An analysis of the economic environment of cyprus

Cyprus is located at the eastern sea of the Mediterranean Sea at the cross roads of Asia, Africa and Europe which is the decisive point of the busy transportation ports and besides air paths which links the three continents. Cyprus is located 75 km South of Turkey, 105 kilometer West of Syria and 380 km North of Egypt. The entire country of Cyprus is 9251, which reports to be the 3rd largest island in the Mediterranean part after Sicily and Sardinia.

Cyprus strategic location of the Island, admirable climatic conditions and besides acceptable substructure and besides supply of high quality, good trained labour are some of the advantages for Cyprus to offer its foreign investors.

Cyprus is ranked 40 out of 139 emerging states in the 2010-2011 Global Competitiveness study which assesses the ability of states to supply high degrees of prosperity to their citizens. This in bend depends on how fruitfully a state uses available resources. Therefore, the Global Competitiveness Index measures the set of establishments, policies, and factors that set the sustainable current and medium-term degrees of economic prosperity ( CIPA, 2011 ) .


Transportation system

Cyprus has a really good concern substructure with really good telecommunications web, and is ranked 26 in the Global Competitive study with a mark of 5.1/7.0, which shows the criterion maintained by the Cyprus authorities in supplying better substructure installations for the investors every bit good as the citizens of Cyprus. It has two international airdromes, modern route web and besides dual-purpose port installations have established Cyprus as a commercial concern centre. It takes about four hours to wing from Cyprus to London, Moscow and Dubai.

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Larnaca Airport


Larnaca has transformed into the 2nd deep-sea port on the island which expands over 1.3 sq kilometer. There is besides transporting terminus at Vasilikos, near to Lemesos, because of its location and substructure 5466 ships called at Cyprus ports in 2007.

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Cyprus is connected to legion advanced engineering pigboat overseas telegrams which helps in supplying better connectivity to Europe, the Middle East and Asia and has seven satellite Earth Stationss supplying orbiter telecommunications installations for companies to turn up and be connected globally through and advanced and dependable telecommunications web.

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Satellites in Cyprus

Macro Economic Environment

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Cyprus stands in 60th place in the Macroeconomic environment, and the existent GDP of Cyprus is above mean growing rate of EU 27. The one-year growing rate is expected to go on high degrees in close hereafter. Cyprus has benefited from macroeconomic stableness which is reflected through the statistics below. Cyprus had and record addition in its GDP by 2.2 % in the 4th one-fourth of 2010 ( PSEKA, 2011 ) .

Harmonizing to Eurostat this is the 4th back-to-back one-fourth during which the Cyprus GDP shows addition.

GDP Growth

Beginning: Eurostat

Inflation Rate

Beginning: Eurostat


Cyprus has a immature, good educated and really gifted childs, and if we see in GCI study Cyprus stands 12th in primary instruction sector and 29th in Higher instruction sector. Cyprus fundamentally is committed towards supplying instruction and work towards accomplishing sustainable growing, and since 2004 Cyprus has invariably allocated over 6 % of GDP of public outgo on Education, which shows the committedness of the authorities in bettering the criterions and guaranting in supplying quality instruction maintaining the state development in head.

Beginning: Eurostat

Fiscal Market

The Cyprus banking and fiscal service stands 15th in GCI, banking and fiscal sectors is diverse which comprises of domestic and co-operative recognition establishments and former international banking units. Cyprus banking sector is good developed and caters for a broad scope of fiscal demands of both concern and persons every bit good The commercial Bankss and specialised fiscal establishments offer full and varied local, national and international services on personal and corporate degree. ( Cyprus Banking, 2011 ) .

Labour Market

Cyprus has good trained and extremely skilled work force holding a figure of university alumnuss and people with professional and vocational makings. In 2009, 47.5 % of the population between the ages 25-34 held a Bachelor ‘s, Master ‘s or PhD grade.

Theory of Country Size and Natural Advantage

Cyprus strategic location at the cross roads of three continents has been playing a major function in determining the development and economic system, besides the eastern Mediterranean, reputable concern and service centres. Cyprus location has made it an ideal concern hub linking Asia, Africa and the Middle East.

Cyprus which has developed into a fully-fledged transportation Centre, which ranks among the 10 prima maritime states in the universe, with a merchandiser fleet transcending 40 million gross tunnage and about 2000 vass.

Ship Management

Cyprus constitutes one of the largest ship direction centres in the universe around 50 top ship direction companies and besides marine related foreign endeavors are carry oning international activities in Cyprus and besides largest ship direction companies have to the full established offices on the island.

Cyprus is a natural hub for other main-line deep sea trades tracking the Mediterranean, to North Africa and the Middle East. The chief merchandises re-exported from Cyprus are baccy, processed groceries, drinks, fabrics and fabric articles, minerals and chemicals. Cyprus could be used as a base for exporting to the Middle East, North Africa and Asia.


Led by its geostrategic place, the island has been a innovator in the development of purpose-made container terminuss in the Eastern Mediterranean, and was one of the first states in the part to utilize specialised container gauntry Cranes ( Cyrus Shipping, 2011 ) .


Notably, Cyprus is classified as a low revenue enhancement legal power ; meanwhile, its financial and regulative governments every bit good as its statute law are to the full aligned with the EU ‘s acquis communautaire.


Cyprus is an attractive location for the constitution of ship direction companies and companies with transporting related activities. The geographical place of the island, its accession to the chief international maritime conventions, every bit good as the generous revenue enhancement inducements and the extended web of bilateral understandings in merchandiser transportation, have enabled Cyprus to go an ideal transportation Centre.

