoul and says, ‘We are willing to demilitarise if you do too.’ A demilitarised and de-nuclearised peninsula would be too good to refuse, all the defence spending would be saved and China would be able to engage with the South. There can be a similar dividend for Cyprus. The European Bank for Reconstruction and Development (EBRD) and the International Monetary Fund (IMF) would happily pour in money into a unified country.” Whether reunited or not, he says, the economy of Cyprus in 2020 will bear no resemblance to the one we see now or the one that preceded it. “The country will be depopulated and the economy will have found its new size,” Savouri insists, comparing the process to “seeing someone in a suit that they are wearing after they’ve lost three stone in weight. They look odd in it! The best thing is to go to a tailor and have it taken in. That’s what will happen here. Ultimately the new equilibrium for Cyprus is an economy that is materially smaller than it is today. And in 15 years time, it will be a much leaner version of today’s.” It is clear that, in Savouri’s world, things are so interconnected that no country can take decisions without taking information from a hundred others. And he insists that he has as accurate an overview of things as anyone: “I can’t ski or play golf. I do economics and I can hear things that other people can’t! For some time I have being hearing the sound of Europe’s currency tectonic plates moving. Two years ago the Turkish lira fell sharply. I can see another bout of Turkish weakness coming and that will make the economy of northern Cyprus much more competitive compared to the south and Turkey will be more competitive compared to Greece. The escape route for Cyprus – and for any eurozone economy – is through being competitive but if your main rivals are using their currency to become more competitive, as quickly as you cut prices and wages and you privatise in order to become cheaper, the others can use their currency to become even cheaper still. You can’t win.”

IT WOULD BE

IN THE INTEREST OF THE

UNIFIED CYPRUS TO HAVE A CURRENCY THAT IS NEITHER THE EURO NOR THE LIRA

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

OPINION

Time For Change Cyprus must engage in self-criticism and identify past mistakes in order to progress

ecent economic developments in Cyprus, as outlined in the recent report on the IMF’s Consultation paper for Cyprus, have been ‘very’ encouraging, with growth expected to turn positive in 2015. According to the IMF, growth should continue to gradually recover in the coming years. Public finance developments have been also promising, with the budget deficit falling more quickly than anticipated. Nevertheless, continued efforts to strengthen public finances will be necessary to steer public debt onto a sustainable downward path. Numerous analysts have acknowledged that Cyprus has made great progress with its reform programme since March 2013, and continuing these reforms will be critical to ensuring a sustained recovery of growth in the economy and employment. It is particularly important for Cyprus to address the rising level of non-performing loans (NPLs), which now stand at close to 54% for the whole banking system. These problematic loans place a significant burden on the economy because it is very difficult for financial institutions to provide new loans. However, the Government and local banking institutions need to acknowledge that new lending for individuals and corporates is necessary to support investment and other economic activities. Thus, solving the NPL problem is necessary to get growth going and reduce unemployment. The portfolios of Cypriot banks comprise more loans than deposits. Even since the banks were recapitalised, their balance sheets remain deep in the red. Whereas a ‘healthy’ banking system seeks to lend out depositors’ ‘stagnant’ savings (in order to collect a loan interest greater than the savings interest), the banking system in Cyprus is running a deficit which is currently being covered through liquidity guarantees from the ECB and the ELA mechanism. It appears that the authorities have a strategy for turning around the rise in NPLs, based on a reform of the framework for debt restructuring. The first step is the modernisation and application of the foreclosure legislation. The recent legislative changes are a step forward and implementation will be important (we need to review and examine what the banks will do with all the

New lending is necessary to support investment and other economic activities

By George Mountis

‘repossessed’ real estate assets in a market with a very limited liquidity). The second step is the modernisation of the insolvency and/or bankruptcy framework that would allow debtors to either restructure their loans or, for those that truly cannot pay, allow for a “fresh start”. These two steps taken together will encourage banks and borrowers to move more quickly to solutions, all of which will allow a speedier clean-up of old problematic loans, which will then create room for new lending. Of course, it will be very important to pair these changes with the effective implementation of the new safety-net reform that is being phased in. To this end, some local corporates turn recluse and inert, refusing to try out anything new or to make a new start – particularly when their businesses are in financial hot water. Others, describing themselves as “cautiously optimistic”, believe that the crisis is temporary and continue to behave as they did before since, at some point, “the economy has to get better,” an attitude which prevents the review of their past habits. To us, both outlooks are ineffectual. We must not allow ourselves to turn inert amid the current situation in Cyprus; on the other hand, we must not become too optimistic that all the problems will simply vanish from one day to the next. The banks are desperately trying to collect on as many delinquent loans as possible, thus draining liquidity from the economy and from businesses, which have seen their profits evaporate (and turn into losses), thereby exacerbating the very conditions that make a business non-viable. Our businesses have morphed into ‘machines’ that churn out unpaid and artificial debt. Not necessarily because they are poorly run but because of the simultaneous contraction of the private sector, the sharp decline in their turnover, the banks’ tightening restructuring and debt collection mechanisms and, last but not least, the loss of income of the businesses’ own clients. In conclusion, we must adapt, trust in ourselves and be open to the view that, although the crisis has created problems that need addressing, at the same time it presents opportunities. This is therefore a chance to change our mentality, both with regard to the banking system and to the country as a whole. Let’s engage in some self-criticism, identify our mistakes, try to overcome the impasses and shed old habits; and this goes for businesses and of course banks alike. It’s time for us to change.

info: Dr. George Mountis is Managing Partner, Delfi Partners & Company

THE INTERNATIONAL INVESTMENT, FINANCE & PROFESSIONAL SERVICES

Gold 53

BIG IN COMPANY PROFILE

ORACLEâ&#x20AC;&#x2122;S THREE-WORD KEY TO SUCCESS

By Eleni Hoplaros

uruno, the leading manufacturer of marine electronics internationally, opened a Cyprus

Gold: Tell us something about Furuno Electric Company (Furuno) and how it has become an industry leader in the development, manufacture and supply of marine electronics. Charalambos Moyseos: Furuno was established in Japan in 1938, based on the simplest of philosophies: to identify challenges within the maritime industry and deliver quality solutions to assist our clients in overcoming those challenges. This has been achieved through the creative integration of the knowledge, skills

VÉ&#x2030;JL [^V `LHYZ HNV (Z [OL local subsidiary of a Japanese company, it is a rarity in Cyprus but it has already established P[ZLSM PU ^OH[ PZ H ZPNUPĂ&#x201E;JHU[

UPJOL THYRL[ *OHYHSHTIVZ Moyseos, General Manager of -\Y\UV *`WY\Z 3[K ZWVRL [V Gold about the company and P[Z HZWPYH[PVUZ

and know-how accumulated through our ongoing research and business activities. Since its inception, Furuno has always striven for excellence across all its global business segments by adapting to the changing needs of its clients while staying true to its vision and goals.

ness. These are (a) its commitment to serving its customers well though its willingness to adapt to a changing market, (b) ensuring that its management always remains creative in all facets of business and (3) understanding that employee satisfaction and company growth are intrinsically linked.

Gold: What it is that sets Furuno apart from its competitors globally? C.M.: I believe the answer lies in Furunoâ&#x20AC;&#x2122;s three core management principles which are deeply engrained in every aspect of its busi-

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

Gold: With only 17 subsidiaries worldwide, Furuno has managed to establish a massive global presence. How? C.M.: Originating from the ethos of Japa-

JAPAN nese culture, Furuno has always invested in local partnerships in order to extend its reach globally. Furuno is the only marine electronics maker with such an extensive investment in its own subsidiaries around the world. These subsidiaries are accompanied by an impressive 83 national distributors, giving the company a true international presence and ensuring that our customers enjoy quality support wherever they need it. Through its loyalty and commitment to its national distributors, Furuno has proved that the relationships it establishes also go beyond the strict boundaries of commercial agreements. It is Furuno’s philosophy to share knowledge with local markets so that they then become better equipped to serve the needs of their customers within that particular maritime community. Furuno recognizes that local personnel inevitably know the idiosyncrasies of their own market, which is why it follows this approach of localising knowledge. In this way, the company has managed to develop a very strong and competent global network that can serve every customer anywhere in the world.

Gold: Considering this global presence which serves the needs of the maritime market practically everywhere, what was it about the Cyprus market that led to the opening of the Furuno Cyprus Ltd office here in 2012? C.M.: Cyprus is a very attractive jurisdiction in terms of maritime legislation and its ship registry. It is home to the 10th largest fleet globally and is the second largest ship management centre in the world. This is further enhanced by its favourable tax system, applicable not only to Cyprus flag shipowners but also to owners of ships under other flags, ship managers and charterers. This makes the island a very strong contender within the maritime sector. Given the local presence of some of the world’s leading names in the shipping industry, Furuno quickly realised the importance of the Cypriot maritime community, hence the opening of our office two years ago.

Gold: What is your target market in Cyprus, taking into account the company’s extensive portfolio of marine electronics products? C.M.: Our primary market is Merchant Marine to which we supply a wide range of deeps. sea navigational and communication products. This is followed by the leisure fishing sector and, to a lesser degree, the professional fishing sector and recreational boaters. Furuno is the leading manufacturer of marine electronics internationally and the vast majority of vessels across the globe have Furuno products installed. This fact consequently leads to an increased demand for retrofit projects and service/spare parts supply which is the main activity of our business. For the leisure fishing sector it is an unquestionable fact that Furino has the best Fishfinder in the market with unique features like Bottom Discrimination and Accufish that immediately sets us apart as the market leader. Our target here is to create a community that amateur fisherman can rely on for support and the sharing of experiences. It should be noted that Furuno was the first company of its kind to manufacture and distribute the first practical fish-finding device in the world back in the 1940s and, since then, it has continued to be held in very high regard by the fishing industry. Of course, Furuno also manufactures other unique products for the fishing sector and remains a very big player in this regard. Gold: What are the main challenges you face at present, due to the recent financial crisis in Cyprus? C.M.: The maritime market in Cyprus consists primarily of ship management companies. The crisis has certainly affected the profit margins of these firms which are now under pressure to reduce costs and this, of course, has an impact on the sales of marine electronics equipment. As a Cyprus-based organisation, we have adjusted our pricing model to assist our clients and the industry as a whole. Cost-cutting, however, needs to be approached with caution because the impact of having to deal with the breakdown and replacement of inferior quality

FURUNO FUR RUN QUICKLY

REALISED R

TH IMPORTANCE THE OF THE CYPRIOT MARITIME COMMUNITY, HENCE

THE OPENING OF OUR OFFICE TWO YEARS AGO

products could prove to be a very costly and unwanted consequence. Gold: How has your team here in Cyprus managed within such a short period of time to make Furuno Cyprus a strategic partner for its customers? C.M.: Our technical team in Cyprus is composed of industry professionals who, with their passion for marine technologies, have become renowned not only for their expertise and know-how regarding Furuno products but also for the skilled manner in which they are able to provide Furuno certified services. Our personnel are well-trained and certified to international standards and have the necessary practical experience to deliver top quality support to our customers. Gold: What is your vision for Furuno Cyprus? Are you looking to expand your operation and activities? C.M.: Our vision for Cyprus is two-fold. We would like to further enhance our establishment as a strategic partner through mutually beneficial associations with Cyprus-based shipping companies. At the same time, taking into account Cyprus’ strategic geographical location in the maritime region, we are also in a position to undertake any mandate that Furuno Electric Company (FEC HQ) should hand us to service the broader region in any way possible.

THE INTERNATIONAL INVESTMENT, FINANCE & PROFESSIONAL SERVICES MAGAZINE OF CYPRUS

Gold 55

CONFERENCE

THE CYPRUS INVESTORS

SHOW 2015

ow can investors diversify their portfolio in order to reduce their risk? Where are the best investment opportunities? Can the investment market be trusted?The Cyprus Investors Show 2015 – held on November 25 at the Carob Mill in Limassol – addressed all of the above and more. The conference also aimed to present investment opportunities to Cypriot investors interested in schemes designed to protect their own or their clients’ wealth.

