Gold 18 August by INBusiness

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ISSUE 17 AUGUST 2012 PRICE €6.95

THE INTERNATIONAL INVESTMENT, FINANCE & PROFESSIONAL SERVICES MAGAZINE OF CYPRUS

A new generation is driving the services sector

Talented Young Professionals

+ TONY CHRISTODOULOU, THEO PARPERIS, CONSTANTINOS ROUSSOS FRAUD

How to safeguard your organisation’s assets

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OPINION

Irakli Bukhiashvili Constantinos Charalambous Theo Panayotou

UNDER ATTACK!

Anti-piracy law comes into force

PLUS:

MONEY / BUSINESS ECONOMY TAX & LEGAL LIFESTYLE

01/08/2012 10:12

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

As well as being an EU country and a member of the European Monetary Union since 2008, Cyprus enjoys the lowest corporate tax rate in the EU of 10%. Cyprus belongs to those jurisdictions on the OECD White List which have substantially implemented the internationally agreed tax standard. In addition to this, Cyprus provides efficient business services, has a transparent legal and regulatory system and is committed to sustainable growth.

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

communication

system,

banking system, infrastructure in general and last but not least its highly educated labor force.” Captain Dirk Fry, Managing Director Columbia Ship Management Ltd

“The the

favorable excellent

infrastructure,

business

climate,

telecommunications the

well

educated

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

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

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

gold cover me diafimiseis.indd 2

Gradually, NCR managed to expand the office in Cyprus to cover also all the African Countries.” Managing Director of NCR Cyprus, Mr. George Flouros

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

01/08/2012 09:29

www.pwc.com.cy

Value created from the knowledge of our people We are striving to offer our clients the value they are looking for. To achieve this we draw from the knowledge of our international network, and the experience of our teams adapted to your specific needs. Our strength lies on our people -almost 1.000 skilled professionals in Cyprustheir expertise and effectiveness. In this context, we announce that as from 1 July 2012 Anna G Loizou, ACA - Assurance Services and Antonis C Christodoulides, ACA - Direct Tax Services are admitted to Partnership and appointed members of the Board of Directors of the company. Respectively: Socrates C Paschalis, ACA - Assurance & Advisory Services Stelios Demetriou, ACA - Global Compliance Services Varnavas N Nicolaou, ACA - Indirect Tax Services,and Vassilios G Vrachimis, ACA - Assurance & Advisory Services are appointed Directors of Operations.

issue 17 august 2012

08 EDITORIAL 10 UP FRONT 16 FIVE MINUTES WITH

“I believe that there is an “STRONG AND AMBITIOUS INDIVIDUALS WILL ALWAYS BE PRESENTED over-supply WITH GOOD OPPORTUNITIES AND PROFESSIONAL QUALIFICATIONS TEND of nominally TO PROVED TO BE A GOOD PASSPORT.” qualified people and an undersupply of true talent.” I am confident that Cyprus will overcome the current financial

+ OPINION CYPRUS NEEDS ITS OWN MARGARET THATCHER by Dr. Constantinos Charalambous 32

“CYPRUS IS ALREADY AN ESTABLISHED SERVICES AND FINANCIAL CENTRE. THE CHALLENGE FOR ALL OF US IS TO MAINTAIN THAT POSITION FOR THE YEARS TO COME.”

HERE COMES ANOTHER ECONOMIC MIRACLE! by Stelios Violaris 34

issues as long as appropriate measures are implemented, such as the appointment of technocrats in key positions, and collective action is taken by the relevant authorities.

“Cyprus is an easy and fun place to live “OTHER JURISDICTIONS and work, ranking relatively high on the “THERE IS A NEED HDI index and the professional pace can HAVE CAUGHT FOROUR STRUCTURALbe as fast or as slow as you set it.” UP WITH US. CHANGES AND GENERATION’S INCENTIVES “The firm I work ‘MISSION’FOR MUST ECONOMIC BE TO ELEVATE for can provide GROWTH. IF WE CYPRUS’ ROLE TO THINGS MANAGE me with the RIGHT, WE COULD THE NEXT LEVEL.”

same challenges, “INTERNATIONAL quality of work FIRMS OR FIRMS and opportunities WITH INTERNATIONAL as any London ASPIRATIONS TEND TO BE firm.” BE IN A MUCH BETTER SITUATION IN A FEW YEARS.”

CUTTING BUREAUCRACY By Irakli Bukhiashvili 62

TALENTED YOUNG PROFESSIONALS

50 58

FEATURE 46 | OCCUPATIONAL FRAUD

54 | LET’S SEE ACTION!

How to safeguard your organisation’s assets

Tony Christodoulou looks back on 40 years of PR success.

50 | LIVE-ON-LINE The new, flexible mode of study from Intercollege Globaltraining

A NEW GENERATION OF PROFESSIONALS IN CYPRUS ARE AT LAST BEING GIVEN A CHANCE TO MAKE THEIR MARK ON SOCIETY AND THE ECONOMY IN A WAY THAT WAS NOT PREVIOUSLY POSSIBLE.

BUILT ON THE PRINCIPLE OF MERITOCRACY.”

4 5

NOSTALGIA FOR THE FUTURE by Peter Economides

58 | UNDER ATTACK! Anti-Piracy Law Comes Into Force

66 68 76 80 84

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

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

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01/08/2012 07:33

KPMG Academy Upcoming Seminars: September - December 2012 The KPMG Academy training activities began in April 2009 and were met with great success. Our experienced training team has delivered 95 open or in-house seminars to approximately 2000 professionals across all industries in Cyprus and has organized 4 international conferences, on leadership, taxation and tourism. You may see below the titles of a few of the Academy’s seminars for the period September – December. AIFMD, ICIS Legislation and UCITS * Πρόσφατες Τροποποιήσεις στην περί Φ.Π.Α. Νομοθεσία Πρόσληψη και Απόλυση Προσωπικού: Μια πρακτική προσέγγιση του Κυπριακού Εργατικού Δικαίου Where we Stand? New Developments in Banking Regulation Σύστημα Παρεμπόδισης Νομιμοποίησης Εσόδων από Παράνομες Δραστηριότητες* Introduction to the Crisis Management Law Latest Trends in Investment Fund Administration, Custody and Pricing*

* The programmes have been approved by the HRDA. Enterprises participating with their employees who satisfy HRDA’s criteria, are entitled to subsidy. These seminars may contribute to Continuing Professional Development requirements.

For more information please contact: Persa Papademetriou T: +357 22209053 F: +357 22513294 E: ppapademetriou@kpmg.com Visit our website at: www.kpmg.com.cy or our web tv at: www.kpmgcy.tv

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

Grasp knowledge into your hands

UP FRONT

KANIKA GOES TO CHINA

imassol-based Kanika Developments, part of the Kanika Group of Companies, is making inroads into the Chinese market thanks to its decision to invest in the Far East. With Chinesespeaking employees and a growing cooperation with associates in China, the property company is gaining unprecedented exposure. Last month the Kanika Developments team organised and participated in five presentations in Beijing and Shanghai. Group Managing Director, Dora Onouphriou and Business Development Manager Demos Antoniou presented the company, its property portfolio and Cyprus as a growth destination for tourism and business. Against the backdrop of the major Chinese investment in the old Larnaca Airport and the launch of the non-profit China-Europe Business Zone, Dora Onouphriou notes that Kanika Developments is strengthening the Cyprus-China link and that China is seen as an emerging market for Cyprus.

FOREX TRAINING ACADEMY

X Careers is a new training academy in Limassol, offering the only fasttrack opportunity for gaining employment in the FX sector in Cyprus. The academy is a joint venture between GRS Recruitment, Cyprus’ leading recruitment agency, and ConversionPros, the retail financial industry’s leading

marketing agency. Courses will start on 1 September. During the first quarter of 2012, one in six job placements in Cyprus was in the Forex sector according to GRS and this statistic looks certain to rise as more and more existing international brokers and startups open new offices in Cyprus. “The demand for candidates is high but so is the skill gap between what brokers require and what applicants offer,” says Donna Stephenson, Director of GRS. FX Careers will take entry level students and equip them with what brokers require. Students will be taught the fundamentals of Forex trading

as well as the opportunity to specialize in one of three key skills most often required by Brokers: Marketing, Sales or Compliance. After passing the course, graduates will be awarded an internationally-acknowledged certificate. Furthermore, FX Careers has signed a high number of brokerages with operations in Cyprus to directly interview course graduates. Each graduate will have a guaranteed opportunity to be interviewed by the leading brokers operating in Cyprus. Spots are highly selective and limited. For more information, visit www.fxcareers.com or call 25342720.

DURING THE FIRST QUARTER OF 2012, ONE IN SIX JOB PLACEMENTS IN CYPRUS WAS IN THE FOREX SECTOR

Cyprus hosts European Shipping Elite

CSA (European Community Shipowners’ Associations) organised their Annual General Assembly in Cyprus for the first time on 2829 June 2012. The meeting was held in Limassol just two days before Cyprus’s assumption of the Presidency of the Council of the European Union, and took place under the auspices of the Minister of Communications and Works and the Deputy Minister for European Affairs. The General Assembly discussed issues including the continuation of EU state aid guidelines for maritime transport, piracy, and measures taken by the EU shipping industry to further reduce greenhouse gas emissions.

Donna Stephenson

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31/07/2012 10:03

Baker Tilly Klitou sponsors Cyprus book translation

he Romanian translation of Katia Hadjidemetriou’s A History of Cyprus was published in Bucharest in June 2012, thanks to sponsorship by Baker Tilly Klitou. Speakers at the official book launch, which took place under the auspices of the Embassy of Cyprus in Bucharest, included Cypriot Ambassador Kalliopi Avraam, Andreea Pastârnac, Director-General of the Romanian Ministry of Foreign Affairs, Marios Kitou, CEO of Baker Tilly Klitou, Prof. Dr. Ion Bulei of Bucharest

University and the book’s translator Christina Christodoulou-Todea. Speaking at the launch of the Romanian edition, Baker Tilly Klitou CEO Marios Klitou noted that “We are always at the forefront in co-organising, sponsoring or cosponsoring activities that could expand and develop further the relationship between Cyprus and Romania. Our Baker Tilly role in the international economic system and our ability to influence changes with regard to policies and regulations provide a great opportunity for Cyprus and Romania.”

BSM CYPRUS CELEBRATES

with a name, e-mail address and details of the course they are interested in. They will be contacted to arrange a personal interview to enrol in the program. Intercollege Globaltraining provides training and development opportunities ntercollege Globaltraining, the official for practitioners at all levels. CIPR provider of the Chartered Institute of qualifications are the only industryPublic Relations (CIPR) Professional recognized PR qualifications at Qualifications in Cyprus, Greece and Romania, Foundation, Advanced, Certificate and has announced that its next term begins in Diploma level, plus specialist short October 2012. Candidates can register for courses in Internal Communication the September/October intake by e-mail to (certificate / diploma level), for the Public info.cy@globaltraining.org, by visiting http:// Affairs Diploma and the Crisis (Response) www.globaltraining.org or calling 22841500 Communication Diploma.

CIPR COURSES AT INTERCOLLEGE GLOBALTRAINING

SM or Bernhard Schulte Shipmanagement (Cyprus) Ltd, (formerly Hanseatic Shipping Co. Ltd) recently celebrated its 40th anniversary with a Summer Dinner attended by all members of staff. BSM, founded in Cyprus in 1972, was the first offshore shipmanagement company on the island

and it has been instrumental in helping Cyprus become one of the world’s leading shipmanagement centres. In 2008 Hanseatic Shipping joined forces with three other shipmanagement organisations to establish Bernhard Schulte Shipmanagement as a unified and extremely resourceful global platform, providing an unparalleled range of maritime and engineering services.

Five PwC athletes compete in London Olympic and Paralympic Games

he PwC network is home to three people who have qualified for the London Olympic Games and two people who will represent their country at the London Paralympic Games. Marathon: Caitriona Jennings of PwC Ireland is one of three marathon runners selected to represent Ireland at the 2012 Olympic Games. Caitriona is a senior manager in the financial services tax practice. Sailing: Jenna Hansen of

PwC New Zealand is one of 12 sailors who have been selected to represent her country in London Hockey: Iain Mackay of PwC UK has a place in the Great Britain hockey squad. He is an associate in the referred accounting practice. Wheelchair basketball: Shimpei Oikawa of PwC Japan is the assistant coach of Japan’s national wheelchair basketball team taking part in the London Paralympic Games. His PwC colleague and fellow

player Reo Fujimoto will join him to represent Japan at the Games. Dennis Nally, Chairman of PricewaterhouseCoopers International Limited, says, “We are proud to have five PwC athletes taking part in the London Olympic and Paralympic Games. At PwC, we strive to give all our people the opportunity to realise their ambitions – be it professional or personal. I am delighted that our five colleagues have realised their sporting dreams.” Caitriona Jennings

THE INTERNATIONAL INVESTMENT, FINANCE & PROFESSIONAL SERVICES MAGAZINE OF CYPRUS

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31/07/2012 10:03

UP FRONT

Star Wars

CATEGORY: MOVIE

Units sold/sales: $4.54 billion in ticket sales Parent Company: Century Fox n 2009, James Cameron’s Avatar became the highest-grossing US film of all time. When receipts are adjusted for inflation, the 1939 classic Gone with the Wind remains the highest-grossing film. However, when a film franchise is considered – and accounting for inflation – nothing comes close to George Lucas’s Star Wars. The original movie debuted in 1977, grossing more than $1.4 billion. With the five films that followed, ending with Episode III: Revenge of the Sith, the franchise has grossed $4.54 billion.

iPad

CATEGORY: TABLET

Units sold/sales: 67 million units Parent Company: Apple pple released the first iPad in April 2010 and it was an instant success. Recently, the company launched the third generation of what is by far the most popular tablet computer in the world. To date, more than 67 million iPads have been sold (it took Apple 24 years to sell the same number of computers). According to one recent survey, 12% of iPad users no longer use their PC. In the education sector, Apple sells 2 iPads for every computer.

Play Station

CATEGORY: VIDEO GAME CONSOLE

Units sold/sales: 300+ million units Parent Company: Sony he first version of the Sony PlayStation, released in 1995, was the Japanese electronics manufacturer’s first foray into video games. Five years later it launched the PlayStation 2 which went on to become the most popular gaming console of all time, selling more than 150 million units by the beginning of 2011. The PS3 has been less successful but the franchise is by far the most popular in history, having sold well over 300 million units.

they were a franchise. Though both were instantaneous successes, Apple continues to release new versions of the iPad and iPhone. The 11th generation of the Toyota Coro lla, another best-selling product, hit the markets in May. The Mar io franchise has turned into 31 titles. Most, though not all, of the products on the list have reached a wide demographic. The Rubik’s Cube could be purchased and played by anyone. Harry Potter, while initially geared toward a ‘tween’ audience, was even tually enjoyed by people of all ages. Even the iPad, while generally considered a luxury item, has multiple features and price points. 24/7 Wall St. reviewed product categories that generate attention from many groups and command significant and frequ ently long-lasting loyalty. It then identified individual prod ucts that had the highest sales in their category. Toys, consumer electronics, books and movies can be passing interests. However, the most successful of these are the best-selling products of all time.

Lipitor

8 Toyota Corolla CATEGORY: CAR

Units sold/sales: 39 million cars Parent Company: Toyota he Corolla has been selling for more than four decades with the model evolving over 11 generations. Since it was first produced, Toyota has sold one Corolla every 40 seconds. The Corolla is the first and only car to achieve sales of over 30 million. (In second place is the Volkswagen ‘Beetle’ which was the first to top the 20 million mark.) In Cyprus, prices range from €15,900 for the Corolla Terra to €20,200 for the Corolla Sol-X.

CATEGORY: PHARMACEUTICAL

Units sold/sales: $125 billion revenue Parent Company: Pfizer ipitor, approved by the US Food and Drug Administration in 1997, belongs to the class of drugs called statins that help lower the level of LDL – ‘bad cholesterol’ – in the blood. By 2008 the market for drugs advertising had grown to more than $4.5 billion and in 2009 Lipitor had the largest ad expenditure of any drug. Pfizer’s patent has now expired but sales of over $125 billion represent 25% of the company’s revenue over the past 15 years.

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

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31/07/2012 09:43

COVER STORY

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EDITORIAL

Young, Gifted and Cypriot

here was a time when most Cypriots were surprised and impressed to come across a foreigner in his/her thirties in an important or high position within a company or organisation. The idea that “someone so young” could be entrusted with a considerable amount of responsibility did not reflect their own experience in a business environment where those at the top were often rapidly approaching retirement and pensionable age. Fortunately, in the private sector at least, things have changed. Cyprus has always been good at observing others and imitating the best. Moreover, the Cypriots have – thankfully – retained their longstanding realisation that a good education is probably the most valuable thing that they can give their children. The high level of academic qualifications held by thousands of Cypriot students has played no small part in the success of the professional services sector which is, at present, a key driver of the economy. This month’s cover story presents a small sample of the young professionals, men and women, who are each playing their own role in this crucial sector. It is to be hoped that, given the worryingly high level of unemployment among the under-25s not only in Cyprus but throughout Europe, ways will be found of maintaining the momentum of recruitment of talented, specialised, qualified young people in this and other sectors. Local politicians frequently tell us that the younger generation represents our future (except in politics, it seems, where things mysteriously develop at a much slower pace) and for once they are right. A major problem at present is that too many people are over-qualified for the available positions or they have impressive academic qualifications but lack hands-on experience. The universities clearly need to keep up with requirements of the business sector if today’s young people are to feel that it is worth the effort and expense of dedicating several years to obtaining a qualification. It is worth noting, however, that a university degree, while valuable, is not everything. Not everyone in the professional services sector is a Chartered Accountant or a practising lawyer, nor do they all hold a postgraduate qualification. Talent amounts to much more than a fancy diploma. Ask Tony Christodoulou, Founder and Managing Director of Action Global Communications (see page 54) who left school at 16. Of course, it’s easy to say that things were different in the ‘60s but while that is undoubtedly true, it does not necessarily mean that they were easier. Nonetheless, most of the young professionals featured in this issue of Gold believe that things will be even harder for today’s graduates to enter their particular areas of expertise than it was for them. As Dr Theodore Panayotou observes (see page 34), “Cyprus should rediscover the hard work ethic, enterprising creativity and social responsibility that led to the economic miracle in the two decades that followed the devastation of the Turkish invasion of 1974.” In recognition of those who have not only adopted the hard work ethic but have shown their faith in Cyprus as a base for their business activities, Gold and the Cyprus Investment Promotion Agency (CIPA), are jointly organising the first CIPA International Investment Awards in October. The awards, which will honour individuals, organisations and companies that have invested directly in Cyprus or contributed to the country’s economic and business development, are a tribute and a ‘thank you’ gesture to all those who have helped Cyprus establish itself as a reputable International Business Centre. There will be full coverage of the awards, the recipients and the ceremony, due to be held at the Presidential Palace in Nicosia, in our October issue. Meanwhile, enjoy this month’s presentation of 33 young, gifted Cypriot professionals. As you will see from photographer Jo Michaelides’ often playful shots, these are people who not only have the ability, the talent and the qualifications to succeed but they also know how to relax and have fun. They don’t teach that in many universities.

John Vickers, Chief Editor john@imh.com.cy

PUBLISHED BY IMH ISSN 1986 - 3543

MANAGING DIRECTOR:

George Michail

GENERAL MANAGER:

Daphne Roditou Tang

MEDIA MANAGER: Elena Leontiou EDITOR-IN-CHIEF:

John Vickers

CONTRIBUTING EDITORS:

Antonis Antoniou, Stella Mourettou, Maria Pilidou CONTRIBUTORS TO THIS ISSUE:

Irakli Bukhiashvili, Dr. Constantinos Charalambous, Peter Economides, Antigoni Fakonti, Loizos-Andreas Hajiloizos, Nathalie Kyrou, Boris Lazic, Fiona Mullen, Steven A. Newberry, Dr. Theodore Panayotou ART DIRECTION:

Anna Theodosiou SENIOR DESIGNER: Maria Kyriakou PHOTOGRAPHY:

Olesia Constantinou, Jo Michaelides MARKETING EXECUTIVE:

Kevi Chishios

SALES & BUSINESS DEVELOPMENT EXECUTIVE:

Christos Kyriakides

ADVERTISING EXECUTIVES:

Irene Georgiou, Christopher Constantinou OPERATIONS MANAGER:

Voulla Nicolaou

SUBSCRIPTIONS:

Kevi Chishios PRINTERS:

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

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

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31/07/2012 16:49

presents the

cipa International Investment Awards

The annual awards

ceremony to honour international

investors in Cyprus as well as individuals

and companies whose

contribution to the country’s transformation into an International

Business Centre deserves recognition. Presidential Palace, Nicosia October 2012 Cyprus is now a reputable international business centre, attracting companies and High Net Worth individuals to invest in the island. Tens of thousands of corporations and individuals use Cyprus companies for tax planning purposes. The provision of professional services to this community of international investors has become one of the most important sectors of the Cyprus’ economy. Gold, the international investment, finance & professional services magazine of Cyprus, and the Cyprus Investment Promotion Agency (CIPA), are jointly organising the CIPA International Investment Awards. The awards, which will honour individuals, organisations and companies that have invested directly in Cyprus or contributed to the country’s economic and business development, are a tribute and a ‘thank you’ gesture to all those who have helped Cyprus establish itself as a reputable International Business Centre.

UP FRONT

iPhone

CATEGORY: SMARTPHONE

Units sold/sales: 250 million units Parent Company: Apple n just five years, 250 million iPhones have been sold, making it the most successful smartphone to date. Research firm Strategy Analytics estimates that the iPhone has generated about $150 billion in revenue for Apple since its introduction to the market in June 2007. There are already five generations and undoubtedly more to come. With newer generations often more popular than previous ones, iPhone sales are likely to continue to grow at a healthy pace.

Rubik’s Cube CATEGORY: TOY

Units sold/sales: 350 million units Parent Company: Seven Towns Ltd. rno Rubik created the first prototype of his “Magic Cube” in Budapest in 1974. An American toy manufacturer bought the product license and renamed it Rubik’s Cube in 1980, making the puzzle an international sensation. At the height of the toy’s popularity in the mid-1980s, it is estimated that as much as one-fifth of the world’s population had tried solving Rubik’s Cube. With its eye-catching colors, affordability and the puzzle’s level of difficulty, Rubik’s Cube has maintained popularity over the years.

Mario Franchise CATEGORY: VIDEO GAME FRANCHISE

Units sold/sales: 262 million units Parent Company: Nintendo The Mario character debuted in 1981’s popular Donkey Kong franchise. Since then, the Italian plumber has appeared in dozens of titles, including at least 31 separate games that have topped 1 million unit sales. One of the sub-franchises, Super Mario, has alone sold more than 262 million units. While it is the most popular console video game franchise of all time, the Angry Birds mobile franchise, which creates phone and tablet application games, has recorded more than a billion downloads.

THE BESTSELLING PRODUCTS OF ALL TIME

ome products sell so well that they fundamentally impact our culture. Recently the 24/7 Wall St. website published a list of 10 such products and while each product is in a different movies industry – from smartphones to cars and rs. All leade the ng amo s – there are clear similaritie e in vativ inno were list the e mad the products that Harry The sed. relea when ories categ ctive their respe to be Potter series of fantasy books was the first . Many 8-14 aged ers read particularly geared toward ause l bec essfu succ were ucts prod of the best-selling

Michael Jackson: “Thriller” CATEGORY: ALBUM

Units sold/sales: 110 million units Parent Company: Epic Records hriller, released in November 1983, was one of the first albums to use music videos as a promotional tool and it was the best-selling album of all time 12 months later. Jackson won eight Grammy Awards in 1984 for Thriller and seven of the songs on the album were top ten hit singles. To put his album sales in perspective, the secondbiggest selling album of all time, Pink Floyd’s Dark Side of the Moon, is estimated to have sold around 50 million copies.

