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Cyprus as an International Business and Financial Centre
2001-12-11 13:22:40

Cyprus is the third largest island in the Mediterranean Sea, situated at the Crossroads of three continents and in the trading paths of the first merchants of antiquity. Cyprus' strategic location has been a major factor in shaping its history throughout the centuries and its development in recent years into a centre for international business.

Cyprus' economy is market oriented, with the private sector playing the dominant role in the production sphere. The government's role focuses on the creation of a favourable entrepreneurial climate, through the maintenance of conditions of macroeconomic stability, the development of the economic, social and legal infrastructure and the pursuance of social and environmental objectives.

The economy of Cyprus has exhibited dynamism and flexibility throughout the period since its independence. It is worth noting that according to the publication of the World Bank "The East Asian Miracle" Cyprus ranks as one of the top 12 performers worldwide in terms of its average annual growth rate of GDP per capita.

Some of the salient elements of this success are the following:

-An impressive real annual rate of growth of GDP.

-The rapid growth of GDP accompanied by the creation of a large number of employment opportunities and the consolidation of conditions of full employment.

-The satisfactory growth performance accompanied by conditions of relative internal and external economic stability.

-The rapid rate of growth was accompanied by a profound restructuring of the economy from the sectoral point of view.

Furthermore, the island is characterised by its extensive political, cultural and economic ties with the EU. Formal relations with the EU date back to 1972 with the signing of an Association Agreement which was basically a trade agreement. In 1987, a Customs Union Agreement was signed between Cyprus and the EU. The relations of Cyprus and the EU entered into a new dimension with the application of Cyprus for full membership to the EU in July 1990. Accession negotiations began in 1998. The EU constitutes Cyprus' main trading partner absorbing more than 55% of its domestic exports and supplying around 50% of the total imports to Cyprus. Furthermore, around 70% of tourists originate from EU countries. The last two decades have witnessed the gradual transformation of Cyprus into an international centre for tourism, transit trade, international business and maritime activities and services in general.

In addition, Cyprus maintains also close political and trading ties with the countries in the Middle East region, both the Arab world and the Israelis as well as with the former socialist countries of Central and Eastern Europe.

Throughout its long history, the island of Cyprus has played a central role in the economic activity of the Middle East region and has developed into an important trading centre.

The attraction of foreign direct investment, including the promotion of joint ventures between Cyprus and foreign enterprises, has always constituted a major objective of the government policy, aiming at facilitating the transfer of advanced technology and know-how. Foreign investors benefit from tax incentives and the relatively low level of taxation in Cyprus in general. In addition, Cyprus has been signatory to the Convention for the Settlement of Disputes between States and Nationals of Other States and it has signed bilateral agreements with a significant number of other countries for the avoidance of double taxation.

Furthermore, the government of the Republic of Cyprus has recently proceeded with the liberalisation and simplification of the procedures governing the approval of foreign direct investment. Recently, Cyprus has temporarily closed the Chapter of Free Movement of Capital.

This means that as from the 1st of January 2001 the ceiling on the interest rate has been abolished. Money markets have since continued to function in an orderly manner and rates are already beginning to decline. This development has been proceeding hand in hand with the liberalisation of capital movements by the Central Bank of Cyprus.

Direct investments in Cyprus by residents of the EU member states and by Cypriot residents in the EU have been liberalised, blocked accounts have been abolished and medium and long term borrowing by Cypriot residents in foreign currencies is now free.

Moreover, the Central Bank of Cyprus and the government of the Republic of Cyprus have continued with their policy of strengthening and effectively monitoring the enforcement of anti-money laundering legislation. It is important to note that an IMF mission invited to Cyprus has concluded that after a detailed and in-depth investigation, current anti-money laundering measures in Cyprus are effective.

Cyprus has also developed to an international shipping centre for the conduct of maritime activities and for the rendering of shipping services worldwide. Cyprus ranks fifth in the list of the leading maritime nations. This development is attributed to the comparative advantages of Cyprus as well as the excellent services offered to the sector. However, Cyprus cannot be regarded as an opportunity flag state.

The government of the Republic of Cyprus has ratified major international conventions on maritime safety, prevention of sea pollution, training, certification and watch keeping of seafarers and limitation of ship-owners' civil liability in case of oil pollution damage and Conventions on maritime labour. It has also hired inspectors both in Cyprus and in foreign ports, with a view to upgrading the safety conditions of Cypriot vessels. Furthermore, in the framework of its harmonization with the acquis, Cyprus has temporarily closed the Chapter on Transport, thereby satisfying the EU criteria in this area.

Cyprus has also become in recent years one of the main transit trade centres in the region of the Eastern Mediterranean, a development attributed inter alia to the minimal but efficient customs formalities and a reliable handling and delivery system. The island is also being extensively used as a regional entrepot for the Middle East region, as reflected in the remarkable expansion of re-exports from Cyprus during the last decade.

For further information you are encouraged to visit the following websites:

Department of Registrar of Companies and Official Receiver

Central Bank of Cyprus

Cyprus Stock Exchange

Cyprus Chamber of Commerce and Industry

Employers and Industrialists Federation

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