The Report Company: How would you define the ‘basic interests’ that Cyprus aims to preserve and protect in the context of its relationship with the United Kingdom and what’s your current assessment of this bi-lateral relationship? Where would you say are the main intersections of interest between both countries?

Alexandros N. Zenon: The UK has a strong bilateral relationship with Cyprus, reflecting the two countries’ economic, social and political ties. In 2008, UK FDI flows into Cyprus amounted to €375.7million and Cyprus’s FDI into the UK was €63.3million. The two countries are both members of the European Union and of the Commonwealth. Of course, one should also remember that Cyprus was under British rule from 1878 until 1960. 

We estimate that there are more than 250,000 Cypriots living in the UK and that approximately 12,000 Cypriot students are currently enrolled in British universities. At the same time, there are between 60,000 and 70,000 Britons living in Cyprus. English is the second most widely spoken language in Cyprus. The UK is Cyprus’s 3rd trade partner and the legal system in Cyprus is based on Common law.

The fact that the Institute of Chartered Accountants in England and Wales (ICAEW) and the Chartered Institute of Management Accountants (CIMA) have chosen Cyprus as the main country to train U.K. Chartered and CIMA accountants outside the U.K. as well as the training of U.K. Certified Accountants on the island, confirms the high level of education, the high ethics and standards and the excellent training that exist in Cyprus as well as the strong relationship the two countries enjoy.

TRC: How would you define your role as the High Commissioner to the UK?

ANZ: In terms of economic and trade matters, I’m a facilitator within what is a globalised and free market economy, so I facilitate contacts between institutional organisations from both sides and individuals. We have a trade office as well as a tourism office and a maritime office through which we facilitate contacts.

Diplomatically speaking, London is the pinnacle; it is a very important posting for us. Back in 2008 we agreed with the UK Government a Memorandum of Understanding (MOU) for the further enhancement and strengthening of our relations with the UK. I am trying to implement that MOU, which covers several fields including political, economic and cultural cooperation, and I would be happy if I succeed in fully implementing that protocol.

Diplomatic relations nowadays are not what they used to be. Our ministers meet on a monthly basis on the sidelines of the meetings of the Council of the European Union, so our role has changed. We have become more facilitators than anything else between not only government departments but also civil society.

Diplomacy today is more open, more global, more transparent, and the nature of diplomacy changed even more following our membership of the EU.

TRC: How do you want Cyprus to be perceived by British investors, potential visitors and the political leadership in the country? What concrete steps have you taken to manage perceptions and enhance the perception of Cyprus in the UK?

ANZ: Recently, the Cyprus Government implemented a number of initiatives aimed at further enhancing the appeal of Cyprus as an investment destination and helping faster economic recovery of the country. These initiatives include promotional measures, legislative reforms and infrastructure improvements. Cyprus can, in fact, offer an environment that makes business enjoyable as well as profitable.

TRC: The Cyprus question: views on the specific solutions being proposed through diplomatic channels and most significant messages that you have aimed to convey to Britain’s political leadership with regards to the 37-year-long issue.

ANZ: The UK is an important actor in the efforts to reunify Cyprus and it is in a position to exercise what we believe should be a positive role in promoting a just and lasting solution to the Cyprus question. For the solution to be viable, it must be in accordance with relevant UN Security Council resolutions and European values. It also means the withdrawal of all Turkish troops from Cyprus and the end of the current illegal occupation of 37% of our territory.

The UK has a very good relationship with Turkey. Since we cannot talk directly with the Turkish Government because Ankara doesn’t recognise the Republic of Cyprus, we believe that the UK can exert influence on the Turkish government in order to adopt a constructive attitude in the current efforts to solve the Cyprus problem. The UK has a special interest in solving the Cyprus problem because apart from being a guarantor power for the independence and territorial integrity of Cyprus, it is also one of the countries which strongly support Turkey’s accession to the EU which is, of course, conditional on the fulfilment of a number of obligations by Turkey vis a vis the EU and its member states including Cyprus. If the UK wants Turkey to become a full member of the EU then it must send the message to Ankara that it must fulfil all the obligations it undertook towards the EU.

Both the current and previous UK governments supported the direct negotiations to find a solution to the Cyprus problem between the leaders of the two communities in Cyprus, which began in September 2008 under UN auspices. All UK parties support the position that the solution of the Cyprus problem should be Cypriot- owned and Cypriot- led and they all express their support to the leaders of the two communities in their efforts to find a solution, based on relevant UN Security Council resolutions. Of course this is a very difficult task because of the lack of will on the Turkish side, which recently has been coupled with Turkey’s provocative threats in relation to our sovereign right to carry out explorations within our exclusive economic zone where we believe natural gas resources exist. These are being hampered by Turkey despite the fact that we are acting in compliance with and within the provisions of the UN Convention on the Law of the Sea. On this issue, the UK government has in fact taken a very clear position that Cyprus is acting within its sovereign rights.

TRC: Cyprus in the context of the EU: how would you assess the strategic geopolitical value of Cyprus for the European Union?

ANZ: Cyprus has a long established reputation as a safe and secure location for commercial and business activities, and continues to develop into an important bridge for doing business between the Middle East and Europe. Geographically we are at the crossroads of three continents so we can be a hub for promoting both business and political initiatives in the region. Over the years, Cyprus has developed into a bridge of co-operation and can be used not only as an effective jurisdiction for routing investments within the EU, but also as a portal for investment outside the EU, particularly into the rapidly growing economies of Central and Eastern Europe, Africa, India and China.