Harry Potter CATEGORY: BOOK SERIES

Units sold/sales: 450 million units Parent Company: Bloomsbury (UK publisher) he first Harry Potter book of the series (Harry Potter and the Philosopher’s Stone) was published in 1997 and was an instant success, only to be repeated with each successive instalment. The novels made J.K. Rowling one of the highest paid authors in the world and led to a similarly successful movie franchise. The seventh and last book in the series (Harry Potter and the Deathly Hallows) sold more than 11 million copies within 24 hours of being published.

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

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INTERVIEW

five minutes with... THEO PARPERIS

President of the Institute of Certified Public Accountants of Cyprus (ICPAC)

Your members are closely involved with the economy and business. Did the present crisis come as a surprise to you? Our members are on the front line of business and have a very good grasp of economic developments. Their profession requires that accountants be objective and see things as they are so we have not been surprised by the present economic crisis. ICPAC has been sending warning messages to all the relevant bodies for the last 2 years. As a country, Cyprus has been spending more than it earns, the government budget has been in deficit for the last three years and the public debt has grown worryingly high. Neither the problem of recapitalisation of our banks nor the present economic crisis came as any surprise at us. What measures do you expect the Troika to take in return for the requested bailout of the island’s economy and banking system? We have seen the measures that the Troika has imposed on other EU countries such as Greece, Ireland, Portugal, etc., with the aim of fixing chronic problems of the economy, improving efficiency in the public and private sectors, reducing government spending and/or increasing taxes. The same will apply in Cyprus and it has to be said that, in many respects, some of the measures are to be welcomed since our political parties have historically lacked the will to fix structural problems such as the viability of the national pensions scheme, the reallocation of resources (i.e. civil servants) within ministries and the closure of unnecessary government agencies, to cut bureaucracy and to deal with the cost of living allowance (CoLA) which automatically increases salaries irrespective of productivity, etc. Has ICPAC submitted its own proposals to the government and/or the European Commission? Yes. Last September we submitted a set

Will the need for austerity measures automatically have a negative effect on Cyprus’s ambition to become a major regional services and financial centre? In its last report the World Bank estimates the contribution of accounting, legal, banking and other services to foreign investors at 45% of GDP. Almost 80% of corporation tax revenue emanates from Cyprus companies of foreign interests. It is clear that our economy depends on Cyprus being a successful and stable international business and financial centre and it is therefore crucial that we cut unnecessary government spending, improve efficiency, invest in IT, fight bureaucracy and avoid the need to raise taxes. If we do this we can meet the targets that will inevitably be imposed by the Troika, without affecting the island’s position as a major regional financial centre.

Assuming that we agree the ‘right’ measures with Troika, I expect that Cyprus will return to growth during 2014 of proposals to the Ministry of Finance with measures to revive economic growth in Cyprus. Some of the measures have already been adopted but many others are still pending. We are involved in continuous discussions with the relevant Ministries and the House of Representatives in order to implement them. Over the last two years we have been emphasising the need to keep the 10% Corporation Tax rate unchanged and maintain the stability of our overall tax system, as this has been and still is the cornerstone of the country’s economic growth.

How confident are you that the country can survive the latest difficulties? Cyprus has come through many difficult times throughout its long history. I believe that, when it matters, the Cypriots have proved that they have the will and the commitment to take and implement the necessary measures in order to deal with situations such as the current economic crisis. The Cyprus economy is relatively small, hence any cure is not going to be very costly to the EU or other possible lenders. The future prospects arising from the confirmed reserves of natural gas and its exploitation in the coming years give me confidence in Cyprus’ medium- to long- term prospects. Maintaining our competitiveness as a financial centre and as a tourist destination is crucial for the short-term prospects and this is where we need to focus our attention right now. How long do you think Cyprus needs to return to growth? Assuming that we agree the ‘right’ measures with Troika, I expect that Cyprus will return to growth during 2014.

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

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ince independence in 1960, Cyprus has had a reputation for being run by people who are – let’s be polite – no longer in the first flush of youth. This has applied not only to the civil service, where officials magically reach the top salary scale just in time for retirement and are then reemployed as experts, consultants and aides, but to politics (Glafcos Clerides was 74 when he became president, Tassos Papadopoulos was 69 on being elected), and even the private sector where company founders would insist on clinging onto power until forced to hand over to their – by then – ageing children. But while Cyprus now has an ageing population (the number of people over 65 is expected to rise from the 2000 figure of 11.6% to 18.1% by 2025), things have been changing over the past decade or so, especially in the private sector where companies have followed the example of their counterparts in other countries by recruiting well-educated, highly-qualified university graduates with much-needed specialist knowledge. The legal, financial, accounting and banking sectors will always try to look after family and friends but even those receiving a helping hand from Dad or Uncle need to have the necessary academic and professional qualifications these days. Indeed, a BA or a BSc alone is no longer considered adequate in many areas where an MA or MSc is viewed as a minimum requirement. The professional services sector is widely acknowledged as being the main driver of the economy these days as it gradually eclipses tourism and one reason for its thriving progress is the calibre of its people, many of whom are under 35 but hold key positions in leading companies. On the following pages we pay tribute to more than 30 such individuals who, we believe, represent what is happening across the sector and in other sectors too. This is not to say that impressive paper qualifications are necessarily a substitute for experience gained ‘the hard way’ or that a ‘youth vs age’ conflict is developing but it

is evident that young professionals in Cyprus are at last being given a chance to make their mark on society and the economy in a way that was not previously possible. In order to form a clear picture of how these gifted young professionals view Cyprus, the current financial crisis and their own situation, we asked them for their views on a range of issues. A selection of their responses is presented on the following pages but some clear and striking conclusions emerge from their answers. For instance, while acknowledging that nepotism and “knowing the right people” still exists within companies, most of the people to whom we spoke expressed the view that the concept of meritocracy is no longer unknown in Cyprus, especially within foreign-owned, Cyprus-based firms which have brought with them a fairer way of dealing with their personnel. What’s more, the vast majority of respondents to our questions said that they would not want to live and work abroad, even if they had the opportunity. The main reason would appear to be the perceived quality of life that Cyprus offers, although, paradoxically, one of the main issues raised as a serious problem facing their generation (together with unemployment and an excess of highly-qualified people) was that of work-life balance. It appears that Cyprus is a good place to live and work but that it is quite an art to ensue that one does not fall into the trap of leading a life that is all work and no play. In keeping with the findings of the Cyprus Business Leaders Survey, published in the July issue of Gold, the young representatives of the broader professional services sector are almost unanimous in their optimism that the country will overcome the problems currently besetting the economy and the banking industry, though many of them predict that it will require several years of patience, austerity and better leadership before Cyprus has a chance of returning to pre-crisis levels of prosperity. On the positive side, it is suggested by

many young professionals that the relative small size of the economy means that it should not be too difficult to fix its problems until natural gas comes to the rescue. While recognising that times and attitudes have changed, the people we spoke to were divided on the issue of whether coming generations will have a more difficult time as they attempt to ascend the corporate ladder. For many, the present state of the economy means that, in the short term at least, it is going to be hard for newly-qualified graduates to find work corresponding to their field of study and their abilities, due to downsizing and fewer vacancies. Others take a more optimistic view, suggesting that there will always be demand for qualified professionals and that as Cyprus consolidates its position and reputation as a regional business, services and financial centre, this demand will increase. However, several representatives of the legal profession acknowledged that too many people are qualifying as lawyers to be employed by the island’s law firms, though at present the same situation does not seem to apply to the accountancy profession. Moreover, concern was expressed that other jurisdictions are pulling ahead of Cyprus in terms of attracting foreign investment and that the present generation of young professionals will have to bear the burden of correcting this negative course. Readers who are firm supporters of equality between men and women in the workplace may note with some concern that our sample comprises 21 men and 12 women and may wish to draw conclusions from this. However, everyone featured on these pages was selected by his/her employer to represent their company/organisation and not by Gold. Our aim in drawing attention to the young people working in the professional services sector is to show that this key area of the economy is one which, in terms of recruitment and employment, is clearly in tune with what is happening in the larger economies and countries of Europe and the world.

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Costas Xitas, 32

Carolos Georgalis,33 is Vice President, Investment Banking, Levant region with Renaissance Capital in Nicosia. He has held this position for 1 year and been with Renaissance for 2 years. Previously he spent 7 years as an Investment Analyst and later Fund Manager for Herald Investment Management in London. He is a CFA charterholder and has a BEng Electical and Electronic Engineering from Imperial College and an MPhil Engineering from the University of Cambridge. His hobbies and interests include sports and family time while his stated professional ambition is “To grow further Renaissance Capital’s commercial presence in Cyprus and the Levant region.”

is Head of Legal & Regulatory Counseling at Renaissance Capital in Nicosia. He has held this position for 4 years and has been with the company for 7 years. Previously he worked as an Advocate at the Law Firm of Montanios & Montanios. He obtained his LLB from the University of Sheffield and an LLM from University College London. His hobbies and interests include jogging, soccer, skiing and kitesurfing while his stated professional ambition is “To enhance further Renaissance Capital’s legal and regulatory framework and adapt it accordingly to support the firm in its local and regional expansion”.

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COVER STORY

HELEN HADJICHRISTOUDIA, 36

is Director of Abacus Ltd in Nicosia. She has held this position since January 2011. Previously she was Senior Manager in International Business Advisory at Abacus Ltd. She is a Fellow Member of the Association of Certified and Chartered Accountants and a Member of the Institute of Certified Public Accountants of Cyprus. She obtained her LLB from the University of London. Her hobbies and interests include travel, reading and the culinary arts while her stated professional ambition is “To excel in my field, maintaining a balance of career and family, and to pave the way for more women in top managerial positions”.

ANTONIS HOURY,33

is Global Financial Advisor, Private Banking with Eurobank EFG Cyprus in Nicosia. He has held this position for 14 months. Previously he worked for Citigroup and

Commerzbank. He obtained his BSc, MSc and PhD at Imperial College London. His hobbies and interests include travel and tennis whole his stated professional ambition is “To offer top level services to our clients”.

ZAKIS HADJIZACHARIAS, 33

is a Board Member at KPMG Ltd in Limassol. He has held this position for 2 years. Previously he worked for KPMG in the UK. He is a Chartered Accountant with a BA in Accounting and Finance obtained at the University of Lancaster. His hobbies and interests include playing football and attending sporting events and enjoying quality time with his family. His stated professional ambition is “To establish myself in this difficult business environment while always acting with integrity”.

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COVER STORY

Leonidou, 28 ANDREAS KONTOS, 31 Erasmia is a Human Resource Officer (Training and Developis Chief Dealer at FxPro Financial Services Ltd in Limassol. He has held this position for 3 years. Previously he was Assistant Chief Dealer. He has passed Level 2 of the Chartered Financial Analyst (CFA) Examinations and holds Cyprus Securities and Exchange Commission certificates, General Advice and Responsible Manager certificates from the Australian Securities and Investment Commission (ASIC) and certificates in anti-Money Laundering Training. He obtained his MsC in Risk Management and Derivatives at Sheffield Hallam University. His hobbies and interests include mini-football and beach volleyball while his stated professional ambition is “To advance in the financial sector and continue working on innovative products and original ideas. Always being ahead of the market, never following it”.

ment Department) at Alpha Bank Cyprus Ltd in Nicosia. She has held this position for 1 year and 9 months. Previously she worked as a Customer Service Officer for 3 years. She holds a Prince 2 Practitioners Professional Qualification in Project Management and a General Banking Diploma from the American Institute of Banking. She obtained her BA in History and Archaeology at the University of Cyprus and is currently a candidate for a Doctorate of Business Administration, specialising in Human Resource Management. Her research interests include Identity Development over Time, Leadership and Development, Organisational Change, Intercultural competence, Emotional Intelligence and Negotiating Skills while her stated professional ambition is “To use my skills and educational background in the best possible way for achieving the company’s goals”.

ANNA LOIZOU, 34

is a Partner at Pricewaterhouse Coopers Ltd in Limassol. She has held this position since 1 July 2012, having joined PwC as a trainee chartered accountant and progressed to admission in partnership. She is a Member of the Institute of Chartered Accountants in England and Wales and a Member of the Institute of Certified Public Accountants of Cyprus. She obtained her Master’s degree in Economics from Kings’ College, Cambridge University. Her hobbies and interests include travel and shopping while her stated professional ambition is “To be a highly respected trusted advisor in my area of expertise”.

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GEORGE N. MOUNTIS, 34

Demosthenes Mavrellis, 36

is a Partner at Chrysses Demetriades & Co. LLC in Limassol. He has held this position for 5 years. Previously he worked as an Associate at Morgan Lewis in New York City and at Watson Farley and Williams, London. He is a qualified solicitor (England and Wales), Attorney (New York State) and Advocate (Cyprus). He obtained his LLB from Kings College London and an LLM (Securities and Financial Regulation) from Georgetown University, Washington D.C. His hobbies and interests include travel, history and current affairs and his stated professional ambition is “To excel in my chosen field”.

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is a Partner at Dr.K. Chrysostomides & Co LLC in Nicosia. He has held this position for 2 years. Previously he worked as an Associate Lawyer at Tassos Papadopoulos & Co, and as a Senior Associate lawyer at Dr K Chrysostomides & Co LLC. He is a Member of the Cyprus Bar Association and a Member of the Chartered Institute of Arbitrators (MCiArb). He obtained his LLB (Hons) from the University of Kent at Canterbury, an LLM in Corporate and Commercial Law from the London School of Economics and Political Science and a Diploma in the Economics of Competition Law from King’s College London. His hobbies and interests include fishing, hunting, playing the guitar and reading while his stated professional ambition is “To become an acknowledged professional in my field”.

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COVER STORY

EMILIOS TANNOUSIS, 35

GEORGE STYLIANOU, 34 is Head of Marketing at Alpari Financial Services Ltd

in Limassol. He has held this position for 1½ years. Previously he worked as Websites Manager at FxPro Financial Services Ltd and Brand Manager at EasyForex Trading Ltd. He studied for his BSc in Computer Science at Midrand Graduate Institute, South Africa. His hobbies and interests include technology, gadgets, animals and nature, documentaries, rugby, cycling and swimming while his stated professional ambition is “To continue being part of a global organisation and working with a team that is ethical and professional, has global experience and the ambition to innovate and lead the industry to greater heights and achievements”.

AVGOUSTINOS TSARKATZIS, 32 is a Partner at Christos Patsalides LLC in Nicosia. He has held this position for 2 years. Previously he was an Associate (4 years) and a salary partner (2 years) with the same firm. He is a Barristerat-Law. He obtained his BA in Law from the University of Athens and his LLM in European Union Law from the University of Leicester. His hobbies and interests include sport, movies and music while his stated professional ambition is “To become a reputable legal professional”.

is a Fund Manager at Laiki Financial Services in Nicosia. He has held this position for 5 years. Previously he worked as a Fund Manager with the Coop Central Bank and Foreign Fund Manager with Demetra Investments. He is a Member of the Association of Chartered Certified Accountants (ACCA). He obtained his BSc (Hons) in Economics and Finance from the University of Indianapolis, and an MSc in Economic Development and International Trade (Finance) from the University of Reading. His hobbies and interests include sport, travel and music, while his stated professional ambition is “Together with my team to accomplish the targets of our organisation, based on professionalism, prudence and international standards”.

Demetris A. Tsingis, 35 is Assistant Unit Head, Private Banking at Bank of Cyprus PCL in Nicosia. He has held this position for 2 Years. Previously he worked for the Cyprus International Institute of Management as a Fellow of Entrepreneurship (5 years), as Chief Financial Officer of Mocassino Shoes Ltd (2½ years) and as Assistant Manager, Products and Services Assurance & Advisory, at Deloitte & Touche LLP/Arthur Andersen LLP in London. He is a Chartered Accountant (ACA). He obtained his BSc (1st class Honours) in Government and Economics from the London School of Economics and Political Sciences and an MBA in Finance & Entrepreneurial Management from the Wharton School, University of Pennsylvania. His hobbies and interests include Taekwondo, scuba diving, sailing, fishing, basketball, football, poetry and cooking. His stated professional ambition is “To be part of the upper management team of a large corporation in the next 10 years”.

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THANOS VASSILIADES, 36

is Chief Operating Officer at TFI Markets Ltd in Nicosia. He has held this position for 2 years. Previously he was Director & Chief Operating Officer at FxPro Financial Services Ltd (3 years). He is a Chartered Financial Analyst (CFA), a Certified Chartered Accountant (ACCA) and a Certified Management Consultant (CMC). He obtained his BA (Hons) in Accounting & Finance from Kingston University and an MSc in International Securities Investment & Banking from the University of Reading. His hobbies and interests include rallying, cooking, crafts, e-commerce, online marketing and youth entrepreneurship while his stated professional ambition is “To continue working with other professionals in a trustworthy, honest, respectful and team spirit business environment, where I can demonstrate and utilize fully my skills and experience in every move”.

EMILY YIOLITIS, 36 is Managing Partner at Harneys

Aristodemou Loizides Yiolitis LLC in Limassol. She has held this position for 6 years. Previously she worked as a lawyer with Trident Trust and Totalserve Management Ltd. She was admitted to the Bar in 1998 and recently became Chairperson of STEP Cyprus. She obtained her Oxon MA in Jurisprudence from Trinity College, Oxford University, and an LLM in EU Law from the European University Institute, Florence. Her hobbies and interests include skiing, swimming and reading while, asked to state her professional ambition, she responded “Life leads us where we should be”.

THE INTERNATIONAL INVESTMENT, FINANCE & PROFESSIONAL SERVICES MAGAZINE OF CYPRUS

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OPINION

Here Comes Another Economic Miracle! Being forced into the arms of the EFSF could be a blessing in disguise

“W

hen the going gets tough, the tough get going” and things have certainly have got tough for Cyprus. The economy has come to a screeching halt after three decades of impressive growth and a combination of internal imbalances and external shocks have led to rising budget deficits, a tripling of unemployment and the successive downgrading of our economy and our banks from AAA to junk status. What is to blame? Entering the eurozone unprepared to compete as the world economic crisis was unfolding, in combination with our procrastination in taking corrective measures proved deadly. But not all is lost. Being forced into the arms of the European Facility for Financial Stability (EFSF) is a blessing in disguise which may very well prove to be the beginning of another economic miracle. First of all, it removes discretion from our politicians and gives them the alibi they so badly need in order to take unpopular measures to remove the accumulated distortions in our economy, from the over-bloated public sector to the inflexible labour market, from the maze of bureaucratic procedures to unjustified privileges and handouts. Secondly, resorting to the EFSF for help drives home the lesson that the “opportunist” or “serendipitous” economic model, which has proved so generous for Cyprus, does not always guarantee economic growth and prosperity as it depends too much on luck and circumstance and too little on the fundamentals of international competitiveness. It has exposed Cyprus to risks and external shocks and deprived the economy of internal resilience. Instead of relying exclusively on serendipity, Cyprus should rediscover the hard work ethic, enterprising creativity and social responsibility that led to the economic miracle in the two decades that followed the devastation of the Turkish invasion in1974. In the same way that the loss in 1974 of one third of the country and two thirds of the economy removed the comfort zone and the claim of the few to privilege and drove home the need to imagine,

Instead of relying exclusively on serendipity, Cyprus should rediscover the hard work ethic

By Theodore Panayotou

create, work and produce real value, today’s loss of control over our macro-economic management to the EFSF will soon remove the barriers to change and prepare the ground for a new economic miracle. Think of a new Cyprus with: • a lean, highly productive public sector which facilitates rather than inhibits private sector initiatives; • a flexible labour market providing job security and good wages through agility, job creation and productivity, not privilege and acquired right. • trade unions that strive to create jobs for the unemployed instead of merely preserving and enhancing the privileges of their members, regardless of their levels of productivity. • banks that know how to evaluate investment projects, how to assess and manage risks; • an education system that is decentralized, student-centered and promotes moral values, creativity, innovation and enterprise; • investment in research and innovation, a Cyprus that promotes experimentation and entrepreneurship to create wealth and jobs rather than relying on a strange mixture of statism and serendipity; • respect for the environment, our natural and cultural heritage and investment in them as valuable assets and a source of competitive advantage; • a reputation as an educational and research centre, an energy and logistics centre and a centre for conventions and medical tourism; • green and energy-efficient buildings and infrastructure; a Cyprus that exports solar energy technology instead of importing oil; • balanced budgets, a manageable national debt, and a viable social security system; This vision may seem like a tall order but our appeal to the EFSF for help could be the kickstart for a new Cyprus; it may well be the kick in the pants we need to unleash the great reserve of potential that has been released before in times of crisis and produced an economic miracle every time. Those who look for opportunities to invest in emerging high-return ventures with manageable risk must give serious consideration to investing in the emerging new Cyprus. This will give them a head start and a preferential stake in Cyprus’ next economic miracle.

info: Dr. Theodore Panayotou is the Director of the Cyprus International Institute of Management (CIIM) and Professor of Economics and the Environment at Harvard University. He has served as consultant to the UN and to governments in the US, China, Russia, Brazil, Mexico and Cyprus. theo@ciim.ac.cy 34 Gold THE INTERNATIONAL INVESTMENT, FINANCE & PROFESSIONAL SERVICES MAGAZINE OF CYPRUS

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Chrysanthos Christoforou, 33

is a Partner at Andreas Neocleous & Co LLC in Limassol. He has held this position for 4 years. Previously he was a trainee lawyer and associate with the same firm. He is an advocate and a Member of the Cyprus Bar Association. He obtained an LLB, LLM International Commercial and Business Law, and LLM International Trade Law from the University of East Anglia (UK) and Northumbria University (UK) respectively. His hobbies and interests include football, history and politics while his stated professional ambition is “To make the best use of my abilities for the benefit of society, my firm and my family”.

ALEXANDROS CHRYSOFAKIS, 28

is a Portfolio Manager with MeritKapital Ltd in Limassol, a position he has held for the past 1½ years. Previously he worked in Sales, Mortgage and Loans. He obtained his BSc in Finance and Banking Management from the University of Piraeus and an MSc in Investment Management from the Cass Business School. His hobbies and interests include sport, cinema and books while his stated professional ambition is “To become Head of the Investment Department”.

Costas Demetriades, 32 is Head of Treasury at Barclays in

Nicosia. He has held this position for 7 months. His previous professional experience includes Investment Advisory, Investment Banking and Risk Management. He is a Fellow of the Institute and Faculty of Actuaries, UK. He obtained his BSc in Actuarial Science from the Cass Business School, City University of London. His hobbies and interests include travel, scuba diving, chess, music and theatre while his stated professional ambition is “Adding client value. Everything else follows”.

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COVER STORY

DEMOS DEMOSTHENOUS 36

is Director of Accounting, Reporting and Tax Compliance Services at DI Ross & Co Ltd (Meritservus Group of Companies) in Limassol. He has held this position for 2 years. Previously he spent 4½ years as Manager/Director at MGI Gregoriou & Co Ltd and 3½ years as Senior Auditor with Savvides & Partners, Pannell Kerr Forster. He is a Chartered Accountant (ICAEW). He obtained his BA in Economics with specialization in Accounting and Finance from the University of Manchester and an MSc in Accounting and Finance from the London School of Economics and Political Sciences. His hobbies and interests include football, tennis, marketing strategies and leadership techniques while his stated professional ambition is “To build a long-term career in my profession and use my skills in the most effective way for achieving the Group’s overall goals”.

