SPEECH AT THE STATE UNIVERSITY OF NEW YORK AT ALBANY
Speech by the Ambassador of the Republic of Cyprus to the United States
Mrs. Erato Kozakou-Marcoullis
at the State University of New York at Albany
"Prospects for Doing Business in Cyprus"
April 11, 2000
It is a great pleasure for me to be here today in the Empire State's capitol and on this prestigious campus. I thank you for the opportunity to outline the numerous possibilities which Cyprus offers Americans in the fields of trade, industry, professional services and the emerging high-tech industries.
Last week I was in New York for the inauguration at the Metropolitan Museum of Art of four new galleries devoted to the art of ancient Cyprus. Addressing the President of Cyprus, who inaugurated the galleries, the Museum's Director called it "an event of historic importance for Cyprus and Cypriots, and for the Metropolitan Museum of Art." Cyprus, he said, was "that island of legends, the birthplace of Aphrodite, the source of most of the copper used in the ancient world. Cyprus, located so strategically as the way station for maritime activity, at the crossroads of the Mediterranean."
Cyprus indeed holds a strategic location at the center of three continents. Its close proximity to the busy trade routes linking Europe with the Arab World and the Far East has been a major factor shaping our history of Cyprus throughout the centuries. In recent years this strategic location, together with excellent political and economic relations with our neighbors, and advanced socioeconomic infrastructure, excellent telecommunications, a sophisticated banking system, a wide range of high quality professional services and a favorable economic and business environment, make Cyprus an ideal Center for business activities.
Cyprus today is a thriving well-developed European country with strong western institutions. The economy of the island is growing at a satisfactory pace. The Gross Domestic Product is about 9.2 billion U.S. Dollars. The growth rate in 1999 was around 4%. Per capita income is one of the highest in the region and has reached 15,000 dollars. According to a recent report in the Economist, Cyprus ranks 15th worldwide, in terms of per capita income level and purchasing power parties. In fact, Cyprus ranks ahead of countries such as the United Kingdom, Italy, Australia and our neighbor Israel. Moreover, Cyprus enjoys full employment conditions - with the unemployment rate currently at 3.3 %, a low inflation rate of 2.2 % and a strong Balance of Payments position. Foreign exchange reserves are continuously expanding and provide coverage for 15 months of imports. Foreign debt and its servicing remain at manageable levels. The Cyprus pound was linked to the European Currency Unit as of June 1992 and to the Euro at the beginning of 1999, steps that demonstrate our European orientation and the ease with which the country is integrating itself in the new economic structures.
Cyprus is a member of the United Nations as well as the Council of Europe and the Commonwealth. It has been an Associate member of the European Community since 1973 and has had a Customs Union Agreement with the European Union since 1988.
The Customs Union Agreement, which provides for the abolition of all barriers to trade, offers incentives to businessmen including Americans to use Cyprus as a base for accessing the markets of Central and Eastern Europe and the Middle East.
In July 1990, Cyprus applied for European Union Membership. Negotiations began last year, and we are expected to become a full member by the year 2003. In fact, according to the European Union Commissioner for Enlargement, Cyprus has so far concluded negations on more chapters for harmonization than any other candidate country. In addition, Cyprus has been, since 1995, a full member of the World Trade Organization and has adopted all the provisions of the General Agreement on Tariffs and Trade (GATT).
Because of the modest size of our domestic market, access to international markets is of the utmost importance for Cyprus. In 1998 merchandise exports amounted to 1.2 billion U.S. Dollars while total imports were 4 billion.
The European Union is Cyprus' most important trading partner. In 1998 imports from the E.U accounted for about 55% while in the same year domestic exports to the E.U. reached about 52%.
Trade exchanges between Cyprus and Central and Eastern European Countries and Russia are developing at a brisk rate.
