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FY 1997 Country Commercial Guide: Cyprus

Prepared by U.S. Embassy Nicosia, released by the Bureau of Economic and Business Affairs, August 1996

Executive Summary | Economic Trends and Outlook | Political Environment
Marketing U.S. Products and Services | Leading Sectors for U.S. Exports and Investments
Trade Regulations and Standards | Investment Climate | Trade and Project Financing
Business Travel
Appendices (Country Data)

I. Executive Summary

This Country Commercial Guide (CCG) presents a comprehensive look at Cyprus' commercial environment, using economic, political and market analysis. The CCGs were established by recommendation of the Trade Promotion Coordinating Committee (TPCC), a multi­agency task force, to consolidate various reporting documents prepared by the U.S. business community. Country Commercial Guides are prepared annually at U.S. embassies through combined efforts of several U.S. Government agencies.

Cyprus' small but vibrant economy offers some excellent opportunities for U.S. exporters. In 1995 the Cypriot economy grew by 5.0 percent in real terms; unemployment was 2.6 percent of the economically active population; and inflation was also 2.6 percent. The average exchange rate between the Cyprus Pound (CP) and the USD in 1995 was CP 1.00 to USD 2.21 and is forecast to reach CP 1.00 to USD 2.12 in 1995.

The commercial environment in Cyprus makes it easy to do business here: the use of English as a second language is wide­spread; the cost of living is moderate by European standards; Cyprus has good business and financial services, modern telecommunications, an educated labor force, good airline connections, and a low crime rate. The government is gradually liberalizing foreign investment and foreign exchange regulations.

Cyprus' geographical location, tax incentives, and modern infrastructure also make it a natural hub for companies looking to do business with the Middle East, Eastern Europe, the former Soviet Union and North Africa. As a result, Cyprus has a thriving offshore sector.

Cyprus has negotiated a two­phase Customs Union Agreement with the European Union (EU) covering 80 percent of its trade with EU member states. Phase I of the agreement will be fully implemented as of January 1, 1998, when tariffs on many goods from the EU will fall to zero and Cyprus will adopt the EU's Common Customs Tariff for third countries. Although goods from the EU have lower duties than goods from non­EU countries, exports from the U.S. have risen ninefold in the last decade, from USD 53 million in 1986 to USD 480 million in 1995. The U.S. was the single largest exporter to Cyprus in 1995 for the first time ever, with a 13.4 percent share of the market.

Membership in the European Union is one of the government's foremost political and economic policy objectives. The EU has pledged to begin accession negotiations with Cyprus six months after the conclusion of the EU's Inter­Governmental Conference (i.e. sometime in earlyto mid­1998). In view of this prospect, the Government has stepped up its efforts to harmonize laws, standards and regulations with the EU's.

Cyprus ratified the new GATT agreement in 1995, and began implementing it fully since January 1, 1996. Quotas and other non­tariff barriers have been abolished and replaced with higher tariffs for certain protected products. With these traditional barriers to U.S. imports now removed, prospects for increasing U.S. exports are very good. High tariff rates for many U.S. products will be significantly reduced when Cyprus adopts the EU's Common Customs Tariff in 1998.

The largest market for U.S. goods is the Cypriot governmental sector. U.S. companies have won contracts for large projects, such as the computerization of government functions. Best prospects for future procurement from the U.S. are the two satellites scheduled to be launched by Cyprus Telecommunications Authority (CYTA) in 1996 (one for broadcasting and the other for the mobile telephones). Medical equipment for a new hospital and computer services for the public sector will also be announced soon. Local municipalities are working on long­term plans for sewerage projects and plans for new highways and marinas are also underway. The island's private sector also has a growing appetite for U.S.­made office machines, computer software and data processing equipment. With the changes in Cypriot tariff regime, many other opportunities are opening up for U.S. exporters.

The political events of 1974 led to a de facto division of Cyprus into a Government­controlled area in the South and an area in the North declared in 1983 as the "Turkish Republic of Northern Cyprus" ("TRNC"). This area, garrisoned by around 30,000 Turkish troops, is recognized only by Turkey. This report covers only the part of the island controlled by the internationally recognized Government of Cyprus.

Country Commercial Guides are available on the National Trade Data Bank on CD­ROM or through the Internet. Please contact STAT­USA at 1­800­STAT­USA for more information. To locate Country Commercial Guides via the Internet, please use the following World Wide Web address: www.stat­ CCGs can also be ordered in hard copy or on diskette from the National Technical Information Service (NTIS) at 1­800­553­NTIS.

II. Economic Trends And Outlook

Major Trends and Outlook

In 1995 the Cypriot economy grew by 5.0 percent in real terms, compared with 6.0 percent in 1994. GDP in nominal terms was USD 8.53 billion. Services other than tourism (trade, telecommunications, and financial services) and also agriculture provided the main stimulus to economic growth last year. Tourism, by contrast, recorded only marginal gains: tourist arrivals increased by just 1.5 percent, to 2,100,000, and gross revenue from tourism increased by only 3.1 percent, to USD 1.85 billion (compared to an increase of 12.9 percent in 1994). Still, revenue from tourism went a long way towards mitigating Cyprus' substantial trade deficit of USD 2.32 billion in 1995. The current account ended in a USD 214 million deficit in 1995, after a surplus of USD 59 million in 1994.

Despite a temporary improvement in 1994, productivity has been lagging behind real wage increases in recent years, undermining Cyprus' competitiveness in many sectors but particularly in manufacturing. Productivity increased by only 2.8 percent in 1995, while real wages were up by 3.9 percent. Inflation was 2.6 percent in 1995, substantially lower than the 4.7 percent recorded in 1994. Unemployment was 2.8 percent of the economically active population in 1995, compared with 2.7 percent in 1994. The fiscal deficit dropped to USD 110 million in 1995, or 1.3 percent of GDP, compared with 1.5 percent of GDP in 1994. Although not a member of the European Union, Cyprus meets the Maastricht treaty economic targets for inflation, fiscal deficit, etc. ­­ a feat achieved by only two EU countries in 1995.

