Rafael L.C.V.G

Incentives motives to invest

At a time of increasingly intensified international competition, the government has taken several measures to enhance Cyprus’ competitiveness, both in the international and local market; to achieve steady and self-sustained growth; and to maximise the country's Gross Domestic Product. Specifically, having extensively considered ways for the development and reconstruction of the economy, the government has introduced a framework of incentives within the EU harmonisation process and the acquis communautaire in general.

Within the EU harmonisation process and acquis communautaire, the government has introduce a framework of investment incentives

The basic goals, which form the central core of the government’s incentives framework, are:

• Attraction and development of new high-tech industries and skill intensive products
• Assistance and reconstruction of Cyprus traditional economic sectors
• Improvement of productivity and labour skills
• Attraction of capital-intensive foreign investment

The main incentives and schemes are briefly described below. Please note that the various grant schemes may be subject to alterations.

 

Technology and Research

Cyprus is pursuing the goal of establishing itself as a regional research and technology centre. Through incentives, the country is rapidly being transformed into a hub for technological development within the Eastern Mediterranean region.

Foreign capital plays a fundamental role in these efforts, as it contributes substantially to the introduction of high technology, know-how and expertise.

• Business Incubators
  Business incubators act as catalysts, through which the necessary support is given to scientists and researchers in order to exploit innovative ideas. At the same time, business incubators facilitate the establishment and growth of new ventures involved in developing and promoting innovative products or services.

  The programme is addressed to individuals or small groups of individuals, who may apply for government grant under this programme through an incubator company having a contract with the government. The approved individual or team has to register a private company of limited liability. The company is obliged to be housed and operate in the designated premises of the incubator company for a period of up to two years.

  The incubator company undertakes to offer the companies under incubation facilities such as space and office services, secretarial, accounting and legal assistance, scientific and advisory support and assistance in finding venture capitals. The government of Cyprus provides the inventor company a grant of up to C£120.000.

"Harvard School of Public Health wants to make greater contribution to research, technology transfer, and education internationally. We believe our efforts in Cyprus will strengthen environmental science throughout the Mediterranean region."
James Ware - Dean for Academic Programs. Harvard School of Public Health

• Research
  The Research Promotion Foundation (RPF) - an initiative of the government of the Republic of Cyprus - was established in order to promote the development of scientific and technological research in Cyprus. One of its main activities is the development of a national framework programme for financing Research and Development and Innovation (R&D&I) projects.

  A large number of research projects and supporting activities are financed through RPF's programmes, with an approximate funding budget of €17 mln in 2006. The budget is expected to grow substantially in the coming years. The R&D&I supporting programmes are categorised under five Strategic Areas:

  • Strategic & Multi-thematic Research and Development
  • Growth of National Scientific & Research Human Capital
  • Applied Research Development and Enterprise Innovation
  • Research Infrastructure Development and Large Scale Investments
  • International Networking and Collaboration in the field ofR&D&I

for further info: www.research.org.cy

Industrial Development

Industrial development has been amongst the primary objectives of the government, as it constitutes a vital component of economic policy. Cyprus’ accession to the EU provides Cypriot enterprises with the opportunity of participating in the various community programmes concerning industrial technology; product development; marketing; professional training, etc, thus further enhancing the process of restructuring.

"Business boom: Cyprus is taking advantage of its strategic location to promote its transhipment facilities." - Global Finance, May 2004

The Industrial Development Service (IDS) of the Ministry of Commerce, Industry and Tourism, aims at accelerating the rate of growth of the manufacturing sector and enhancing its competitiveness under free market conditions. IDS has introduced a framework of investment incentives, a brief description of which is provided below:

• Technological upgrading: The scheme aims at assisting the technological upgrading of existing and newly established manufacturing enterprises⁹ through government grants. Any manufacturing enterprise, excluding those located in selected rural areas, investing in new machinery, new equipment and know-how within a period of three years, is eligible to apply.
   
• Manufacturing in Rural Areas: The programme is co-financed by the European Regional Development Fund and aims to support, develop, and promote the manufacturing sector⁹ through grants for the expansion and modernisation of existing and/or creation of new viable Small and Medium-sized enterprises¹⁰, which are located, or will be located in specified rural areas.
   
• Relocation of Small Enterprises: The aim of this programme is to motivate the already existing Small enterprises engaged in manufacturing activities, or specified service activities, to move from residential or inappropriate for their activities areas to other authorised areas. Authorised areas are those where an enterprise can legally have its premises and engage in manufacturing or service activities, such as industrial areas, industrial zones, handicrafts zones or any other authorised area.
   
• Government Guarantee for Loans Granted to SMEs: The aim of the scheme is to assist SMEs¹⁰ in the manufacturing sector⁹, which do not have adequate collateral to obtain loans. Government guarantees may be granted for loans given by any commercial bank or financial institution, and will be utilised for:

  a)restructuring and/or expansion in the case of existing enterprises; and

  b)establishment of a new manufacturing unit preferably engaged in the production of new products and/or high technology products.

"...accession to the EU has prompted many important structural reforms, helping to lay the foundation for sustained economic growth into the future." - International Monetary Fund (IMF), Executive Board Concludes 2004 Article IV - Consultation with Cyprus

Encouraging Exports

The Trade Service of the Ministry of Commerce, Industry and Tourism provides state grants aimed at enhancing the promotion of Cypriot products and services abroad, and at providing know-how to entrepreneurs regarding business tactics in foreign markets.

• Promotion of Industrial Products:
  The state grant covers the following schemes:
  
  

  • Financial aid for exploring export potentials in foreign markets
     
  • Schemes for entrepreneurs / manufacturers participating in trade fairs abroad, either at their own expense or at fairs organised by the Ministry of Commerce, Industry and Tourism
     
  • Schemes for entrepreneurs / manufacturers participating in trade missions abroad organised by the Ministry of Commerce, Industry and Tourism
     
• Promotion of Services
  The aim is to promote and support the services industry through the provision of information to exporters regarding the trading conditions within foreign markets. Two schemes are available:
  
  

  • Participation in trade fairs and exhibitions abroad
     
  • Penetration of foreign markets - market research

for further info: www.mcit.gov.cy/ts

"The location of the centre in Cyprus with its attractive climate, well-developed infrastructure and proximity to both Europe and the Middle East will promote the active and sustained involvement of the Harvard faculty in the programme."
Kazem Behbehani - Assistant Director - General World Health Organisation

Quality Assurance

Within its efforts to contribute to the enhancement of product quality, the government has introduced a number of schemes:

• Testing of Products: The aim of the scheme is to assist existing or new SMEs¹⁰ in the manufacturing sector⁹, to cover expenses for laboratory testing, products’ testing and/or analysis, calibration of measurement and testing instruments abroad. The scheme applies in the case where the above needs cannot be met by local laboratories.
   
• Laboratory Infrastructure: The scheme's main objective is to strengthen the laboratory infrastructure through the provision of assistance to existing or new laboratories in order to meet their immediate needs for product testing equipment.
   
• The HACCP System: The scheme intends to assist and motivate companies of the food and beverage industry to implement the HACCP system. It is a systematic approach to the risk assessment, as well as the control of microbiological, chemical, and physical hazards related to any food production procedure.

No doubt Cyprus possesses a unique combination of advantages. This has already been recognised by the ever-increasing number of foreign companies based on the island

Energy and Environment

The Cyprus Institute of Energy provides financial incentives for the materialisation of investments in the field of energy conservation and the promotion of Renewable Energy Sources. Overall, it intends to expand the usage of financially viable energy technologies, and encourage investments that positively affect the environment.

for further info: www.cie.org.cy