What Returns Does Europe Offer? In his presentation, Dr. Savvas Savouri, Chief Economist at Toscafund UK, discussed the many dilemmas investors face in the European market. Far from believing that the worst of the financial crisis has passed, Savouri expressed the conviction that Europe faces considerable challenges ahead, not least through exchange rates. The long and winding road to regional recovery – and attractive investor returns – will continue its sluggish course for many months to come, he said.

Why Seek Diversification? Investors who hold all of their growth assets in a single class are exposed to the risk that it may deliver poor returns, Anastasia Anastassiades, Senior Consultant at Aon Hewitt, told attendees. Suitably diversified growth asset portfolios have better risk-return profiles than narrow portfolios but, in practice, formulating and implementing a diversified strategy is not always straightforward and can be extremely time-consuming. Diversification remains an imperative component for investor success, moving forward in the altered economic climate.

What Lessons Can Cyprus Learn from the Israeli Economy? A strategic partner and close neighbour of Israel, Cyprus has much to learn from the latter state, Dan Catarivas, Director of the Division of Foreign Trade and International Relation of the Manufacturers Association of Israel, affirmed. Like Cyprus, Israel has no natural resources other than its recently discovered natural gas and has, through necessity, it has developed as an innovation economy. The

country’s export-oriented growth has been driven primarily through its significant investment in research and development, something Cyprus can – and should – emulate.

equity investments. Philippos Mannaris, CEO of Aon Hewitt Cyprus, discussed how and why one must implement holistic equity allocations to improve portfolio efficiency.

How to Invest in Israeli Startups

Is Real Estate an Attractive Asset Class?

Israeli entrepreneur and startup investor Yochi Slonim revealed that investing in the startup community may also serve the development of other economies, providing, inter alia, attractive returns on investment. To reap full rewards, participants would do well to invest with knowledgeable partners, so as to reduce the risks of delving into an as yet unknown asset class. Crowdfunding platforms are another attractive option to this end, Slonim explained.

“Since the start of the financial crisis, many perceived facts have changed. The significance of real estate in an investment portfolio is not one of these.” Thus stated Demetris Ashiotis, Executive Director of Pafilia. Discussing the recognition of the asset class as one offering protection against the unpredictability of stockand-bond heavy portfolios, Ashiotis outlined how, in addition to acting as a hedge against inflation, property investments allow for the accumulation of generational wealth.

What Investment Opportunities Does Cyprus Offer? An abundance of unique investment opportunities has emerged following the regional economic crisis, Dr George Mountis, Managing Partner of Delfi Partners detailed in his presentation. In Cyprus, sectors offering promising prospects include the medical industry, while large-scale developments continue to be appealing to investors as the island’s offering increases, concurrently increasing demand for marina developments, conference centres, casino resorts, science technology parks and luxury leisure resorts.

Why Invest in Commodities?

How to Adopt a Holistic Approach to Equity Investing

Major Currency Pairs Prospects in 2015

Equity alternatives belong to the same broad equity asset type as traditional long-only equity investments and may be combined into one asset category. Building holistic equity portfolios can be considered as an alternative to traditional asset allocation methods, recognizing the common risk factors in the different

Panos Remoundos, Global Markets Analysis Head at Alpha Bank Greece, discussed the prospects and risks of the global economy for 2015, focusing on the underlying trends of major currency pairs for the euro and the US dollar based on their macroeconomic, behavioural and technical analysis fundamentals.

Michalis Florentiades, Head of Investment Research at XM, focused on commodities in his presentation, with particular focus on oil & gas, gold & silver, iron ore and copper, further referring to soft commodities. Florentiades discussed the broad factors of the asset class, commenting on its correlation to the dollar. The rise of the dollar, he explained, may be responsible for the current volatility of commodities, though slow demand and surplus supply also contribute to increased instability.

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In Vino Veritas WOULD YOU PAY €2,000 FOR A BOTTLE OF COMMANDARIA? WE MEET A MAN WHO IS CONFIDENT OF FINDING A CLIENTELE THAT IS HAPPY TO PURCHASE – AND DRINK – WHAT HE IS MARKETING IN EXCLUSIVE DIAMOND-STUDDED COLLECTOR’S EDITION BOTTLES. DEMAND FOR CYPRUS’ OLDEST WINE AMONG WEALTHY CHINESE IS ON THE RISE. By Chloe Panayides

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COMMANDARIA

Prior to my meeting with Dai Lingyun – Chinese economist, strategist, and budding Commandaria entrepreneur (yes, Commandaria) – I ponder the depths of my knowledge of this wine. Here’s what I know: it is the oldest named wine in the world, its roots date back to antiquity, it is a sweet amber-hued dessert wine, indigenous to Cyprus and, if King Richard the Lionheart is to be believed, is the “the wine of kings, and the king of wines.” I’m about to learn a lot more… We are seated in the isolated yet serene – and lushly green – Aphrodite Hills in Kouklia, Paphos. Overlooking the golf course, as people of all ages come and go in their athletic endeavours, I am absorbed in the conversation before me, with Dai revealing how he came to be in Cyprus, how he became enamoured with Commandaria, and why he is intent on sharing this sweet wine with people in his homeland. “I am not actually a businessman by trade,” he concedes. “I am first and foremost a professor, having studied economics in the US, as well as Chinese literature and history. In fact, my interest in literature, culture and history is one of the reasons I am so fixated on Cyprus.” Pressed to elaborate, he explains, “I feel that Greek civilisation has made significant contributions to human evolution throughout the ages, and I recognise an acute similarity between Cyprus’ customs and religion with that of Greece; as such, there is a sense of shared values and fundamentals.” Dai first made his way to Cyprus’ shores in July 2012 for the same reason most people do: to enjoy a holiday. He traversed the island, sightseeing, discovering its culture and learning more of its history: “The latter is of monumental importance to me, and was actually the inspiration for the business venture that would grow out of this first visit.”

He continues rather poetically: “For me, walking down the street in Cyprus feels like walking through history. It is for this reason that I decided to stay and contribute efforts to advancing the cultural and economic ties between my home country, China, and my adoptive country, Cyprus.” So why wine, I press? “Throughout Cyprus’ history,” Dai begins, “a key element of its culture has been its wine. Cyprus’ technology and history of wine-making goes back 8,000 years. Some say it is the oldest in the world! “As such, as famous as other wines and wine-making countries have become, I believe that they are all indebted to Cyprus’ traditions.” And Dai is unfazed by the advancements taking place elsewhere, refuting the idea that modernisation equates with amelioration of quality: “Thankfully, whilst other countries are modernising, I feel that Cyprus is staying close to its traditions. No matter which winery I visit in Cyprus, or what wine I sample, I feel as if I’m drinking history: it’s actually a spiritual experience for me, and very empowering.” Having said that, Dai is lost for words when pressed as to his first tasting of Commandaria (“It’s simply ineffable,” he explains), though he admits that he knew immediately that he wanted to take it back to China and share it with the people there. “This particular Commandaria – of the Lambouri winery – is a special reserve, and made using the original recipe. It’s thus rare, hard to find elsewhere, and distinguishes both the winery and its produce as being emblematic of tradition.” This reserve has won seven prizes internationally, I am told, which is “proof enough of its quality.” As to the impetus behind wanting to share the wine with the people of China, Dai is clear: “I want to help the people of China better understand Cyprus and the island’s culture. Commandaria is like a window to Cyprus’ soul.” But Dai, aware of the idiosyncrasies of the Chinese market, knew there was work to be done. “I really felt that Commandaria had to be rebranded. I don’t simply want this to be circulated widely, dishonouring its past and what it represents of Cyprus. I envisage Commandaria as being a token, a gift, between the two countries, so it must be packaged accordingly.”

THE INTERNATIONAL INVESTMENT, FINANCE & PROFESSIONAL SERVICES MAGAZINE OF CYPRUS

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COMMANDARIA

The wine is now encased in a sleek black bottle, marked with a gold-plated emblem upon which there is a blue cross and two lions, paying homage to the crusades, which passed through Cyprus in the 12th century. “During the crusades, Commandaria was served at the wedding of King Richard the Lionheart to Berengaria of Navarre in the town of Limassol,” Dai explains. “It was during the wedding that King Richard pronounced Commandaria ‘the wine of kings and the king of wines’.” Further to the elaborate insignia, seven small diamonds have been affixed to the packaging in honour of the seven awards that the wine has won. The “pride of Cyprus”, Dai believes that the history embodied in Commandaria is an overlooked luxury. “Ordinarily, when people think of luxury wines, they automatically think of French wines. But Commandaria’s ancient method of production really does distinguish it – there’s no reason why the name Commandaria cannot be put on a pedestal in the world of wine the way that Bordeaux has.” He continues: “As far as luxury products go for collecting, I really can’t think of anything better than Commandaria.” And, of course, the Chinese market is quickly earning a reputation for its love of all things luxury. Dai concedes that his home country’s economy has grown dramatically over the last 30 years, opening up people’s appetite for luxury goods. Whereas once people were concerned with satisfying basic daily needs, they are now using their new-found wealth to discover other cultures and access the world. “Over the last ten years, some of the biggest auction houses in the world have been almost exclusively serving Chinese clients and over the last five years, most luxury wines from France have been bought by the Chinese.” However, the now vast stocks and reserves of these imported wines mean that supply is outnumbering demand and consumers are becoming even more discerning, seeking something even more unique. “An overall restructuring of the Chinese wine market is taking place, and I’m confident that Commandaria – branded and sold in the right capacity – can take on a leading role. It’s rare, it’s unique, and a symbol of distinction: the ultimate luxury,” Dai says with pride. Delving into the details, then, of this new venture, Dai reveals that he has placed an initial order for 4,000 bottles, which will not be distributed via mainstream outlets, but rather as collectable items and limited editions.

AS FAR AS LUXURY PRODUCTS GO FOR COLLECTING, I REALLY CAN’T THINK OF ANYTHING BETTER THAN COMMANDARIA “I’m trying to inspire the idea that collecting this wine is akin to collecting the history of Cyprus. “That’s why,” he reveals, “I am selling each bottle for €2,000.” As eyebrow-raising as this figure may be, Dai has already received some 50 orders from the rich and famous of China, from accomplished actors to sports stars. “The Chinese government now has a global vision,” Dai says, “and entrepreneurs are more and more testing foreign waters for opportunities. In the past few years, Chinese companies have started investing in the EU, Africa, and more, with good returns.” For many, Dai adds, Cyprus is considered the best place to invest. Besides its geographical location serving as an ideal hub linking East and West, Dai believes that the island’s highly developed shipping system, the fact it is a member of the EU and aligned with EU strategies, its accomplished legal system and its highly educated workforce all work in its favour in distinguishing it as an investment destination. “And I’m not alone in thinking this,” Dai stresses. In fact, he told President Nicos Anastasiades as much on November 13, when he was invited to an exclusive meeting to discuss the opportunities that lie ahead. With a smile, Dai adds that he was able to present his pride and

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joy, the Commandaria, to the President, which was met with praise and excitement as to its prospects. “I told the President that because China and Cyprus are geographically distant, many people are not even aware of its existence. Returning from my first visit, many of my friends and colleagues couldn’t place the island on a map. I explained that it lies between Africa, Europe, and the Middle East, and they literally took out a magnifying glass to locate it!” The residency scheme, I am told, has helped introduce the island to the people of China and as they have discovered its culture, beautiful weather, and clean environment, the excitement has grown. Since 2012, Dai has brought five groups of Chinese friends to Cyprus, and has convinced at least six of them to buy property (he himself owns a residence at Aphrodite Hills). “Soon,” Dai reveals, “I will return with another group, composed of high-ranking stakeholders in both the private and public sector, who may act as a bridge in enhancing the two countries’ relationship.” Having served as a microeconomic researcher and strategist in the Chinese government, Dai explains that he is closely in touch with influential figures. “There are a lot of people who are interested in investing in the banking sector (acquisitions of institutions), and the oil and gas sector. There’s also a lot of buzz surrounding the privatisation of state-owned enterprises.” Considering his insight that led him to believe that the Commandaria he wanted to introduce to the Chinese market needed rebranding, does Dai believe that Cyprus itself needs to undergo a similar rebranding process as well, I ask? He is emphatic: “Yes, I think so. The Cypriot Government must invest in developing a more cohesive identity and then heavily promote this abroad. “One easy way to do this is to build up its relationship with Chinese travel agents. Young Chinese people, for example, love the idea of destination weddings and cultural tours. Put together a package, and sell it!” Concluding, Dai indicates that for all the steps we’ve seen taken so far in bringing these two countries closer together, this is just the beginning: “I have two important messages to pass on: first, the Chinese are interested in exploring Cyprus’ cultural and economic opportunities,” he says, “And second, initial reaction indicates that the people of China are quickly falling in love with Commandaria! “Have no fear: China is coming to Cyprus.”