Prospects for 1996 remain positive, although real GDP growth is forecast to slow to 3.8 percent. Cyprus' substantial trade deficit is forecast to widen further (to around USD 2.4 billion) due to continued strong demand for imports. As a result, the current account will widen further (to around USD 280 million), since tourism revenue is not likely to record significant gains. Nonetheless, even at this higher level, the current account deficit would represent only 3.2 percent of GDP in 1996, moderate by international standards.

Cyprus has a thriving offshore sector, hosting an ever­increasing number of foreign companies which conduct their business in the region (Middle East, Eastern Europe, the former Soviet Union and North Africa) from here. Currently, some 1,168 offshores operate in Cyprus from fully­fledged offices, at least 30 of which are from the United States. Cyprus also has the fourth­largest ship register in the world, with 2,787 ships and 26.9 million Gross Registered Tons (GRTs).

The official Cyprus Stock Exchange started operation on March 29, 1996, replacing the unofficial, over­the­counter stock market which had existed previously. Foreign participation in new and existing public companies is determined on a case­by­case basis. In general, the amount of foreign participation allowed does not exceed 30 percent of a new company's issued capital, and it is limited to 8 percent for existing public companies in the banking sector. These percentages are expected to be increased in the near future. (For additional information on the Cyprus Stock Exchange please refer to Section VII, Para G.)

Principal Growth Sectors

The principal growth sectors in recent years have been financial services and tourism. The contribution of tertiary sectors (trade, tourism, transport, banking, government and other services) to GDP has increased from 63.6 percent in 1987 to 69.8 percent in 1995. The contribution of primary sectors (agriculture and mining) to GDP, in constant 1985 terms, shrank from 7.7 percent in 1987 to 5.8 percent in 1995. Secondary sectors (including manufacturing, electricity and construction) declined from 28.7 percent of GDP in 1987 to 24.3 percent in 1995.

Analysts and government officials in Cyprus frequently call for less reliance on tourism and services and more on manufacturing. However, not much has been done to change present trends. The island's advantageous position in the Mediterranean, its rich history and friendly people give Cyprus a natural comparative advantage in tourism and services, while the relative shortage of blue­collar workers and rising labor costs make it progressively harder for labor­intensive manufacturing operations to flourish.

Government Role in the Economy

The economy in Cyprus is basically market­driven, but it operates within well­defined guidelines set by the government.

  • Foreign investment from abroad is generally welcome, but it is subject to Central Bank approval for the type of investment and allowable percentage of foreign participation. (The government is planning to liberalize the legal framework for foreign investment. See Section VII.)
  • A 9 percent ceiling on interest rates has been in effect since 1944. In practice, deposits currently may earn up to 7 percent, while the maximum lending rate is 9 percent for hire­purchase loans and 8.5 percent for all other loans. The Central Bank made an important step towards deregulating interest rates when it introduced repurchase agreements (repos) as of January 1, 1996, replacing the liquidity ratio as the main instrument of monetary policy. The government expects to remove the interest rate ceiling by the end of 1997.
  • Residents of Cyprus are subject to exchange control restrictions, covering the holding of foreign currency accounts, investing abroad, travel allowance, etc. Non­residents are exempt from these restrictions.
  • The petroleum industry is subject to a spider's web of regulations, from the number of oil companies and gas stations allowed to operate locally to the commission charged by gas station owners.
  • The Industrial Relations Code requires the government to act as a mediator between unions and employers to resolve major labor disputes.
  • Working hours in all sectors are regulated, despite pressure from some entrepreneurs.
  • Twice a year, employees in all sectors of the economy receive a Cost of Living Allowance (COLA) pay adjustment, equivalent to the increase in inflation in the previous six months.
  • The telecommunications sector is currently publicly­controlled, but the government at some point may consider partial privatization of some services.
  • The government's priorities in the 1996 development budget are road development projects and waterworks (irrigation networks, water conveyors and pumping stations). Computerization of various government services is also an important part of the government's development effort.

Balance of Payments Situation

The trade deficit increased to USD 2.32 billion in 1995, compared with USD 1.83 billion in 1994. Total imports rose by 15.6 percent to USD 3.40 billion in 1995. Total exports (FOB, including re­exports) rose for the second consecutive year to USD 1.08 billion (up by 16.7 percent).

The trade deficit was counterbalanced to a large extent by net invisibles receipts of USD 2.11 billion, compared with USD 1.89 billion in 1994. Most of this revenue came from tourism, even though activity in this sector levelled off in 1995: tourist arrivals rose by only 1.5 percent to 2,100,000 and gross revenue from tourism by 3.1 percent to USD 1.85 billion. Revenue from offshore activities reached USD 378 million in 1995, up 16.8 percent from the previous year, also contributing to the larger invisibles surplus.

The current account closed with a deficit of USD 214 million, after surpluses of USD 100 million and USD 59 million in 1993 and 1994, respectively. Capital transactions resulted in a net inflow of USD 78 million in 1995, after a net inflow of USD 72 million in 1994. The overall balance of payments, after positive net errors and omissions, recorded a deficit of USD 188 million in 1995 (2.1 percent of GDP), after a surplus of USD 135 million in 1994. By the end of 1995, gross foreign exchange reserves had risen to USD 4.11 billion and were equivalent to 15 months of imports.

The main underlying trends in the economy that contributed to a relatively poor performance of the balance payments in 1995 (strong demand for imports and saturation of tourism) are expected to continue in the near term. Thus, in 1996 the current account is forecast to record a deficit of around USD 230 million and the overall balance of payments deficit is forecast to deteriorate further, to USD 280 million.

Infrastructure Situation

Infrastructure in general is commensurate with European standards and is considered efficient. Semi­state organizations handle power generation, telecommunications, management of ports, marketing of agricultural products and several other areas of economic life.