Political and Economic Features

On May 1 2004, Republic of Cyprus became a member of the European Union, it was a natural pick for Cyprus and a attainment of self-respect, when it became a member of EU because of its civilization, civilisation, history and its loyal committedness to the values of democracy, freedom and justness, Entering the EU has helped Cyprus with a new epoch of chances and besides increase in duties.

As highlighted in the state ‘s Strategic Developmental Plan 2007-2013, entry into EU has released a new epoch of committedness to the growing and besides encourages Foreign Direct Investment opportunities in the precedence economic growing sector ( CIPA, 2011 )

Cyprus has besides joined European Monetary Union leveraging a robust economic public presentation marked by streamer cardinal indexs ; a cardinal advantage of fall ining the euro zone is monetary value transparence with the exchange rate hazard eliminated and costs significantly lower, monetary values are crystalline across the euro zone, furthering competition and lower monetary values in the medium to longer term.

Organized Legal, Accounting and Banking Servicess

Cyprus has recognized that information and cognition would play a cardinal function towards the growing in the planetary economic system of the hereafter, So Cyprus has played a major function in easing the exchange of thoughts, services and support among professional worldwide, and 70 % of the state ‘s economic system is based on the proviso of services.

Lowest EU corporate revenue enhancement rate

Cyprus has a last corporate revenue enhancement rate in EU of 10 % and besides dual revenue enhancement understandings with over 45 states has developed a broad web and besides guaranting that the same income is non taxed in more than one state.

International Trusts

Cyprus international trusts are extensively used as a way for international revenue enhancement planning which has the undermentioned advantages

Income and additions of a Cyprus international trust, derived from beginnings outside Cyprus are exempted from revenue enhancement imposed

Interests, dividends or other income which is received from Cyprus international concern company are non subjected to revenue enhancement and withholding of revenue enhancement.

Exemption of revenue enhancement in instance if the alien who creates an International Trust in Cyprus and retires in Cyprus ( CIPA, 2011 ) .

Foreign Direct Investments

Foreign investing is the cardinal factor in determining the state ‘s economic stableness ; hence Cyprus has committed to supply better installations to pull foreign investors and besides ensured to supply a friendly ambiance for foreigners to set up a concern.

Cyprus authorities has relaxed the Foreign Direct Investment policies for both EU and non-EU subjects. Administrative processs have besides been made easy and every bit far as the minimal degree of investing and per centum of foreign engagement are concerned there are no restrictions as such in many sectors of the economic system. This has eased the foreign companies because they can now put and set up a concern in Cyprus on equal footings with local investors and no favoritism with foreign and Cypriot companies

( Cyprussolicitors, n.d ) .

Net Capital Flows

Beginning: Central Bank of Cyprus


Cyprus ranks 31st out of 180 states in the Transparency International ‘s 2008 Corruption Perception Index, having a mark of 6.4/10, with higher tonss bespeaking less corruptness. Harmonizing to the 2009 U.S. Department of Commerce study, corruptness is non perceived as a major obstruction to carry oning concern and investing in Cyprus. The Auditor General is granted the power by Cyprus ‘ Fundamental law to inspect all histories and command all expenses and grosss in the civil service ( Estandardsforum, 2009 ) .

Forces of Globalization

Globalization refers to the displacement towards a more incorporate and inter-dependent universe economic system. Globalization has several aspects, including the globalisation of markets and the globalisation of production. ( Hill, 2009, p.6 )

Forces of Globalization

Cyprus is invariably catching up with new engineerings and cyberspace enabling itself into e-world. On May 1st 2004, Cyprus entered the European and gained an first-class chance to travel beyond its boundary lines towards possible globalisation.

Cyprus is besides the member of Euro zone since January 1, 2008, since so Cyprus has become more unfastened, broad and besides really competitory in its economic system. Globalization forces have a major impact on Cyprus political and economical features, due to which many reforms have taken topographic point which includes the liberalisation of trade and investing limitations for non EU investors. Cyprus is making a broad environment for the foreign investors.

The forces of globalisation has influenced Cyprus to open a investing publicity bureau called Cyprus Investment Promotion Agency which is a private organisation which reports to Ministry of Commerce which aims to pull foreign investings and besides supplying advice and aid to foreign investors.

Cyprus provides many inducements for foreign investors which includes low corporate and forces revenue enhancement rates, modern legal, banking and fiscal system, and friendly concern environment. Cyprus besides has three free zones that offer revenue enhancement inducements for exporting concerns. As a 2009 U.S. Department of State study notes, “ Cyprus has developed into an of import regional and international concern centre. ”

Cyprus geographical location has been a major advantage to Cyprus which acts as a span between West and E has made it an international reputable Centre for concern and service. Cyprus touristry is besides on an upward tendency to the economic system which has seen a 1.5 % addition in the twelvemonth 2010 ( Cyprus Tourism, 2010 ) . The Cyprus Tourism Organization ( COT ) provides support in the signifier of Governmental grants intended to pull investing for Sustainable Enrichment and Development of Tourism in Cyprus. Currently a support plan is available until 31 December 2013 supporting, investing to enrich activities in the field of touristry and besides investing to significant ascent and modernizes bing tourer resorts ( Cyprus Financial Assistance, 2011 ) .


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Cyprus has no railroads and authorities has no programs of puting in railroads, which has increased the route accidents in Cyprus. Government has to concentrate more on supplying better conveyance installations sing safety concerns.

Cyprus has to present strong limitations on public adoptions, which is the 1 of the debatable grounds for making concern and besides by presenting assorted steps that will take down the hazard appraisal degrees of Bankss.

Cyprus overall is a good established state with batch of investing chances with minor economic stableness it will be an investing hub for investors.