Eleana Economides, 30

is Chairwoman of E. Economides & Partners LLC in Limassol. She has held this position for 4 years. Previously she was Managing Director & Legal Consultant to Totalserve Management Ltd. She is a Member of the Cyprus Bar Association, of the International Tax Planning Association (ITPA), and of the Society of Trust & Estate Practitioners (STEP) She obtained her LLB. at King’s College London and an MSc in Shipping, Trade & Finance at City University of London. She is also a qualified Trust and Estate Practitioner (TEP). Her hobbies and interests include modern art, music and travel while her stated professional ambition is “To stand out as a leader in my field”.

SEVAG DEVLEDIAN, 31 is a Client Relationship Man-

ager at Bonalbo in Nicosia. He has held this position for 2 years. Previously he worked in Corporate Services at Bonalbo (2007-2010), as a data source specialist for local financial markets at Reuters Cyprus Ltd (2006 -2007) and as a fixed assets controller for the Eastern Mediterranean and North Africa at Reuters MEA Ltd (2003-2005). He obtained his BA in Business Administration from Coventry University. His hobbies and interests include football (Manchester United), current affairs and technology while his stated professional ambition is “To stay at Bonalbo and, at some point in time, to become a partner”.

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KLELIA ELEFTHERIADOU, 32

is Manager, Investment Banking at Sharelink Securities & Financial Services Ltd in Nicosia. She has held this position for 1 year. Previously she was Manager, Group Strategy and Corporate Finance at SFS Group PCL. She obtained her MSc in Financial Management at SOAS, Centre for Financial & Management Studies, University of London, an MSc in Financial Markets & Derivatives at London Metropolitan University and a BSc in Mathematics with Business Studies at Queen Mary and Westfield College, University of London. Her hobbies and interests include travel, diving, sailing and shopping while her stated professional ambition is “To obtain further experience and exposure in global corporate projects”.

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Loukia Ioannou, 27 is an Investment Consultant at

Aon Hewitt in Nicosia. She has held this position for 2½ years in the company’s London office and 1 year in Nicosia. Previously she worked as an interest rate derivatives structurer at BNP Paribas in London. She is a Chartered Financial Analyst (CFA) and holds an Investment Management Certificate (IMC). She obtained

her BSc (First Class Hons) in Statistics and Operational Research from University College London (UCL) and an MPhil in Finance from the University of Cambridge. Her hobbies and interests include sports and dancing while her stated professional ambition is “To become a trusted business partner to pension and provident funds and other institutional clients and help them to protect and enhance the capital of their members”.

MICHELLE KARI, 31

is Group Property Manager at SFS Group in Nicosia. She has held this position since 2008. Previously she worked as a Chartered Surveyor with Savills Plc in Athens, London & Oxford for a total of 7 years. She is a Member of the Royal Institution of Chartered Surveyors and a Member of ETEK. She obtained her BSc (Hons) in Real Estate Management from Oxford Brookes University. Her hobbies and interests include tennis, swimming and art while her stated professional ambition is “To specialize in asset management/ portfolio management”.

Georgia Kari, 31

is a Fund Manager at Bank of Cyprus in Nicosia. She has held this position for 5 years. Previously she worked as a Research Analyst for Sharelink Securities and Financial Services Ltd. She is a Chartered Financial Analyst (CFA). She obtained her BSc in Public Business and Business Administration from the University of Cyprus and an MSc in Finance from George Washington University. Her hobbies and interests include reading and exercising while her stated professional ambition is “To consistently add value to clients within a relationship build on trust”.

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COVER STORY

MELPO KONNARI, 32 is Senior Manager, Advisory Services at Grant Thornton (Cyprus) Ltd in Nicosia. She has held this position for 3 years. She has worked for Grant Thornton since 2001 and was previously with Moore Stephens in Limassol. She is a Member of the Association of Chartered Certified Accountants (ACCA). Her hobbies and interests include spending time with her two children and travel while her stated professional ambition is “To become a distinguished, successful advisory services leader within the Grant Thornton family and positively contribute to achieving the 2015 ambition of Grant Thornton which is to become known for navigating complexity for dynamic organisations and to double in size in terms of revenue”.

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COVER STORY

GEORGE PANTELIDES, 35

CHRYSIS PEGASIOU, 36, is a Partner at Horwath DSP Ltd, a member of Crowe Horwath International, in Nicosia. He has held this position for 1½ years. Previously he worked at KPMG for 3½ years and HLB Afxentiou Ltd for 3 years. He is a Member of the ICAEW (ACA). He obtained his BA in Accounting, Finance & Economics and an MSc in Financial & Business Economics from the University of Essex. His hobbies and interests include football, travel, art and architecture while his stated professional ambition is “To become an established professional and for our firm to be the provider of choice”.

is a Partner, Human Capital Services & HR Department at Deloitte in Nicosia. He has been head of these functions for 6 years and was made a partner in January 2012. He obtained his. BSc from the University of Manchester and an MBA from the University of Liverpool. His hobbies and interests include water sports and tennis.

Katia Parpi, 33

is Operations Manager at the Andreas Sofocleous Group of Companies in Limassol. She has held this position since September 2004. She holds a CIPR Diploma in Public Relations and she obtained her Bachelor of Business Management (BBM) and an MBA from the University of Wales Institute, Cardiff. Her hobbies and interests include water sports, watching football, listening to good music, shopping, travel, politics and organising social and charity events. Asked to state her professional ambition, she responded, “My professional career so far has taught me that success and advancement in managerial positions are not gifted but, on the contrary, are earned by hard work, thoroughness, patience, perseverance, determination and commitment to personal improvement as well as to the development of the company”.

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SAVVAS PENTARIS, 38 is a Partner at Ernst & Young in Nic-

osia. He has held this position since 1 July 2012. He has worked for the firm since 2002 and previously spend five years with KPMG in London. He is a Chartered Accountant (ICAEW) and a Chartered Financial Analyst (CFA Institute). He obtained his BA (Econ) in Accounting, Finance and Econometrics from the University of Manchester His hobbies and interests include listening to music, reading, watching football and martial arts while his stated professional ambition is “To become a successful partner who is highly appreciated by both colleagues and clients and recognised as a true expert in his field”.

MARIA SAVVA, 31

is Director, Regional Coordination at Eurofast Taxand in Nicosia. She has held this position for 2 years and previously worked for the same company for 6 years. She obtained her BComm, Finance at Concordia University, Montreal and an MBA at the University of Cyprus. Her hobbies and interests include volunteer work, outdoor sports, reading and travel while her stated professional ambition is “To continue to learn, adapt and be competitive in the fast-changing business environment. I am also planning to pursue a program in corporate social responsibility. Numbers are not enough anymore; amongst everything, a firm should be a good corporate citizen to guarantee growth and increase its long term profitability”.

ANDREAS PITTAKAS, 29

is an Audit Manager with Baker Tilly in Nicosia. He has held this position for 2 years. Previously he worked for 5 years at KPMG where he rose to Assistant Manager. He is an Associate Chartered Accountant. He obtained his BA in Accounting & Finance (First Class Honours) from the University of Newcastle upon Tyne. His hobbies and interests include scuba diving and cinema while his stated professional ambition is “To progress in the profession”.

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OPINION

Cyprus needs its own Margaret Thatcher The inability of the government to take correct and timely measures will mean harsh Troika-imposed fiscal policies

here is no question that Cyprus is witnessing the worst economic recession in the country’s history. The inability of the government to take correct and timely measures to stabilise the economy has resulted in an open invitation to the Troika and the imposition of harsh fiscal policies so as to balance the government budget. At 15.4% of GDP, Cyprus has the highest public sector wage bill in the eurozone. Despite this, the unemployment rate has climbed to almost 11%. The problem is more evident in the younger age groups (under 25) where unemployment has reached a record 25.4%. To add to the problem, the government is no longer able to find sources of cheap funds with its bonds being demoted to “junk” status. The depleted social insurance fund is no longer an option and the government will need to somehow come up with the €7 billion it owes to the working people. Although the problems are pretty well-known, at the time of writing the reaction of the Troika remains to be seen. What Cyprus needs right now is its own Margaret Thatcher. Whether we like to admit it or not, we need to be patient as the worst is still to come. The road to economic recovery is a difficult one and hard decisions need to be taken today, starting with limiting government spending and increasing government revenues. It will come as no surprise if the Troika targets indirect taxation by proposing an increase in Value Added Tax. Although this is a first step in minimizing the budget deficit, it is also a measure which discourages consumption. In order to limit this negative impact, the government can negotiate a direct tax cut. More specifically, lowering income tax will boost household spending and lowering corporate tax will increase investments. This measure will have a positive multiplier effect on the economy as witnessed in the UK in 1982.

It will probably take a good two or three years until we witness the first signs of economic recovery

By Constantinos Charalambous

Margaret Thatcher was committed to reducing the power of the trade unions in order to battle unemployment and inflation. The resistance of the Cypriot trade unions to the abolition of the cost of living adjustment will be unsuccessful, I am afraid. The existence of unemployment implies that the labour market is in a state of disequilibrium and that the wage rate is sustained above the market equilibrium. Even though this measure is politically incorrect, from a purely economic point of view it will be the starting point for increasing employment and releasing some of the government’s anxiety over securing the necessary funds to pay for unemployment benefits. Traditionally, finding a job in the public sector has been part of the Cypriot dream. The problem is that it has now become a nightmare for the government. The public sector is plagued with agency problems, low productivity and high wages. In 1983, a wave of privatisations encouraged by Thatcher eventually led to economic growth in the UK which was maintained for a significant number of years. Even though there is resistance to bringing in private investors in the case of natural monopolies, the government can set price ceilings to protect consumers. Through privatisations, the government can obtain an immediate surge in income from the sale of public property, while alleviating fiscal pressure resulting from non-profitable enterprises such as Cyprus Airways. Further, increased employee monitoring resulting from privatisations will have a positive impact on production and subsequently on Gross Domestic Product. It will be very difficult to deploy the proposed measures immediately. Even if they are implemented, it will probably take a good two or three years until we witness the first signs of economic recovery. Even so, they constitute a good, dynamic signal to investors that better days are coming and that we are all, irrespective of political preference, working to that effect.

info: Dr. Constantinos Charalambous is an Assistant Professor of Economics and Head of the Department of Research and Development at PA College in Larnaca. He is Associate editor of the Cyprus International Journal of Management and he maintains a popular economics blog at www.everyday-economist.com. 32 Gold THE INTERNATIONAL INVESTMENT, FINANCE & PROFESSIONAL SERVICES MAGAZINE OF CYPRUS

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O SPOTLIGHT ON...

Our organisation offers the following services: ●C yprus international business company formation ●C ompany formation in worldwide jurisdictions ●C orporate services (nominee directors, nominee shareholders, registered office, company secretary, fiduciary services ) ●C ompany administration and maintenance ● Opening of bank accounts ●B ookkeeping, accounting and financial reporting ● Payroll services ● Auditing ● Business and financial advisory ●L ocal and international tax consultancy and planning ●V AT registration, consultancy and reporting Global Consultants’ strongest areas of specialist knowledge and expertise are the following: ●F ormation of Cyprus companies and companies in worldwide jurisdictions ●C orporate services, administration and maintenance ● I nternational tax planning to maximize clients’ rewards ● Cyprus international trusts ● Cross-border employment companies ● Royalty companies ● Trading companies ● Software development companies ● Real estate investment companies ●B anking services including opening of corporate bank accounts ● Cyprus international trusts ● Shipping companies ● Cyprus holding companies Our clients’ major challenges at present are: ● Financial risk ● Tax exposure ● Economic crisis

● Confidentiality ● Liquidity and cash flow ● Asset protection We advise our clients on: ● Risk analysis and management ● Budgets and cash flow projections ● Business plans ● Corporate finance strategy ● Tax planning and consultancy ●A sset protection through the creation of Cyprus international trusts ●D iversification and economies of scale (mergers, acquisitions, takeovers) ●C orporate and fiduciary services to protect confidentiality and anonymity

Global Consultants 5, Grivas Dighenis Avenue, G&S Court, Office 401, 4TH Floor, 6030 Larnaca Cyprus Tel: (+357) 24629800 Fax: (+357) 24629801 e-mail: george@globalconsultantgroup.net Website: www.globalconsultantgroup.net

Our employees are highly-trained professional qualified accountants, management consultants, business and tax advisers, each a specialist in his/her own field. They have substantial experience and hands-on exposure in local and international business environments. Our professional people are widely recognised for their ability to work closely and cooperatively with our clients and to support their business through a wealth of knowledge and extensive experience. Our clients range from international and local clients to small business, startups and individuals, of which a significant number are engaged in international business. Business activities include holding companies, cross-border employment companies, trading companies, software development, investment companies, shipping companies, electronics, Internet marketing, royalties, finance structures, service companies, logistics, real estate investment and chemicals. Global Consultants’ mission is to: ● Maximize the rewards of our clients ●A dhere to the highest professional and ethical standards in all our dealings ●E xercise honesty, diligence, and objectivity in all our activities ● S afeguard the integrity of confidential or proprietary information entrusted to us ●T reat everyone with courtesy, respect, and understanding ●E ncourage our employees to grow in knowledge and expertise ●U se technology and knowledge to constantly improve the quality of our work. FOR MORE INFORMATION, CONTACT: George Panayiotou FCA Managing Director

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GLOBAL CONSULTANTS

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SPOTLIGHT ON...

INTERCOLLEGE GLOBALTRAINING

Intercollege Globaltraining was formed in 1991. Initially it was operating under the name Accountancy Tutors, but three years later it consolidated with Intercollege to form Intercollege Professional Studies. The founders of Intercollege Globaltraining, Odysseas Christodoulou and Christos Vlachos were induced back in 1991 by the unprecedented international demand for professional knowledge and skills to form a professional training organisation in Cyprus to meet the needs of the local financial market. They were soon driven by the rapid growth in the world financial markets to develop Intercollege Globaltraining into the leading professional training organisation in Cyprus, the Middle East and the Balkans. Operations in Greece began in 1996, setting the standards for professional training in Greece. Intercollege Globaltraining was the first organisation in Greece to offer structured course programs leading to prestigious professional qualifications such as the ACCA, CFA, CIA, CIPR and many specialised seminars for the financial services sector. Operations in Romania began in 2007. Intercollege Globaltraining is a pioneer in professional training in Romania offering a wide range of structured professional courses that no other training organisation in the country offers. Intercollege Globaltraining offers a variety of professional qualifications to satisfy any need. You may choose the mode of study you prefer to follow, whether this involves classroom-based study in Cyprus, Greece and Romania or our “Live-OnLine” courses which offer the flexibility of studying at home.

ASSOCIATION OF CHARTERED CERTIFIED ACCOUNTANTS (ACCA) The Association of Chartered Certified Accountants (ACCA) is the largest and fastestgrowing global professional accountancy body in the world, with 147,000 members and 424,000 students in over 170 countries. The ACCA professional accounting qualification is a highly relevant, targeted combination of study and practical experience. The syllabus is a result of extensive research and consultation with governments, students, colleges and employers from a range of public and private sector organisations. It is a passport to a new world of opportunity, once you become a member the learning process continues throughout your career. ACCA is not only about accounting. You will also develop a range of skills and knowledge in finance, tax, audit, management, law, professional values, ethics and governance. INSTITUTE OF CHARTERED ACCOUNTANTS IN ENGLAND AND WALES (ICAEW) The Institute of Chartered Accountants in England and Wales (ICAEW) is the oldest and largest accountancy body in Europe with more than 138 000 members in over 160 countries. It is the most prestigious professional body for Chartered Accountants globally attracting many students every year who aspire to become qualified accountants. ICAEW members work at the highest level of business, across all industry sectors around the world. This professional qualification delivers essential knowledge, skills and technical expertise in accountancy, finance and business. ICAEW ensures that its members are at the forefront of their profession by maintaining and developing their skills and knowledge. They regulate professional and ethical standards, and are industry leaders in the provision of technical accounting information.

PROFESSIONAL COMPETENCE CERTIFICATES FOR EXECUTIVES AND EMPLOYEES OF INVESTMENT SERVICES FIRMS (KEPEY) Investment Services firms based in Cyprus or based in a third country and providing investment services in Cyprus, as well as any other organisation offering investment services in Cyprus, are expected to employ individuals who hold the appropriate qualifications. This, therefore, creates the need for all such individuals to be holders of Professional Competence Certificates that reflect their ability to carry out such activities. INSTITUTE OF INTERNAL AUDITORS (IIA) The Certified Internal Auditor (CIA) training program is designed to meet the needs of the professional who wishes to pursue the world’s premier certification in Internal Auditing. The CIA designation is the IIA’s premier certification. The CIA title reflects competence in the principles and practices of internal auditing and serves as the only internationally recognised designation for internal auditors. Achieving the CIA qualification demonstrates your commitment to the auditing profession and, whether you choose to stay within the field of internal auditing or to broaden your skills and move onwards and upwards within your organisation, the fundamentals of business, risk and control covered by the CIA will prove invaluable. THE CFA INSTITUTE (CFA) In the competitive, rapidly evolving profession of investment, few achievements will say more about your commitment to knowledge and high ethical standards than earning the right to use the CFA designation. Employers understand the dedication that the CFA program entails, which is why they often make the CFA charter an eligibility

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Members of the Board: Odysseus Tavros Christos Vlachos Avraam Hadjihannas Odysseas Christodoulou

requirement for senior-level positions and, frequently, are willing to pay for their employees to participate in the program. SEMINARS Intercollege Globaltraining has extensive experience and an excellent reputation in developing and delivering seminars for professionals with emphasis on accounting, banking and finance in Cyprus, Greece, Ro-

mania, Russia, Poland, the Baltic countries and the Middle East. These seminars, presented by professional trainers who have many years of experience in the relevant areas, are essential for individuals seeking to broaden their horizons and keep up to date with the latest developments affecting their profession. Seminars are essential for professionals to remain effective in their role. Professionals are

relied upon by their clients to stay abreast of changes in regulations, markets and the environment in which they work. In order to maintain this trust, providing a valuable service and giving up to date advice, they need to be committed to their own professional development. FOR ANY ADDITIONAL INFORMATION please visit www.globaltraining.org

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FRAUD PREVENTION

HOW TO SAFEGUARD YOUR ORGANISATION’S ASSETS

By Loizos-Andreas Hajiloizos, FCCA, CIA, CFE, CRMA

OCCUPATIONAL

FRAUD

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n today’s world, right in the middle of a global financial crisis, when everything else seems to indicate a downward trend –people’s salaries are being reduced, pay increases and bonuses have become a thing of the past, many employees are losing their jobs due to downsizing or bankruptcy – fraud, and especially occupational fraud, seems to be on the rise and is gathering momentum. As everybody tries to maintain their accustomed standard of living, in some cases people turn to fraud as a means of achieving this. Fraud can be as small and petty as taking office stationery to as big as the embezzlement of funds, i.e. stealing money from unsuspecting companies. In cases of fraud, everybody is quick to assign the blame on the internal auditor for not discovering it during his/ her audits. However, the professional practice standards issued by the Institute of Internal Auditors state clearly that, “The IA should have sufficient knowledge to identify the indicators of fraud but is not expected to have the expertise of a person whose primary responsibility is detecting and investigating fraud.” Management is the owner of the internal control environment within an organisation. Various auditing standards around the globe state clearly that management is responsible for the detection and prevention of fraud and they require management to implement internal control systems designed to mitigate fraud. The Association of Certified Fraud Examiners (ACFE), in its Report to the Nations on Occupational Fraud and Abuse – 2012 Global Fraud Study summarises the situation as follows: “Survey participants estimated that the typical organisation loses 5% of its revenues to fraud each year. Applied to the 2011 Gross World Product, this figure translates to a potential projected annual fraud loss of more than $3.5 trillion.” As can be clearly seen from the chart (above right), fraud losses spiked two years after the start of the global financial crisis in 2008. They are still growing, though at a slower rate.

TOTAL OCCUPATIONAL FRAUD LOSSES 3500 3000

2500

2000

1500

1000

500 0

1996

2002

2004

OCCUPATIONAL FRAUD SCHEMES SEEM TO FALL INTO THREE PRIMARY CATEGORIES: ● Asset misappropriation schemes (86.7% frequency of occurrence), in which an employee steals or misuses the organisation’s resources, e.g. stealing of cash, inflating expenses reports ● Corruption schemes (33.4% frequency of occurrence), in which an employee misuses his/her influence in a business transaction in a way that violates his/her duty to the employer in order to gain a direct or indirect benefit, e.g. bribery ● Financial statements fraud schemes (7.6% frequency of occurrence), in which an employee intentionally causes a mis-statement or omission of material information in the organisation’s financial reports, e.g. recording fictitious revenues, understating reported expenses or artificially inflating reported assets. Occupational fraud is most likely to be detected by a “tip” than any other method while internal auditing and management internal controls are the next two detection methods. The main sources of tips are

2006

2008

2010

2012

Years

employees (51%) and customers (22%) while 12% are anonymous. OTHER KEY CONCLUSIONS OF THE ACFE REPORT WERE THE FOLLOWING: ● Corruption and billing schemes pose the greatest risks to organisations throughout the world. ●O ccupational fraud is a significant threat to small businesses. ● The industries most commonly victimised in the study were banking & financial services, government and manufacturing. ●T he presence of anti-fraud controls is notably correlated with significant decreases in the cost and duration of occupational fraud schemes. ●P erpetrators with higher levels of authority tend to cause much larger losses. ●T he longer a perpetrator has worked for an organisation, the higher fraud losses tend to be. ●T he majority of frauds (77%) were committed by individuals working in one of six departments: accounting, operational,

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EDUCATION

LiveOnLine

Christopher Kazantzis

THE NEW, FLEXIBLE MODE OF STUDY FROM INTERCOLLEGE GLOBALTRAINING Photograph by Jo Michaelides

n 2010, Intercollege Globaltraining embarked on a project aiming to provide students with an innovative mode of study that is flexible enough to accommodate busy professionals, those who live some distance away from its study centres, students with military service obligations, and working mothers, while guaranteeing the same high standard that has earned Intercollege Globaltraining its reputation as a quality tuition provider.

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Ernst & Young is a global leader in assurance, tax, transaction and advisory services. More specifically we offer the following services: ASSURANCE SERVICES ● Audit Services ● Fraud Investigation & Dispute Services ●F inancial Accounting Advisory Services ●A udits of mergers and legal restructuring processes ● Special audits

ADVISORY SERVICES ●B usiness Risk Services, including Internal Audit Services ●F inancial Services Risk Management ● I nformation Technology Risk and Assurance Services ●P erformance Improvement Services TAX ADVISORY AND COMPLIANCE SERVICES ● S trategic Tax Planning ●T ax Compliance Services for Direct and Indirect Taxes ● Transaction Tax Services ● Human Capital Services ● Tax Advisory Services TRANSACTION ADVISORY SERVICES ● Company Admission to Stock Markets ● Mergers and Acquisitions Advisory ● Restructuring Services ● Valuation Services ● Feasibility Studies ●B usiness Modelling Services (model build and model review)

ACCOUNTING COMPLIANCE AND REPORTING SERVICES ● Statutory reporting services ● Accounting Services ● Payroll Services The clientele of Ernst & Young in Cyprus ranges from private individuals and entrepreneurial businesses to major public companies, large multinationals and entities engaged in international operations, We aim to assists our clients to anticipate, define and deal with issues that are critical to their success by recognising that all our clients are on a unique journey. We work with our clients to create a tailored client experience that helps them achieve meaningful results. Our 152.000 people are the foundation of our success. We assemble the right multi-disciplinary team for our clients’ business, drawing on our global network of professionals. We work with our clients in a collaborative way, bringing the right people together in the right place at the right time. We combine leading practices, methodolo-

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SPOTLIGHT ON...