The Cyprus Telecommunications Authority (CYTA) provides modern telecommunications services. Installation of telephones, telexes and telefax usually takes one week. Direct dialling is available to the majority of countries in the world. Postal and courier services are highly efficient and there are many courier companies in Cyprus, including DHL and Federal Express. Internet is now available from a number of providers.

Several roads connecting the main cities have recently been constructed as dual­way highways. Land transport is performed by vehicles only (private or company vehicles and taxis). There is no train, and bus service is limited. A small island, distances in Cyprus are very short.

III. Political Environment

Nature of Political Relationship with the United States

The United States and Cyprus enjoy an excellent bilateral relationship. Political events in 1974 resulted in a de facto division of Cyprus into a Government­controlled area in the South ­­ Greek Cypriot (population about 645,000) ­­ and a Turkish Cypriot area in the North (population about 170,000). Since 1983, the Turkish Cypriots have declared the northern area to be the "Turkish Republic of Northern Cyprus" ("TRNC") ­­ an entity recognized only by Turkey. Approximately 30,000 Turkish troops are stationed there. This section, as well as the rest of the report, however, covers only the part of the island controlled by the internationally recognized Government of Cyprus.

Major Political Issues Affecting Business Climate

The United Nations Force in Cyprus (UNFICYP) polices a buffer zone between the Greek Cypriot and Turkish Cypriot communities. Except for occasional demonstrations or incidents along the buffer zone, there has been no violent conflict since 1974. At present, there is essentially no movement of goods, persons, or services between the two parts of the island. Foreign products imported by the Turkish Cypriot community are normally handled by agents in Turkey or small trading companies in the Turkish Cypriot community. The ports and airports of the Turkish Cypriot community are considered illegal by the government of the Republic of Cyprus. However, under the auspices of the United Nations, the two communities continue to pursue a negotiated settlement based on a bizonal, bicommunal, federal structure. The U.S. plays a significant role in supporting the U.N. Secretary General's efforts to negotiate a political solution to the Cyprus problem.

Political System, Schedule for Elections, and Major Parties

Cyprus is a democratic and independent Republic with a presidential system of government. The elected President of the Republic (who serves for five years) appoints the Council of Ministers, which is the main executive instrument of the Republic. Ministers are responsible for the initiation of legislation and administration of matters falling within their domain. Legislative power lies in the hands of the House of Representatives, which consists of 56 elected members (who serve for four years).

Presidential elections held in the Governmentcontrolled part of Cyprus in February 1993 brought Glafcos Clerides and the political right to power for the first time since independence in 1960. The next presidential elections will be held in early 1998.

In the parliamentary elections of May 26, 1996 the right­wing Democratic Rally (DESY) remained the largest political party supported by roughly 34 percent of the electorate. Second in strength was the island's oldest political party, communist AKEL, which commanded 33 percent support. Next came the centrist Democratic Party (DIKO) with 16 percent, followed by socialist party, EDEK, with just over eight percent and the left­of­center Free Democrats, with under four percent. Traditionally, the Greek Cypriot Orthodox Church has also played an important role in Greek Cypriot politics, although its influence has waned in recent years.

The President of the House of Representatives is the country's second­ranking government official and becomes Acting President in the absence of President Clerides.

IV. Marketing U.S. Products And Services

Distribution and Sales Channels;
Use of Agents/Distributors;
Finding a Partner; and Franchising

Many U.S. companies are already represented in Cyprus on an agency/representative basis. Some fast food companies are also represented under franchise agreements.

It is relatively easy to find qualified Cypriots to serve as agents and distributors. Cypriot agents/representatives normally market U.S. products and services under agency agreements based on commissions. These agreements are binding. In Cyprus, a Commercial Agent has to register with the Council of Commercial Agents and receive a license with a registration number. Importers/distributors/dealers are free of any registration.

Joint Ventures/Licensing; Steps to Establishing an Office

A partnership or a joint venture/licensing agreement with a Cypriot individual or organization is another channel for selling U.S. goods in Cyprus, depending on the nature of business concerned.

Non­residents wishing to participate in a Cypriot business enterprise are required to obtain the services of a lawyer or accountant practicing in the Republic who must submit, on their behalf, an application to the Central Bank with the requisite information. This information includes share capital for the proposed investment, economic activities, financial requirements, confidential references, and a four­page questionnaire, which can be obtained from the Central Bank.

All applications for direct investment by non­residents require the prior approval of the Central Bank, which considers them in consultation with appropriate government departments. Registration, re­organization and liquidation of businesses must be undertaken through attorneys or accountants practicing on the island. Businesses with non­resident participation must prepare and submit to the Central Bank of Cyprus and to the Department of Inland Revenue annual financial statements audited by accountants practicing in Cyprus. (See also Investment Climate, Section VII.)

Advertising and Trade Promotion

Advertising methods in Cyprus are the same as in other developed countries. TV and newspaper advertisements are used, as well as general and product­specific trade shows. Most newspapers are affiliated with particular political parties. The major Greek language newspapers are Phileleftheros, Alithia, Simerini, Aghon, and Haravghi.

The major English language newspapers are the Cyprus Weekly, Cyprus Mail and the Financial Mirror.

There are two Government­owned TV channels and three private channels.

Selling to the Government

The procurement practice of the Government is to announce international or local tenders, depending on the size of the procurement. All tenders of over USD 45,000 must be put out to international tender. U.S. companies may bid directly or through a local agent on any tender. Information on upcoming tenders is available through the Department of Commerce in Washington, the National Trade Data Bank (on CD­ROM or through the Internet: www.stat­, or the American Embassy in Nicosia (E­mail address:

Evaluation of government tenders is done by committees. Bids are evaluated first on technical merit and then on cost. Bidders on government contracts are advised to offer products/services that exactly meet tender specifications. "Overbidding"­­ providing additional technical capabilities or services ­­ only adds to the cost thus risking low ranking by the financial committee. The Government is required by law to choose the lowest bidder among technically qualified proposals.