As for the United States, Cyprus has had close traditional ties since the establishment of the Republic of Cyprus in 1960. These relations can be seen today in many areas and in particular the trade sector where increasing numbers of American companies take advantage of Cyprus as a base for their regional and even global operations. These Companies include some of the powerhouses of the U.S. economy: Raychem, Coca-Cola, NCR, Merck, American Life Insurance Company, Smith Kline Beecham, and Gateway to name only a few.
Trade between our two countries is the highest it's ever been but there is considerable room for improvement. Total trade reached $500 million and the U.S. remains the number one exporter to Cyprus.
Cyprus's domestic exports to the United States in 1999 reached over $31 million, showing a significant increase over the previous year. Exports to the U.S. such as clothing, footwear, Halloumi and other cheeses also posted dramatic gains.
An area that holds great advantages for both our countries is the role Cyprus plays as the main trans-shipment center in the eastern Mediterranean. This is highlighted by the fact that over 50% of U.S. exports to Cyprus are re-exported to other countries making Cypriot businessmen highly effective promoters of American products abroad. An indication of the position Cyprus holds, as a main trans-shipment center is the substantial volume of products re-exported which in 1998 reached $660 million dollars.
The Industrial Free Zone located near Larnaca International Airport and not far from the ports of Larnaca and Limassol, offers possibilities for setting up manufacturing and or assembling units for the production of goods destined for export to Europe and the nearby markets. The wide knowledge of the markets of Eastern Europe and the Middle East, by Cypriot entrepreneurs combined with the existence of a large number of International Business Companies in Cyprus, offers substantial advantages to Americans wishing to use Cyprus as a base for penetrating the growing markets of the area.
Attracting foreign investments is one of the primary objectives of Cyprus' development policy, since it contributes to the transfer of know-how, the introduction of high technology and facilitates further the expansion of exports. Foreign companies can benefit from the numerous tax and other incentives by using Cyprus as a base for direct investment either for assembling or manufacturing operations for supplying existing and new merging markets in the region.
Regulations governing foreign direct investments have recently been liberalized, allowing American and other investors a greater percentage of ownership in investment projects. The services sectors including trade and tourism have been the main stimulus to economic growth accounting for almost 73% of GDP.
Cyprus is committed to further liberalize, progressively, the services sector on the basis of the GATS Agreement. Services are expected to be the center point of the new globalized economy. In the case of Cyprus, they cover a very wide spectrum which includes, apart from tourism- which constitutes the engines of our economy- banking, financing, insurance, shipping, legal, accounts, medical and educational services.
Concluding, I would like to stress Cyprus' liberal philosophy, concerning both the domestic business environment and the island's trade policies. Private initiative and free enterprise are encouraged to develop and expand without burdensome restrictions. The Government's main responsibility is to ensure the smooth functioning of the economy, create the necessary infrastructure, extend support services and provide appropriate incentives.
Cypriot businessmen and professionals are prepared to enter into profitable cooperation with interested American entrepreneurs.
We are especially interested in joining forces with American scientists, financial institutions and venture capitalists in developing Cyprus' potential as a high-technology center in our region of the world.
Our Minister of Commerce, Industry and Tourism headed a delegation which held seminars this past February at MIT and silicon Valley to outline the government's New industrial Policy in the high-tech area.
Cyprus is offering a generous package of incentives, facilities and funding support in order to attract high-technology industries to the island in a range of disciplines ranging from information technology and computer science to biotechnology.
The incubator program, which has worked so successfully in Israel and Ireland, will be a keystone of this New Industrial Policy
We are hopeful in the success of this initiative given Cyprus' high educational standards, its intelligent workforce and the disproportionate number of scientists, engineers, medical researchers and doctors among our population, many of whom are dispersed around the world, including the United States. We would like to lure them back to Cyprus along with what we hope will be a sizeable number of their American colleagues.
Our Trade Office in New York under the Trade Commissioner Dennis C. Droushiotis, who is the point man in the United States on this matter, would be happy to supply details to anyone at SUNY who is interested.
Within this framework, we welcome you as partners in expanding our trade and economic relations with the United States.