ERNST &Cyprus YOUNG Limited gies and tools, fresh thinking and tailoring our services to our clients’ business needs. It’s how Ernst & Young makes a difference. Although the economic environment has shown some signs of stability (in certain regions around the world), recent events suggest that change and unexpected developments will continue to be a headache for businesses in Cyprus and abroad. The major challenges currently faced by Cyprus businesses can be summarized as: ●T he adoption of policies for the targeted reduction of costs, while at the same time increasing productivity so as to improve their competitiveness. ●E ffective and efficient management of their finances, and especially their liquidity. ●P roper and flexible budgeting and forecasting for the minimisation of the impact of any negative external developments. ●C ontinuing their investment in the research and development of new products and services ●E nsuring proper management of personnel matters through timely and honest communications. At Ernst & Young we have the knowledge, technology and creativity expected of a trusted business advisor and we are in a position to assist our clients in dealing with the above challenges. For example, our Accounting Compliance and Reporting services assist clients in minimising compliance costs via outsourcing either part or the full spectrum of their accounting and reporting functions; our

Performance Improvement services assist clients in optimising processes; we also provide Business Modeling, Restructuring and other Transaction Advisory services, to name but a few. The background of our team of professionals varies from holders of university post-graduate degrees to holders of specialized professional qualifications such as those of the Institute of Chartered Accountants in England and Wales, and the Association of Chartered Certified Accountants. They are Chartered Financial Analysts, Certified Information Systems Auditors, etc. We’re passionate about helping our people achieve their potential. At Ernst & Young we focus on: ●A ttracting high performing individuals committed to reaching their potential while helping our clients achieve their business aims ●C reating an inclusive environment where all are welcomed, each point of view is heard and all contributions are valued ● S haring experiences among professionals ●M obility, giving the opportunity to our professionals to work with people from a variety of cultures and backgrounds. Our development framework called Ernst & Young and you (“EYU”), gives our people the skills, knowledge and support to grow in confidence, boost their individual strengths and do amazing things at work. Three areas will be key to the development of our professionals: learning, experiences and coaching. Ernst&Young has a set of values that define who we are:

“People who demonstrate integrity, respect, and teaming. People with energy, enthusiasm, and the courage to lead. People who build relationships based on doing the right thing.” These are the fundamental beliefs of our global organisation. They guide our actions and behaviour. They influence the way we work with each other and the way we serve our clients and engage with our communities. Every day, each one of us makes choices and decisions that directly affect the way we experience each other and the way our clients and wider communities experience us. Our values give us confidence that we are using the same principles to help us make these decisions, throughout our global organisation. BOARD OF DIRECTORS OF THE FIRM: George Kourris, Andreas Demetriou, Neophytos Neophytou, Stavros Pantzaris, Gabriel Onisiforou, Yiannakis Theoklitou, Charis Stylianou, Maarten Koper, Andreas Avraamides, Petros Liassides, Philippos Raptopoulos, Irene Psalti, Savvas Pentaris. FOR INFORMATION, CONTACT: Nicosia Tower Centre, 36 Byron Avenue, 1096 Nicosia. Tel: (+357) 22209999, Fax: (+357) 22209996 Ernst&Young House, 27, Spyros Kyprianou Avenue, Mesa Gitonia, 4003 Limassol. Tel: (+357) 25209999, Fax: (+357) 25209998 Website: www.ey.com

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Stavros Ioannou Managing Partner, CEO

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SPOTLIGHT ON...

GRANT THORNTON

Grant Thornton (Cyprus) Ltd has been a member of Grant Thornton International since 1982. Our 31,000 employees around the world and our presence in more than 100 countries allow us to offer a wide spectrum of services, ranging from assurance to tax, specialist advisory and business support services. We serve clients in the public, private, local and international fields across a broad variety of industries. Grant Thornton has established a flexible team whose aim is to make a difference – to its colleagues, the profession, the environment and the community it operates in. Grant Thornton is proud of the distinctive level of service offered to clients, independent of size and origin. All of the services offered are partner-led using insight, experience and instinct. This implies that clients have easy access to partners and service stands out from the crowd in terms of quality and response time. In the midst of the financial crisis our clients’ major challenges focus around liquidity and potential growth. We make sure that we are by our clients’ side during these challenging times with practical and meaningful advice. We share expertise and knowledge to help them deal effectively with their day-to-day challenges. The team of Grant Thornton is what

makes us stand out in this increasingly competitive market place. Our people strategy is integral to our success and the achievement of our aims, objectives and long-term strategic goals. Attracting the best people across all markets is a continuous commitment for everyone at Grant Thornton. We recruit people from different backgrounds, with expertise, knowledge and the academic qualifications that are necessary to be able to offer the best level of service to our clients. We always look for people with the right attitude and skills, since our policy is to recruit tomorrow’s managers and partners. Therefore, the professional staff of Grant Thornton comprises qualified ACA or ACCA accountants, with international corporate exposure and excellent technical skills. The people at Grant Thornton share the same passion and enthusiasm as they take ownership of their assignments, clients & careers. They are professionals with business acumen who take charge of their personal development. Our people live up to our CLEARR global values demonstrating Collaboration, Leadership, Excellence, Agility, Respect and Responsibility in everything they do, showing the way to better business. An impressive new project for Grant Thornton is the launch of our China Desk. This is a Nicosia-based service focused on helping Cypriot and Chinese companies tap into each other’s markets. Through our Chinese staff, the China Desk offers insights into working with Chinese entrepreneurs and has developed an in-depth understanding not only of doing business but of the business culture in modern China. The Chinese branch of Grant Thornton international can assist in matters such as: ●M arket and feasibility studies ●C ross-border acquisition services

●A ssistance with joint ventures and strategic alliances ●D ue diligence and public reporting accountant services ●A ssurance and business risk management services ●T ax planning and transfer pricing studies ● I PO-related services Our motto is ‘An Instinct for Growth’. Grant Thornton helps dynamic organisations unlock their potential for growth by providing meaningful, actionable advice through a broad range of services. More importantly, the firm has an ambition to be known for navigating complexity in dynamic organisations. Additionally we have a simple yet challenging ambition: in 2011 we said that by 2015 we want to double the size of our revenue and be recognized as the leading brand in its chosen markets. It seems that we are on the right path, since we have the right combination of actions taken towards organic growth, strategic investments, and mergers and acquisitions. The strategic actions taken in this direction are: ●F ast and well thought growth in selected areas ●D istinctive client service ●H iring, training and continuously developing the best people ●E fficient operations We believe that with our strategic actions and values we will be able to achieve our 2015 goal. FOR MORE INFORMATION about our Firm and services, please visit our website: www.gtcyprus.com. For a personal appointment, you may contact the Firm’s Managing Partner directly, at: stavros.ioannou@cy.gt.com.

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SPOTLIGHT ON...

PAPANTONIOU & PAPANTONIOU L.L.C.

THE FIRM Papantoniou & Papantoniou L.L.C. was founded in 1987, by Antonis S. Papantoniou. It is an esteemed law firm that provides an extensive range of legal products in an efficient and cost-effective manner to local and international clients. The firm provides legal, consulting and fiduciary services, judicial representation, international trusts and tax planning to clients in Cyprus and worldwide. In the

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context of its legal services, the firm has a full-function organisational mechanism for representing international interests in Cyprus and providing consulting services to persons and companies intending to expand their business activities in Cyprus or through Cyprus on a global level. Since 2004, the firm has been a member of European Law Firm (E.L.F.), an international organisation consisting of law firms from every European country. E.L.F. is a sophisticated and cohesive network of 29 commercially orientated law firms committed to offering outstanding yet cost effective legal services

across Europe and beyond. Membership is by invitation only and is limited to one representative per country. SERVICES The aim of E.L.F. is the provision of high quality legal services to businesses, companies, public and private organisations. Through its ELF membership, Papantoniou & Papantoniou L.L.C., has the ability to provide legal services in any other European country and worldwide. This ensures the speedy processing of legal affairs, efficiency and legal protection for business activity in other countries. John P Poyiadjis

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The firm has been an active member of E.L.F. and has enhanced its experience, knowledge and legal practice on an international and European level throughout the network. Moreover, our law firm offers an extensive range of legal services in the Franchise Agreements sector of which aims to protect clients’ interests by providing constant support for the smooth operation of these agreements. Furthermore, it provides services to clients regarding the development of their business in the European area, the protection of their interests when they invest in real estate, the protection of their intellectual property such as trademarks, industrial ownership and judicial representation whenever necessary. Additionally, the firm’s experience and activities extend to representing its clients’ interests in the finance sector, including the stock market, securities, investment accounts and judicial representation whenever necessary. We also act as introducers to the Cyprus Stock Exchange and we advise and assist companies on public listing. The firm’s expertise also extends to the sector of green development through European funding programmes that apply to companies and individuals. As a consequence, this has opened up new horizons for cooperation and the representation of foreign companies wishing to be active in this sector through Cyprus companies. Last but not least, the firm has earned a reputation for representing the interests of Middle East, Indian, Chinese, Eastern European and Russian companies which use Cypriot international companies to expand their business activities in Europe. The firm has close connections with Arabic, Indian, Chinese and Russian law firms so as to provide the highest quality of services with a view to protecting their interests. At the same time, our 25-year experience in providing legal services to Cypriot and international clients in almost all business sectors gives them a chance to develop their business activities beyond the borders of their own country. The firm’s experience, knowledge and connections give Cypriot and International clients a chance to obtain high-quality and cost-effective legal representation in response to challenges and opportunities as they arise.

Papantoniou and Papantoniou LLC is a full service law firm. It offers an extensive but non-exhaustive range of legal services in almost all fields of law. The firm has built a strong reputation for providing legal services to Cyprus and International companies, financial institutions and private clients. The areas of practice in which the firm specializes are: ● International Tax & Trusts ●C orporate & Commercial Law ●M ergers & Acquisitions ●B anking & Finance Law (Stock Exchange) ● I nvestment Law ●G eneral Litigation & Arbitration ● I ntellectual Property Law ●W ills & Probate ●A dmiralty & Shipping Law ●D ebt Recovery CORPORATE DEPARTMENT One of the largest departments of the firm is the company division, which deals in particular with the establishment and administration of companies, both International Business Companies (IBCs) and local ones registered in Cyprus and in other countries: ● International Tax Planning ●F ormation of Cyprus Companies ●R egistration and administration of trusts -Trustee services ●R egistration of branches of foreign companies in Cyprus. Establishing and assisting foreign investments in Cyprus. ●D irector, Secretarial and Nominee services, Registered Office, Mailing Address ●M anagement and administration of companies ●O pening of bank accounts. ●B ook keeping, Accounting, Preparation of financial statements and audit reports through qualified accountants. ●R egistration of Shipping Companies GENERAL LITIGATION DEPARTMENT Our litigation department has extensive experience and a proven track record in successfully handling a wide range of claims and disputes in respect of general civil and criminal litigation including: ● Company and partnership disputes ● Banking and finance disputes ● Insurance claims

● Contract Claims ● Debt collection ● Intellectual Property ● Stock exchange Cases ● Intellectual Property Department: The firm offers a full range legal services and assistance in relation to intellectual property law. Our expertise covers the following areas: ● Advice on the acquisition, registration and protection of all intellectual property. ● Franchising and licensing. ● Restrictive trade practices ● Protection against unfair competition. ● Patent, trademark, copyright, franchising proceedings and passing off actions. ● Advice on all related tax aspects. Languages: Greek, English, French, Arabic Offices: Cyprus, Greece and associated offices all over Europe through the European Law Firm. ASSOCIATION MEMBERSHIPS Cyprus Bar Association, the International Society of Logistics (SOLE), the Association of European Legal Community and the European Law Firm. NUMBER OF LAWYERS: 8 1. A ntonis S. Papantoniou (Managing Director) 2. George Payiasis (Senior Associate Lawyer) 3. Nicoletta Papamichael (Senior Associate Lawyer) 4. Kyriakos Georgiou (Associate Lawyer) 5. Nicoletta Nicolaidou (Associate Lawyer) 6. Dora Demetro (Associate Lawyer) 7. Angelos Exadaktylos (Associate Lawyer) 8. Maria Karekla (Associate Lawyer) CONTACT DETAILS Papantoniou & Papantoniou L.L.C. 41, Themistocli Dervi St., Hawaii Tower, Office 708, 1066 Nicosia, Cyprus Postal address: P.O. Box 21233, 1504 Nicosia, Cyprus Tel: (+357) 22817711 Fax: (+357) 22817717 Website: www.paplaw.com.cy e-mail: paplaw@logos.cy.net

THE INTERNATIONAL INVESTMENT, FINANCE & PROFESSIONAL SERVICES MAGAZINE OF CYPRUS

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FRAUD PREVENTION

CORRUPTION AND BILLING SCHEMES POSE THE GREATEST RISKS TO ORGANISATIONS THROUGHOUT THE WORLD sales, executive /upper management, customer service and purchasing. ● Most occupational fraudsters are first time offenders with clean employment histories. ● In 81% of the cases, the fraudster displayed one or more behavioural red flags that are often associated with fraudulent conduct; i.e. living beyond means, financial difficulties, close relationship with the suppliers or customers and excessive control issues. ●N early half of the organisations do not recover any losses that they suffer due to fraud. So what are the deterrence, prevention and detection controls that an organisation should have or needs to establish or strengthen in order to mitigate the possibility of fraud and making it one of the statistics in a future survey? When the management of an organisation encounters fraud, it usually thinks about the immediate cash loss and the effect on the bottom line; managers often fail to see the

Who’s Who

INTERNAL AUDITORS The internal auditors’ role is: • to assist the Audit Committee in complying with the charter • to conduct risk-based audits and identify high risk areas – close collaboration with the risk department • to report functionally (internal audit issues) to a strong and independent Audit Committee

indirect ripple effects, i.e. possible regulatory fines, legal and investigative costs, management time, rising insurance premiums, reputational impact, loss of key staff/customers/ suppliers, the inability to raise new finance, loss of market share and the possibility of bankruptcy. FRAUD TENDS TO OCCUR WHEN THE PERPETRATOR COMES ACROSS A BREAKDOWN IN THE INTERNAL CONTROL SYSTEM OF THE ORGANISATION. EXAMPLES OF SUCH BREAKDOWNS ARE: ● u se of judgment ● management overrides ● collusion (when two or more people work together towards a common “beneficial” cause) ● f inancial pressures and ● c ost versus benefit decisions. Fraudsters tend to rationalise their actions so that they can sleep better at night by “convincing” themselves that their actions are either insignificant, or their salary is below market levels, or they have earned it, or they are overworked and underpaid or they even think that they are too clever to be caught. THREE BASIC ACTIONS EXIST TO ASSIST AN ORGANISATION TO MITIGATE ITS FRAUD PROBABILITIES (“mitigate” because you can never eliminate fraud altogether however good your internal controls are; collusion can always overcome normal organisational controls): ●C reate a culture of honesty and high ethics within your organisation ●E valuate your anti-fraud processes and internal controls for adequacy and appropriateness and

● Develop an appropriate oversight process, e.g. internal audit

THERE ARE THREE TOOLS THAT ARE REQUIRED TO COMBAT FRAUD: ● Fraud deterrence & prevention – you set up internal controls in your organisation and its processes that deter and prevent easy access to your assets ●F raud detection – you install mechanisms (red flags, exception reports, etc) that detect possible fraudulent activities to be further investigated by the internal auditor in order to assess whether there is fire or not under the smoke and ●F raud investigation – your controls have been bypassed and you perform a fraud investigation in order to answer the following questions: WHO? WHAT? WHY? WHERE? WHEN? HOW? The following is a non-exhaustive list of controls that could help protect a company from itself: AWARENESS CONTROLS ●A pply corporate governance (as per the EU green paper on corporate governance) i.e. a strong Board that meets at least once a quarter, the creation of the three essential board committees (Audit, Risk and Nomination & Remuneration) with independent non-executive directors as their members. All committees should meet regularly with set agendas and minutes. They should have their own charters where their duties, roles, scope of work, authorities and responsibilities are clearly recorded. ●E stablish a whistle blowing system, i.e. a “hotline” via which employees may call and report irregularities anonymously

and administratively to the CEO Management) within the culture of of the company. This helps the the organisation internal auditor to maintain his/her • to update the risk registers with independence. the internal audit findings on the testing of the said management controls The risk officer’s • to report to a strong and role is: independent Risk Committee. • to identify and measure risks • to assist the company in creating its risk registers and shareholders/ Independent external auditors board in setting their risk appetite can provide management • to embed ERM (Enterprise Risk and the Audit Committee

RISK OFFICERS

EXTERNAL AUDITORS

with an assessment of the organisation’s internal controls environment and compliance, and checks and balances to protect the company from fraud. The process will only work properly if the external auditors are truly objective and have no ties to the entity that would impair their judgment. A five-year rotation cycle of the external auditors is a generally an accepted best practice.

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without fear of retaliation. The ACFE’s Report to the Nation on Occupational Fraud reported that hotlines can cut an organisation’s fraud losses by approximately 50%. ● S et the correct Tone at the Top, i.e. a moral and ethical compass to be set by top management so that the other employees follow. ●E stablish Enterprise Risk Management (ERM) whereby risks are identified, measured and recorded. Most vulnerabilities (risks) are known in advance. Before 9/11, for example, the Federal Emergency Management Agency listed the three most catastrophic disasters facing America, which were a terrorist attack on New York, a major earthquake in San Francisco and a hurricane strike on New Orleans. Small companies tend to be more prone to fraud since such owner-managed businesses believe that they run a tight ship, the shareholders / directors tend to trust their

HOTLINES CAN CUT AN ORGANISATION’S FRAUD LOSSES BY APPROXIMATELY

50%

employees, due to company size there is lack of segregation of duties and they do not see the necessity of having an IA department, let alone a certified fraud examiner. HR CONTROLS ● Establish and distribute a company Code of conduct (written standards that are reasonably designed to deter wrongdoing), be consistent with disciplinary measures. Promote honest and ethical conduct, irrespective of positions. ●C reate a positive working environment. There is a higher probability of fraud occurring in an unpleasant environment. ●C ontrol the recruitment process well to

ensure that your new employees are of the right calibre and meet the right ethical and integrity standards prior to being signed up. Before a company opens its doors to new employees, managers should stop and ask themselves “Do I really know this person well enough to trust them with my money, confidential information and, above all, my reputation?” Bear in mind that a survey in the US revealed that 30% of employees admitted to lying while applying for jobs, 18% of employees think it is necessary to exaggerate on their CV, 34% of managers do not check the background of applicants and 36% of organisations state that lies on CVs cost them significant time and money. In the case of the 1995 $1.4 billion Barings Bank fraud case in the UK, Nick Leeson failed to declare County Court Judgments (for outstanding debts) against him and that the Securities and Futures Authority had turned him down for accreditation. His employer, Barings, failed to detect this and sent him to Singapore where he successfully applied to operate as a trader. The rest is history. ●R ecruit the right people using the correct and appropriate recruitment techniques: a dequate screening of CVs c ompletion of application forms l ook for gaps in employment history r equest written references & check by telephone c heck all original qualifications and professional memberships c arry out in-depth due diligence in relation to senior employees i f possible obtain details of criminal records c arry out checks on all staff not just new recruits i nduction training for all new staff c ontinuous training for employees. A survey has revealed that employees with more than ten years of service were responsible for 33.33% of all frauds ●P lan for the worst T he plan should identify at least one individual, who has been properly trained, is qualified, professional and competent, to whom fraud or suspicion of fraud should be reported. S et up an investigation team to lead a possible fraud investigation. The members of this team could include: certified fraud examiners, internal audi-

· · · · · · · · · · · ·

LOIZOS-ANDREAS HAJILOIZOS

is Group Internal Audit Manager at Nest Investments Holdings (Cyprus) Ltd. He has worked in multinational organisations in London, Greece and Cyprus for the last twenty years. He has a Joint Honours Degree in Economics & Accountancy from the City University of London and he is also a Fellow Chartered Certified Accountant (FCCA), a Certified Fraud Examiner (CFE), a Certified Internal Auditor (CIA) and a Certified Risk Manager Assurer (CRMA). He has been conducting seminars for the last fifteen years, as a quest speaker for various professional institutes in the areas of internal audit, fraud, and corporate governance.

tors, security personnel, HR personnel, management representatives, outside specialists, legal counsel etc. T he fraud response team will need to have appropriate seniority and independence - they should not be in a position where a conflict of interest could arise. T he team may also have to consider what should be communicated and to whom (directors, police, etc) and when since once staff become aware of this. it will become uncontrollable I f the company has insurance coverage, the insurance company will need to be informed at an early stage to ensure that coverage applies. Fraud has always been a growth industry and especially so during a global financial crisis as can clearly be seen in the graph at the start of this article. Yet, the explosion of fraud worldwide has changed not only the way we look at it but also has urged us to create more sophisticated deterrent and prevention measures.

· · ·

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PUBLIC RELATIONS

E E S S ’ T

N O I T C A

E L

TONY CHRISTODOULOU, FOUNDER AND MANAGING DIRECTOR OF ACTION GLOBAL COMMUNICATIONS, LOOKS BACK ON 40 YEARS OF SUCCESS IN THE PUBLIC RELATIONS SECTOR.

hen Tony Christodoulou set up Action Public Relations, the first full-service PR Company in Cyprus and the region in 1971, even he would have found it hard to imagine that, over 40 years later, he would be heading a network of offices in the countries of Central and Eastern Europe, the Balkans, the Baltics, Russia, the CIS countries, Central Asia, the Middle East, North Africa and the Eastern Mediterranean. To hear him tell it today, it sounds like a fairly straightforward story of a small company becoming successful and developing into a much bigger

By JohnVickers, Photography by Jo Michaelides

one but Christodoulou’s effusive personality means that he tends to gloss over the years of hard work and the not inconsiderable obstacles that he has had to overcome to get where he is today. Born in Larnaca, he moved to London with his family at the age of six. Ten years later his father died, forcing him and his brother to leave school. “We had to go to work to keep the family going so I never had a chance of any kind of higher education. But you could say that it was a blessing in disguise because otherwise I may never have ended up doing this.” His early foray into Public Relations came when he became part of Jonathan Rowlands and Associates (“I was the ‘Associates’ part!” he says with a broad smile), a company involved in publicity for pop singers including Tom Jones, Rod Stewart, The Kinks and other ‘60s acts at the start of their careers. “In those days, PR was mainly a matter of getting their records played on the radio, which meant the BBC and Radio Luxembourg at first and then, in 1964, the pirate stations like Radio Caroline came along. We were publicists in those days, trying to find ways of getting our clients to appear in as many places as possible.” After working with many of the big names in British pop music in

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

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Under Attack! ANTI-PIRACY LAW COMES INTO FORCE By Antigoni Fakonti

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

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TO THE GLOBAL SHIPPING INDUSTRY, PIRACY IS A VERY REAL PHENOMENON AND NOT SOMETHING TO BE TAKEN LIGHTLY

SHIPPING

THE SHIPOWNER’S VIEW

“

n recent years, thanks in no small part to the four blockbuster Pirates of the Caribbean movies starring Johnny Depp as Captain Jack Sparrow, most people’s idea of shipping piracy has comic, romantic and adventurous connotations with a strong suggestion that it is a harmless thing of the past. To the global shipping industry, however, piracy is a very real phenomenon and not something to be taken lightly. And while the illegal seizure of vessels, the detention of seafarers under inhuman conditions, ransom demands, torture, injuries and even murder have escalated dramatically, international law does not satisfactorily cover all aspects of the problem which means that the onus is on the flag state to take appropriate measures. Cyprus, with the third biggest maritime fleet in the European Union and the tenth largest in the world, has been affected by piracy and the government has thus followed the example of jurisdictions such as the UK and Greece by preparing legislation to combat piracy on the high seas and allowing the use of specially trained and certified guards/ escorts on ships. Law 77(I)/2012) on The Protection of Cyprus Ships Against Acts of Piracy and Other Unlawful Acts Law (published in the Official Gazette of the Republic on 15 June 2012) is an innovative and detailed piece of legislation based on and taking into account International Law, the recommendations and guidance of the International Maritime Organization (IMO) and the shipping industry in general, as well as the provisions of the United Nations Convention on the Law of the Sea. Its enactment is expected to assist in resolving the piracy problem and to make Cyprus the first

In conjunction with the Cyprus Shipping Chamber and with considerable input from shipowners, Cyprus has adopted comprehensive new Capt. Eberhard Koch, Chairman, measures to counter the CEO and ever-increasing piracy Managing Partner, Oesterreichischer problems and to protect Lloyd Seereederei our seafarers, vessel (Cy) Ltd. and cargoes against vehement pirates. The Anti-Piracy Law is a pioneering, innovative and detailed legislative framework regulating the legal use of armed guards on Cyprus flagged vessels and allowing security teams, when authorised by the Master, to return fire if a vessel is being fired upon. We all know only too well that piracy has escalated in recent years, not only in terms of the number of attacks but also the measure and severity of these attacks, with crew members detained under inhumane conditions and subject to torture and even death. I personally have opted to refrain from even considering these specific trading areas and will not jeopardise my crew or my vessels. With this bill in force, however, Cyprus will further enhance its maritime infrastructure and reassure charterers that their cargoes will be protected.”

country in the EU and, possibly, in the world to regulate this issue in such detail. The Law is designed to enhance the security of Cyprus-flagged ships at sea, especially in high-risk areas such as the north-west Indian Ocean, off the west coast of Africa and in the Gulf of Guinea. It establishes the necessary legislative framework for the regulated use of privately-contracted unarmed and armed security guards on board ships, in addition to measures set out in the International Convention for the Safety of Life at Sea (SOLAS) of the International Ship and Port Facility Security Code (ISPS Code). The Law covers acts of or attempts at piracy as well as unlawful acts, which includes any act or suspicious or attempted act which threatens the security of – or may cause damage to – the ship, cargo or persons on board. Under the Law, the registered owner, bareboat charterer or manager of a ship may employ the services of a certified and insured private ship/marine security company (PMSC) providing certified armed or unarmed guards.