Protecting Your Product from IPR Infringement

The adoption of a new Copyright Law in Cyprus as of January 1, 1994 marked an important milestone in the island's fight against intellectual property piracy. In response to the effective implementation of this law, the United States Trade Representative (USTR) took Cyprus off the Watch List in 1995 and remains off in 1996. However, USTR noted that Cyprus needed to continue to act aggressively against piracy of software and of video and audio recordings. The U.S. Government believes the current patent regime in Cyprus is inadequate, especially with regard to patent protection for pharmaceuticals and enforcement against piracy. The current law on patents dates back to 1959 and is based on British laws. It honors only British patents registered in Cyprus; these patents must be filed within three years of the UK registration.

Need for a Local Attorney

A local attorney must prepare the constitution of the company and submit the application for registration to the Registrar of Companies. A list of local attorneys is available from the Consular Section of the Embassy.

V. Leading Sectors For U.S. Exports And Investment

Best Prospects for Non­Agricultural Goods and Services

The Cyprus five­year development plan (1994­98) emphasizes the need for technological upgrading, enhanced competitiveness, and harmonization with the European Union. Best prospects for U.S. firms include export management and financial services, computer equipment and data processing services, environmental protection technology and telecommunications equipment. In addition, opportunities exist for U.S. firms for the supply of equipment for the following upcoming projects:

  1. Expansion Works for the Port of Larnaca (PRT).
    The Port of Larnaca will soon be upgraded, and will be used for nautical tourism, with marinas and cruise boats. Construction works will begin in 1997.
  2. Electrical Power System (ELP).
    The construction of a 240MW Electricity Generating Station is in process. The tender for management consultants was awarded to the British company Ewbank Preece. An environmental study has been prepared. Generators and other equipment will be purchased. Estimated cost USD 400 million.
  3. Medical Equipment (MED).
    A new Nicosia General Hospital (450 beds) will need the latest technology in medical and surgical equipment. The construction and equipment for the hospital will cost about USD 60 million. Tenders will be announced in 1997.
  4. Computers Peripherals (CPT), Computer Software (CSF) and Computer Services (CSV).
    Gradual Computerization of all government functions and automation of government offices. Estimated value about USD 50 million
  5. Telecommunications Equipment (TEL).
    Improvement of an already sophisticated telecommunications network. Procurement of two communications satellites. Possible privatization of some aspects of national telecommunications system.
  6. Pumps, Valves/Compressors (PVC).
    Improvement in the Water Development Department. Pumps, valves and other equipment will be purchased.
  7. Pollution Control Equipment (POL)
    Sewerage projects are announced by major communities all over the island. The Ministry of Commerce and Industry has announced that it will provide grants to manufacturers for the establishment of systems for the control of industrial pollution. The Chamber of Commerce is actively recruiting environmental technology firms to come to Cyprus to demonstrate new products/techniques.
  8. Airport Ground Support Equipment (APG)
    Tenders will be announced for expansion of the national airport. Construction, equipment and airport services will be needed. Estimated value: USD 300 million.
  9. Computerization of Stock Exchange (CSF).
    Tenders will be announced for the Automation ­ Computerization of the Cyprus Stock Exchange trading and clearing system.

Best Prospects for Agricultural Products

By far, the best prospect for agricultural exports to Cyprus is cereals. In 1995 the U.S. exported about 870,000 metric tons of cereals to Cyprus, valued at USD 37 million under the Export Enhancement Program. All imports

of cereals go through the Cyprus Grain Commission. Other prospects for agricultural exports to Cyprus include animal or vegetable oils and fats, animal feeds and oil seeds.

VI. Trade Regulations And Standards

Trade Barriers

The Cypriot Parliament ratified the Uruguay Round agreement in July 1995; implementation began January 1, 1996. One of the basic commitments of all parties to the new GATT was the elimination of quantitative restrictions and other non­tariff barriers. This requirement necessitated a major revision to Cypriot government policy concerning the protection of local industry and agriculture.

In implementing the new GATT, a policy of tariffication of the quantitative restrictions has been followed, i.e., where a quantitative restriction was abolished, the tariff on that product was raised to afford an equivalent degree of protection. This policy was applied to both preferential (EU) tariff rates and General (non­EU) tariff rates. Cyprus' Customs Union Agreement will serve to lower these tariffs to zero for goods from the EU and very substantially for goods from third countries, including the U.S., when Cyprus adopts the EU's Common Customs Tariff, expected January 1,1998.

Customs Valuation

Customs duties are regulated by a tariff system based on the harmonized commodity description and coding system (HS). Goods are classified according to their composition, description and purpose and carry various rates of duty. Luxury items carry the highest duties. Other than import tariffs, there is an 8 percent value added tax (VAT) and a temporary refugee levy (TRL) ranging from 1 to 3 percent on all goods. It is advisable to use Letter of Credit through the bank for any transactions.

Import Documentation

The following documents should be presented at Customs at time of clearing goods: delivery order for the goods; an invoice; and a Packing List.

Various other documents according to the nature of each import will be required. A Health Certificate and Listing of Ingredients will be required for any food products.

Temporary Entry

The temporary entry of goods allows the importation without payment of duty. Other than the temporary importation of motor vehicles, this facility is extended to goods for processing or repair prior to their re­exportation, goods for exhibition, and commercial samples, provided they do not change their form or character. The initial temporary permit is valid for three months and can be extended by application to Customs headquarters.

Labeling, Marking Requirements

In 1995, Cyprus adopted a stricter law on the labelling of food products, requiring that the product name, ingredients, net contents and country of origin be in the Greek language. A sticker with a Greek translation on the product is acceptable, provided it does not conceal the original label and it has the approval of the Ministry of Commerce, Industry, and Tourism. Implementation of this law has already started for specialized food products but it will become mandatory for all food products as of February 1, 1997.