OPINION

From Eggs to BEPS Making international taxation ‘fair and moral’

ince ancient times, from the glory days of Ancient Greece and Egypt to the mighty Roman Empire onwards, taxes have been due and paid one way or another. Through manual labour for the less affluent, and in monetary terms or in-kind by those who could afford it on commodities like tobacco and cotton, eggs and spices, sugar and coffee to name a few. Ever since, organised societies at first and sovereign states through their elected Governments thereafter, have kept pace by devising comprehensive mechanisms one after the other for collecting taxes from the people, always in the name of providing for the wellbeing of society at large. In tax literature, it is often stated that tax is a distinctive mark of civilization. What the rationale is for this statement, I couldn’t quite explain, but I would dare to assume it somehow manifests the transition from acting as a lone-wolf to collectively contributing towards building a community, which is a better and safer place for all to live in and prosper. It is those communities however, which collectively form society as we know it, which revolted against the establishment, claiming that not everyone is contributing in proportion to their ability and earnings, sending shockwaves to the political elite globally. This helps explain why, in the last couple of years, we have all witnessed the unprecedented and coordinated effort undertaken by the OECD and backed by all the political groups of power and importance on the planet, such as the G7 and G20, to tackle tax evasion and tax avoidance. Undeniably, the world of international tax is currently undergoing fundamental changes comparable only to the sweeping effect that the industrial revolution had on the global economy back in the 18th century. Acronyms and technical terms like BEPS and CRS have become part of the daily vocabulary of every C-level officer, Board member and tax practitioner in the last couple of years. In a nutshell, the BEPS (Base Erosion Profit Shifting) initiative which came into life only last year, is the answer to the tax “injustices” that were

By Costas Markides

The tax scene is changing by the day and there is no looking back

born out of a decades-old global tax system which, according to its critics, failed to keep pace with a constantly developing, heavily mobile and digitalized economy. The BEPS initiative, through a series of proposed steps-turned-actions, aspires to make international taxation “fair and moral” by coordinating the efforts of sovereign states in adopting or reforming legislation that will succeed in matching the act of a “fair share” of taxation with real activity and consumption on the ground. Another area of developments, that has taken on the form and speed of an avalanche, is that of coherence and transparency in financial dealings globally. The Common Reporting Standard (CRS) is another reporting mechanism developed only this year, which breathes, lives and feeds on political support and endorsement. Its main purpose is to facilitate and statutorily accommodate the automatic exchange of information on a global scale, and it has already been adopted by more than 50 countries (including Cyprus), which have committed to automatically start exchanging information on accounts held by individuals and entities alike (including trusts and foundations) as early as 2017. The information to be exchanged will cover sales proceeds from financial assets, account balances, dividends and interest income. The sweeping impact and radical effect on a global scale that such measures will have on the international tax scene were, only a few short years ago, in the sphere of the imaginary, no more real than Santa Claus and his elves. The irony, however, lies in the fact that the very same political groups that made sure that such measures were kept off the global political agenda all those years are now the missionaries leading the crusade towards restoring order, substance and transparency in the “mediaeval” corporate world. The tax scene is changing by the day and there is no looking back. Simple times demanded simple solutions and, even though the most effective tax avoidance technique in antiquity was flight (in order to escape from the tax collector), this is hardly an effective solution in the 21st century. In today’s borderless business environment, the words of American legendary boxer Joe Louis sound fit for the occasion: “You can run, but you can’t hide…”

info: Costas Markides is a Member of the Board of KPMG.

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GREEN TAXATION

TAX ‘BADS’ NOT GOODS!

Time for a Green Tax Reform in Cyprus

s a result of the recent financial crisis, European governments need to raise public revenue to maintain sustainable debt levels and reduce fiscal deficits.

At the same time they are committed to implementing EU legislation. Furthermore, Member States are being asked to pursue the implementation of structural reforms and to consolidate their public finances as part of the ‘Europe 2020’ strategy which aims at generating ‘smart, inclusive and sustainable growth’.

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By Theodoros Zachariadis

Until recently, environmental taxes had not been viewed as major revenueraising options. It is becoming increasingly evident, however, that such taxes can be important components of a cost-effective fiscal consolidation strategy. Currently, European countries generate most of their revenues by levying taxes on labour and

ENVIRONMENTAL AND NATURAL RESOURCE TAXES ARE AMONG THE MOST PROMISING MEASURES TO IMPROVE PUBLIC FINANCES WITHOUT BEING DETRIMENTAL TO ECONOMIC GROWTH income. At the same time, revenues from taxes on activities that cause environmental degradation and the depletion of scarce natural resources (such as the consumption of electricity, fuels and water as well as the production of waste) account for a small fraction of government finances. This endangers economic growth and employment while rewarding the over-exploitation of natural resources. Environmental fiscal reform can correct this disparity by shifting the focus of government taxes: Instead of taxing ‘goods’ (such as from labour or income), governments should tax ‘bads’ (i.e. environmentally harmful and resourcedepleting activities). Such reform can rely on market-based policy instruments like carbon taxes, emissions trading, water abstraction charges, levies on the production of waste, traffic congestion charges, etc. Another important element is the phasing out of environmentally harmful subsidies to fossil fuels; according to independent studies, governments across the G20 countries spend $88 billion every year subsidising the exploration of fossil fuels, whose combustion causes adverse health effects and may lead to serious climate change. Several European countries have already introduced green tax reforms. Apart from saving energy and improving the environment, environmental taxes can produce better economic results than conventional taxes: Many studies and best practices show that, depending on how the additional public revenues generated from environmental taxation are used by the government, environmental fiscal reform may also be beneficial to economic growth. The importance of environmental taxation is even more pronounced in countries that apply fiscal consolidation policies as part of broader structural reforms in their

economies. To increase public revenues, governments often consider raising excise taxes on goods and services or increasing income tax rates. However, according to many economists and international organisations, environmental and natural resource taxes are among the most promising measures to improve public finances without being detrimental to economic growth. They can discourage polluting and resource-depleting activities and, at the same time, generate much needed public revenues – some of which may also be used for compensating vulnerable households that may suffer from the increase in environmental charges. This has been well documented by the European Commission, the Organisation for Economic Cooperation and Development (OECD) and the International Monetary Fund (IMF). Moreover, a strong political consensus exists in Europe on the subject. For example, the European Parliament has recently expressed its support for such reforms: in November 2014, the Parliamentary Committee on Economic and Monetary Affairs urged the European Commission to proceed with legislative proposals that would increase environmental taxes and align tax policy with the objectives of the EU’s energy and climate policy for 2030. An international conference on this topic was held in Nicosia in June 2014, in the context of European “Green Week 2014”. It was jointly organised by the European Commission Representation in Cyprus and the Cyprus University of Technology (CUT), in the framework of its EU-funded Jean Monnet project “European Energy and Environmental Policy at a Crossroads”. Speakers at the conference shed light on this topic from various angles – the fiscal and environmental effectiveness of such

a reform, political acceptability, and equity concerns, i.e. whether such a tax reform hits low-income households more strongly and how such impacts can be alleviated. They provided an overview of environmental taxation in the European Union and policy initiatives of the European Commission towards strengthening the environmental tax base in EU member states. They explained the rationale of environmental fiscal reforms and provided examples of how these have been implemented in different countries, using Germany as the leading example, where such reform has helped reduce carbon emissions and has reportedly created a substantial number of new jobs. Another concrete example was described in detail: the implementation of a carbon tax in Ireland, during the period when a Troika-supervised economic adjustment programme was in place. Cyprus is still faced with a serious financial and fiscal crisis. Therefore, this is the right time for national authorities to consider moving to a rigorous green tax reform. Lessons learnt from around Europe can provide valuable information to national policy makers. The fact that the governments of Italy and Portugal, amidst their own economic problems, are currently giving serious consideration to proceeding with environmental fiscal reform and have set up expert committees to provide the relevant recommendations shows that such reform is not a luxury; it can be a major component of an economic strategy to promote growth and environmental quality at the same time. More information about the European experience on green tax reforms will be available in the December 2014 issue of the journal ‘Cyprus Economic Policy Review’, published by the University of Cyprus. It is freely available at http://www.ucy.ac.cy/erc/ en/publications/cyprus-economic-policyreview.

info: Theodoros Zachariadis is an Assistant Professor in the Department of Environmental Science and Technology, Cyprus University of Technology. This article has

been written within the framework of the BIOforLIFE Project (2012-2015) which aims to make Cypriots aware of the significance of biodiversity in our lives. THE INTERNATIONAL INVESTMENT, FINANCE & PROFESSIONAL SERVICES MAGAZINE OF CYPRUS

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{December 14, 2014 – January 13, 2015}

ISSUE

+ BOOK REVIEWS MONEY: Master the Game: 7 Simple Steps to Financial Freedom By Tony Robbinsr 69 BUSINESS: Me, Inc. By Gene Simmons

ECONOMY: The Trillion Dollar Economists: How Economists and Their Ideas Have Transformed Business By Robert Litan 75 TAX & LEGAL:EU Securities and Financial Markets Regulation By Niamh Moloney 77 LIFESTYLE: LIFESTYLE: Moriarty By Anthony Horowitz 81

{money}

66 Review Your Investment Portfolio in five simple steps By Andrew Lumley-Holmes 68 Insurers trusted less than banks An EY survey shows that consumers want more frequent, meaningful and personalized communications.

{business}

70 Best Business Books of the Decade Winners of the annual Business Book of the Year Award over the last 10 years.

72 Using Social Apps to Drive Brand Engagement By Mariana Antonescu 73 PwC and Google Announce Joint Business Relationship Collaboration to help companies thrive in a changing world.

{economy}

74 Emirates’ impact on the EU The results of a revealing study from Frontier Economics. 75 Achieving Change Global financial services organisations are struggling to align risk management frameworks, culture, and talent.

{tax&legal}

76 De-offshorisation The implications of the new Russian law for users of Cyprus holding ding and fin finance structures.

{lifestyle}

78 It Was A Very Good Year… 2014 proved profitable for alternative assets, which have enjoyed a stellar 12 months of record-breaking sales. 82 A Day In The Life Johny Abuaitah

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investment

{MONEY}

ENT M T S E V IN R REVIEW YOU

O I L O F O T POVRE SIMPLE STEPS IN FI

By Andrew Lumley-Holmes

ow is the time of year that I sit down with many of my clients to review their financial situation. But what are the steps you should take when reviewing your investment portfolio? A specialist investment manager for private clients will normally carry out an in-depth review, including the underlying holdings of the portfolio for each individual client but there are five basic first steps everyone should take:

STEP 1: REVIEW YOUR ASSET ALLOCATION

Most client portfolios will have a mix of asset classes that will often include equities, fixed interest, property and cash. It’s important to make sure that the portfolio still reflects your current goals and attitude to risk. For most people who take a long-term view with their portfolios, there is a good chance they are overly exposed towards equities now. Most developed market equity funds have had good returns recently, whereas most fixed-income investments have not. If your required weighting of an asset class is just a few percentage points out from your target, there is not much to be concerned about;

IT’S IMPORTANT TO MAKE SURE THAT THE PORTFOLIO STILL REFLECTS YOUR CURRENT GOALS AND ATTITUDE TO RISK

however, where the allocation of an asset is more/less than 5-10% out of the target range, it may be time to rebalance things. That is more important the closer you are to the end of your timeframe for investment. Where you have a heavy equity focus, it may be time to start locking in some of those gains or looking at options that offer more protection on the downside.