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OPINION

Cutting Bureaucracy Making Cyprus a better service-oriented economy is essential if the island is to prosper

he importance of the services sector in Cyprus is evidenced by the fact that, according to some independent figures, it contributes 73% to GDP while other sectors, such as agriculture and manufacturing which once dominated the Cypriot economy, have seen a significant decline in the last few years. Financial experts now refer to Cyprus as a service economy and, as an important regional financial centre thanks to tax incentives, a far-reaching network of double tax treaties, its advanced infrastructure and highly-educated labour force, it ought to reform its government services in order to cope with the growing trends in the world economy and bolster the services sector while, at the same time, encouraging businesses and enterprises to utilize Cyprus for their dealings. The challenges facing the Cypriot services sector need to be addressed immediately. One way to achieve this is by raising the standard of discussion about economic policy issues in Cyprus and offering coherent answers to the problems facing the economy. In another respect, institutions tasked with protecting competition, especially in the field of the provision of services, should be strengthened. Most importantly, the bureaucratic nature of the government has to be tackled effectively. Cypriot service providers must stress the importance of modernising the public sector so as to better serve their clients. Determinants such as a firm strategy that defines the dynamics within the sector and the establishment of stable links between related and supporting industries, which is considered as an important factor in the clustering process, need to be introduced so as to reduce bureaucracy and offer a more coherent approach in the development of a comprehensive national policy framework that will benefit service providers, clients and the government. In addition to the above, production factors should be also taken into account in addressing present shortcomings. Basic factors, such as the cost of labour, energy and capital should be balanced by advanced factors such as the

Bureaucracy must be eradicated as it prevents domestic and foreign investment and delays growth

By Irakli Bukhiashvili

availability of a modern infrastructure within the government and a human capital and knowledge infrastructure that will allow the ‘de-bureaucratization’ of the public sector for the benefit of the island’s economy as a whole, since growth in the services sector and the associated customer satisfaction will provide a means of addressing the general challenges facing the Cyprus economy in the midst of the world economic crisis and that within the eurozone. Taking into account the importance of the services sector within the overall economic framework of Cyprus, both the services sector and the government should adapt to the circumstances and implement a twofold policy that will establish an even more competitive services sector and contain the minimum degree of regulation, far from the bureaucratic constraints that currently exist. At the end of the day, the sector and the government will be required to adopt macro- instead of micro-policies that will accommodate the creation of a favourable environment in which the services sector can flourish. Such policies can only be implemented if the government becomes business-friendly and its workforce well-equipped to adapt to the constantly changing economic, technological and social environment. In line with the Lisbon strategy, Cyprus is required to undertake all necessary structural reforms with the aim of promoting stable economic growth. In this context, the country has to be on convergent economic paths with the other actors in European and international fora. Existing regulatory barriers to the provision of services should make way for a comprehensive policy framework that allows business to foster, develop and provide enhanced client services and satisfaction. Business dynamics, especially in the services sector which plays such an important role in the economy, should become the focal point of government policies concerning the fiscal realities of Cyprus. Bureaucracy, on the other hand, must be eradicated as it prevents domestic and foreign investment and delays growth. Making Cyprus a better service-oriented economy is, arguably, a sine qua non if the island is to prosper.

info: Irakli Bukhiashvili is a lawyer and CEO of the Fine Life Group 62 Gold THE INTERNATIONAL INVESTMENT, FINANCE & PROFESSIONAL SERVICES MAGAZINE OF CYPRUS

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investment

{MONEY}

GOING GREEN

with Alternative Investments “ALTERNATIVE INVESTMENTS” ARE FREQUENTLY – AND MISTAKENLY – ASSOCIATED WITH HIGH RISK AND VOLATILITY AND MANY EVERYDAY INVESTORS THINK THAT EITHER THEY CANNOT HAVE ACCESS TO THEM OR THAT ALTERNATIVE INVESTMENTS ARE ONLY FOR THE WEALTHY. NOTHING COULD BE FURTHER FROM REALITY. THERE IS MUCH MORE TO ALTERNATIVE INVESTMENTS, PARTICULARLY WHEN YOU LOOK AT THE OPPORTUNITIES AVAILABLE WITHIN DIRECT PROJECT INVESTMENT.

the 21st century is set to see unparalleled growth in the green, environmental and alternative market. To give an indication of what we can expect let’s look at some key areas: Agriculture, Forestry and Carbon Emissions.

Agriculture

Food prices are skyrocketing all across the world, and there’s no end in sight. According to the United Nations, food inflation is currently at 30% a year and the fasteroding value of the dollar is causing food prices to appear even higher in contrast to a weakening currency. As the dollar drops in value due to runaway money printing at the Federal Reserve, the cost to import foods from other nations looks set to double in just the next two years alone – and possibly every two years thereafter. Farmland values generally increase faster than inflation, making farmland an effective inflation hedge and capital preservation vehicle. This may be appealing to investors concerned about inflationary government policies and low interest rates. Farmland provides a regular income as well as appreciation in the land’s value.

By Steven A. Newberry

ost analysts argue that alternative investments should be a key part of any portfolio. If you limit your portfolio to traditional investments, you will forever be bound to instabilities in the stock market. Alternative investments construct variation by adding diverse layers to your portfolio; you can alleviate and strengthen your money and ensure steadier return prospects. Alternative Global Solutions (AGS) believes that alternatives are a necessity for all. So why invest in alternatives or eco-friendly investments? Simply because

16 14 12

FARMLAND IS A NATURAL HEDGE AGAINST INFLATION Performance of

15.7%

Farmland During Low, Medium and High Periods of Inflation, Between 1971 and 2008

12.3%

■ Inflation Rate ■ Farmland Prices

8.3%

6 4

info: Steven A. Newberry is the Director of Alternative Global Solutions Ltd. 66 Gold THE INTERNATIONAL INVESTMENT, FINANCE & PROFESSIONAL SERVICES MAGAZINE OF CYPRUS

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EDUCATION

Through “Live-OnLine” tuition, students are able to study in their office or conference room at work, or even from the comfort of their home. No specialized equipment is required: all that is needed is a computer and an Internet connection. Gold spoke to Christopher Kazantzis, Manager of e-learning Studies and Senior Lecturer at Intercollege Globaltraining. Gold: Why “Live-On-Line”? Christopher Kazantzis: There are two approaches to online teaching – synchronous and asynchronous learning. Put simply, you can either offer recordings of the lectures or you can offer a “real-time” lecture. We chose to offer real-time lectures as this provides more interaction between the students and the lecturers, hence the name we chose: “Live-On-Line”. Based on the feedback received from our corporate clients and from students themselves, we believe that this option provides the highest quality of online teaching. Gold: How exactly does it work? C.K.: Our lecturers deliver their courses from their base location in Cyprus, Greece or Romania. All our lecturers are experienced in the subjects they teach and they teach them in a classroom environment. Before delivering an online course, they undergo training on how to use the relevant technology and on how to best deliver the lectures. Lecturers use a tablet computer for delivering the course. From

their side, students can see exactly what the lecturer sees as the latter shares his screen. This means that any document the lecturer uses will also be visible to the students. The lecturers have the ability to write on the tablet screen using a special pen, which means that lecturers can annotate their notes, just like using a blackboard in class. Students can listen to the lecturers through their speakers, see them deliver the course via a camera, and

ONLINE COURSES ARE MORE INTENSIVE AND GENERALLY MORE EFFICIENT interact with them using a chat-box. Gold: What if you can’t watch the lecture at the precise time that it’s being delivered? One of the advantages of online learning is being able to choose when to study. C.K.: Yes, and this is why another important feature of “Live-On-Line” is that we offer students “classroom on demand”, which means that if they miss one of their online lectures they are able to watch a recording using a link provided after the actual lecture. The recorded lecture is available for a limited amount of time (usually up to 48 hours) and aims to ensure that students do not miss out. Upon registration, all students receive an information pack with all the necessary

information they might need for accessing our courses. Gold: What is the difference between a classroom course and a “Live-On-Line” course? C.K.: The obvious difference is that students do not attend their courses in a classroom but other than that they are very similar – the same lecturers, the same books, the same quality. All notes used for the online lectures are from the same books used in the classroom so “LiveOn-Line” students do not miss out on the materials that the classroom students have at their disposal. There is one other main difference, however, and that is that the online courses are more intensive. In total, the number of lecture hours is lower than it is in the classroom. This is because online courses are generally more efficient as there are fewer interruptions. As a result, students are expected to do more work on their own to ensure they keep up with the course. Having said that, the number of lecture hours is roughly double that of our main competitors, as we aim to cover the entire syllabus as opposed to leaving sections out for students to study entirely on their own. Gold: What courses do you offer online? C.K.: We currently offer the majority of the ACCA (Association of Chartered Certified Accountants) modules using our “Live-On-Line” courses. Students are able to attend the tuition phase online and then choose one of our classroombased revision courses in any of our centres. Of course, students may choose the “Live-On-Line” revision course if that suits them better. We also offer online CFA (Chartered Financial Analyst) courses, a selection of the ICAEW (Institute of Chartered Accountants in England and Wales) Knowledge modules, preparation courses for the Professional Competence Certificates for Investment Services Firms, and seminars for professionals with an emphasis on accounting, banking and finance. For more information, visit www.globaltraining.org or call 22841715.

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

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Commitment to Excellence

ACCA "Live-On-Line" Papers available : F7, F8, F9, P1, P2, P3, P4 and P7 Through our â&#x20AC;&#x153;Live-On-Lineâ&#x20AC;? courses you will be able to study from the professional environment of your office, the conference room at work, or even from the comfort of your home. No specialized equipment is required, all you need is a computer and an internet connection.

For further information on our "Live-On-Line" courses, please visit www.globaltraining.org or contact info.cy@globaltraining.org or +35722841715

CYPRUS 46 Makedonitissas Ave., P.O. Box 24005, 1700 Nicosia Tel: +357- 22841500 Fax: +357- 22357484 info.cy@globaltraining.org

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GREECE 265 Mesogeion Ave., Neo Psichiko, 15451 Athens Tel: 30210 - 6722868 Fax: 30210 - 6729629 info.gr@globaltraining.org

ROMANIA 31A Economu Cezarescu Str., Sector 6, 060754 Bucharest Tel: 4031- 4253663 Fax: 4031- 4253662 info.ro@globaltraining.org

www.globaltraining.org

PUBLIC RELATIONS

the ‘60s, Christodoulou returned to Cyprus in 1968 at his mother’s wish. “She wanted to come back to Larnaca so we returned and, with two other London Cypriot friends, we invested money in the Marabou restaurant in Kyrenia harbour. My brother ran the restaurant while I worked for Hull Blyth Araouzos doing the PR for their bus tours and then, in 1971, I decided to start my own company, Action Public Relations. I adapted the name from New Action Ltd, a company owned by Kit Lambert, manager of The Who.” Things ran smoothly for Tony and his family for the company’s first three years. He did PR work for three airlines – Pan Am, Middle East Airlines and BOAC – including the launch of BOAC’s flights to the Seychelles. Action also built a studio in the firm’s Nicosia office and worked as correspondent in the capital for BFBS Radio, a partnership that would continue for 16 years. 1973 saw the first publication of Sunjet. “I suggested to Cyprus Airways that they should have an in-flight magazine,” Christodoulou recalls. “This was long before High Life ever existed. I was told to go ahead with the idea, provided that Cyprus Airways wouldn’t lose any money. And I’m proud to say that the airline has not lost a penny on it in 39 years.” Things were looking good for Action but then came the Turkish invasion in July 1974. Tony, his English wife Mickey and his then 13-month-old daughter Kathy, were evacuated from Kyrenia and made their way to the UK where Christodoulou worked for a few months as Press Officer at the Cyprus High Commission in London before returning to the island and trying to restart the company. “We had seven refugees living in the offices for some time,” he says. “It was a bad time for everyone but after a couple of years things started to move again. In 1988 we expanded to Greece, though more by accident than design, and then we opened an office in Egypt and the company has been growing ever since. We now have over 40 offices, almost all in emerging markets, the exception being Brussels where we have won several EU contracts.” So what is the secret of Christodoulou’s success, which has seen his one-man PR company turn into today’s huge Action Global Communications network? “It goes without saying that my wife Mickey and I worked hard from the beginning to ensure that we have always provided a good service. These days, when we open an office in a new country, we always make a point of finding staff who have good relationships with the authorities and the media, people who are creative and capable of writing excellent proposals for clients and carry out this kind of work. And, of course, working in a foreign country means having an understanding of people’s perceptions which may be very different from your own. I am fortunate in that I understand cultures and my experience has been that we can enter a country and, in a relatively short space of time, understand the culture and fit into it.” When asked to name some of his most memorable moments,

Christodoulou –perhaps not surprisingly, given his formative years in PR spent in the world of pop music – mentions events featuring superstar Julio Iglesias and 80s glamour-girl-turned-singer Samantha Fox. “When we announced that Julio Iglesias was coming, no-one believed us because no-one of his stature had ever given a concert in Cyprus so we persuaded him to come on holiday ahead of the show to announce it himself. Before that, in the ‘80s, we reintroduced jousting to Cyprus after 500 years when we organised a mediaeval week in Paphos featuring an array of stars to publicize the opening of the Cypria Maris hotel. The following week Samantha Fox was on TV in England telling everyone that she was the Queen of Cyprus!” Pressed to name his favourite or most successful campaign, Tony Christodoulou cites two of them without hesitation. “One would be getting an astonishing amount of international publicity for the Russian ophthalmologist Stanislav Fyodorov and his hospital ship which, for a time, was the most famous eye clinic in the world. It was perhaps the most successful PR we ever did with virtually every country in the world having a TV company that filmed a report or a programme about it, from Europe to China and Australia, everywhere. I would also say that one of my greatest achievements was getting the Cyprus Rally known as the “holiday rally” and helping to make September the top tourist month in the Cyprus calendar as it always took place during the last week of September. When it was part of the World Rally Championship, the Cyprus rally brought over £13 million to the island every year. I like to think that in my modest way I made contribution to that.” One of the most striking aspects of Christodoulou’s career is the way in which so many of his business relationships have been remarkably long-lasting: Sixteen years with BFBS, 39 years with Sunjet magazine, acting as Press Officer for the Cyprus Rally for 29 years, promoting the Dubai Air Show for 18 years, representing The Wall Street Journal for 34 years and the Financial Times for 30 and, perhaps most memorably of all, more than 40 continuous years with British Airways. “It’s a Public Relations record in aviation,” he notes with pride. “And we’ve recently been given another 18 countries.” Tony’s greatest source of pride, however, is not a PR campaign or a successful promotion: “My son Chris and daughter Kathy are now running the business and I am very proud of the great job they’re doing, especially now that we’re involved in so many countries and the industry is changing in so many ways.” The founder of Action Global Communications can still be found at his desk most days and when he’s not busy he likes to relax with his family under the vine in his garden. However, even though the day-to-day running of the spreading Action network is now the responsibility of Chris and Kathy, their father is not contemplating retirement anytime soon. In fact, he says, he is going to open an office… in Mongolia. “I’ve travelled all over the world for work and there are still plenty of places left. As long as its fun, I’ll go there. I enjoy looking at a new place, hearing from people there and appointing staff to run the office. I’m not as young as I once way but age hasn’t affected my enthusiasm for the business one bit.”

WE NOW HAVE OVER 40 OFFICES, ALMOST ALL IN EMERGING MARKETS

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SHIPPING

THE PMSC’S VIEW “Where there is sea, there are pirates” Greek proverb

n the Red Sea, the Gulf of Aden, the Arabian Sea, the western Indian Ocean and off the west coast of Africa, incidents of piracy have dramatically increased in recent times. In high risk areas, pirates now operate in organised action groups with different types of mother ship (often previously hijacked vessels) that can travel long distances on the open sea. Attacks nowadays may

last for anything from 15 to 40 minutes, thanks to the naval coalition forces’ rapid response and intervention but in some cases they have lasted up to five hours. For the greatest possible protection of vessels, the following are crucial factors: • A full tactical picture of the area ‘• Hardening’ of the vessel • Adequate organisation for dealing with possible threats • An effective action plan Where guards (armed or unarmed) are employed to defend a vessel, crew and cargo from capture, a security policy based on detection, deterrent and – finally – defence on board is essential. When an attempt is made to seize a vessel that can

To this end, a relevant certificate is issued by the competent authority following the filing of a relevant application. The application must be based on a reasoned and justified risk assessment and include full information on the ship, its voyages and routes, full information about the PMSC, the firearms and special security equipment to be used, the guards, the place and dates of their embarkation and disembarkation and the loading and unloading and storage of the firearms and/or equipment. A written agreement concluded between the parties may follow the GUARDCON contract published by the Baltic and International Maritime Council (BIMCO) and be developed to provide a clearly worded and comprehensive standard contract to govern the employment and use of security guards, with or without firearms, on board ships. A company wishing to offer services as a PMSC must also file an application with the competent authority for the issuance of the certificate attesting that it is allowed to provide the services of unarmed or armed security guards. It must be incorporated and have its registered office in Cyprus or in an EU member state provided that it has an authorized representative in Cyprus. A description of the applicant’s services in relation to the current law, the firearms and/or the special security equipment to be used and a declaration that they have been acquired legally is also necessary. Moreover, the Law contains detailed provisions with regard to the guards including their clean criminal record, mental status, character, communication skills and training.

demonstrate excellent defence mechanisms, pirates are likely to call off their attack. Early warning and the instantaneous activation of self-defence measures are crucial. So, a full tactical picture of the area in conjunction with precautionary defence measures (water hoses, trailer wires, night vision binoculars, etc.) and crew drills may provide the best services, based on the golden rule “See-Detect-Avoid”. The use of force by an onboard armed team for the purposes of self-defence must be proportionate and applied only when absolutely necessary. The proper reinforcement and

THE NEW LAW WILL FURTHER ENHANCE BOTH THE COUNTRY’S MARITIME INFRASTRUCTURE AND ITS IMAGE AS A RELIABLE AND CONSTANTLY DEVELOPING MARITIME CENTRE The certificates issued in relation to the ship operator or the PMSC are valid for a specific period and the conditions of their issuance, suspension and cancellation are expressly regulated by the Law, which also

operation of a vessel with Operations Centre support in specific areas and with guards experienced in dealing with threats (ex-navy seals, for instance) can be extremely effective. Irrespective of whether weapons are deployed (their hasty or improper use may cause pirates to retaliate), ensuring the right preparation and maintaining morale in a well-trained crew can certainly go a long way to eliminating the possibility of a vessel being captured. Panagiotis Theodorakides Brig. (Special Forces H.A.) r. ex-NATO Military Spokesman, Advisor to Argonautis Maritime Services Ltd, a Cypriot company offering unarmed guard services. Currently in line for obtaining a licence to offer armed guard services to ships.

includes provisions regarding the right of shipboard personnel to self-defence, their right to arrest and detain those attempting or committing an unlawful act against the ship and to seize their arms and equipment when they are found on board the ship. There are also legislative provisions which regulate the protection of Cyprusflagged ships by the armed forces or security forces of other states as well as issues relating to intervention, immobilisation and tracking when ships are unlawfully detained or seized. The Law also gives Cyprus Courts the jurisdiction to try cases that relate to the Law and the criminal and civil offences arising from it. While the Republic of Cyprus, the IMO, BIMCO and the shipping world in general do not want to see the institutionalize use of armed security guards on ships, they recognize that piracy and unlawful acts are growing issues that need to be addressed. The Law on the Protection of Cyprus Ships Against Acts of Piracy and Other Unlawful Acts Law is both innovative and unique since it is probably the only legislative framework to regulate this issue in such detail. The Law also aims to minimize the huge cost of piracy in the form of increasing insurance charges, seamen’s wages, remedies or damages. The new Law, together with Cyprus’ beneficial tax regime and experience, will further enhance both the country’s maritime infrastructure and its image as a reliable and constantly developing maritime centre.

info: Antigoni Fakonti is a lawyer at Polakis Sarris & Co. 60 Gold THE INTERNATIONAL INVESTMENT, FINANCE & PROFESSIONAL SERVICES MAGAZINE OF CYPRUS

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{august 2012}

ISSUE

+ BOOK REVIEW BUSINESS: Management in 10 Words By Terry Leahy 74 ECONOMY: How Much is Enough? The Love of Money, and the Case for the Good Life By Robert Skidelsky & Edward Skidelsky 79

{money}

66 Going Green with Alternative Investments By Steven A. Newberry

{business}

68 Doing Business in Cyprus Alexia Aspri and Celia Pourgoura on the business environment and the risks it faces.

{economy}

TAX & LEGAL: The Oxford Guide to Treaties By Duncan B. Hollis 83 LIFESTYLE: The Venetian By Lina Ellina

76 How to Pay Off Cyprus’ National Debt The ‘unmentionable’ solution of a pipeline to Turkey would have major advantages. By Fiona Mullen.

{tax&legal}

70 Investing in the Future Interview with Christos Christodoulou, CEO of Trust Insurance (Cyprus).

80 Intellectual Property Rights Cyprus is Becoming the Jurisdiction of Choice

74 Limassol Hosts WISTA MED 2012 Professional women from the Mediterranean and beyond came together to network and create new business opportunities.