The "Safety of Consumer Products Law" of 1994 outlines the legal responsibilities of those involved in the production or distribution of consumer products requiring safety warnings (including household appliances, pharmaceuticals, and many other products). One of these responsibilities concerns the proper labelling and packaging of consumer products to render them completely safe to the public. This includes having the necessary safety warnings for consumer products in Greek. A recent survey (March 1996) by the Ministry of Commerce, Industry, and Tourism showed that 90 percent of electric appliances sold in Cyprus did not satisfy the provisions of this law. The Ministry is expected to draft suggestions for stricter enforcement of the law.

Prohibited Imports

The importation of certain items is prohibited. The principal ones are listed below:

  • Rifles and repeating firearms, automatic and semi­automatic, repeating and semi­repeating shotguns, airguns, air rifles and air pistols of a calibre exceeding 0.177 inches.
  • Narcotics.
  • Seditious Publications.
  • Counterfeit or false coins or currency notes.
  • Goods bearing a false trade mark.
  • Agricultural products such as fresh vegetables, fruits and plants.
  • Dogs, cats, tropical fish, parrot and other birds can be imported into Cyprus after the issuance of a special permit from the Director of the Veterinary Services.


Cyprus is making every effort to streamline its laws and regulations with those of the EU, in order to facilitate its application to join the EU as a full member (accession negotiations are scheduled to begin in earlyto mid­1998). As a result, current regulations on standards are based on corresponding EU regulations.

Many companies in Cyprus have achieved the ISO standard. Semi­government organizations such as the Cyprus Telecommunications Authority and the Electricity Authority request tendering companies to meet ISO requirements.

Free Trade Zones

There are free­zone areas at the ports of Larnaca and Limassol as well as bonded warehouses where goods are kept for onward transhipment. Foreign participation in the free zone is usually granted.

Membership in Free Trade Arrangements

Cyprus has negotiated a two­phase Customs Union Agreement with the European Union covering 80 percent of its trade with EU member states. In accordance with this agreement, import tariffs on products imported from the EU are lower than on products imported from non­EU countries, including the United States. Phase I of the Customs Union Agreement will be fully implemented as of January 1, 1998, when tariffs on many goods from the EU will fall to zero and Cyprus will adopt the EU's Common Customs Tariff on most products from third countries.

VII. Investment Climate

(A1) Openness to Foreign Investment

General Attitude to Investment. Attracting foreign investment is among the primary objectives of the development policy of the Government of Cyprus (GOC). Cyprus offers numerous advantages and incentives to the foreign investor even though, in practice, majority foreign ownership is rarely approved. During the past 20 years (since January 1, 1976) non­residents have established 922 companies for the investment of capital locally, 22,216 companies for the management of their overseas affairs (offshores) and 10,613 companies for the registration of ships under the flag of the Republic. There are currently 1,168 offshore companies with fully­fledged offices on the island, at least 30 of which are from the United States.

Administrative procedures concerning foreign entrepreneurs have been simplified in order to minimize bureaucracy. The Constitution of Cyprus guarantees the right of private property, and it does not discriminate between citizens and aliens. Nationalization has never been part of government policy nor is it contemplated in the future.

Cyprus is a signatory to the Convention of the Settlement of Disputes between States and Nationals of other States, the Multilateral Investment Guarantee Agency Agreement (MIGA), and the Convention on the Protection of Industrial Property. Additionally, Cyprus signed an Investment Guarantee Program with the United States in 1963. This program is essentially unused but, in principle, makes it possible to insure long­term U.S. investments abroad against the possibility of non­commercial risks.

Administrative Procedure. Non­residents wishing to participate in a Cypriot business enterprise are required to obtain the services of an advocate (lawyer) or accountant practicing in the Republic who must submit, on their behalf, an application to the Central Bank with the requisite information. This information includes share capital for the proposed investment, economic activities, financial requirements, confidential references, and a four­page questionnaire, which can be obtained from the Central Bank. For further information the Central Bank may be contacted directly at: 80 Kennedy Ave., P.O.Box

5529, Nicosia, Cyprus, tel: 357­2­379800, fax: 357­2­378153.

Information received during the administrative procedure is treated as strictly confidential. Applications are classified into one of three categories:

  • Direct Investment, covering Cypriot firms which may belong partly or wholly to non­residents and which may carry on business and derive income from within Cyprus;
  • Offshore Enterprises, covering Cypriot firms which belong entirely to non­residents and which carry on business and derive income exclusively from outside Cyprus; and
  • Shipping Businesses, covering Cypriot firms which may belong entirely to non­residents and which limit their activities to the ownership, bareboat chartering and operation of ships outside Cyprus.

Permits for offshore enterprises and shipping companies are normally issued by the Central Bank within a few days, if all the information is complete. The Government considers offshore enterprises and shipping companies as making a positive net contribution to the national economy without competing with local firms.

All applications for direct investment by non­residents require the prior approval of the Central Bank, which considers them in consultation with appropriate government departments. Normally this process is completed within 30 days and a decision given. The applicant is notified in cases where the procedure cannot be completed in that period. After the permit is issued, the non­residents' shares or participation must be registered in their names or in the names of their nominees at the Department of the Official Receiver and Registrar under the Companies or Partnerships Laws. These laws are based on the corresponding Acts of the United Kingdom.

Registration, re­organization and liquidation of businesses must be undertaken through attorneys or accountants practicing on the island. Businesses with non­resident participation must prepare and submit to the Central Bank of Cyprus and to the Department of Inland Revenue annual financial statements audited by accountants practicing in Cyprus.

Non­residents wishing to take up employment in Cyprus require work permits by the Immigration Department. Permits are readily issued to the senior executives of companies as well as to other foreign personnel when administrative or technical staff of the same caliber cannot be found in Cyprus, or when the employment of the non­resident is absolutely necessary for conducting the business of the enterprise. In the case of offshore enterprises, arrangements have been made for the Ministry to issue and renew the permits of expatriate employees upon the recommendation of the Central Bank.