STEP 2: CHECK YOUR EQUITY SECTOR POSITIONING

Look at the holdings you have within your equity investments to review which sectors most of your money is in. It’s important not to be too over-exposed to a specific sector e.g. technology or financials. Diversification is just as important when it comes to sector weightings in the portfolio as it is when looking at overall asset allocation. When it comes to sectors for investment, generally the technology sector looks the most expensive right now. On the other side, stocks in the basic materials and energy sectors look attractive based on their price/fair values.

STEP 3: THINK GLOBALLY

The next step is to check how your equity exposure is apportioned internationally. Developed market equities have returned bigger numbers than emerging markets for most of the last five years. This means that many clients are perhaps not diverse enough in their exposure to emerging markets, especially where they have a longer investment timeframe and should be taking more risk. Investors should not

ignore global market capitalization when building their portfolios. If you’re close to – or in – retirement, it makes sense to reduce the emerging market weighting.

STEP 4: ASSESS YOUR FIXED-INCOME POSITIONING

Increasing interest rates are a concern for a bond investor. However, the biggest concern when I see most portfolios is the poorer quality of debt. High-yield bond funds have seen strong inflows recently but many mixed asset funds have also been reducing quality to increase yield. As part of a portfolio review, make sure that your fixed interest/ bond holdings offer true diversification.

STEP 5: TAKE STOCK OF LIQUID RESERVES

As well as reconsidering your long-term investment allocations, you should also check your cash reserves. Have you got 3-6 months cash in your bank account in case of emergency? If you are retired this portion should be even greater: around one to two years of expenses is recommended. If you have more than this, it may be time to consider investing more towards your long-term portfolio to potentially generate better returns and keep up with the impacts of inflation on your net worth.

SUMMARY

In summary, you need to go through the basics of your portfolio and check that it matches with your current attitude to risk, the investment goals that you have and the timescale for the investment.

info: Andrew Lumley-Holmes is an independent financial adviser with Finsbury Private Wealth Management. e-mail: andrew.holmes@finsbury-group.com or (+357) 96418652.

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

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CONTACT DETAILS: 2, Eschilou, Engomi, Nicosia | Email: timosc@cytanet.com.cy | Tel: 22772945 | Mbl: 99606373, 99449574 | Fax: 22776948

insurance

{MONEY}

Insurers trusted

less than

BANKS

EY SURVEY SHOWS THAT CONSUMERS WANT MORE FREQUENT, MEANINGFUL AND PERSONALIZED COMMUNICATIONS

he level of consumer trust in insurance companies is lagging at just 70%, compared to 82% for banks, largely because of the low frequency of contact insurers have with their customers, according to EY’s 2014 Global Consumer Insurance Survey: Reimagining customer relationships, released last month. Consumers indicate that they want more frequent, meaningful and personalized communications, but currently very few insurers are getting this right. In fact,

44% of consumers report no communication from their insurer in the last 18 months. EY surveyed approximately 24,000 people in 30 countries between May and July 2014 to find out what matters most in the relationship customers have with their insurers, how they interact and how satisfied they are with the range of policy offerings. Graham Handy, Global Insurance Customer Leader at EY, says, “We need to fundamentally rethink how the industry communicates. During the financial crisis trust in banks took

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

WE HAVE SEEN TRUST IN BANKS RECOVER WHILE TRUST IN INSURERS REMAINS LOW a severe hit, but we have seen trust in banks recover while trust in insurers remains low. Banks have an established reason for regular interactions with their customers and, as a result, the ability to rebuild trust when it is lost. Insurers are relying on too few points of contact to build a trusted long-term relationship with their customers.” Globally, 70% of consumers trust insurance companies, which is lower than the levels of trust in supermarkets (84%), banking (82%), car manufacturing (80%) and online shopping sites (78%). In mature markets – such as Europe (61%) and Australia (53%) – there are even lower levels of trust but consumers in developing markets such as Latin America (81%) and the Middle East and India (79%) have more trust in their insurer. Some 44% of survey respondents indicated that they had had no contact from their insurance providers in the past 18 months. But 57% of people would prefer to hear from their insurer more than once a year and 56% of consumers report having to proactively contact their insurance company. The survey found that the interactions between insurers and consumers currently occur

so rarely that any one point of contact can significantly shift the perception of insurers and brokers in the consumer’s mind. When they do communicate the outcome is usually positive – globally, 70% of customers report a positive outcome from their interaction with insurers. Handy says: “These financial products do really matter at the end of the day, especially when customers have to call on them. Consumers want insurers to anticipate their key decision points for them and insurers need to recognize that just one point of contact at the right time can make a real difference. By delivering services beyond policies – such as timely information that promotes healthier living, safer driving or better financial outcomes – insurers have a real opportunity to transform consumer perceptions about the industry. However, they will have to get better with data in order to deliver this.” The ways in which insurers engage with consumers require significant attention. Consumers are far from delighted with outbound communications across all regions. Japanese consumers report the lowest level of satisfaction, with just 4% being highly satisfied. However, at the top end of the scale, insurers in North America and the UK are not performing that well either, with just 21% and 19% of their customers being highly satisfied respectively. Digital and remote channels are fast reaching parity with traditional face-to-face chan-

nels. In fact, 80% of customers – including 44% of seniors – would consider any proposed channel rather than in-person for all types of transactions and inquiries. Handy says: “It’s clear that insurers have yet to get ’direct-to-consumer‘ right in most markets. And even where there is a broker or an agent involved this doesn’t mean the customer is getting what they really need in terms of information. The insurance provider ought to be ensuring that all customers receive this, regardless of whether they are served through a broker. With the rise of digital, insurers are increasingly better placed to do this – so the race is on to see who can do this most effectively, and most quickly.” Consumers’ decisions are still motivated largely by price and material benefits. While the frequency and relevance of communication is a reason given for closing or replacing a policy, it is actually fourth in the list of priorities for consumers, with less than 30% of consumers citing it as a top reason for changing a policy. The cost/terms of the policy is the biggest reason for people closing or replacing their policy, with more than half of consumers citing this as a top reason, followed closely by policy benefits or coverage, and less closely by a recommendation from a broker or friend. This means that many customers who do switch insurers still retain overall positive views of their former provider – 38% of customers who were willing to recommend their provider to friends or relatives have closed their policy in the last 18 months. Handy says: “Insurers have traditionally devoted a lot of attention to new sales to new customers. Insurers have in the last few years started to devote more attention to retaining their existing customers. But the analysis suggests there is a third important group, ex-customers who left their insurer for a non-emotional reason (i.e., price point) and still hold them in high regard and who the insurer could win back.” One way of winning customers back is perhaps through deals and promotions. 59% of global insurance consumers want to hear about promotions and special deals from their insurer more than once a year, but today, only 45% receive that level of contact. In global developing markets, the gap is even starker: 49% of consumers would prefer to receive information on promotions more than once a year, but just 29% of consumers receive this level of contact.

ABOUT THE SURVEY To provide more insight into current consumer preferences and attitudes, EY surveyed approximately 24,000 people in 30

countries between May and July 2014 about their relationships with insurance providers. Building on the inaugural 2012 survey, this year’s survey focused on what matters most to consumers in these relationships, how they interact with their providers and how satisfied they are with a range of offerings from insurers. Along with EY’s 2013 Global Insurance Digital Survey and thought leadership concerning customer centricity, these findings present an overview of strategic opportunities and specific tactical choices insurers face in what many industry stakeholders recognize as a new, customer-driven era. For a copy of the report, go to ey.com/ insurance. EY is a global leader in assurance, tax, transaction and advisory services.

BBOOK O RREVIEW E MASTER THE GGAME GAME: 7 SIMPLE STEPS TO FINANCIAL FREEDOM BY TONY ROBBINS (SIMON & SCHUSTER LTD, 2014) R.R.P. £14.99 (£10.49 FROM AMAZON.CO.UK)

ony (he used to prefer the more formal Anthony) Robbins is a bestselling author, entrepreneur and philanthropist. For almost 40 years, millions of people have enjoyed his corporate and personal development events but more relevant here is the fact that the companies he has founded or partnered-in have combined annual sales of more than $6 billion a year. The book – more than 650 pages long – deals not only with the L_WLJ[LK ÄUHUJPHS PZZ\LZ I\[ ^P[O ^OH[ money means to us on an emotional level. Robbins’ genius is in explaining JVTWSL_ ÄUHUJPHS PKLHZ PU ZPTWSL ^H`Z proving that anyone can start making PTTLKPH[L JOHUNLZ [V NL[ [OLPY ÄUHUJPHS house in order. What to do with investments, mortgages, insurance, how to beat the S&P and minimize risk? That’s all covered here. He even persuaded numerous billionaires to reveal their V^U ÄUHUJPHS PU]LZ[TLU[ MVYT\SHZ (SS PU all, this is a useful and game-changing book that will help you and your family’s future. There is no one who will not learn valuable information from it.

THE INTERNATIONAL INVESTMENT, FINANCE & PROFESSIONAL SERVICES MAGAZINE OF CYPRUS

Gold 69

books

{BUSINESS}

Best Business

ast month the Financial Times and McKinsey, the current sponsor of the Business Book of the Year Award, named Thomas Piketty’s Capital in the Twenty-First Century as the 2014 Business Book of the Year. The newspaper also recalled previous winners of the annual award, publishing the winners of the last 10 years. They are as follows:

2014

CAPITAL IN THE TWENTY-FIRST CENTURY By Thomas Piketty (Harvard University Press) RRP: £29.95; £11.00 from amazon.co.uk n his acclaimed work, Thomas Piketty analyzes a unique collection of data from twenty countries, ranging as far back as the 18th century, to uncover key economic and social patterns. The

book reorients our understanding of economic history and confronts us with sobering lessons for today. Political action has curbed dangerous inequalities in the past, Piketty says, and may do so again. (Recommended in Gold, issue 38, May 14-June 13)

2013

THE EVERYTHING STORE: JEFF BEZOS AND THE AGE OF AMAZON By Brad Stone (Corgi) RRP: £8.99; £7.19 from amazon.co.uk hough Amazon.com started off delivering books through the mail, its visionary founder, Jeff Bezos, was never content with being just a bookseller. He wanted Amazon to become ‘the everything store’, offering limitless selection and seductive convenience at disruptively low prices. Bezos and. Amazon placed one of the first and largest bets on the Internet. Nothing would ever be the same again. (Recommended in Gold, issue 34, January 14-February 13)

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

2012

PRIVATE EMPIRE: EXXONMOBIL AND AMERICAN POWER By Steve Coll (Penguin) RRP: £12.99; £9.09 from amazon.co.uk ulitzer Prizewinner Coll investigates the ExxonMobil Corporation and the secrets of the oil industry. Beginning with the Exxon Valdez accident in 1989 and closing with the Deepwater Horizon oil spill, the narrative spans the globe, taking readers to Moscow, impoverished African capitals, Indonesia as well as to the company’s Washington lobbying offices and its corporate headquarters in Irving, Texas in a masterful exposé.

2011

POOR ECONOMICS: BAREFOOT HEDGE-FUND MANAGERS, DIY DOCTORS AND THE SURPRISING TRUTH ABOUT LIFE ON LESS THAN $1 A DAY By Abhijit Banerjee (Penguin) RRP: £9.99; £6.99 from amazon.co.uk hy would a man in Morocco who doesn›t have enough to eat buy a television? Why do the poorest people in India spend

Books of the Decade 2009

LORDS OF FINANCE: 1929, THE GREAT DEPRESSION, AND THE BANKERS WHO BROKE THE WORLD By Liaquat Ahamed (Windmill Books) RRP: £9.99; £7.49 from amazon.co.uk he recent financial crisis has only one parallel: the Wall Street Crash of 1929 and subsequent Great Depression of the 1930s.. Yet that economic meltdown could have been avoided, had it not been for the men in charge of the US, English, German and French central banks. Ahamed tells their story, reminding us that individuals and their weaknesses lie at the heart of global catastrophe.