TRC: The global financial crisis has been a game-changer, particularly for countries with a strong position in the financial services industry and significantly exposed to nations like Greece. How has the crisis affected Cyprus, where does the economy stand today and what are the government’s growth projections for 2012 and beyond?

ANZ: Like every other country, Cyprus has been affected both directly and indirectly by the financial crisis. At the beginning of the crisis the effect was not so tangible; however our major banks are exposed to Greek sovereign bonds so this affects the general economic situation in Cyprus. Despite this, the major Cypriot banks have no problems of liquidity because they adopted a policy of opening into countries of the former Soviet Union like Russia or Ukraine which have not been affected to such a great extent by the crisis, which in turn has meant that we have seen large inflows from those countries. We are about to conclude a loan agreement from the Russian government for €2.5 billion with favourable terms, so we have other sources for counterbalancing the effects of the economic crisis.

The financial sector in Cyprus is very well-regulated and the system is sound and liquid with a comfortable capital adequacy and sufficient profitability. It is also well-developed and stable and can cater for a wide variety of financial needs. The Cypriot banks successfully passed the 2011 EU-wide stress tests, reaffirming the solid financial fundamentals of our banks.

In terms of the government debt to GDP ratio, we are currently at around 65% of the GDP. The Economic and Monetary Union criteria stipulate a figure of no higher than 60% of the GDP, however in the current economy climate this figure is comparatively better than many other European countries. We project that the figure will decrease to 62.8% by 2014, and then reduce further by 2015.

We foresee a deficit of between 6 and 6.5% by the end of this year, which is twice as much as what is provided for by the Maastricht Treaty, but we expect this to go down to 2.8% by the end of next year and to 1% by 2014 so the trend is downwards. We expect GDP growth of 0.2% in 2012.

In the long-term, Cyprus stands to benefit from the possible discovery of new energy sources. As you know, a few weeks ago the Cyprus Government has begun exploratory drilling for the discovery and exploitation of hydrocarbons within its Exclusive Economist Zone (EEZ). And, if initial indications are anything to go by, there is a wealth of reserves lying in the seabed within our EEZ.

TRC: Thoughts on the current investment climate, review of most significant competitive advantages of the nation as an investment destination and specific opportunities that your office is promoting amongst UK investors.

ANZ: Cyprus’ economic and business growth is mainly attributed to a wide range of competitive advantages that have contributed towards the island’s position as an attractive investment destination. It is an EU member state and Eurozone member with a stable, reputable political and legal system. Cyprus has excellent relations with its neighbouring countries, and is located at the crossroads of three continents linking Europe, Africa and Asia.

In terms of taxation, the country has one of the lowest corporate tax rates in the EU at 10% and has signed double taxation avoidance agreements with 44 countries, including the UK, and is currently in negotiations with a further 18 countries.

The economy is market-oriented with macroeconomic stability and a positive growth outlook, and its highly educated, qualified and multilingual workforce as well as its broad range and quality of financial and business services, including legal, tax and accounting services, create an extremely attractive business and investment centre.

Cyprus offers a wide range of investment opportunities in various sectors of the economy. The most attractive sectors are: Banking and Financial Services, Professional Services, Shipping, Information & Communication Technologies (ICT), Energy, Tourism, Research & Development (R&D), Education and Medical Services.

In addition, we also have a number of large Infrastructure Development Projects, such as marinas and golf courses, as well as more integrated development projects which include residential, commercial as well as high-quality educational and health services are currently available for Foreign Investment. Some of these projects have already begun construction and others are in the final stages of licensing.

TRC: Comments on Cyprus’ most distinctive features as a tourism destination and efforts underway to strengthen the country’s brand as a selected tourism spot amongst British business travellers and holiday-makers.

ANZ: Cyprus has an enviable climate. Cuisine and gastronomy is another factor. We have two new state of the art airports. Next year will see the opening of the Limassol Marina, with luxury villas, apartments, restaurants and shops. In addition, we have 56 blue flag beaches.

Convention tourism is important, as well as medical tourism which we are promoting quite strongly.

We have many antiquities, being a crossroad of continents and also civilisations, which is extremely interesting for those who are interested in culture.

Our competitive advantage as a tourism destination is that we can combine sea with mountains. You can ski on the mountains then water-ski in the sea on the same day.

TRC: Cyprus’ strengths as a financial centre: thoughts on the industry’s competitive edge over countries and jurisdictions like Malta and Luxembourg. In what ways may Cyprus’ financial services sector be complementary of that of the United Kingdom and what are the opportunities for British financial firms in this regard?

ANZ: We can compete with these countries because we provide different type of financial services, as well as banking. We are an EU member state but in the easternmost part of the Union, which is an advantage as other member states cannot operate with the same facility to the Middle East as we do. It was part of my Government’s policy in the past years to establish a more active diplomatic and commercial representation in the Gulf countries. As a result we now have many more embassies in that part of the world.

Cyprus today has significant comparative advantages when compared with other jurisdictions that offer investment fund services and is implementing measures for the transposition of EU Directives so that it will be able to offer outstanding possibilities for cross-border and global fund distribution. Cyprus combines a strong banking infrastructure with low costs while complying with EU fund regulations and international best practices.

TRC: Final message?

ANZ: There is still a lot of room for further strengthening and developing our bilateral relations with the UK in all fields and we are here to help and to facilitate this further upgrading of the relations between the two countries.