Evaluation Criteria. The Central Bank evaluates each investment proposal on its own merits. Whether the Bank grants permission to go ahead with the project and the percentage of foreign participation depend on how "desirable" the project is from the Cypriot point of view. Typically, foreign participation is restricted to 49 percent for manufacturing, and 30­40 percent in tourism. In exceptional cases, such as manufacturing of products new to Cyprus or exclusively for export, and specialized tourism­related projects such as golf courses, marinas, and theme parks, foreign participation may reach 100 percent. (Please refer to Subsection A8 for a more detailed description of the evaluation criteria currently used by the Central Bank.)

(A2) Conversion and Transfer Policies

Exchange Control. The Exchange Control Law does not distinguish between Cypriot nationals and aliens but rather between residents and non­residents. The residential status of physical persons is normally determined by their places of residence and employment. The residential status of firms is normally determined by the place of incorporation. Currently, residents are subject to exchange control restrictions. Within its overall liberalization of the financial system, we expect the Government's exchange control policy to be relaxed in the near future. For now, however, restrictions remain in place. Non­residents are exempt from these restrictions. Non­residents may hold and manage assets and liabilities in any foreign currency and in any foreign country, including freely convertible and transferable balances with banks on the island.

Cypriot firms which belong partly or wholly to non­residents and which carry on business or derive income within the island are considered residents for exchange control purposes. Cypriot firms which belong exclusively to non­residents and which carry on business and derive income exclusively outside the island are exempt from exchange controls. Persons who are not permanent residents of Cyprus are also exempt from exchange controls.

Once the non­resident investor has obtained the approval of the Central Bank, he/she is free to go ahead with an investment project and repatriate capital, profits, dividends and interest arising from the investment. The savings of expatriate employees may be transferred abroad

monthly or credited to a freely convertible or foreign currency account in Cyprus. There is no prescribed maximum percentage of profits that may be repatriated each year, or minimum period before which the non­resident may dispose of his investment. On both counts the foreign investor may act freely.

(A3) Expropriation and Compensation

Nationalization has never been government policy and it is not contemplated in the future. Private property is only expropriated for public purposes in a non­discriminatory manner and in accordance with established principles of international law. In cases where expropriation is necessary, due process is followed and there is transparency of purpose. Furthermore, investors and lenders to expropriated entities receive fair compensation in the currency in which the investment is made. In the event of any delay in the payment of compensation, the Government is liable to the payment of interest based on the prevailing 6­month LIBOR for the relevant currency in addition to the amount of compensation.

(A4) Dispute Settlement

There have been no cases of investment disputes or outstanding expropriation/nationalization cases in recent years. Effective means are available for enforcing property and contractual rights. Under the Arbitration Law of Cyprus, arbitrators are appointed by the parties to an agreement and an umpire is usually appointed in the case where a dispute cannot be settled by the arbitrators of the two parties. An arbitral award may be enforced by the court in the same way as a judgment. In 1979, Cyprus became a signatory to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards and a foreign award may be enforced in Cyprus by an action in common law. Cyprus is also a signatory to the Convention of the Settlement of Disputes Between States and Nationals of Other States.

(A5) Performance Requirements/Incentives

Cyprus does not have a rigid system of performance requirements for foreign investment. Each application for investment is judged on its own merits and any conditions are negotiated and agreed before the investment is approved. Transfer of technology, for example, although not a requirement, is definitely considered a "plus" in the initial evaluation.

Investment incentives. Investment incentives currently available in Cyprus are summarized in the following paragraphs:

I. Direct Investment Incentives:

  • Low corporate tax; resident companies are taxed at the rate of 20 percent for chargeable income up to CP 40,000 and 25 percent for chargeable income in excess of CP 40,000;
  • Initial investment and annual depreciation allowances;
  • Carry­forward of losses for five years;
  • Exemption from customs and excise charges for operations in the Industrial Free Zone; and
  • Salaries of foreign employees working in the Industrial Free Zone are taxed at one­half of the standard rates.

II. Offshore Investment Incentives:

  • Offshore companies are taxed on income at a rate of 4.25 percent.
  • Offshore branches which are managed and controlled from abroad and offshore partnerships are totally exempt from income tax.
  • Beneficial owners of offshore companies, branches and partnerships are not liable to tax on dividends or profits other than that paid by the firms themselves.
  • Expatriate employees of offshore enterprises living and working in Cyprus are taxed at half the standard rates applicable to personal income, currently from 0 to 20 percent.
  • Foreign employees of offshore enterprises living and working outside the island are exempt if paid through any bank in Cyprus, and taxed at 10 percent of the standard rates if paid directly abroad.
  • No capital gains tax is payable on the sale or transfer of shares in an offshore company.
  • No estate duty is payable on the inheritance of shares in an offshore company.

Additionally, Cyprus has concluded 26 treaties for the avoidance of double taxation (including one with United States, effective January 1, 1986). These treaties offer significant possibilities for international tax planning.

III. Incentives to Shipping:

Fees payable by Cypriot vessels compare favorably to those paid under other similar flags. Registration is inexpensive, annual fees modest and services excellent. Other important incentives are:

  • Zero tax on profits from the operation of a Cypriot registered vessel and on dividends received from a shipowning company;
  • Zero capital gains tax on the sale or transfer either of a Cypriot registered vessel or of the shares of a shipowning company;
  • No estate duty on the inheritance of shares in a shipowning company;
  • No income tax on wages and benefits of officers and crew; and
  • No stamp duty on ship mortgage deeds or other security documents.
(A6) Right to Private Ownership and Establishment

As mentioned above (VII, A1), approval of foreign investment in Cyprus is subject to a set of pre­conditions set out by the Central Bank on a case­by­case basis. The right of foreign entities to establish, acquire or dispose of interests in business enterprises is subject to these pre­conditions.

(A7) Protection of Property Rights

Investment in real estate is treated differently for residents and non­residents. Non­residents may buy a single piece of real estate for private use (normally a holiday home). The Central Bank verifies that non­residents buy real estate with funds from abroad. The Council of Ministers routinely approves such purchases. Non­residents are allowed to sell their property and transfer abroad the amount originally paid, with the remainder being released from a blocked account at the rate of CP 50,000 per annum from the capital plus the whole amount of interest earned that year.