2008

7% of their food budget on sugar? Does having lots of children actually make you poorer? This eye-opening book overturns the myths about what it is like to live on very little, revealing the unexpected decisions that millions of people make every day.

2010

FAULT LINES: HOW HIDDEN FRACTURES STILL THREATEN THE WORLD ECONOMY By Raghuram G. Rajan (Princeton University Press) RRP: £12.50; £10.60 from amazon.co.uk aghuram Rajan was one of the few economists who warned of the global financial crisis before it hit. Instead of attacking a few greedy bankers who took irrational risks and left the rest of us to foot the bill, Rajan argues that serious flaws in the economy were also to blame, and warns that a potentially more devastating crisis awaits us if they aren’t fixed.

WHEN MARKETS COLLIDE: INVESTMENT STRATEGIES FOR THE AGE OF GLOBAL ECONOMIC CHANGE By Mohamed El-Erian (McGraw-Hill Professional) RRP: £17.99; £17.99 from amazon.co.uk ritten by the man who Fortune refers to as a “Global Guru,” the book offers a cogent picture of the rapidly changing world financial system. It gets you up to speed on the new economic and investing landscape and provides a detailed blueprint for capitalizing on the phenomenal investment opportunities now available, while minimizing the new and challenging set of risks.

2007

THE LAST TYCOONS: THE SECRET HISTORY OF LAZARD FRÉRES & CO. By William D. Cohan (Penguin) RRP: £14.99; £10.49 from amazon.co.uk hey amassed unimaginable fortunes and would stop at nothing to make a deal, until their titanic egos started to jeopardize everything. This is the story of legendary investment

TEN YEARS OF GREAT BUSINESS READING bank Lazard Frères and the men who reigned over it. William Cohan takes us into their mysterious and secretive world, telling a story of ruthless ambition, explosive feuds, glamorous mistresses, decadent excesses and unimaginable wealth.

2006

CHINA SHAKES THE WORLD: THE RISE OF A HUNGRY NATION By James Kynge (Phoenix) RRP: £9.99; £7.99 from amazon.co.uk ynge shows not only the extraordinary rise of the Chinese economy but what the future holds as China begins to influence the world more and more. He also reveals China›s weaknesses – its environmental pollution, its crisis in social trust, its weak financial system and the faltering institutions of its governments – which are poised to have disruptive effects across the globe.

2005

THE WORLD IS FLAT: THE GLOBALIZED WORLD IN THE TWENTY-FIRST CENTURY By Thomas L. Friedman (Penguin) RRP: £10.99; £7.69 from amazon.co.uk he beginning of the twenty-first century will be remembered, Friedman argues, not for military conflicts or political events, but for a whole new age of globalisation – a ‘flattening’ of the world. The explosion of advanced technologies means that suddenly knowledge pools and resources have connected all over the planet. This is a timely update on globalization, its successes and its discontents, powerfully illuminated by a world-class writer.

THE INTERNATIONAL INVESTMENT, FINANCE & PROFESSIONAL SERVICES MAGAZINE OF CYPRUS

Gold 71

brands

{BUSINESS}

USING SOCIAL APPS to Drive Brand Engagement

MORE AND MORE BUSINESSES ARE DEVELOPING BRANDED APPS AS PART OF THEIR MARKETING PROGRAMMES, INTEGRATING PRODUCT INFORMATION WITH PRODUCT REVIEWS AND EVEN GAMING ELEMENTS TO REACH CONSUMERS.

By Mariana Antonescu

rom in-game advertisements to entire games built around brands, engagement through games-based apps takes on multiple forms and presents unique opportunities for marketers. Social gaming is one of the best mediums that can be leveraged by companies to capture the attention of their audience as well as engage them. Social games are interactive in nature, which in turn makes marketing easier as information can be given to customers and brand awareness is created. This interactive mode of social gaming helps not just in promoting and raising awareness of a company’s brand but also in keeping customers engaged for a long time. The message for marketers should be clear: they need to consider using social game-based apps to build brand engagement, recognition and loyalty. Here are four tips on what brands of all sizes should consider when building their own custom apps.

DEFINE YOUR GOALS. As with every other social strategy that marketers employ, success in social gaming engagement starts with a clearly defined goal. Knowing what you want the gaming experience to be will go a long way in helping you decide on the right game and type of engagement. You need to build a game that accomplishes your goals while targeting your desired audience. When defining your goals, consider fan growth, consumer engagement, viral growth, revenue generation, coupon or sales promotion and the campaign component (part of broader campaign).When launching a social gaming application you must determine what works best for your brand and overall marketing strategy. Highly engaging and with viral components built in, social games provide the perfect vehicle for fuelling fan growth and building community. They also serve as a perfect vehicle for driving brand awareness, revenue, and promotions.

OFFER REAL-WORLD REWARDS. By linking the points that users earn inside the game to real world rewards (coupons or gift cards), businesses can give users more incentives to come back to their apps and spend time earning points. If you’re looking for a leader to follow – or one to borrow ideas from – look no further than McDonald’s. To promote their new collection of sauces, McDonald’s launched an online game – ‘McNuggets Saucy Challenge’ – challenging those who dare to test their Chicken McNuggets sauce-dunking skills and win real world rewards. The company incorporated giveaways into their social gaming giving players something tangible to strive for or achieve in a fun and entertaining way. DON’T BUILD IT FROM SCRATCH. Remember that you are building a game to engage your social community, not to become the next great video game publishing company. Aware of the growing demand for branded social games, companies specializing in community management tools have made it relatively quick and easy to choose a game, brand it with your look and feel, and launch it online. As long as you don’t need to create your games from

scratch, then brandable, traditional games can provide a cost-effective means of offering fun, interactive content to your consumers. Consider partnering with a company with a wide portfolio of social apps which allows you to include your gaming concepts and company information. SIMPLIFY AND BEAUTIFY. If a game is confusing, difficult, or just plain boring, players will likely abandon it. A consumer is more likely to be drawn to your game, and spend more time engaging with it and your brand, if it’s shared on your website or social platform, it’s easy to get started and rules and instructions are kept to a minimum. To succeed in the age of mobile apps, companies must do more than just launch an app. They need to deliver engaging customer journeys, with compelling and relevant app experiences that build binding relationships with customers. Social gaming is a great way to do that as it adds a fun, engaging layer to any brand. Who doesn’t like playing for a chance to win a prize? Adding social games to any brand will not only promote your business, but build loyalty and engagement.

info: Mariana Antonescu (MBA) is Business Consultant with a special interest in the field of Social Media Marketing. www.mari10.blog.com 72 Gold THE INTERNATIONAL INVESTMENT, FINANCE & PROFESSIONAL SERVICES MAGAZINE OF CYPRUS

PwC

collaboration

{BUSINESS}

AND GOOGLE

ANNOUNCE JOINT BUSINESS RELATIONSHIP

COLLABORATION TO HELP COMPANIES THRIVE IN A CHANGING WORLD

wC and Google Inc. announced the launch last month of a joint business relationship to bring new and innovative services to companies around the world. The rapid pace of innovation in technology has fundamentally changed how and where work gets done, driving organizations to transform their businesses for the future. Together, PwC and Google can help that transformation happen. A statement from the two companies said: “From Google, companies get unprecedented innovation, technology platforms and Internet scale; while PwC brings deep industry experience, a broad range of business services and cutting-edge client insights, from strategy through execution. Together, PwC and Google will help companies collaborate more effectively, better use technology and information, and adapt to the disruptive forces shaping the world.” “For our clients, acquiring the knowledge most important to their operations, securing that information and using it optimally are critical – now more than ever before,” said Mike Burwell, PwC’s Vice Chairman - Transformation. “PwC is teaming with Google to offer our joint knowledge and capabilities to clients – giving them one place to go, maximizing experience and assets from both organisations.” Together, PwC and Google will help clients by collaborating on existing solutions and developing new offerings in three areas: (1) Help companies succeed by leveraging PwC’s business insights along with Google Apps, Google’s suite of cloud-enabled collaboration and productivity tools. In doing so, the companies will empower others to be more productive, serve customers more efficiently and deliver a more connected employee experience.

THE RAPID PACE OF INNOVATION IN TECHNOLOGY HAS FUNDAMENTALLY CHANGED HOW AND WHERE WORK GETS DONE (2) Use the combined power of PwC’s analytical acumen and Google Cloud Platform to help businesses make the most of technology and information and be better equipped to compete, creating new services to reinvent and optimize operations, connect with consumers and provide an enhanced customer experience. (3) With the right tools and insight now driving decisions, PwC and Google will guide companies seeking to break new ground in their businesses – not only to compete with new entrants and adapt to disruptive market forces – but also to lead the innovation themselves. “Ultimately, our collaboration is about helping clients to embrace their journey to the cloud, and transform their organisations to thrive and maintain relevance in a rapidly changing world.” said Tom Archer, PwC’s Google Strategic Alliance Leader. “Millions of companies, large and small, look to Google to help them launch, build and transform their businesses,” said Amit Singh, President, Google for Work. “We’re delighted to enter into a relationship with PwC – a leading advisor for businesses around the world – to bring the best of Google to work and help companies innovate. It’s great to see PwC lead by example, accelerating their own journey to the cloud that will lead to enhanced collaboration, greater speed and ultimately, transform their business for the digital era.” PwC has also begun to introduce Google for Work products to its own operations. PwC

is transitioning 40,000 people in the United States and 5,000 people in Australia to Google Apps, transforming how those firms do business.

BBOOK RREVIEW ME, INC M ME INC.

BY GENE SIMMONS (DEY STREET BOOKS, 2014)

R.R.P. £16.99 (£14.88 FROM AMAZON.CO.UK)

he fact that Kiss is one of the most successful rock bands in the world is no accident. From the beginning, Gene Simmons and Paul Stanley had a clear-cut vision of how they wanted to operate Kiss as a business well before they ever took to the stage. Simmons has proved to be a formidable businessman, having sold over 100 million CDs and DVDs worldwide. Part One of Me, Inc., (subtitled Build an Army of One, Unleash Your Inner Rock God, Win in Life and Business) is autobiographical, describing what he did to achieve world fame in music. In Part Two he shares [OPY[LLU ZWLJPÄJ WYPUJPWSLZ MVY Z\JJLZZ based on his own experience, triumphs, and instructional failures in business. The message here is extremely clear: Ruthlessly pursue Big Money, make it the absolute No. 1 goal of your life. Don’t compromise. Don’t let anyone get in your way. If your dream is the rainbow of Big Money, then Me, Inc. is the right IVVR [V OLSW `V\ ÄUK [OH[ [YLHZ\YL

THE INTERNATIONAL INVESTMENT, FINANCE & PROFESSIONAL SERVICES MAGAZINE OF CYPRUS

Gold 73

travel

{ECONOMY}

EMIRATESâ&#x20AC;&#x2122;IMPACT

CONNECTIVITY CREATES EMPLOYMENT: THE CASE OF HAMBURG

ON THE EU A REVEALING STUDY FROM FRONTIER ECONOMICS

ith more than 700 passenger flights per week to and from 16 European Union (EU) Member States, Emirates has a relatively limited intercontinental footprint in comparison to some of the big European carriers. But the economic impact of this connectivity is at times underappreciated, and something that merits attention. Frontier Economics, a leading European economic consultancy, is due to release a report which quantifies Emiratesâ&#x20AC;&#x2122; socioeconomic impact in the EU in 2013. The report shows that the direct, indirect and induced impact of Emiratesâ&#x20AC;&#x2122; operations and the development of connectivity to secondary cities in particular, has a substantial impact on EU GDP. Frontier estimates that Emiratesâ&#x20AC;&#x2122; operations supported 85,000 direct, indirect and induced jobs across the EU in 2013, equivalent to â&#x201A;Ź6.8 billion or 0.05% of the total EU GDP.

