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November, 6 2019
November, 6 2019
Investment opportunities in a thriving jurisdiction
What are the main questions investors ask when looking into possible investments?
What are investors’ main objectives?
What do investors examine before proceeding with the investment?
What are the best investments in Cyprus?
The list of questions is endless and the answers always vary, depending on the uniqueness of each case. Investments, as a concept, refer to any activity that intends to exploit new opportunities with the sole purpose of capital increase.So, when an investment is materialized, the outcome should result in profit and capital increase, otherwise it is considered as spending. Consequently, investors seek a return on their capital, either on a long-term basis or as traders on a short-term basis.The combinations of opportunities and options in the international market are limitless and no-one can list them all, per se, since they differ considerably.My experience as a lawyer and CEO of the international law firm Chambersfield Economides Kranos has helped me identify many and varied promising investment opportunities in Cyprus. Before naming and analyzing them, I would like to mention a tendency that I have come across in the past few years, usually observed among young investors/entrepreneurs. It is usually referred to as “analysis paralysis” and describes the way investors tend to over-think and over-analyze an investment opportunity, resulting in them taking no action. This is quite often found among start-ups, which are themselves considered high-risk investments. In their attempt to minimize their risks, start-up entrepreneurs over-analyze their options, resulting in an idea that is never realized.Despite this, I must also say that, in the past few years, Cyprus has accomplished the impossible and is, in my opinion, among the ‘fighters’ of our era, earning the respect of the international market. After the financial and banking crises in 2013, the bailout programme agreed between the Government and the Troika (the European Commission, the European Central Bank and the International Monetary Fund), the downgrading to “junk” status by the credit rating agencies and the implementation of the AML Directives, Cyprus has managed to rise up and thrive once more, earning a place among the most dynamic and stable business centres in the world, with a growing economy that attracts international investments. Cyprus, as a European Union member state and a business hub, offers various investment opportunities.Below, I identify some of these, from both traditional and emerging industries.
Top Three Traditional Cyprus Investments
1. Real Estate
The Real Estate industry is again thriving in Cyprus. The Cyprus Investment Programme is a significant booster which, when successfully implemented, encourages foreign direct investment (FDI) and attracts High Net Worth Individuals to settle and conduct their business activities in Cyprus. Today, there are numerous attractive opportunities in real estate, both commercial and residential units, all over Cyprus that promise a relatively secure initial capital investment, an excellent Return on Investment (ROI) and capital appreciation.
According to the World Data Atlas, “In 2017, the contribution of travel and tourism to GDP for Cyprus was 22.3 %.” Moreover, Deputy Minister of Tourism Savvas Perdios has stated that “the tourism industry has the long-term potential to contribute to Cyprus’s economy by 25%.” Tourism is one of the strongest industries in the Cyprus economy and it is continuously increasing its competitiveness, through new developments and strategies. Therefore, investments on this sector are considered premium, especially when investors target large-scale projects such as the construction of marinas, luxury resorts, etc.
Cyprus is renowned for its high-quality maritime services, as well as for its reliable operational infrastructure and appealing legal framework. As a result, Cyprus is the third largest ship management jurisdiction in the EU and possesses a large merchant fleet market share on a worldwide basis. An investment in this industry, through the establishment of a Cyprus entity, is considered very promising since services, registration fees and taxes are very competitive, compared to other EU member states. Additionally, it is worth noting Cyprus’ EU-approved Tonnage Tax System, which is a major advantage that should be taken into consideration by investors.
Top Three Emerging Cyprus Investments
In the last few years there has been a substantial increase in the number of startups in Cyprus. The highly educated workforce and eligible human capital, incentives provided by the government (e.g. the startup visa regime), as well as the straightforward legislative incorporation framework and attractive tax system are just some of the main factors that have contributed to the startup sector’s growth. Major players in the field of technology have proven that Cyprus is a very favourable jurisdiction for startups, since, after their establishment in Cyprus, they have successfully run multi-million international businesses.
2. Investment Funds
Investment funds represent the new emerging market that Cyprus is seeking to expand and, to this end, it is continuously upgrading its regulatory and legislative framework in order to attract foreign direct investment and has already formed various Alternative Investment Funds (AIFs) and Undertakings for the Collective Investment in Transferable Securities (UCITS). Of course, this target would have been unreachable if the professional services sector was not so strong and well-educated to support this expansion. In my opinion, investors should take a closer look at Cyprus Investment Funds opportunities, since a lot of effort and support is being provided by the legislator and other supervisory authorities.
The discovery of hydrocarbons marked the start of a very promising new era for Cyprus in the energy industry. Energy giants have since approached Cyprus and formed strategical alliances, upgrading the jurisdiction to that of a developing oil and gas hub for the region. Of course, from the energy industry we should not omit the growth in renewable energy that Cyprus has experienced over the past few years, mainly in the areas of wind power and solar energy. I personally advise professional investors to monitor activities in the country’s energy industry very closely, since it holds great promise and enormous future potential for development and expansion. Cyprus is a country that has a lot of investment opportunities to offer. Potential investors are therefore advised to establish cooperation with law firms that can consult and assist them in selecting the best possible combinations of investment, determining risk tolerances and the capital required to achieve a successful portfolio allocation.
Info: Michalis Economides is CEO, Advocate & Legal Consultant, Chambersfield Economides Kranos Law Firm.