The adoption of a new Copyright Law in Cyprus as of January 1, 1994 marked an important milestone in the island's fight against intellectual property piracy. In response to the effective implementation of this law, the United States Trade Representative (USTR) took Cyprus off the Watch List in 1995 and 1996. However, USTR noted that Cyprus needed to continue to act aggressively against piracy of software and of video and audio recordings. The U.S. Government believes the current patent regime in Cyprus is inadequate, especially with regard to patent protection for pharmaceuticals and enforcement against piracy. The current law on patents dates back to 1959 and is based on British laws. It honors only British patents registered in Cyprus; these patents must be filed within three years of the UK registration.

(A8) Regulatory System: Laws and Procedures

The Government has been an active supporter of a more competitive marketplace. Existing regulations and policy concerning investment are completely transparent, while the Government is working to eliminate bureaucratic delays.

Following is a more detailed description of the evaluation criteria used by the Central Bank to evaluate foreign investment proposals. (Note: the Central Bank is revising these criteria; they are thus subject to change.)

In general, the Central Bank gives priority to projects falling under the following categories:

  • Manufacture of goods which are new to Cyprus;
  • Investments which develop the economy's export potential;
  • Those which transfer modern technology and know­how and introduce new management techniques;
  • Those which improve the quality of local products and services; and
  • Those which complement existing activities.

Foreign Participation. Current standards for non­resident participation depend on the sector:

  • In industry, foreign ownership of up to 100 percent is allowed in firms manufacturing products new to Cyprus or exclusively for export,
  • As of May, 1995 more liberal regulations allow foreign participation in tourist projects as follows:

(a) for new tourist projects, from 30­49 percent;

(b) for existing hotel projects, from 30­49 percent, provided the foreign participation helps improve the viability of hotels or helps expand tourism market potential;

(c) for supplementary tourism projects, such as marinas, golf courses, theme parks, etc., foreign participation of up to 100 percent is allowed, provided the land on which these developments take place remains under Cypriot ownership and leased to the development company on a long term basis.

  • "Traditional sectors" (which include agriculture and manufacture of solar water heaters, pumps and turbines, furniture, footwear and apparel, food and beverages, leather products and tobacco) foreign participation was traditionally limited to under 49 percent, but there is a drive for more liberalization in this area.
  • In "saturated" sectors, such as land development, tourist agencies, and trade within Cyprus, no approvals are granted for non­resident participation by foreign investors.
  • In all other sectors, including agriculture, mining and services, non­resident participation is determined on a case­by­case basis. Traditionally, foreign participation has been up to 49 percent but, in the future, foreign participation of up to 100 percent will be considered.
(A9) Efficient Capital Markets and Portfolio Investment

The permit issued by the Central Bank to non­resident investors specifies the activities of the firm. It also imposes certain conditions with regard to financing arrangements. Equity capital issued to non­resident investors must be funded from abroad.

Total capital must be commensurate with the total cost of the project. Loan financing must be raised from local and foreign sources in proportion to the equity participation by residents and non­residents. For example, if non­resident ownership is 40 percent, 40 percent of the loans must come from abroad. This requirement is waived if non­resident participation is 24 percent or less.

Terms for foreign loans must be approved by the Central Bank. Interest and other costs must be at market prices. Royalties and other payments for the use of patents, know­how, brand names, etc., must be approved in advance, but then may be readily remitted abroad.

(A10) Political Violence

There have been no incidents over the past few years involving politically­motivated damage to foreign projects and or installations. Despite its proximity to the volatile Middle East, Cyprus has been a very safe place for business and tourism over the last 20 years.

(B) Bilateral Investment Agreements

Cyprus has entered into bilateral double tax treaties with a total of 26 countries. The main purpose of these treaties is the avoidance of taxation of income earned in any of these countries. Under these agreements, a credit is usually allowed against the tax levied by the country in which the taxpayer resides for taxes levied in the other treaty country. The effect of these arrangements is normally that the taxpayer pays no more than the higher of the two rates. Cyprus has such agreements with Austria, Bulgaria, Canada, C.I.S., Czech Republic, Denmark, Egypt, Federal Republic of Yugoslavia, France, Germany, Greece, Hungary, India, Ireland, Italy, Kuwait, Malta, Norway, People's Republic of China, Poland, Romania, Slovak Republic, Sweden, Syria, United Kingdom, and the United States.

(C) OPIC and Other Investment Insurance Programs

The U.S. Overseas Private Investment Corporation (OPIC) is not active in Cyprus, but OPIC finance and insurance programs are open and may be useful when bidding on build, own, operate and transfer (BOOT) contracts. The government has started a campaign to attract U.S. corporate investors. Cyprus is a member of the Multilateral Investment Guarantee Agency (MIGA).

(D) Labor

At the end of 1995 the local labor force comprised 274,000 persons. Of these, 12.6 percent worked in agriculture, 17.0 percent in manufacturing, 8.4 percent in construction, 25.9 percent in trade and tourism, 6.3 percent in transport and communications, 7.7 percent in finance and business and 22.4 percent in community, social and personal services.

The Cypriot economy essentially operates at full employment. Unemployment has remained under 3 percent in recent years. Labor shortages in manufacturing, tourism and construction are becoming increasingly common, restraining growth. By contrast, there is an abundant supply of white collar workers and college degree­holders. Cyprus enjoys the distinction of being ranked third in the world with regard to college graduates per capita. One side­effect of Cyprus' experience as a British colony (until 1960) is the widespread use of the English language.

In response to labor shortages, more women have joined the labor force in recent years (women are now about 39.0 percent of the labor force, compared with 33.4 percent in 1980) and a growing number of Cypriots are repatriating from abroad. There are also about 22,000 legally­registered foreign workers in Cyprus and another 5,000 estimated to be working illegally. Existing legislation ensures that foreign workers receive minimum wages. The minimum wage for sales assistants, clerks, paramedical staff, and child care staff is currently USD 480 per month (USD 518 after six months). For live­in housemaids, the minimum wage is USD 320 per month, plus room and board.