THE IMPACT OF THE A380 ON EMPLOYMENT

With a total of 140 aircraft ordered, Emirates is the largest purchaser of Airbusâ&#x20AC;&#x2122; A380, accounting for more than 40% of the total A380 order book. In 2013 Airbus delivered 13 A380s to Emirates which represented 50% of the total A380 deliveries that year. Whilst Emirates has been operating A380s for 6 years, after placing the original order more than 13 years ago, the employment generation in Frontierâ&#x20AC;&#x2122;s analysis is only calculated for 2013. This impact can however be

projected for the duration of the delivery schedule. Airbus estimates that Emiratesâ&#x20AC;&#x2122; A380 deliveries support the employment of 41,000 direct, indirect and induced jobs in Europe. 70% of these jobs are split equally between France and Germany, with the UK having 17% and the remaining 5,000 jobs in Spain. According to Frontier these 41,000 jobs have a significant impact on the European economy, specifically as they are highly skilled roles and impact a high-value supply chain, creating a significant multiplier effect in countries where Airbus has aircraft production sites.

QUANTIFYING THE VALUE OF EMIRATESâ&#x20AC;&#x2122; CONNECTIVITY

Some of Emiratesâ&#x20AC;&#x2122; European competitors have in the past accused the airline of overcrowding existing routes and stealing traffic, but the Frontier analysis paints a different picture. Traditionally, international travel from Europe involved flying from or often backtracking to one of the big European hubs such as Amsterdam Schiphol, London Heathrow, Paris Charles de Gaulle and Frankfurt. This contributed to a connectivity gap for other major European cities, restricting their ability to develop trade and Foreign Direct Investment (FDI) opportunities. Since launching services to Europe in 1987, Emirates has helped bridge this gap, by gradually and on the basis of demand, increasing services to major and secondary cities across Europe. The Frontier analysis covered 29 destinations in 16 EU Member States, and

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

ccording to Frontierâ&#x20AC;&#x2122;s analysis, Emiratesâ&#x20AC;&#x2122; direct employment in Germany is one of the highest in the EU countries it operates to â&#x20AC;&#x201C; leading to higher indirect and induced employment and ultimately a greater impact on GDP. Among the four points Emirates serves in Germany, Hamburg has the least number of intercontinental destinations, and Emirates PZ [OL VUS` VWLYH[VY [V VÉ&#x2C6;LY H KPYLJ[ JVUULJtion to the Gulf Cooperation Council area (GCC). )` VÉ&#x2C6;LYPUN H \UPX\L KPYLJ[ JVUULJ[PVU MYVT Hamburg, Emirates provides more than \UPX\L VUL Z[VW JVUULJ[PVUZ IL[^LLU /HTI\YN HUK [OL YLZ[ VM [OL ^VYSK ]PH Dubai. (U LZ[PTH[LK WHZZLUNLYZ Ă&#x2026;L^ VU [OLZL \UPX\L VUL Z[VW YV\[LZ PU 0U H â&#x20AC;&#x2DC;no Emiratesâ&#x20AC;&#x2122; scenario, these passengers ^V\SK OH]L ILLU MVYJLK [V \ZL [^V Z[VW alternatives. By bridging this connectivity gap Emirates is positively impacting trade, [V\YPZT HUK -+0 (KKP[PVUHSS` ,TPYH[LZÂť VWerations and Airbus purchases create a total VM QVIZ HJYVZZ .LYTHU` M\Y[OLY contributing to GDP.

identified 220 routes from Europe that are unique to Emirates. 21 of these are direct connections from European cities to Dubai, and the remaining routes are unique one-stop connections, via Dubai. Using any other airline or alliance on these unique routes would require an additional stop. Frontier concludes that the connectivity provided through the 220 unique routes positively impacts FDI and trade by supporting the development of regional centres, increasing tourism and providing choice for the consumer. In addition to the 82,100 direct, indirect and induced jobs, they estimate that 2,900 jobs are facilitated through the catalytic impact of the 220 uniqueconnections, equivalent to â&#x201A;Ź 215 million of GDP. The report also provides in-depth analysis of the number of routes where Emirates provides substantially greater connectivity.

risk

Achieving CHANGE

{ECONOMY}

GLOBAL FINANCIAL SERVICES ORGANISATIONS ARE STRUGGLING TO ALIGN RISK MANAGEMENT FRAMEWORKS, CULTURE, AND TALENT

n 2014, the Deloitte Global Human Capital group conducted a survey of business leaders to understand the implications of risk and regulatory changes on organisation, culture and talent across the globe. The survey included 59 respondents from 13 countries around the world, representing global senior FSI leaders (CEOs, CFOs, CHROs and CROs). The Risk, Culture, and Talent in Global Financial Services report released by Deloitte Touche Tohmatsu Limited (Deloitte Global) revealed that, while significant progress has been made to control risks through process, rules and governance, financial services organisations are still struggling to align risk management frameworks with their organisation, culture and talent to achieve change. The report also identifies the cultural and talent issues business leaders are grappling with in response to their risk and regulatory environment and examines what organizations are doing to address these issues. “At Deloitte we believe executives and business leaders must work together to drive change in order to create an environment that can quickly adapt to the ever changing demands of the regulatory landscape,” said Heather Stockton, Deloitte Global Human Capital Financial Services Industry Leader. “Our goal with this report is to explore these opportunities and help enable a dialogue among

EMBEDDING RISK PRACTICES IN THE FABRIC OF THE ORGANISATION IS AN ENABLER OF SUCCESS AND LONGEVITY

key business leaders on how to address the importance of organization, culture and talent in managing organisational risk.” The global survey findings offer four key areas of opportunity for organisations to navigate the current and future regulatory environment: · Review risk management programmes: Only 36% of respondents indicated that HR risks are included as part of the risk management framework, suggesting an opportunity to expand risk management’s focus on people in addition to controls. · Reinforce the need for increased CXO accountability: 67% of respondents said that active leadership involvement is required to manage risk. C-suite leaders and the board must serve a more prominent role in driving risk governance and demonstrate stewardship in managing risk. · Reframe talent, compensation and performance management programmes: Compensation and rewards are falling behind performance management in ensuring alignment with the risk framework. Among those surveyed, there is without a doubt a strong momentum to addressing talent management (80% of respondents) and culture (69%) in light of increased regulation and risk requirements. · Refine the culture to move toward one of trust and ‘risk intelligence’: 61% percent of respondents have seen no increase in behavioural indicators, such as personal responsibility for the management of risk; and 57% of respondents have seen no increase in the alignment of individual interests, values, and ethics with those of the organisation’s risk strategy, appetite, tolerance, and approach. “This report makes it clear that, in order to be successful in today’s highly regulated environment, business, talent and risk leaders across the organisation must engage in continued, focused and open dialogue,” said Stockton. “Financial services organisations that consider how they can reinforce, reframe and refine their approach to risk management will be well-po-

sitioned to demonstrate that embedding risk practices in the fabric of the organisation is an enabler of success and longevity.”

B BOOK RREVIEW THEETRILLIOND TRILLION DOLLAR ECONOMISTS: HOW ECONOMISTS AND THEIR IDEAS HAVE TRANSFORMED BUSINESS BY ROBERT LITAN (JOHN WILEY & SONS, 2014) R.R.P. £26.99 (£18.35 FROM AMAZON.CO.UK)

L^ LJVUVTPZ[Z HJ[\HSS` MVYLJHZ[ the economy's performance. 0UZ[LHK [OL I\SR VM [OL WYVMLZZPVU PZ JVUJLYULK ^P[O OV^ THYRL[Z ^VYR HUK OV^ [OL` JHU IL THKL TVYL LɉJPLU[ HUK WYVK\J[P]L [V NLULYH[L [OL [OPUNZ WLVWSL ^HU[ [V I\` MVY H IL[[LY SPML Litan is one of the most brilliant and versatile economists of the modern age and his IVVR VU [OL OPZ[VY` VM LJVUVTPZ[ PUUV]Htors presents some of the most important people in economics and their contribu[PVUZ [V TVKLYU ZVJPL[` -\SS VM PU[LY]PL^Z ^P[O SLHKPUN LJVUVTPZ[Z HUK PUK\Z[Y` SLHKLYZ P[ KLZJYPILZ [OL ^H`Z PU ^OPJO LJVUVTPZ[Z OH]L OLSWLK ZOHWL [OL ^VYSK – in some cases, dramatically enough to IL YLJVNUPaLK ^P[O H 5VILS 7YPaL ( KL[HPSLK KPZJ\ZZPVU VM OV^ LJVUVTPZ[Z [OPUR HIV\[ [OL ^VYSK HUK [OL WHJL VM M\[\YL innovation leads to an examination of the YVSL PTWVY[HUJL HUK SPTP[Z VM [OL THYRL[ and economists’ contributions to business and policy in the past, present, and future. ;OPZ PZ HU PUZPKL Z[VY` VM IYLHR[OYV\NOZ MYVT TH[JOTHRPUN [V TH[OLTH[PJHS WYVNYHTTPUN MYVT ÄUHUJPHS ^PaHYKY` [V [OL deregulation movement.

THE INTERNATIONAL INVESTMENT, FINANCE & PROFESSIONAL SERVICES MAGAZINE OF CYPRUS

Gold 75

russia

{TAX&LEGAL}

DE-OFFSHORISATION

THE IMPLICATIONS OF THE NEW RUSSIAN LAW FOR USERS OF CYPRUS HOLDING AND FINANCE STRUCTURES

By Philippos Aristotelous and Stavros Supashis n 24 November 2014, the Russian President, Vladimir Putin, signed Federal Law No. 376FZ, which introduces the long-anticipated Russian de-offshorisation measures. The new law, which will take effect from 1 January 2015, has gone through several changes since the first draft was published for consultation in March 2014. While the enactment of the Law brings an end to the initial uncertainties, it is widely expected that it will be refined and amended in the light of experience of its operation once it is in force. Since Cyprus is one of the principal portals for investment into Russia (in 2013 it accounted for US$ 22.7 billion, more than 13% of Russian inward investment) the changes are of great importance for users of Cyprus structures.

CFC rules

The Law defines a CFC (Controlled Foreign Corporation) as a foreign company that is not tax resident in Russia and that is controlled by organisations or individuals that are Russian tax residents. For the purposes of the Law, the thresholds for an individual to be regarded as having controlled are:

· ownership of a participating interest (direct, indirect or direct and indirect combined) of more than 25% in the organisation in his or her own right or in conjunction with close relatives (his spouse and minor-age children) and other associates (as defined in the transfer pricing rules set out in clause 2 of Article 105.1 of the Tax Code); or · ownership of a participating interest (direct, indirect or direct and indirect combined) of more than 10% in the organisation in his or her own right or in conjunction with close relatives (his spouse and minor-age children) and other associates, if Russian tax residents, alone or jointly with their spouses, minor children and other associates directly or indirectly have an interest of over 50%. For a transition period ending on 1 January 2016, the threshold for both tests will be 50%. In addition, an individual or entity may be treated as a controlling person despite these conditions not being met if they exercise a decisive influence on the distribution policy of a CFC either due to their participation in its share capital, under an agreement governing its functions or due to implications of their relationship with the CFC. A number of categories of foreign CFCs are excluded from the scope of the CFC rules subject to the taxpayer providing documentary evidence to substantiate the exemption.

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

CFC taxation and profit calculations

From 2015 onwards, income of a foreign CFC will be subject to the following rates of tax: · 20% if the CFC is controlled by a legal entity; · 13% if the CFC is controlled by an individual. The profit of a foreign CFC that is resident in a country with which Russia has a double tax agreement will be calculated in accordance with its audited financial statements. For other companies, profit will be calculated in accordance with chapter 25 of the Russian tax code. A CFC’s profit is reduced by the amount of dividends paid out of that profit and by Russian tax paid on the profit of the CFC, including Russian corporate income tax on the profit of any permanent establishment it has in Russia. The threshold above which profits of CFCs must be included in a Russian taxpayer’s tax base will be RUB 50 million (approximately €956,000) for 2015 and RUB 30 million (approximately €574,000) for 2016. Following the expiry of the transitional period, from 1 January 2017 the threshold will be RUB 10 million (approximately €190,000).