82 No Taxing Problems Companies doing business in Cyprus have good relationships with the local tax authorities.

{lifestyle}

84 Domain Thing The changing business of Top-Level Domains 87 Top-Level Domain Man Interview with Constantinos Roussos about his .music project and more.

THE INTERNATIONAL INVESTMENT, FINANCE & PROFESSIONAL SERVICES OF CYPRUS

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Gold 65

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CARBON OFFSETS ARE A FORM OF TRADE. WHEN YOU BUY AN OFFSET, YOU FUND PROJECTS THAT REDUCE GREENHOUSE GAS (GHG) EMISSIONS.

Private Equity

ANNUALLY COMPOUNDED RETURN

14% US Timberland

Steven A. Newberry

Long-Term Govt. Bonds

12% Corporate Bonds 10% 8% 6%

ALTERNATIVE GLOBAL SOLUTIONS LIMITED

Hedge Funds (Since 1994)

Commercial Real Estate

High Yield Bonds

Interim-Term Govt. Bonds

INE RKET L A M L A CAPIT

4% 2%

Russell 2000 S&P 500

US Treasury Bills

10%

15%

20%

25%

STANDARD DEVIATION

Forestry

It is common knowledge that our natural rainforests are shrinking at an alarming rate and the world’s population is growing at an equally rapid rate constantly increasing the already great demand for timber. But not many know that the Investment Property Databank UK Forestry Index returned 32% in 2007, five times higher than equities and bonds. This is also in stark contrast to the fall in property investments. Timber investments have shown better returns and less volatility than the S&P 500 during the last half-century with timber prices increasing during that same long period slightly above inflation.

Carbon Emissions

One of US President Barack Obama’s first steps on taking office was to set out fuel efficiency targets for the automotive industry, showing that he was willing to do what was right as opposed to what was

THE 21ST CENTURY IS SET TO SEE UNPARALLELED GROWTH IN THE GREEN, ENVIRONMENTAL AND ALTERNATIVE MARKET popular with American voters. This is a clear indication that even the traditionally eco-adverse US will have to start working toward carbon efficiency. At the same time, the EU has set targets to reduce carbon output by 20% by 2020. To reach these targets the European Commission has stated that significantly more investment will be needed – as much as €175bn annually by 2020. Last year the global carbon market grew by 81% in the first nine months alone, and the World Economic Forum has stated that the global carbon market could exceed $100 billion this year. The carbon market is expected to

lternative Global Solutions Ltd (AGS) is an International alternative Investment boutique providing alternative investment solutions to private and institutional investors, including ethical and socially responsible investments. With over 10 years’ experience in the Alternative Investment and offshore industry, AGS has the knowledge, know-how, expertise and experience to guide investors to alternative solutions that meet their individual specific requirements and investment objectives. AGS is committed to ethical projects which benefit less fortunate communities by providing work, food and education along with eco-friendly practices. Info@agsethical.com www.agsethical.com Tel: +357 7000 0289

be worth over $2.1 trillion by 2020. Carbon offsets are a form of trade. When you buy an offset, you fund projects that reduce greenhouse gas (GHG) emissions. Alternative investments offer exceptional opportunities which are not generally correlated with stocks and shares and have outperformed ‘traditional’ markets over the last 5 years (some averaging a 15% yearly income). Ethical and green investments are investments which not only aim to provide a financial return but also strive benefit the environment or have a positive humanitarian or ethical impact in some way. They take into account social and or environmental factors such as poverty, education and carbon emissions. In forthcoming issues of Gold, Alternative Global Solutions will providing further details about their preferred alternative investments and will discuss the factors investors should consider when entering the alternative market.

THE INTERNATIONAL INVESTMENT, FINANCE & PROFESSIONAL SERVICES MAGAZINE OF CYPRUS

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31/07/2012 09:28

insurance

{BUSINESS}

Investing

in the Future IN 2011, JUST TWO YEARS AFTER ENTERING THE LOCAL MARKET, TRUST INSURANCE (CYPRUS) RANKED 13TH ON THE LIST OF THE 24 GENERAL INSURANCE COMPANIES OPERATING ON THE ISLAND. CEO CHRISTOS CHRISTODOULOU IS CONFIDENT THAT BY THE END OF THIS YEAR IT WILL BE IN 8TH PLACE. HE SPOKE TO GOLD ABOUT TRUST’S STRATEGY OF OFFERING CUSTOMERS GREATER VALUE FOR MONEY AND EXPLAINED WHY THE COMPANY IS INVESTING IN CYPRUS DURING SUCH CRUCIAL TIMES. By John Vickers, Photograph by Jo Michaelides

his is not a time when many business leaders are seen to be brimming with confidence but Christos Christodoulou, CEO of Trust Insurance (Cyprus), absolutely exudes optimism. And with some justification. Having entered the Cyprus market in August 2009, when the effects of the financial crisis were already beginning to be felt, Trust fully expects be one of the top ten general insurance companies in six months’ time. “To be in the top ten after our first three full years of operations is an indication that our vision – “To lead through innovation and service excellence” – was correct from the beginning,” he says.

Christos Christodoulou

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

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THE CYPRIOTS HAVE PROVED IN THE PAST THAT THEY CAN GET OVER CRISES AND ADAPT QUICKLY TO NEW CIRCUMSTANCES AND THIS WILL BE NO EXCEPTION

THE INTERNATIONAL INVESTMENT, FINANCE & PROFESSIONAL SERVICES MAGAZINE OF CYPRUS

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international shipping & trading

{BUSINESS}

LIMASSOL HOSTS WISTA MED 2012 TURKEY SENDS A DELEGATION TO CYPRUS CONFERENCE

he 4th WISTA MED Conference took place in Limassol on June 2223, hosted by WISTA Cyprus. The Women’s International Shipping & Trading Association (WISTA) is an international organisation for women in management positions involved in shipping, trading and related professional services worldwide. Professional women in leading positions from all over the Mediterranean and beyond gathered for the conference and to network and create new business opportunities and relationships. WISTA MED 2012 was attended by delegates from Cyprus, Greece, France, Italy, Spain, the Netherlands and, most significantly, Turkey. WISTA Cyprus and WISTA Turkey decided that the two Associations, together with the help of WISTA Greece, would try to find ways to cooperate in a non-political manner in order to benefit shipping and to enhance business A CYPRUS relationships WIST between the ISTA Cyprus, a member of WISTA two countries. International, was established in

October 2011 and already has more than 50 members from various maritime sectors such as ship-owning and ship-management companies, trading, Insurance, oil & gas, consulting, legal and auditing services, etc. The goals of WISTA Cyprus are: • To promote networking within the Cypriot & International Maritime Community • To promote the development of Leadership through continuous education, sharing of knowledge and experience • To mentor young professionals entering the maritime sector and encourage all female professionals at management level and above • To offer seminars, training courses, workshops and conferences for supporters of WISTA Cyprus, not restricted to its members • To form and strengthen relationships with other NWAs • To be a valued member of the Cypriot and International Maritime Community

WISTA Cyprus is one of the youngest national WISTA Associations and this was the first regional event organised by Cyprus. On the second day, the subject of the conference was Why Cyprus? An Optimal Business Base, and speakers encouraged the foreign delegates to consider Cyprus for their operations, despite the financial problems that the country is currently facing, pointing out that the island is still an ideal place for shipping and tradingrelated companies. The speakers came from a wide range of sectors within the maritime cluster and included Capt. Eugen Adami (President of the Cyprus Shipping Chamber), Solon Kassinis (Director of the Energy Service, Ministry of Commerce, Industry & Tourism), Athena Chrysostomou (Maritime Affairs Officer, Department of Merchant Shipping, Cyprus), Evgenios C. Evgeniou (CEO, PwC Cyprus) and Capt. Eberhard Koch (Chairman and CEO, Oesterreichischer Lloyd Seereederei (Cyprus) Ltd). The meeting was also addressed by Karin Orsel (President, WISTA International), Beatrice Witvoet (President, WISTA France) and Despina Panayiotou Theodosiou (President, WISTA Cyprus). It was announced during the conference

that WISTA Cyprus would be bidding to organise the 2014 WISTA International AGM and Conference.

BOOK REVIEW MANAGEMENT IN 10 WORDS BY TERRY LEAHY (RANDOM HOUSE BUSINESS, 2012), RRP: £20 (£9.86 FROM AMAZON.CO.UK)

n his fourteen years as CEO of Tesco, Sir Terry Leahy not only turned the company into the largest supermarket chain in the UK but also transformed it into a global enterprise. As a result, he is now one of the world’s most admired business leaders, widely acclaimed for his drive, flair and no-nonsense approach. In his book he draws on his experience and expertise to pinpoint what he sees as the ten vital attributes that make successful managers and underlie great organisations. Not surprisingly, Leahy maintains that the customers are the most reliable guide that any business has. “Putting the customer at the core of everything we did may sound exceptionally obvious – yet how many organisations truly listen to their customers?” he writes, before proceeding to discuss effective ways to let customers fully express their views and then to act on them. The book is easy to read, with good illustrations of the 10 words which are these: Truth, Loyalty, Courage, Values, Act, Balance, Simple, Lean, Compete and Trust.

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

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cyprus

{BUSINESS}

Doing Business

IN CYPRUS B

anking sector problems, weak tourism from the EU and the need for sharp public sector cutbacks rule out any return to growth this year and a return to recession is now expected. Although deficit reduction targets for 2012-14 will be missed, cost cuts now being enforced will help to revive tourism growth after a bad first quarter, limiting the slide in GDP to just over 1% this year. The government is committed to retaining the 10% corporate tax rate and tax treatment for finance and shipping that ensures a large services surplus. But other tax rates are being forced up and the trade gap means a persistent current account deficit, imposing a financing constraint that will limit GDP growth in 2013-14. Cyprus is connected to Greece through its banking system which has largely been downgraded due to heightened risks in Greece. Cypriot banks are estimated to have €4.2 billion of exposure to Greek sovereign debt and a Greek default would cause serious problems for Cyprus. Monetary conditions are tightening as banks limit lending while they deal with the effects of the Greek debt write-off, and emergency sales will keep the property market subdued. The government budget deficit is estimated to fall to 4% of GDP in 2012 from an estimated 6.5% in 2011, but will be higher than the government’s 2.8% target. Acquisition International spoke to Alexia Aspri and Celia Pourgoura, the Directors of CA Advocates (Pourgoura & Aspri LLC).

Can you define the quality of the business environment in Cyprus and the risks it faces in 2012? “Cyprus has an economy which has proven during its history that it can overcome any obstacle which arises, a business-friendly government, and excellent geopolitical relations. Cyprus has always been a strategic platform for trade, politics and investments. Today, it has developed into a professional business service centre, thanks in part to its credibility and legitimacy in being a member of the EU and the eurozone. Cyprus provides many advantages to the corporate sector, including the lowest corporate taxation rate in the EU (10%) and a broad range of double taxation agreements with almost 50 countries. Among the attributes of the business environment in Cyprus are the country’s advanced transport and telecommunications infrastructure, its highlyeducated, skilled and multilingual human capital as well as a high standard of specialized professional services, including banking, tax, accounting, auditing, business administration, legal, investment and funds management. Although the credibility of the Cyprus banking system has been affected by the economic crisis in Greece, there is confidence that Cyprus will be able to overcome all the obstacles. Despite the current situation, the Cyprus banking system still enjoys the respect of the international community. Cyprus has traditionally had strong ties with a large community of foreign investors keeping monies on the island. So far, the numbers show that foreigners are not worried. Central Bank data for April showed a 0.5% year-on-year increase in total deposits in

CA ADVOCATES (POURGOURA & ASPRI LLC)

WAS ESTABLISHED IN MID- 2011 BY CELIA POURGOURA AND ALEXIA ASPRI who wished to create a progressive commercial and corporate law firm by offering tailormade professional services through directing each client’s needs in a personal and individual way. Although the Firm advises on all areas of Cyprus law, it focuses mainly on the business side of the legal affairs of investing into and via Cyprus, driven by the favourable tax circumstances of Cyprus with core specialisations in commercial, corporate, banking, financing, shipping and real estate law. The Firm is considered a ‘boutique’ law firm consisting of two partners and corporate administrators. Its mission and vision is to provide professional and trusted legal services by establishing ongoing and longterm relations with clients through commitment, specialisation and the highest level of professional and personalised service in a quick, efficient and affordable manner. CA ADVOCATES (POURGOURA & ASPRI LLC) Website: www.ca-advocates.com Address: 33, Clementos Street, Office 401, 4th floor, 1061 Nicosia, Cyprus e-mail: info@ca-advocates.com Tel: (+357) 22460831

info: Adapted from an article in the June 2012 edition of Acquisition International. 68 Gold THE INTERNATIONAL INVESTMENT, FINANCE & PROFESSIONAL SERVICES MAGAZINE OF CYPRUS

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Alexia Aspri

Cyprus to €71.6 billion, of which there was a 29% increase in deposits from other eurozone residents. Of the Cypriot banks, Laiki Bank is the most heavily exposed to Greek government debt and a €1.8 billion capital injection has been granted by the state. Bank of Cyprus has managed to downsize its own capital shortfall of €1.57 billion to €500 million for which it has also requested state aid. Hellenic Bank seems to be escaping relatively easily, holding only €100 million in Greek sovereign debt, which it has already written down. The other Cyprus banks remain safe and sound without any issues of concern. As is well-known by now, Cyprus is the fifth EU member to seek emergency financial aid from its EU partners in order to buffer a banking sector battered by exposure to Greece and is also in negotiations with Russia for a loan of up to €5 billion. Under the circumstances, we do not consider that Cyprus’s request for financial assistance should be seen negatively since, by the implementation of a comprehensive plan, aimed at addressing “the financial, fiscal and structural challenges” (as noted by the Eurogroup), will enable the Cyprus economy to finally return to a sustainable growth path’’.

Celia Pourgoura

ALTHOUGH THE FIRM ADVISES ON ALL AREAS OF CYPRUS LAW, IT FOCUSES MAINLY ON THE BUSINESS SIDE OF THE LEGAL AFFAIRS OF INVESTING INTO AND VIA CYPRUS, DRIVEN BY THE FAVOURABLE TAX CIRCUMSTANCES OF CYPRUS WITH CORE SPECIALISATIONS IN COMMERCIAL, CORPORATE, BANKING, FINANCING, SHIPPING AND REAL ESTATE LAW. How has Cyprus coped with the ongoing debt crisis in Europe and what effect has this had on the economy, and in particular on tourism? “One should not forget that over 70% of the Cyprus economy is based on the provision of services, a large share of which arises from tourism. Undoubtedly, since the European economic crisis hit, consumers have become more careful and selective with their spending

and decision-making and consider their options more thoroughly before choosing what to spend their money on. Regarding tourism, Cyprus is lucky in the sense that it has been quite easy to market the beautiful landscapes, beaches, weather and all the associated services. There has been an evident fall in the numbers of UK visitors to Cyprus in the past few years, due to the sterling/euro exchange rate but this trend has now stabilised. On the other hand, visitor numbers from other markets have risen dramatically. The Russian tourist market now falls into the top categories of high spenders. Furthermore, the political unrest in the region around Cyprus inclines tourists to choose Cyprus as the safest destination compared to other places close by. The Cyprus Tourism Organisation has been quite busy attracting new target markets, new low-cost airlines and new routes. It has also been working closely with tour operators to bring even more people to Cyprus, not focusing purely on the summer season but also on opening up and increasing traveller numbers during the winter period (November-April). Figures show that tourism levels are actually up despite of the prolonged European economic crisis.”

THE INTERNATIONAL INVESTMENT, FINANCE & PROFESSIONAL SERVICES MAGAZINE OF CYPRUS

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insurance

“In our first year we registered 85% growth and at present we are seeing about 50% higher growth than last year. We intend to maintain this until we are among the top 5-6 insurance companies on the island.” The idea of entering a new market at a time of economic upheaval may seem illogical, especially when problems in the local economy are worsened by the effects of a global financial crisis but, says Christodoulou, “The best time to enter a market is actually when things are not going well. By doing so, you show trust in that market. An optimistic and encouraging stance will be remembered afterwards. If you are here during the difficult times, people will trust you more during the good times.” This is particularly true in the insurance sector, he adds, even though there is always a danger that when times are difficult, people may consider that insurance is not a priority purchase. “When things are not going well, insurance is a must. If something happens to your home or business at such a time, you will be in much more serious trouble than during a positive period when the banks are willing to lend you money to help you get back on your feet. So insurance is more essential when times are tough. In Cyprus, people are insurance-aware but it is also true that a large section of the population tries to get by without it. It’s our job to bring this need to their attention.” Christos Christodoulou knows that it is not easy to persuade people to part with their money when economic uncertainty is the norm but, he says, one of the keys to Trust’s success has been the ability to explain things to customers and to convince them that insurance is a worthwhile investment. “Insurance is an extremely valuable service in that it takes away risk from individuals and families and keeps them free from worry. As insurers, we have different products at different costs. We adapt to each customer’s individual circumstances which means that we have solutions for small, medium and high budgets. When times are hard, people start thinking about how they can save money, and that includes saving on the cost of their insurance. If we can persuade them that we are providing better value for money than our competitors, they will be willing to change.”

Value for money has been a key factor in Trust’s rapid rise. One example is the provision of assistance to customers whose vehicles break down, something which is standard practice with all insurance companies. “Trust Insurance Cyprus takes things a step further,“ explains Christodoulou. “We not only provide road assistance to our customers but we also have a service which lets drivers call us if they have had too much to drink and we’ll take them home. Where all insurance companies provide transport for the vehicle, we provide it for the customer as well.” Other significant factors have been the introduction of all-risk policies – what the company calls “new generation insurance” – and the special

WE NOT ONLY PROVIDE ROAD ASSISTANCE TO OUR CUSTOMERS BUT WE ALSO HAVE A SERVICE WHICH LETS DRIVERS CALL US IF THEY HAVE HAD TOO MUCH TO DRINK AND WE’LL TAKE THEM HOME. emphasis it places on the way it pays claims. “We consider this to be the number one criterion for customer service in the insurance business,” says the CEO of Trust Insurance Cyprus. “We have earned a reputation for paying fair claims fast and this strategy has been extremely well received by the public. We mostly pay claims by people who are not our customers (third party motor insurance) and this is actually an excellent way to attract business – it’s a bit like word-ofmouth advertising – because if someone’s claim is paid quickly and fairly, there is a good chance that this person will want to become a customer of ours.” Cyprus may be a small country with a comparatively small insurance sector but when measured as a percentage of GDP, Cypriots spend about half of their counterparts in the UK, for example, and the 24 companies competing for general business are sharing some €450 million in premiums. That figure will grow, according to Christodoulou, not least because premiums are going to become more expensive as they become better aligned with

the amounts paid in claims and compensation which rose when Cyprus joined the EU but premiums did not. Trust Insurance (Cyprus) has many competitive advantages in the Cyprus market including the huge benefits that come from being part of the Nest Group and having access to the Group’s corporate services and expertise, enabling it to secure reinsurance treaties that are unique to the Cyprus market, allowing the development of innovative products and services that differentiate the company from its competitors. Moreover, the Nest Group’s IT department has provided a state-ofthe-art IT infrastructure as well as general insurance logistics and performance management systems to Trust Insurance. Customers see these advantages, says Christodoulou, and eventually the local insurance sector will undergo changes. “There are actually too many companies here at present but many observers believe that the Solvency II directive will force mergers and acquisitions and thus reduce the number of insurance companies by about half. If we, as Trust Insurance (Cyprus) see an opportunity for a good acquisition we will go for it.” Coming back to the issue of investing in the economy during a time of crisis, Trust Insurance (Cyprus) has shown its strong belief in the island and its future through its actions. “Even at the height of this financial crisis, we have been investing,” says Christodoulou. “Over the past three years we have recruited 120 insurance brokers and 50 members of staff which gives a very positive message. The Nest Group is also investing in an oncology centre in Limassol which also indicates how much it believes in Cyprus. We want to declare our presence, our financial strength and our strategy during these difficult times so that, when the financial crisis is over, people will remember that we were here and that we showed confidence in the economy and the people of Cyprus.” Christodoulou is under no illusions about the severity of the current situation (“I don’t think the crisis is going to disappear in the next year”) but he is confident that won’t last long “because there are too many positive factors affecting the Cyprus economy”. It’s a process that, unfortunately, we have to go through but the Cypriots have proved in the past that they can get over crises and adapt quickly to new circumstances and this will be no exception.”

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

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natural gas

TABLE 3: ESTIMATED NET VALUE OF GAS SOLD VIA PIPELINE TO GREECE A. Gas available for export, bcm B. Gas lost in pipeline transit (estimated 5%), bcm C. Gas available for sale through pipeline (A-B), bcm

173 9 165

D. Price of Russian natural gas at German border in May 2012, $ per 1,000 cu m

$450

E. Value of Block 12 pipeline gas after transit but before investment costs (CxD), $ million

$74,051

F. Cost of exploration (estimated derived from Noble investment in 1 year), $ million G. Cost of submarine pipeline from Block 12 to Vassiliko (see Table 2), $ million H. Distance from Cyprus to Crete and Pelaponnese (source DEPA), km I. Estimated cost per 100km of pipeline of 2000m derived from cost of 1,000 m, $ million J. Cost of submarine pipeline from Vassiliko to Greece (HxI), $ million K. Estimated distance on land to link to pipeline network, km L. Estimated cost per 100km of an onland pipeline inc land purchase, $ million

$2,000 1,038 $1,500 $15,570 200 $670 $1,340

M. Cost of onland pipeline in Greece (KxL), $ million N. Net revenue of Block 12 gas to Greece after transit and investment costs (E-F-G-J-M)

The first deduction that has to be made is the gas consumption costs for this energy-intensive business. Estimates range from 5% to 20%, so I have pinned the estimate at 12.5%. Another deduction is the cost of exploration. Here, I have estimated $600m, based on Noble Energy’s reported costs of exploration in Cyprus and Israel in a single year (2011) of roughly $200m. The next major investment cost is the construction of a single-train LNG plant, estimated by the government at €7-€10 billion or $10 billion at the mid-range value.

$600

$54,541

Finally, one must deduct the cost of the pipeline from Block 12 to Vasilikos. This is estimated by the Natural Gas public Company (DEFA) at $2 billion, an estimate that also matches figures based on other sources. The total investment costs for an LNG plant therefore amount to around $12.6 billion. Thus, after deducting the gas losses from domestic consumption, the use of gas in LNG production and investment costs, the net revenue of the gas in Block 12 sold via LNG would be just over $50 billion.

CHALLENGES OF PIPING GAS TO GREECE

THE NET REVENUE THAT CAN BE GENERATED BY GAS SOLD VIA PIPELINE TO TURKEY COMES OUT AT $69 BILLION, COMPARED WITH $55 BILLION FOR A PIPELINE TO GREECE AND $50 BILLION FOR AN LNG PLANT

Given the issues with LNG, there has been discussion about constructing a pipeline from Cyprus to Greece. At a total distance of some 1,150 km, it is almost as long as Nord Stream which, at 1,224 km, is said to be the longest in the world and probably also cuts across more difficult terrain. The Public Gas Corporation of Greece (DEPA) has said that the pipeline would have a capacity of 8 billion cubic metres (bcm) per year. Using all of the gas available in Cyprus’ Block 12 would be enough to keep the pipeline running

INDUSTRY EXPERTS NOTE THAT FINANCIERS WILL TYPICALLY NOT PUT UP THE CAPITAL FOR AN LNG PLANT BEFORE THERE IS A SECURE CONTRACT OF AT LEAST 20 YEARS WITH A BUYER for around 20 years at full capacity. However, more gas is probably needed to secure supply. Therefore, just like the LNG option, its viability may also depend on either further significant gas finds in Cyprus or a decision by Israel to export, which is still pending. Building a pipeline at such a depth and at such long distances involves a large amount of capital expenditure. According to my estimates (Table 3), the additional investment cost of a pipeline from Vasilikos to Greece and then onland in Greece would be almost $17 billion. This would reduce the net revenue that could be generated to $54.5 billion. Thus, there is little difference in value between piping gas to Greece and selling it as LNG. The fact that investment costs are so high also raises the same issues as an LNG plant, namely whether one can secure financing, particularly when two junk-rated countries are involved.

PIPING GAS TO TURKEY?

This brings us to the ‘unmentionable’ option, namely piping gas to Turkey. One advantage of piped gas is that it takes less time to set up the infrastructure than to build an LNG plant, therefore revenue comes onstream faster. Another advantage is that it has a ready buyer, although the long-term nature of many LNG contracts means that the same is also currently true for LNG. A third advantage is that, by linking it up to a pipeline network, it can reach the very large European market. The key advantage, however, is that the investment cost is much lower, resulting in considerably more net revenue after investment. According to my estimates (Table 4), the investment costs of a pipeline to Turkey are only around $5 billion, compared with $12.7 billion for the LNG plant, which also uses up valuable gas in production. This means that the net revenue that can be generated by gas sold via pipeline to Turkey comes out at $69 billion, compared

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TABLE 4: ESTIMATED NET VALUE OF GAS SOLD VIA PIPELINE TO TURKEY A. Gas available for export, bcm B. Gas lost in pipeline transit (estimated 5%), bcm C. Gas available for sale through pipeline (A-B), bcm D. Price of Russian natural gas at German border in May 2012, $ per 1,000 cu m E. Value of Block 12 pipeline gas after transit but before investment costs (CxD), $ million F. Cost of exploration (estimated derived from Noble investment in 1 year), $ million G. Cost of submarine pipeline from Block 12 to Vassiliko (see Table 2), $ million H. Estimated distance from Vasilikos to Kyrenia, km I. Estimated cost per 100km of an onland pipeline inc land purchase, $ million J. Cost of a land pipeline from Vasilikos to Kyrenia (HxI), $ million K. Estimated distance from Kyrenia to Aydincik on Turkey coast (shortest route), km L. Cost of submarine pipeline from Kyrenia to Turkey coast (IxK), $ million M. Estimated distance from Aydincik to Ceyhan, km N. Cost of a land pipeline from Aydincik to Ceyhan (IxM), $ million O. Net revenue of Block 12 gas to Turkey after transit and investment costs (E-F-G-J-L-N)

SUMMARY: REVENUE GENERATED BY DIFFERENT EXPORT OPTIONS Net revenue from gas converted to LNG, $ million

$50,148 €41,105

Net revenue from gas piped to Greece, $ million

$54,541 €44,706

Net revenue from gas piped to Turkey, $ million

$69,271 €56,779

Rough estimate of net revenue from gas piped to Israel (Turkey minus 10%)

$62,344 €51,101

Difference between LNG and gas to Turkey

$19,122 €15,674

Republic of Cyprus government debt in 2011

€12,720

Bank recapitalisation requirements (Fitch Ratings, June 2012)

€6,000

173 9 165 $450 $74,051 $600 $2,000 60 $670 $400 65 $440 200 $1,340 $69,271

with $55 billion for a pipeline to Greece and $50 billion for an LNG plant.

CHALLENGES OF A PIPELINE TO TURKEY

Of course, pipelines also have their downsides. As mentioned in the case of the Egypt-Israel pipeline, they are probably more vulnerable to attack. The main downside of a pipeline to Turkey, of course, is that it is not possible in the absence of a settlement of the Cyprus problem. Even in the event of a solution to the Cyprus problem, there is a worry that Turkey could “switch off the taps” and thus cut off a revenue stream to Cypriots. However, this seems unlikely. Turkey depends for 73% of its energy needs on imports and it is therefore unlikely to have the spare capacity to cut off supply. In addition, if Turkey stopped imports from a united Cyprus, it would also imply cutting revenue flowing to the Turkish Cypriots.

WHAT CAN €15 BILLION BUY?

The difference between the net revenue from a pipeline to Turkey and the net revenue from LNG – some €15.7 billion – would more than pay off the €12.7 billion in public debt held by the Cyprus government at the end of 2011, with a little bit spare for bank recapitalisation.

Maybe a solution to the Cyprus problem is too much to hope for. But if the Syria crisis pushes the Turks and Israelis to make peace, if they revive earlier plans to pipe gas from Israel to Turkey, and our junk status makes it difficult to finance the LNG plant, we might just find ourselves piping gas to Turkey anyway. Except that under this scenario we’d be doing it at a heavy discount because it would have to go via Israel first.

BOOK REVIEW HOW MUCH IS ENOUGH? THE LOVE OF MONEY, AND THE CASE FOR THE GOOD LIFE BY ROBERT SKIDELSKY & EDWARD SKIDELSKY (ALLEN LANE, 2012) RRP: £20 (£17 FROM AMAZON.CO.UK)

conomic growth has long been regarded as a self-evident good, with political debate focused on the best means to achieve it. There are now signs that this shared assumption is weakening as anger at ‘greedy’ bankers and their huge bonuses has given way to a deeper dissatisfaction with an economic system that is geared overwhelmingly to the accumulation of wealth. Robert and Edward Skidelsky argue that wealth is not an end in itself but a means to the achievement and maintenance of a ‘good life’, and that our economy should be organised to reflect this fact. The book includes a definition of the ‘good life’, discusses the relevance of ‘Happiness Studies’ and the environmental impact of our ever-growing need to consume. It concludes by offering a radical new model for income redistribution – and a consideration of what human beings might really want from their lives. The authors propose that the seven dimensions of the `good life’ are health, security, respect, personality, harmony with nature, friendship, and leisure. Fascinating ideas and plenty of food for thought

info: Fiona Mullen is Director of Sapienta Economics Ltd and co-founder of Strata Insight, bespoke consultants to the Eastern Mediterranean hydrocarbons sector. THE INTERNATIONAL INVESTMENT, FINANCE & PROFESSIONAL SERVICES MAGAZINE OF CYPRUS

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tax certainty

{TAX&LEGAL}

eloitte recently announced the results of its first EMEA (Europe, Middle East and Africa) edition of Tax Certainty – A Survey about the Relationship between companies and the Tax Authorities. The survey, which aimed at understanding various aspects of the relation between companies and tax authorities in 24 countries, noted that most countries have a good relationship with their local tax authorities. However, overall tax uncertainty is a concern: One in two respondents feel that the tax uncertainty in their country impacts or even damages their business operations. The survey also investigated the extent to which local tax authorities are implementing digital information in their operations, how respondents in the different countries look at disagreements with tax authorities and how they evaluate their local ruling practices.

The Deloitte survey results show that, overall, companies or organisations have a good relationship with their local tax authorities – 65% of respondents described this relationship as good and 27% rated it as being very good. In Cyprus the relationship between companies and the local tax authority is comparable to the opinion at EMEA level (73% good, 27% very good). However, in Austria, Italy, Nigeria, Poland, Romania and Russia more than 15% of respondents consider their relationship to be bad or very bad. Taxpayers around EMEA indicate that the quality of their company’s relationship with the local tax authorities depends on the particular department they need to deal with at the local tax authorities. This especially applies to the department dealing with corporate income taxes – more than 21% of respondents have experienced difficulties with this department, followed by the VAT department with almost 20%. Throughout EMEA, one in two respondents (exactly 52%) feels that the tax uncertainty in their country impacts or even

damages their business operations. In Cyprus, 41% shares this opinion. According to the country-specific response rates, there would be even more tax uncertainty in Hungary, Kenya, Poland, Portugal and Romania as over 75% of respondents in these countries share the opinion of the EMEA majority. The main reason for uncertainty is the frequently changing legislation, which was indicated by almost one third of respondents. Next is the excessive length of tax disputes (12.4%) followed by the weaknesses and reversals in the tax authorities’ doctrine and in publicly available guidance (12.1%). The Swiss are the most confident about the tax certainty in their country and 80% believes that no other country in the EMEA region would have a higher certainty level. On the other hand, in Hungary, Poland, Romania and Russia, over 55% of respondents believe tax uncertainty is greater in comparison to other EMEA countries. “Our survey’s findings are very encouraging for the international business sector in Cyprus

No Taxing Problems COMPANIES DOING BUSINESS IN CYPRUS HAVE GOOD RELATIONSHIPS WITH THE LOCAL TAX AUTHORITIES.

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

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Pieris Markou

as they demonstrate that the majority of companies doing business in Cyprus maintain excellent relationships with local tax authorities. Respondents demonstrated a positive perception concerning tax certainty in Cyprus. It is therefore not a coincidence at all that the respondents believe that overall tax certainty in Cyprus is greater than that experienced in other EMEA countries and that the system in general should not be subject to any kind of improvement”, said Pieris Markou, Head of Tax Services of Deloitte in Cyprus. “It is obvious that the country’s reliable tax system plays an important role in the establishment of excellent and sincere business relationships that have a positive impact and benefit international business operations by paving the way for their success and prosperity”, Markou added. The ruling systems in Belgium, Denmark, Finland, Luxembourg, Poland, Sweden and Switzerland are well-known in the respective business communities and, as such, contribute to the level of tax certainty. In addition, taxpayers also consulted other tax authorities’ departments to obtain certainty on tax matters through a ruling but without interference of the official Ruling Commission. In general, almost one quarter of all respondents initiated a ruling request through these channels. Almost 36% of respondents who have experience in dealing with the official local Ruling System consider this to be a slow procedure, especially in Russia and Romania. The Cyprus, Luxembourg, Slovakia, Polish, Swiss and Dutch official ruling procedures are rated much more positively. In Cyprus, Luxembourg and Slovakia, none of the respondents has an overall poor experience or indicated that this procedure should be subject to improvement so one might need to look at these ruling systems as best practices. According to 32% of all respondents throughout EMEA, however, there is room for improvement in dealing with the local official Ruling System and 12% of all respondents perceived their experience with the local Ruling Institution as poor. During the last three years, nearly a third of respondents were audited by the VAT (Value Added Tax) and CIT (Corporate Income Tax) departments of their local tax administration. Approximately a tenth of respondents were audited in view of transfer pricing, international tax and personal income tax during this period. Less than 6% of respondents were audited in the area of customs, excise duty and property tax – audit activity in these tax fields appears to be considerably lower. Even though the

OUR SURVEY’S FINDINGS ARE VERY ENCOURAGING FOR THE INTERNATIONAL BUSINESS SECTOR IN CYPRUS majority (53%) indicates that tax audit activity remained constant during the past year, approximately a fifth (21%) of the respondents feel that the audit activity increased. This was most apparent in Russia where 50% experienced an increase in audit activity. Disputes with local tax authorities are generally settled through administrative recourse. In Switzerland, the Netherlands, Nigeria and Sweden, a large majority (>70% in each country) is rather confident that an administrative recourse with the local authorities leads to an acceptable solution. On the other hand, in Norway, Russia and in a number of Central European countries as Hungary, Poland, Romania and Slovakia, only a minority of respondents believes that an administrative recourse is likely to result in a satisfactory solution. Approximately 78% of respondents confirmed that their company would be prepared to litigate in court in case of failure of the administrative recourse; in France, Portugal, Russia and Sweden this concerns more than 90%. Even though the likelihood of going to court in case of disputes is significant, only 26% of respondents confirmed that their company actually started a court case during the last three years. Poland, Portugal and Russia top the list of countries where such court cases have taken place. The majority of respondents (83%) are confident that their company would be treated fairly by the local Revenue service, whereas 17% rule out the chances of fair treatment. This number is especially high in Romania where 43% of respondents do not believe their company would get a fair treatment from the Romanian Revenue service – 12% of respondents, mainly from Russia and Romania, confirmed having filed a complaint for unfair or unprofessional treatment by the local tax authorities in the past. In Cyprus, Finland Hungary, Ireland, Kenya, Luxembourg, Norway and Switzerland no respondent has ever filed such a complaint. The vast majority of the companies surveyed (83%) indicated they can provide information to their local tax office via digital communication channels. According to the majority of the participating countries (56%), local tax

authorities provide taxpayers with a public information website enabling them to verify the tax authorities’ position on a certain topic. The Danish and Swedish tax websites are considered to be of high quality because the tax authorities’ position on certain tax matters is publicly available and because of the website’s good search capabilities. The Netherlands and Portugal also score well in this regard. To download the full Tax Certainty Report, go to www.deloitte.com/cy

BOOK REVIEW THE OXFORD GUIDE TO TREATIES BY DUNCAN B. HOLLIS (OXFORD UNIVERSITY PRESS, 2012), RRP: £125 (£125 FROM AMAZON.CO.UK)

rom trade relations to greenhouse gasses, from shipwrecks to cybercrime, treaties structure the rights and obligations of states, international organisations, and individuals. For centuries, they have regulated relations among nation states and today, they are the dominant source of international law. This comprehensive guide to treaties sheds light on the rules and practices surrounding the making, interpretation and operation of these instruments. Leading experts provide essays designed to introduce the law of treaties and offer practical insights into how treaties actually work. Issues addressed include what treaties are and when they should be used, with detailed analyses of treaty formation, application and interpretation as well as those associated with treaties involving the EU and other international organisations. These scholarly treatments are complimented by a set of model treaty clauses. Real examples illustrate the approaches treaty-makers can take on topics such as entry into force, languages, reservations, and amendments. The Oxford Guide is an authoritative reference point for anyone involved in the creation or interpretation of treaties or other forms of international agreement.

THE INTERNATIONAL INVESTMENT, FINANCE & PROFESSIONAL SERVICES MAGAZINE OF CYPRUS

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internet

HIGHEST PRICES PAID

AT THE END OF LAST YEAR, THE MOST EXPENSIVE DOMAIN NAME SALES ON RECORD WERE THE FOLLOWING: Insure.com sold for $16 million in 2009. Sex.com sold for $12-$14 million in 2006. Fund.com sold for $9.99 million in 2008. Porn.com sold for $9.5 million in 2007. Business.com sold for $7.5 million in 1999. Diamond.com for $7.5 million in 2006. Beer.com sold for $7 million in 2004. Israel.com sold for $5.88 million in 2004. Casino.com sold for $5.5 million in 2003. Toys.com for $5.1 million in 2009. (Note: Most million-dollar domain deals are carried out privately and go unreported)

enforcing their trademark rights and lawsuits followed, which in turn took more money out of the sales channel. Nevertheless, a lot of domains were still being bought for six and seven figures. Finally, with Search Engine Optimization (SEO), people jumped in knowing that a keyword-rich domain would be ranked highly by the search engines. The aftermarket for .net and .org domains skyrocketed, and brought in more million-dollar sales. Today, things are still fluctuating. With Google algorithms constantly changing, leaving SEO experts trying to figure out how to make the most of an unstable system, keywordrich domains are selling but at a much lower rate, as are non-.com domains. In 2012, there has been just one domain selling for $1,000,000 (dudu.com) while in 2011, there were three and in 2010 there were seven. So where do we go from here? With so

many new gTLD extensions available in the future, compared to the 21 we currently have, the choice for consumers is going to increase drastically. One domainer has applied for 54 new gTLDs, committing $60 million in the process. Although the debate continues about what effect these new gTLDs will have on the value of existing domains and extensions, the truth is the future remains uncertain. Will all domain prices hold steady? Would an immigration lawyer from New York who might pay $10,000 for NewYorkImmigrationLawyer.com in 2012, still pay that much when he could register for $50-$100 any one of a number of new possibilities, such as NewYorkImmigration. Law, NewYorkimmigration.Lawyer, NewYorkImmigration.Attorney or NewYorkImmigration.Legal, or even ImmigrationLawyer.NYC? What happens if Google, which has applied for over 100 new gTLDs, decides to give domain names away free in 2014? It would be an interesting turn of events if things eventually end up where they started with free domains. The introduction of new gTLDs will affect most organisations. Whether or not you decide to apply for a new gTLD, you should still pay attention to the process. By owning a piece of the Internet landscape yourself, however, you can utilise the web in ways not imagined before to re-define, enhance and renovate your business model, distribution channels and company’s strategic positioning. Owning your own TLD translates to complete control of the policies surrounding it as well as who can register what domain name, for what purpose and for what price. The benefits of using new TLDs for branding are that businesses could own an entire TLD space and have an unlimited selection of website domain names to market their brand. These websites will clearly communicate the brand for significantly less

.COM VERSUS .NET, .BIZ & .INFO

any people believe that the .com domain is the only one worth purchasing and while it is true that .com domains are very popular, there are lots of businesses which use other Top-Level Domains without a problem. After .com, the .net and .org domains are by far the most popular. It used to be that .org domains were for non-profit organisations while .net were reserved for Internet companies but that quickly went out the window. The same applies for .biz which was implemented originally for businesses while .info was

supposed to provide information but anyone can use either these days. What you have to think about is how your customers are going to access your site. If they are simply going to type your company name into the URL bar and hit enter, then getting the .com domain is a must. But if you can brand your site with a .net or .cy suffix and get people used to using that, it will not matter. Another solution is to use the TLD as part of your entire corporate name. The well-known social bookmarking site Delicious does this quite well with its domain: http://del.icio.us

NEW TLDS WILL BE EVEN MORE VALUABLE THAN PREMIUM .COM DOMAINS THAT HAVE BEEN SOLD FOR MILLIONS OF DOLLARS than the price of a high traffic, premium .com domain that you can buy in aftermarket auctions. Given the array of business opportunities and possibilities for innovation, new TLDs will be even more valuable than premium .com domains that have been sold for millions of dollars in domain auctions. Nevertheless, the decision to apply for a new gTLD should not be entered into lightly. Applying to run your own gTLD is not the same as registering a second-level domain name; when you apply for a new gTLD you are applying to run a registry business and you will be responsible for a critical and highly visible piece of Internet infrastructure. Just as Verisign is responsible for all the domain names registered in the .com top-level domain, you would be responsible for all the domain names registered in your .something gTLD. While operating a top-level domain registry offers exciting opportunities and rewards, it carries great responsibilities as well. Potential Benefits include entrepreneurship, increased control, an ongoing revenue stream, innovative marketing opportunities and business models. On the downside, risks include a loss of investment, contractual restrictions, staffing, competition, and working in uncharted territory. Ultimately, the business of successful “domaining” may rest on branding. If a domain is intuitive and memorable (and therefore “brand-able”), it will – along with your business – thrive. Otherwise you may find yourself buried under a heap of endless domain combinations.

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

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Constantinos Roussos

MOST TOP SEARCHES FOR POPULAR ARTISTS USING TERMS SUCH AS ‘MP3’ RETURN PIRATED, ILLEGAL RESULTS speaking at prestigious universities as well as participating on music and tech industry panels. He has received numerous awards and has been on the forefront of emerging technologies within the entertainment, SEO and Internet industry. Roussos, however, is much more than simply Internet savvy. A musician and singer-songwriter, he has been actively involved in the music industry for over a decade, engineering and producing music for other artists as well as himself and he is the architect behind .music (dotMusic), the community-based TLD name and industry standard for official music websites.

TOP-LEVEL

DOMAIN MAN A LIMASSOL-BORN GREEK CYPRIOT, NOW RESIDENT IN LA, IS AMONG THE MOST SUCCESSFUL ENTREPRENEURS IN THE INCREASINGLY IMPORTANT WORLD OF TOP-LEVEL DOMAINS WITHIN THE INTERNET INDUSTRY. GOLD SPOKE TO CONSTANTINOS ROUSSOS ABOUT HIS .MUSIC PROJECT AND MORE. By Nathalie Kyrou

onstantinos Roussos has been making headlines. Recently quoted in Forbes, The New York Times, The Washington Post, Los Angeles Times, Billboard, World Trademark Review

Gold: What led you to becoming involved in this industry? Constantinos Roussos: I am a Harvard Business School graduate and have an entrepreneurial background relating to Internet activities. My family business in Cyprus, the Roussos Group of Companies, has been one of the leaders in the property/land sector in Limassol for the last three decades. Domain names are similar to real estate in a sense: if you develop it then you have a home on the web. The slogan “location, location, location” that the real estate market uses to determine prices applies to the domain market too. Great domains are like great locations: the more desirable the domain name, the higher the price. Also, Top-Level Domain extensions play a role in the pricing. A .com domain is considered to be of higher value than the same domain under a different extension, such as .net.

and Hollywood Reporter, this Limassolian has broken new ground when it comes to the Internet, becoming the only Cypriot successfully involved in the world of Top-Level Domains. Currently based in Los Angeles, his hometown for the last decade, Roussos travels around the world, giving presentations and

THE INTERNATIONAL INVESTMENT, FINANCE & PROFESSIONAL SERVICES MAGAZINE OF CYPRUS

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Nostalgia for the Future Greek kids don’t understand their

THE LAST WORD

power because their parents don’t allow them to By Peter Economides

I strolled through my old neighbourhood. The parking lot on the corner was now a luxury apartment block. “No Name”, the nondescript coffee shop under my apartment had given way to a huge name – Dior. But the Chinese restaurant owned by a Chinese/Irish couple was still there. As was the old Italian bar which felt as if it might once have belonged to Al Capone. Taxis still rattled over the cobbles and, according to the intercom buttons next to the door, most of my former neighbours were still around, though their dogs might have moved on and their children moved out. I thought I did not miss New York. But I realize that I do. I thought I had removed the New York bug from my system but I have not. It’s not the restaurants that I miss. It’s certainly not the muggy weather. Nor is it the rude cab drivers who toss you around in the back seat like a sack of potatoes. The nostalgia I feel is for something else. The future. And I realized this during a conversation with my brilliant young film director friend, the one described by Wim Wenders as “one of the next immortals.” New York City imbues you with that constant feeling that everything is possible. Absolutely everything. And that all that it takes is vision, creativity, courage and a lot of hard work. Like the amazing Cypriot who drove me to his office in his Bentley with a huge smile on his face as he told me about his incredible journey from waiter to taxi driver to owner of one of the largest corporations in his field, anywhere, worldwide. His story started when he was a young

boy at school in Nicosia. Encouraged to be entrepreneurial, he started selling views through the lenses of his 3D Viewmaster to earn pocket money. That first experience equipped him to pursue his dreams. And then I remembered a 28-year-old fellow I had once interviewed for a position in my advertising agency in Athens. He was good enough to have made it through

New York City imbues you with that constant feeling that everything is possible

a number of interviews to reach the CEO. After 45 minutes I asked him why he wanted to work for my agency. His answer? “I am not yet sure that I want to.” I kicked the arrogant little sh*t out of my office. But I would not be surprised if he is a boss in an ad agency today. Sigh… My own financial independence started at the age of thirteen. I was taught that if I wanted something, then it was worth working for. And through this I discovered my own power. The power to imagine. And the power to turn imagination into reality. I walked past the Apple store, a shrine to the man who transformed bankruptcy into the world’s largest corporation, and I made a stop at Dean and Deluca, renowned among New York foodies as the place to find the best of everything. I made my way to the olive oils. 60% of the shelf space was Italian. 25% was Spanish. 5% was Californian/South African/Chilean/Australian and less than 5% was Greek. Greece produces 28% of the world’s olive oil and Greek olive oil is widely recognized as being the best. Worldwide. But the Greeks sell their oil to the Italians for €2 per litre and the Italians give it an Italian name and then they premium price it at Dean and Deluca. Greek kids don’t understand their power because their parents don’t allow them to. This is holding the nation back. “Δεν Γίνεται” (pronounced “Then Yinete”) is one of the most popular phrases in the Greek language. It means “It can’t be done. “Γίνεται” means the opposite. We need to get rid of the ‘Δεν’ and hold on to the ‘Γίνεται’. Just like New York does.