SINCE CYPRUS IS ONE OF THE PRINCIPAL PORTALS FOR INVESTMENT INTO RUSSIA, THE CHANGES ARE OF GREAT IMPORTANCE FOR USERS OF CYPRUS STRUCTURES The Law introduces specific rules regarding the determination of losses of foreign CFCs. Such losses may be carried forward indefinitely provided the CFC has already been disclosed to the tax authorities.

Penalties in relation to CFCs

The penalty for non-payment or underpayment of tax as a result of non-inclusion in the tax base of a share in the profit of a CFC remains unchanged at 20% of the amount of unpaid tax or RUB 100,000, whichever is higher. However, a grace period has been introduced in the Law: no penalty will be charged for the tax periods 2015 to 2017 inclusive. A penalty of RUB 100,000 will be imposed for failure to notify the tax authorities of participation in a CFC, or for failing to provide the tax authority with information or for submitting inaccurate information on a controlled entity.

Notification requirements

The Law imposes various reporting obligations on taxpayers, including the obligation to notify the tax authorities of any participation in: · foreign organisations (either directly or indirectly) of more than 10%; · foreign structures not involving the formation of a legal entity (whether as a beneficiary or in any other capacity). The time allowed for notifying the tax authorities of participation is one month from the date where grounds for such obligation arose (1 April 2015 if they arose before the Law entered into force). In relation to CFCs the notification must take place no later than 20 March of the year following the tax period in relation to which the profits of the CFC must be accounted for (the first deadline is 20 March 2016).

Disclosure of participants in companies and structures that own property in Russia Foreign companies and structures not involving the formation of a legal entity that have property taxable in Russia are required to provide the tax office responsible for the area in which the property is located with information on the participants in the company or structure, including disclosing the indirect participating interest of any individual or public company whose direct or indirect interest exceeds 5%.

Failure to provide this information or delay in providing it will incur a penalty equal to the tax calculated on the company’s property, which will be allocated between the participants by reference to their participation percentage.

Determination of tax residence of legal entities by place of management

The Law sets out rules for determining the tax residence of legal entities, providing greater certainty and consistency than hitherto. A company incorporated overseas is to be regarded as tax resident in Russia if it is tax resident in Russia under an international taxation agreement or if its place of effective management is in Russia. The place of effective management is determined according to three main criteria, namely, the location of the majority of the meetings of the board of directors or equivalent management body, the location of the executive management of the organisation and the location in which the key executives principally operate. The CFC rules will not apply to companies that voluntarily choose to be treated as tax resident in Russia. Foreign companies that are resident in a country that has a tax treaty with Russia and that are tax residents of that foreign country under the treaty may opt for such treatment. The scope of this provision has not been clarified until now.

Effects on Cyprus structures

Although Cyprus has a comprehensive double taxation agreement with Russia, which includes up-to-date information exchange arrangements, the Cyprus corporate tax rate of 12.5% is below the effective tax rate (generally 15%) required for exemption on the basis of the effective tax rate. Companies that are holding companies and whose income is principally characterised as passive will also be affected by the proposals as they stand. The current double taxation agreement between Cyprus and Russia provides that until 1 January 2017 gains on shares in property-rich companies will be taxable only in the country of residence of the disponor. The proposal to tax such gains in the country in which the property is located is incompatible with this and, under the Vienna Convention on the Law

of Treaties, to which both Russia and Cyprus are parties, Russia is bound by its obligations under the agreement. These issues will clearly need to be resolved at an early stage. In the meantime it would be prudent for users of Cyprus structures (and indeed structures involving other jurisdictions) for investment into Russia to carry out an analysis of the companies and other entities involved in order to assess the possible implications in terms of future tax costs and develop strategies for mitigating them.

BBOOK O RREVIEW EUU SECURITIE SECURITIES AND FINANCIAL MARKETS REGULATION BY NIAMH MOLONEY (OUP OXFORD)

R.R.P. £145 (£145 FROM AMAZON.CO.UK) his is the third edition of the highly successful and authorita[P]L TVUVNYHWO ÄYZ[ W\ISPZOLK as EC Securities Regulation. Almost entirely recast and re-written MYVT [OL ZLJVUK LKP[PVU [V YLÅLJ[ [OL JOHUNLZ ^YV\NO[ I` [OL .SVIHS Financial Crisis, it adopts the in-depth contextual and analytical approach of earlier editions and so considers the market, political, international, institutional and constitutional context of the new regulatory and supervisory regime, and the underlying forces which have shaped it and will continue to do so. It WYV]PKLZ [OL ÄYZ[ JVTWYLOLUZP]L JYP[PJHS and contextual account of the vast new Y\SL IVVR ^OPJO UV^ HWWSPLZ [V [OL ,< ÄUHUJPHS THYRL[ PU [OL HM[LYTH[O VM [OL seismic reforms which have followed the ÄUHUJPHS JYPZPZ ;VWPJZ JV]LYLK PU KLW[O include the AIFMD, EMIR, the Short SellPUN 9LN\SH[PVU [OL UL^ THYRL[ HI\ZL and transparency regimes, the rating HNLUJ` YLNPTL [OL <*0;: 0= =0 YLMVYTZ HUK 4P-0+ 00 4P-09 ;OL IVVR HSZV JVUsiders in detail the potential impact of the Single Supervisory Mechanism for L\YV HYLH IHURZ VU [OL Z\WLY]PZPVU VM [OL ,< ÄUHUJPHS THYRL[

info: Philippos Aristotelous, Advocate-Partner, and Stavros Supashis, Legal Consultant, work in the Corporate and Commercial Department at Andreas Neocleous & Co LLC.

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Gold 77

atlernative investments

{LIFESTYLE}

IT WAS A VERY GOOD YEAR… ANOTHER YEAR PROVES PROFITABLE FOR ALTERNATIVE ASSETS, WHICH HAVE ENJOYED A STELLAR 12 MONTHS OF RECORD-BREAKING SALES. By Chloe Panayides

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

s 2014 comes to a close, many are still rather confused by the state of the investment climate the world over. Standard investment portfolios are still struggling to regain their composure following the harmful financial domino effect emanating from the Lehman Brother’s collapse in 2008, which saw robust financial centres stumble, and lesser ones crumble. Alternative assets – that is, non-traditional assets with potential economic value that would not be found in a standard investment portfolio – have nevertheless held up their end of the bargain in retaining value. In fact, alternative assets harbour a unique asset unto themselves: their sales are spurred by fervent passion, as opposed to mere number-crunching, and their value is measured by the joy they will inspire in prospective owners. And, indeed, buyers were sharing their passion aplenty in 2014, with numerous sales shattering previous world records held. Enjoy Gold’s picks of the most distinguished sales of the season.

ART

What: Georgia O’Keeffe’s Jimson Weed (White Flower No. 1) Date: November 20, 2014 Distinction: Highest price ever recorded for an auctioned piece of art by a woman

ainted in 1932, Jimson Weed (White Flower No. 1) exhibits one of Georgia O’Keeffe’s most enduring motifs: her innovative renderings of magnified flowers. As a subject, the flower embodies one of mankind’s greatest challenges: the ease with which the beauty in the details of such small forms is overlooked. Beginning in the 1920s, O’Keeffe thus resurrected the coy flower from the oblivion of people’s fast-paced lives, deciding to paint them on a large scale so that “even busy New Yorkers” would be awe-struck, and inspired to stop and appreciate the unique sensory experience of nature.

CLASSIC CARS

$44.4 million

Coming up for sale on November 20, 2014 at Sotheby’s New York, the classic flower painting was modestly marked with a pre-sale high estimate of $15 million. An intense bidding war ensured, resulting in the hammer falling on $44.4 million. O’Keeffe’s painting has far surpassed the previous record held for a piece of art by a female artist, which was an untitled work by Joan Mitchell that sold for $11.9 million in May. Just one year previously, in November 2013, Francis Bacon’s Three Studies of Lucien Freud earned the record for highest auction price achieved for a male artist, reaping

$34.65 million

$140 82 million. illi $140.82 Indeed, artwork by revered artists has been gaining considerable traction of late. One need only look at the sale history of Jimson Weed (White Flower No. 1) for affirmation. It has been sold twice before by Sotheby’s: once in 1987, when it achieved $990,000, and again in 1994, for $1 million.

ALTERNATIVE ASSETS HARBOUR A UNIQUE ASSET UNTO THEMSELVES: THEIR SALES ARE SPURRED BY FERVENT PASSION, AS OPPOSED TO MERE NUMBER-CRUNCHING

What: 1962 Ferrari 250 GTO Date: August 14, 2014 Distinction: Most expensive car ever sold at auction

COMIC BOOKS

t seems fitting that, in the throes of this year’s sweltering summer, the classic car market would heat up to explosive proportions: on August 14, Bonhams sold a 1962 Ferrari 250 GTO for a record-breaking $34.65 million. The previous record, a Mercedes-Benz racer sold in the summer of 2013 for $31.6 million, pales in comparison. “The market right now is just so strong,” explained Marcel Massini, a leading Ferrari historian and adviser to collectors. “And this is one of the big prizes in the entire collecting world.” Ferrari only ever manufactured 39 250 GTOs, which would go on to dominate 1960s culture, enduring still today as the holy grail of classic sports cars. Rare in number, GTOs also seldom make their way to auction: in fact, experts suggest that it has been over a decade since a GTO was last sold at auction. Defying the growth trajectory of other classic cars, the GTOs are now considered in a class of their own: not long ago, the cars were selling for $10 million.

$3.2 million

What: Action Comics No. 1 Date: August 24, 2014 Distinction: Highest price ever paid for a comic book

onsidering that the world of media has been inundated with comic book-inspired movies of late – excitingly portraying heroes from Superman and Batman, to Spiderman, the Hulk, Iron Man, and more – it doesn’t seem surprising that the original comics from which said characters have been borne are regaining traction in the market. In 2011, just as the onslaught of movies and associated TV shows was beginning, a copy of Action Comics No. 1 sold for $2.1 million. Fast forward three years later, and another copy of said comic came up for auction on eBay, selling for $3.2 million. Indeed, it has been recognised with a grade of 9.0 from the Certi-

fied Guaranty Company, the highest grade ever assigned to a copy of Action Comics No. 1: not bad for a 76-year old comic. Only 50 unrestored original copies of Action Comics No. 1 reportedly still exist. The seller, collectibles dealer Darren Adams, described the worth and value of the comic book on the eBay page thus: “This comic features not only the first appearance of Superman, Clark Kent and Lois Lane, but this comic began the entire superhero genre that has followed during the 76 years since. It is the Mona Lisa of comics.”

THE INTERNATIONAL INVESTMENT, FINANCE & PROFESSIONAL SERVICES MAGAZINE OF CYPRUS

Gold 79

atlernative investments

DIAMONDS

What: 9.75-carat fancy vivid blue diamond Date: November 20, 2014 Distinction: World auction record for any blue diamond

iamonds have long endured as examples of rarity and perfection. Imagine, then, the discovery of an intense blue-hued diamond and the value it may command if brought to market. Thankfully, our imaginations needn’t work too hard, for on November 20, a 9.75-carat fancy vivid blue diamond from the collection of Mrs. Paul Mellon sold for more than $32.6 million, shattering its high estimate of $15 million. The Sotheby’s New York sale not only set a world auction record for any blue

$32.6 .6 million on

diamond: at more than $3.3 million per carat, it set a world auction record for any diamond at priceper-carat. The previous auction record for any blue diamond was $24.3 million, set by the Wittelsbach Diamond at Christie’s London in December 2008. The previous per-carat auction record for any diamond was nearly $2.4 million, set by a 14.82 carat fancy vivid orange diamond at Christie’s in Geneva in November 2013

MOVIE MEMORABILIA What: Cowardly lion costume, The Wizardd of Oz Date: November 24, 2014 Distinction: 20.6% growth per annum since nce its last sale in 2006

he Cowardly Lion burst forth in full technicolour in the Land of Oz in 1939, settling deep within people’s hearts the world over. Generations fondly remember his struggle to find courage, and his loyalty ty d to friends who extended kindness and consideration. On November 24, 2014, actor Bertt Lahr’s Cowardly Lion costume, as worn orn when bringing this beloved movie to life, came up for auction at Bonhams’’ TCM sale in New York, reaping a grand $3 million. Considering its last sale in 2006 garnering $826,000, this figure equates es with 20.6% growth per annum. MGM designer Adrian Gilbert was responsible for the iconic look of the suit, which is made from genuine African lion pelts. Herbert Lahr, Bert’s ’s son, fondly recalls: ““The Lion’s suit was very interesting. It was a real lion skin, and it weighed 60 lbs. My dad had to be in it all day; he couldn’t eat because of the way the mask was, so he had to eat his lunch through a straw.””

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

$3 million

THE HOLY GRAIL OF ROCK LYRICS HAS TAKEN ITS RIGHTFUL PLACE AS THE MOST EXPENSIVE POPULAR MUSIC MANUSCRIPT SOLD AT AUCTION.

SONG LYRICS

$2.19 million

What: Bob Dylan, Like a Rolling Stone Date: June 24, 2014 Distinction: Highest paid for at auction for a popular song manuscript

ob Dylan began life as Robert Zimmerman in unassuming origins in Minnesota. a. The US’ mid-westt would take on a life of its own in Dylan’s musical work as it evolved, as would issues such as social and political corruption, truth, love, and drugs. The poet of the people, named the most influential cultural figure alive, and considered on numerous occasions for a Nobel Prize for Literature, Dylan has carved a place for himself in history that transcends his small beginnings busking on the streets of New York. As such, when handwritten lyrics to the hallmark anthem of the ’60s, Like a Rolling Stone came up for auction, few doubted the impact it would have on the market. In the first dedicated music history sale in a decade — entitled, ‘Rock & Roll History: Presley to Punk’ — Sotheby’s presented the manuscript to great acclaim, with the winner bidder committing $2.19 million to bring it in to his possession. The previous record was set in 2010 when John Lennon’s handwritten lyrics for A Day in the Life sold for $1.2 million. Richard Austin, Head of Books and Manuscripts at Sotheby’s New York commented: “The Holy Grail of rock lyrics has taken its rightful place as the most expensive popular music manuscript sold at auction.”

POSTAGE STAMPS What: 19th Century One-Cent Magenta, British Colonial Guyana Date: June 17, 2014 Distinction: World record price paid for a postage stamp

roof that the verve of stamp collecting has not wilted with years, an incredibly rare 19th century postage stamp – a onecent magenta from British colonial Guyana – sold for $9.5 million in June 2014, setting a new world record for the most ever paid for a stamp. The Sotheby’s auctioneer began bidding began at $4.5 million: within two minutes, an anonymous bidder had committed the mighty figure of $9.5 million to acquire it. “With the premium, the stamp has just sold

WATCHES

What: Henry Graves ves Jr. Supercomplication lication pocket watch Date: November 11, 2014 Distinction: Mostt ever paid for a timepiece ece

$24 million

t seems fitting that hat it was in the th heart h of Geneva that the record price paid for a timepiece was achieved on November 11, 2014. In the home of fine watchmaking, it was indeed a Swiss-made pocket watch that took home the coveted record, selling for $24 million. The Henry Graves Jr. Supercomplication – designed by Patek Philippe – is named after a New York banker who competed with the car manufacturer James Ward Packard to commission the most elaborate watch possible in the early 20th century, the Wall Street Journal reports. Elaborate indeed: the timepiece boasts 24 complications (features), including the showing of moon phases, the time of the sunset, and a perpetual calendar that won’t require resetting until the year 2100. Sotheby’s has since said that the sale of the watch re-established its supreme status as the most valuable timepiece in auction history, beating the $11 million record set in 1999.

$9.5 n million

for approximately $9.5 million, which means it has set a new world record price for a stamp,” David Redden, Sotheby’s director of special projects, told a packed room in New York. Sotheby’s said the previous auction record for a single stamp was $2.2 million, set by the Treskilling Yellow in 1996. Made in 1856 in Guyana and measuring just 2.54 by 3.18 centimetres, the one-cent magenta is octagonal, printed in black ink and bears the initials of the postmaster. Redden had described the stamp

WINE

as having “extraordinary fame and charisma” and being in remarkable condition given it is more than 150 years old. According to the auction house, the stamp is the only surviving example of a one-cent magenta; so rare that it is missing even from the British Royal Family’s philatelic collection.

$1.6

million What: 114 bottles of Romanee-Conti Burgundy Date: October 4, 2014 Distinction: Most expensive wine lot ever sold

BOOK REVIEW MORIARTY

BY ANTHONY HOROWITZ (ORION, 2014) R.R.P. £19.99 (£9.00 FROM AMAZON.CO.UK)

Sotheby’s auction in Hong Kong in early October 2014 broke the world record for the most expensive lot of wine ever sold, with 114 bottles of Burgundy going for $1.6 million. This is perhaps not so surprising, if one considers that, according to Vinexpo, China overtook France in 2013 as the world’s largest consumer of red wine, drinking more than 1,865 billion bottles a year. The collection of Romanée-Conti, one of the world’s most sought-after Burgundy labels, sold for the equivalent of $14,121 per bottle or $1,700 per glass. The lot contained six bottles of each of the 19 vintages made from 1992 to 2010. The previous record for a single lot of wine – also held by Sotheby’s – was $1.05 million for 50 cases of top Bordeaux Chateau Mouton Rothschild 1982, sold in New York in 2006. “The RomanéeConti superlot presented a once-in-a-lifetime opportunity to acquire an unprecedented quantity of the world’s most desirable wine,” Robert Sleigh, head of Sotheby’s Wine in Asia explained. “It is only fitting that it has broken the world record to become the most valuable wine lot ever sold at auction.”

his is the second Sherlock Holmes novel written by Anthony Horowitz and authorised by the Arthur Conan Doyle estate. The House of Silk, published in 2011 was very much a ‘Holmesian’ novel, with Sherlock and Doctor Watson playing major roles in the investigations. This story, however, starts with the news that Holmes and his arch-enemy Moriarty have fallen to their doom at the Reichenbach Falls. The death of Moriarty has created a poisonous ]HJ\\T ^OPJO OHZ ILLU Z^PM[S` ÄSSLK I` H ÄLUKPZO UL^ JYPTPUHS THZ[LYTPUK who has risen to take his place. Frederick Chase, a Pinkerton Agency Senior Investigator, is now in Europe on the tail of the new threat. Chase, a devoted student of Holmes’ methods of investigation and deduction, must forge a path through the darkest corners of the capital to shine light on this shadowy ÄN\YL /VYV^P[a VUJL HNHPU IYLH[OLZ SPML into the world created by Arthur Conan Doyle. With pitch-perfect characterisation and breathtaking pace, Horowitz weaves a relentlessly thrilling tale which teases and delights by the turn of each page.

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Gold 81

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Johny Abuaitah 7KH &(2 RI :LQGVRU %URNHUV RQ ZK\ KH QHYHU EHFDPH D SURGXFWLRQ HQJLQHHU LQ KLV IDPLO\ÂˇV SODVWLFV IDFWRU\ ZKDW KH ORYHV DERXW OLYLQJ LQ &\SUXV DQG ZKDW GHDOLQJ LQ PRQH\ KDV WDXJKW KLP DERXW UHDO YDOXHV Â´,ÂˇP QRW DQ HDUO\ ULVHU and if I donâ&#x20AC;&#x2122;t have my eight hoursâ&#x20AC;&#x2122; sleep Iâ&#x20AC;&#x2122;ll have a bad day so I donâ&#x20AC;&#x2122;t usually get up until around 8.30am. I need to monitor the global financial markets on a 24-hour basis and so my working day tends to be from 10am to 8pm. I live in Limassol with my wife and our two children so, although we never have breakfast all together, lunch with the family is a must every day. When I wake up I do a bit of exercise â&#x20AC;&#x201C; stretching, push-ups, a little treadmill â&#x20AC;&#x201C; and then I spend at least 45 minutes talking about family matters with my wife. We check the news over breakfast too, so as soon as I reach the office, I am up-to-date and ready to work. The moment I switch on my computer there will be lots of messages waiting for me â&#x20AC;&#x201C; urgent matters requiring an immediate decision or requests for a brief meeting. Once I have dealt with them, I spend 90 minutes on my e-mails and I go back to them after 6pm once my afternoon meetings have finished. My familyâ&#x20AC;&#x2122;s business, based in Bethlehem, was one of the biggest manufacturers of plastics in the Middle East and the plan was for me to join the business when I finished

my studies. I was interested in production engineering but when I was 17 and doing my A levels in England â&#x20AC;&#x201C; as well as trying to learn the language! It was quite an experience! â&#x20AC;&#x201C; I realised that I preferred accounting and computing and in the end I did a double major in those two subjects at the University of Leicester and then a Masterâ&#x20AC;&#x2122;s in Systems Analysis at City University, London. I didnâ&#x20AC;&#x2122;t simply want to go into the family business. I wanted to prove myself with something new and I was hoping to convince my father to set up a business assembling computers, which didnâ&#x20AC;&#x2122;t exist in the Middle East at the time â&#x20AC;&#x201C; this was 30 years ago. While I was away, however, my father retired to Cyprus where he decided to establish the islandâ&#x20AC;&#x2122;s first licensed financial services firm and he invited me to join him. I agreed and I have never regretted my decision. My job is very exciting. Financial markets are changing all the time and every day is a new day. I actually love the fact that decisions have to be taken fast as I donâ&#x20AC;&#x2122;t like to delay things. In recent years I have changed my schedule so as to have more time with the family. Until 4-5 years ago, I would go home and continue working until

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

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midnight but there came a time when I decided that I needed to delegate certain responsibilities to others. I also changed the amount of travel I was doing for the same reason. In the evening we donâ&#x20AC;&#x2122;t watch much TV and Iâ&#x20AC;&#x2122;m not usually the one who will suggest going to the cinema although I do go on special occasions. The last movie I saw on the big screen was Papadopoulos & Sons. If weâ&#x20AC;&#x2122;re not going out we will see friends and talk. I donâ&#x20AC;&#x2122;t read for pleasure â&#x20AC;&#x201C; I have enough business-related material to read! â&#x20AC;&#x201C; but I listen to audiobooks or downloaded radio programmes at night before I fall asleep. I love music and I still play drums. I used to be more into heavy rock but now I prefer softer

sounds. My favourite singer is still Rod Stewart. Iâ&#x20AC;&#x2122;ve never been into classical music but I like choral music very much. I enjoy some Greek music, too, and I love the songs and style of Dimitris Mitropanos. In many ways theyâ&#x20AC;&#x2122;re quite close to the music of my own country and they just take me awayâ&#x20AC;Ś Perhaps because I am dealing in money 24 hours a day, I have come to realise that there is more to life. In the last few years I have lost several people who were important to me, who were working hard, wanting to make money for their families and suddenly they were gone. When that happens, it makes you realise that there has to be a proper balance: friends, family and a social life are very important. Itâ&#x20AC;&#x2122;s also important that we always have a dream, in life and in business. It would be very nice to have 1,000 employees and branches in every country but I am not going to spoil everything to try and make it happen. Itâ&#x20AC;&#x2122;s good to move up gradually, one step at a time. This has always been my fatherâ&#x20AC;&#x2122;s philosophy and I have adopted it as my own. I like the fact that I can go home for lunch in just seven minutes every single day and I can call friends at 9pm and arrange to meet up with no pre-planning. This doesnâ&#x20AC;&#x2122;t happen in London or New York! I donâ&#x20AC;&#x2122;t think I could live anywhere else now. Iâ&#x20AC;&#x2122;m used to this way of living and I am very happy to be here.â&#x20AC;?

www.vacheron-constantin.com

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