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

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

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{ECONOMY}

HOW TO PAY OFF CYPRUS’ NATIONAL DEBT THE ‘UNMENTIONABLE’ SOLUTION OF A PIPELINE TO TURKEY WOULD HAVE MAJOR ADVANTAGES By Fiona Mullen

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natural gas

yprus Minister of Commerce Neoclis Sylikiotis announced in June 2012 that the decision had already been taken to construct a liquefied natural gas (LNG) plant to export the â&#x20AC;&#x153;gross meanâ&#x20AC;? 7 trillion cubic feet (tcf) or 198 billion cubic metres (bcm) of natural gas found by Noble Energy in Block 12 in late 2011. After using 25 bcm for domestic consumption as estimated by the Cyprus Energy Regulatory Authority (CERA), the island would have 173 bcm available for export.

TABLE 1: TOTAL AMOUNT OF GAS AVAILABLE FOR EXPORT A. Gross mean estimate for gas in Block 12, tcf (source Noble)

7.0

B. Gross mean estimate for gas in Block 12, bcm (conversion source: BP)

198

suggested that it could take six to seven years while others say it could take even longer. With every year that passes, a number of important factors might change the calculations. The first is the impact on prices of the large amounts of shale gas discoveries in the US. As of early July, LNG in the US was selling at $2.90 per million British thermal units (MMBtu), compared with $12.69 at its peak in June 2008. While European and Asian LNG prices are still higher, there is bound to be downward pressure on prices in the long term. This will influence whether or not we can find investors for the LNG plant. Secondly, industry experts note that financiers will typically not put up the capital for an LNG plant before there is a secure contract of at least 20 years with a buyer. The third and most important consideration is the cost of building and running a plant. A proper analysis requires a full

THE MAIN DOWNSIDE OF A PIPELINE TO TURKEY, OF COURSE, IS THAT IT IS NOT POSSIBLE IN THE ABSENCE OF A SETTLEMENT OF THE CYPRUS PROBLEM feasibility study by industry experts. But below I have made a rough estimate for the net revenues to be gained by selling gas as LNG or pipeline, taking into account the major cost and price factors. The calculations were made for the forthcoming report (still subject to peer review), Promise of Fortune? Hydrocarbon Exploration Offshore Cyprus, to be published in the autumn by the Peace Research Institute Oslo (PRIO).

TABLE 2: ESTIMATED NET VALUE OF GAS SOLD AS LNG

173

A. Gas available for export, bcm C. Domestic consumption at 1m bcm per year (source CERA), bcm

D. Gas available for export before investment, costs and transit losses (B-C), bcm

B. Gas used in operating the LNG plant (estimated 12.5%), bcm C. Gas available for sale as LNG (A-B), bcm D. Converted to million MMbtu or trillion Btu

173

E. Spot price of European LNG on 22 June 2012, $ per MMBtu F. Value of Block 12 LNG gas after operating but before investment costs (DxE)

ADVANTAGES OF LNG

One advantage of LNG is that, unlike pipeline gas, it does not depend on a single buyer, so can be exported to the faster growing Asian markets, although in practice LNG is often sold under long-term contracts. A second advantage is that LNG production is probably less vulnerable to attack by militant groups than a long pipeline. The pipeline between Egypt and Israel, for instance, has been attacked at least 14 times since the Egyptian uprising. However, while the political decision has been made to build an LNG plant, construction takes time. Sylikiotis has

G. Cost of exploration (estimated derived from Noble investment in 1 year), $ million H. LNG construction cost, mid-range (source: Minister Sylikiotis), $ million I. Distance from Block 12 to Vasilikos (source DEFA), km

22 152 5,456,376,470 $11.5 $62,748 $600 $10,000 200

J. Cost per 100km of a submarine pipeline of more than 1000m, $ million

$1,000

K. Cost of submarine pipeline from Block 12 to Vassiliko (IxJ), $ million

$2,000

L. Net revenue of Block 12 gas after running and investment costs (F-G-H--K)

$50,148

Sources: Reuters (LNG prices); Pete Wallace, Tractebel Engineering (pipeline/km costs); Minister Sylikiotis (LNG plant cost); DEFA (distances from Block 12 to Vassiliko and pipeline cost).

THE INTERNATIONAL INVESTMENT, FINANCE & PROFESSIONAL SERVICES MAGAZINE OF CYPRUS

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ip companies

{TAX&LEGAL}

INTELLECTUAL

PROPERTY RIGHTS Boris Lazic

CYPRUS IS BECOMING THE JURISDICTION OF CHOICE

t is a recognised principle that wealth-creating assets may well rest on Intellectual Property (IP) rights, as all companies have them but few exploit them to their fullest extent. IP rights derive from the legal system and include registered rights, trade marks, etc. IP rights give more value to businesses. When forming an IP company, proper due diligence is essential in order to identify all possible IP rights that may exist. The next step is the very important consideration of finding the most suitable jurisdiction for the IP Holding Company. The jurisdiction in question must offer a wide range of agreements for the avoidance of double taxation (DTT) so that IP rights can be exploited in a number of countries. In addition, due to the DTT, a favourable withholding tax (WHT) if any will be imposed on the royalty income that the IP Holding Company is entitled to receive. Above all, however, the country of tax residence of the IP Holding Company must itself offer a beneficial tax regime. There is no perfect jurisdiction for an IP company. Each case should be assessed on its own merits as all jurisdictions offer advantages and disadvantages. What a skilled tax advisor should do is to ensure that the benefits his/her client receives exceed the costs to the greatest possible extent. Cyprus is a jurisdiction that offers IP companies many more advantages than disadvantages. Taxation of royalty income is regulated by the Income Tax Law 118(I)/2002 (as amended), in accordance with which the Cyprus IP company will be subject to WHT if it receives royalty income from the use of intellectual property in Cyprus. In most cases, however, when a Cyprus IP company is used for the purpose of international tax structures, the IP rights are not used in Cyprus but outside the country. If the IP rights are not used in Cyprus, no WHT will be imposed in Cyprus when the Cyprus IP company, in its capacity as sub-licensee, proceeds

GROUP HEAD QUARTERS CYPRUS IP COMPANY

License COMPANY IN RUSSIA

Dividends received

€ 9,800

Royalties received Profit Income Tax: 10% on 20% of income After Tax Profit Dividends paid

10,000 10,000 200 9800 9,800

Royalty income

10,000

with making a payment from the sublicensing of the IP rights to the licensee located abroad. The House of Representatives passed amendments to the aforementioned Income Tax Law in May 2012. The intention of the amendments is to establish Cyprus as a favourable jurisdiction for IP rights, by creating an appealing tax regime for an IP company. The amendments to the law provide that 80% of any income generated from IP rights will be exempt from Corporate Income Tax (CIT); therefore only 20% of the profits generated from IP rights (royalties) will be subject to CIT at the rate of 10%. This tax treatment is also applicable to any profit made from the future sale of the IP rights. Furthermore, the law permits the deduction of all expenses resulting from the production of the royalty income so the amount payable may be reduced even further. With regard to capital expenditure, it should be noted that the Cyprus IP company will be able to write off any capital expenditure for the purpose of the acquisition or development of the IP rights. Such a write-off will be permitted for the initial five years of use. Straight line capital allowances at the rate of 20% will be applicable for the first five years of use. Consequently, a Cyprus IP company will effectively be liable to a maximum tax of 2%, as it is only taxed on 20% of its profits in case of royalty income. The amendments to the law came into

force on 6 July 2012 and have a retroactive effect as of 1 January 2012. The benefits gained by using a Cyprus IP company are shown in the illustration which uses used Russia as an example. The illustration shows an initial royalty income of €10,000 before any taxes are imposed. We have indicated that the Cyprus IP company has gained a profit of €10,000 from licensing the IP rights. Applying the favourable tax regime, the Cyprus IP company will be liable to an amount of €200 tax on the royalty income. It will then distribute its profits by way of dividends to the Group headquarters, free of any WHT in Cyprus. As noted, the right jurisdiction for an IP company needs to offer a range of treaty networks as well as the lowest possible tax. Cyprus satisfies all the requirements of a very beneficial IP company jurisdiction: a non-offshore jurisdiction that offers a flat tax rate of 10% only on 20% of the royalty income. Moreover, Cyprus has an extensive DTT network with leading countries as well as with emerging economies. To be more precise Cyprus has signed treaties with the G20 countries, with the former Eastern Bloc countries (Ukraine, Azerbaijan, Armenia,etc.), with the EU the BRICs (Brazil, Russia, India, China) as well as with countries of the Arab World (UAE, Egypt etc). Cyprus has over 46 treaties that are currently in force.

info: Boris Lazic is a Tax & Legal advisor with Eurofast Taxand Cyprus 80 Gold THE INTERNATIONAL INVESTMENT, FINANCE & PROFESSIONAL SERVICES MAGAZINE OF CYPRUS

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The The Business of Business of

Shipping Shipping re-examined re-examined This key industry event will provide in-depth analysis and views on the most important issues affecting global shipping today. Key themes include: The General State of the Industry | Prospects for the Global Economy and Trade and for Global Shipping | How Can Shipping Adapt To The Worldâ&#x20AC;&#x2122;s New Economic and Financial Realities? | The Continuing Influence Of The Banking Crisis | Oversupply: Is It Here to Stay? | Dry Bulk Industry Focus | Container Ships Industry Focus | Oil and Gas Sector Focus | Identifying the Best Shipping Opportunities | Where Do You Put Your Money Now - Dry Bulk, Tanker or Container Ships? | International Ship Finance | Ship Building and Investment

internet

{LIFESTYLE}

DOMAIN THING THE CHANGING BUSINESS OF TOP LEVEL DOMAINS

GIVEN THE POWER OF THE INTERNET IN TODAY’S WORLD, IT IS HARD TO BELIEVE THAT AS RECENTLY AS TWO DECADES AGO, ONLY A HANDFUL OF PEOPLE KNEW WHAT IT WAS, LET ALONE WHAT A DOMAIN NAME WAS OR HOW TO REGISTER ONE. TODAY, IT WOULD BE HARD TO FIND SOMEONE WHO DOESN’T. AS THE WORLD CONTINUES TO CHANGE, SO DOES THE INTERNET AND THE DOMAIN NAME WORLD IS NOT IMMUNE. By Nathalie Kyrou

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

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ccording to Rod Beckstrom, boss of the Internet Corporation for Assigned Names and Numbers (ICANN), the non-profit entity that controls the web’s naming system, “The Internet is about to change forever.” The reason for his bold statement is that, on June 13, ICANN revealed the names of 1,410 new so-called generic Top-Level Domains (gTLDs), providing more choices than ever to consumers for domain registrations. With Google, the biggest search engine in the world, applying for 101 of these new gTLDs, and even the Vatican applying for .catholic in several languages, we have finally reached a new age of “domaining.” In 2010, the number of active domains reached 196 million and the number keeps growing. It all began long before Google even existed, when domain names were free. Network Solutions LLC was a technology company founded in 1979, whose most important division became the domain name registration business. It was not until 1995 that Network Solutions was allowed to charge to register or renew a domain name and the charge was $100 for 2 years (after a lawsuit, the fee was dropped to $70 for 2 years in 1997). Prior to that, any domain name you could think of was available, and although they all ended in .com, they did not cost anything to register or renew. With the late 1990s came the realisation by some that domain names were in essence virtual real estate. In 1999, Network Solutions’ monopoly over domain internet registrations ended (even though a decade later the company still managed more than 6.6 million domain names), other registrars came online and the domain world changed. People began to notice how businesses were built using catchy names and realized that business success could

WHAT’S IN A (DOMAIN) NAME?

omain names serve as humanlymemorable names for Internet participants such as computers, networks, and services. In other words, a domain name represents an Internet Protocol (IP) resource, such as a personal computer used to access the Internet, a server computer

hosting a website, the website itself or any other service communicated via the Internet. It is basically a simple abstraction of a host’s numerical address on a computer network, which provides an easily recognizable (and easy to remember) name for a numerically addressed Internet resource. The right to use a domain name

even hinge on a great domain. A domain that matched your business name exactly could create a tremendous marketing opportunity and this fuelled a growing number of “domainers” who started to register and buy domain names for resale. At this stage, the monetization of domain names was very limited except for adult domains, which were already a big business. The period of the “dot com crash” between 2001 and mid-2003 further altered the perceived value of the Internet as a

IT WOULD BE AN INTERESTING TURN OF EVENTS IF THINGS EVENTUALLY END UP WHERE THEY STARTED WITH FREE DOMAINS business model. Companies invested and lost hundreds of millions – even billions – of dollars in the dot com bubble. Although domain names could now be had for $10 a year renewal fee, the vast portion of domains – especially the older ones – were still with Network Solutions, and still cost $70 for 2 years. At this point, a few smart “domainers” went against the flow of the entire market, swept in and bought everything they could, believing that the trend would reverse and that the business of domain names would ultimately be invaluable. The monetization era started with Goto.com and FindWhat.com: the former was acquired in 2001 by Overture which, in turn, was acquired by Yahoo in 2003. Google acquired Applied Semantics in April 2003, and shortly afterwards the boom

is delegated by domain name registrars, which are accredited by the Internet Corporation for Assigned Names and Numbers (ICANN), the organisation charged with overseeing the name and number systems of the Internet. The registration of these domain names is usually administered by the registrars who sell their services to the public.

in domains values and sales began. For six years, fortunes were made as domains were bought and sold. “Parking revenue” drove domain sales and domain sales drove more domain purchases. During the next era of “domaining”, monetization started to decline. Brands started

WHAT IS A GTLD?

Generic top-level domains (gTLDs) are extensions/suffixes with three or more characters that represent generic words, categories, regions, cultures or brands. Until recently there were only 21: .aero the air transport industry . asia companies, organizations and individuals in the Asia-Pacific region .biz: business use .cat: catalan language/culture .com commercial organizations .coop cooperatives . edu post-secondary accredited U.S educational establishments . gov government entities within the United States .info informational sites . int international organizations established by treaty .jobs employment-related sites .mil U.S. military .mobi sites catering to mobile devices .museum museum .name families and individuals . net: originally for network infrastructures, now unrestricted . org originally for organizations not clearly falling within the other gTLDs .pro certain professions . tel single name space for Internet communications services . travel travel agents, airlines, hoteliers, tourism bureaus .xxx pornography

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internet

CONSTANTINOS ROUSSOS

onstantinos Roussos holds an MBA and is a graduate of Harvard Business School’s (HBS) prestigious Owner-President Management (OPM) program. He is the founder and editor of SEO.tv, an online marketing, branding and web development company and he is considered an authority on Search Engine Optimization (SEO) and Social Media

THE INTERNET DOMAIN NAME SPACE AS WE KNOW IT IS GOING TO EXPERIENCE A COMPLETE MAKEOVER IN THE NEXT FEW YEARS Gold: Let’s just clarify what precisely is meant by the term Top-Level Domain name. C.R.: A Top-Level Domain (TLD) is the name at the highest level in the hierarchical Domain Name System of the Internet. The Top-Level Domain names are installed in the root zone of the domain name space. Examples of generic top-level domains (also known as gTLDs) include .com, .net, .org, and .info which are three characters or more. There are also country-code Top-Level Domains (also known as ccTLDs), which are two characters, for example .CY, .GR, .US, .FR or .UK. The governing body of the Internet and its namespace, ICANN, just launched a new programme to allow any type of top-level domain. These will include semantic words such as .music, .movie or .law, geographic regions such as .London and .Berlin, communities, such as .Irish and .Catholic, as well as brand names, such as .IBM, .Google and .BMW. The Internet domain name space as we know it is going to experience a complete makeover in the next few years.

Optimization. He is the co-founder of MyTLD.com, a gTLD management and consulting company that specializes in launching and managing new ICANN Top-Level Domain (TLD) names, Internationalized Domain Names (IDNs) and Search Engine Optimized (SEO) TLD platforms for Fortune 500 brands and Industries. Roussos has also been an active ICANN community participant regarding

Gold: What are you trying to achieve with the .music project and what is your ultimate goal? C.R.: I started the initiative to launch .music in 2005 via the website www.music.us. Its objective is to give music entities and the global music community a unique identity online and a validated industry standard for official music websites. The specialized .music address will enhance a brand’s visibility online and aims to ensure that .music websites are associated with a memorable, self-explanatory badge restricted to the music community while creating a trusted, safe online haven for music consumption and licensing. By utilizing the root of the Internet Domain Name System (DNS), the .music Top-Level Domain brings consistency, organisation and centralisation to the music industry as well as ensuring trust, credibility, and consumer safety by verifying that the rightful, legitimate music entities own their domain name, so that monies flow to the pockets of the artists and not to unlicensed websites. The ultimate objective is to create the first global Industry standard domain for the music community. Gold: Will .music affect how business is conducted on the Internet? How will it benefit music fans? C.R.: The objective of .music is to give Google, Bing and other searches a relevant signal that represents legal and licensed content. The goal of search engines is to provide the most relevant and contextual results to users. We have

the launch of new TLDs, IDNs and ICANN-policymaking and is considered the ICANN expert in the area of TLD Community Applications. His track record in online marketing includes creating the most popular MySpace profile with 4.3 million friends, gaining thousands of followers on Twitter and Facebook, as well as obtaining top search engine results for highly-competitive terms such as “music.”

established criteria for the eligibility and use of .music domains that increase consumer trust and ensure that any transaction made on .music domains is legal. Unfortunately, today there is no filter to determine if a music site is legal or not. Most top searches for popular artists using terms such as “mp3” return pirated, illegal results. This is because there is no filter to let search engines know whether a domain is legal or not. The .music domain will provide that benefit. In this way, music fans will be more comfortable buying on .music sites without security concerns. Artists and music entities also benefit by receiving increased traffic generated by placing higher in the search results, since .music domains will be more relevant for music-related search terms, and direct navigation. Lastly, they will enjoy higher conversions with regard to lead generation and music sales due to increased trust and reliability from the music consumer’s perspective. Gold: How does this project work as a business? C.R.: Significant financial returns are expected and the barrier to entry is high. For example, applying for .music and setting up the .music registry cost more than half a mil-

IF YOU WANT TO BUY A PREMIUM, ONE WORD .COM DOMAIN TODAY, IT WILL COST MILLIONS

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

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THE MORE DESIRABLE THE DOMAIN NAME, THE HIGHER THE PRICE

lion dollars. It is a highly specialized business with a steep learning curve. Furthermore, you require a team with domain name expertise in the area of registry and registrar functions and compliance with ICANN rules. Moreover, since this is a business that is highly complex with only a few key players in the space, relationships are crucial. Gold: Could someone set up a similar proposal with another domain ending, such as .film, for example? C.R.: The top-level domain .film has already been applied for. Unfortunately anyone trying to apply for a new TLD will have to wait for the second round to apply for any that have not been applied for yet and are therefore still available. ICANN has not determined a date yet for the second round. Gold: Since it is all online, can the kind of business you are in be run from anywhere at any time? C.R.: Yes. The Top-Level Domain business can be run from anywhere at any time just as long as the backend registry services that power the infrastructure of the TLD is outsourced. In our case, Afilias, the domain name system backend registry service, powers the infrastructure of the .music TLD. It also powers other domain extensions such as .org, .info, .mobi, .in and .me. Gold: Do you need a lot of money in order to make a lot of money in this industry? C.R.: The most profitable entrepreneurs in the domain space (“domainers”) are those who first registered the best .com names a decade or so ago. They have either sold those premium domains for millions of dollars or they make money through parking pages where people directly type the domain name into the browser and click on ads. If you want to buy a premium, one word .com domain today, it will cost millions. For example last year, the domain Social.com was sold for $2.6 million. Even two-word domains can be sold for large

amounts. For example, PersonalLoans.com was sold for $1 million in February 2012. Gold: What is happening in Cyprus regarding top level domains and domains related to Cyprus? C.R.: Nothing is happening regarding top level domains but there is significant activity with regard to the fact that many global Internet companies have offices in Cyprus, given the tax benefits. Today, Cyprus has around 450,000 Internet users. That means that only one in two people access the Internet which is a below average penetration rate. Internet e-commerce is significantly low as well, at nearly 10%. Mobile commerce is even lower than that. Gold: You have had meetings with government officials and ministers about your .music project and, more generally, the Internet in Cyprus. What was the outcome? C.R.: Apart from seeking support for .music, the discussions I had with the Cyprus government were about launching a Top-Level Domain representing Cyprus in Greek script and about the Cyprus government sending Government Advisory Committee representatives to the ICANN meetings, which I volunteered to do if needed. Unfortunately, both the Minister of Communications & Works and the Commissioner for Electronic Communications expressed interest in the ideas but they did not follow through. It is very unfortunate for Cyprus that I am the only Cypriot participant at these crucial Internet-related meetings that are only held three times a year – I have been the only applicant for a new TLD from Cyprus and the only participant at ICANN meetings from Cyprus for years. I have also presented a unique opportunity to the Cyprus government to apply for a Cypriot Internationalised Domain Name in Greek so that Internet users can have their own Greek domain name. It has not applied, despite the fact that ICANN would have offered the Greek language script extension for free.

Gold: What would your advice be to anyone wanting to become involved in this industry? C.R.: Unfortunately for novice domainers, the learning curve is too high and buying valuable domains is an expensive proposition. My advice to newcomers would be to participate in ICANN meetings, read domainer blogs and forums and keep up with all the changes happening so as to spot and exploit an opportunity. The most successful domainers are those who act fast; those registering first are the ones who get the most lucrative domains.

BOOK REVIEW THE VENETIAN BY LINA ELLINA (ARMIDA PUBLICATIONS, 2012) RRP: €16.00 FROM ARMIDA PUBLICATIONS (£13.35 FROM AMAZON.CO.UK)

yprus was under Venetian rule from 1489-1571, following the abdication of the island’s last queen, Caterina Cornaro, but half of the this novel is set in the year 1467, some 22 years before Venice took over the country’s administration. The other half of the story takes place in 2010-2011 as an Italian chef decides to seek his ancestors in Cyprus. In this, her debut novel, Lina Ellina effortlessly weaves the two stories together while bringing a fascinating period of Cypriot history to life without sacrificing the requirements of plot and characterisation. The two parallel stories, set some 550 years apart, underline the connections that still exist in many Cypriot minds with a past that, in other countries, is simply ‘ancient history’ but here is an authentic unbroken link. In this case, the name Zanetti is the key that unlocks the two worlds of Cyprus in 1467 and 2010. A local love story with a difference, it announces the arrival of a talented new author on the local literary scene.

THE INTERNATIONAL INVESTMENT, FINANCE & PROFESSIONAL SERVICES MAGAZINE OF CYPRUS

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communication

system,

banking system, infrastructure in general and last but not least its highly educated labor force.” Captain Dirk Fry, Managing Director Columbia Ship Management Ltd

“The the

favorable excellent

infrastructure,

business

climate,

telecommunications the

well

educated

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

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

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Gradually, NCR managed to expand the office in Cyprus to cover also all the African Countries.” Managing Director of NCR Cyprus, Mr. George Flouros

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

01/08/2012 09:29

5 291295 000577

00001 >

ISSUE 17 AUGUST 2012 PRICE €6.95

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Gold ISSUE 17 AUGUST 2012

A new generation is driving the services sector

Talented Young Professionals

+ TONY CHRISTODOULOU, THEO PARPERIS, CONSTANTINOS ROUSSOS FRAUD

How to safeguard your organisation’s assets

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OPINION

Irakli Bukhiashvili Constantinos Charalambous Theo Panayotou

UNDER ATTACK!

Anti-piracy law comes into force

PLUS:

MONEY / BUSINESS ECONOMY TAX & LEGAL LIFESTYLE

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