More than 85 percent of the labor force in the government­controlled area of Cyprus is unionized. As a result, unions have a strong say in collective agreements. Head­on confrontations between management and unions occur frequently, although long­term work stoppages are rare. Offshore companies are not required to hire union labor. The current practice of giving twice­yearly cost­of­living allowance (COLA) increases is currently under review.

In recent years, gains in productivity have lagged behind gains in real wages, undermining Cyprus' competitiveness, particularly in industry. This situation improved in 1994, but in 1995 it deteriorated again, with productivity increasing by 2.8 percent and real wages by 3.9 percent.

(E) Foreign Trade Zones/Free Ports

The government has established a Free Industrial Zone near the town of Larnaca, close to both the airport and the harbor, and is planning to establish more zones in other areas in the future.

Existing regulations allow foreign enterprises to lease factory sites at the Larnaca free zone at reasonable rates and on a long­term basis. In addition to the advantage of operating under minimum customs formalities, such enterprises are exempt from paying duties on machinery and production equipment, as well as on inputs for production in the zone. Foreign shareholders of companies in the free zone will pay tax at either the Cypriot rate applicable to the company's profit or at the Cypriot tax rate applicable to that shareholder's dividend, whichever is lower.

(F) Capital Outflow Policy

Government restrictions on outward investment apply only to residents of Cyprus. In such cases, capital outflow is allowed only in cases where the investment will demonstrably aid the local economy. However, in the last couple of years, several local manufacturers (mainly large clothing interests) chose to re­locate segments of their operations in neighboring Arab countries where labor costs are much cheaper.

(G) Foreign Direct Investment Statistics

The Government of Cyprus did not establish an official policy on foreign direct investment until 1986 and it was not until after that year that significant investments started taking place. Since then, the Central Bank has issued 922 permits for foreign equity participation amounting to USD 301 million in projects costing around USD 656 million. In 1994 and 1995 the Central Bank issued a total of 284 permits for foreign investment of USD 62 million in projects costing USD 117 million (131 permits and USD 18 million in 1994; 153 permits and USD 44 million in 1995).

Breakdown of direct investment by country of origin is unavailable ­­ the Central bank considers it confidential. In terms of sector destination, foreign investor interest in 1995 was mainly focused on manufacturing and services, particularly tourist, computer and consulting services.

The Central Bank has been liberalizing slowly foreign investment regulations over the last two years. This initiative is intended to open up more sectors to greater percentages of foreign participation.

Since March 29, 1996, Cyprus has had an official Stock Exchange, replacing the unofficial, over­the­counter stock market which existed previously. Feverish trading activity in the four months preceding the establishment of the official stock market resulted in a near­50 percent gain in total market capitalization. Since March 29, stock trading volume has settled down to traditional levels and stock prices have recorded a downward correction. Non­resident portfolio investment in the Cyprus Stock Exchange is encouraged within certain prescribed limits. Foreign participation in new and existing public companies is determined on a case­by­case basis. In general, the amount of foreign participation allowed does not exceed 30 percent of a new company's issued capital, and it is limited to 8 percent for existing public companies in the banking sector. In the near future, foreign participation will increase to 49 percent for new companies and to 15 percent for existing companies.

(H) Major Foreign Investors

As with investment statistics by country, the Central Bank does not disclose names of specific foreign investors. Direct investment from the United States consists of some very minor projects, mostly by Greek Cypriot expatriates.

(I) Corruption

In Cyprus, corruption by public officials has not been identified as a problem of disquieting proportions. Cyprus' democratic regime and transparent procedures act as a deterrent against corruption in the civil service. The embassy is not aware of any U.S. firms identifying corruption as an obstacle to foreign direct investment in Cyprus. Following is some information on Cyprus' anti­corruption legislation and administrative controls.

Law number 65 of 1965 stipulates that persons holding public office may be prosecuted on the ground of having acquired property by abuse of power. However, this law has never been used because there have never been any formal complaints and because the law does not address the procedure for investigating into the assets of such persons. The inefficiencies of this law are being addressed by two pieces of draft legislation, currently pending before the House: the first bill will oblige government officials and politicians to disclose personal financial details every year as long as they hold office and for three years thereafter. The second bill aims to improve the government tendering procedure. It provides detailed rules and regulations for tendering and for evaluating progress in public works or public supply contracts.

Under Cyprus' Constitution, the Auditor General controls all disbursements and receipts and has the right to inspect all accounts on behalf of the Republic. In his Annual Report, the Auditor General identifies specific instances of mismanagement or deviation from proper procedures in the civil service. Since 1991, Cyprus has also introduced the institution of the "Ombudsman," who oversees the acts or omissions of the administration.

VIII. Trade And Project Financing

Banking System

The standard of banking services in Cyprus compares well with European countries and the United States. There are six active domestic banks offering all types of services, including deposit accounts, lending advances, hire­purchase financing, credit card facilities, automatic banking machines, etc., while some of them have subsidiaries dealing with insurance services, investment banking, and other related services. All domestic banks have first­class correspondent arrangements with U.S. banks.

Foreign Exchange Controls Affecting Trading

Current regulations for exchange control do not affect or hinder international trade. The Central Bank actively encourages cross border financing activity and grants permission freely to businessmen to meet their international obligations. In general, there is no problem with credit availability. Although businesses have complained of a credit crunch, this situation should ease by the second half of 1996.

General Financing Availability/

Types of Available Export Financing and Insurance

Cypriot businesses currently have to rely on local sources of financing. However, as mentioned in Section II, the Central Bank has already started deregulating interest rates and the next step will be to liberalize the system completely, allowing locals to borrow from abroad as well.

Companies with foreign participation are required to borrow from external sources in proportion to the non­resident participation in their capital. This requirement is waived if the non­resident participation is less than 24 percent of the share capital.

Cyprus enjoys an excellent credit rating internationally (Standard and Poor's rates Cyprus' long­term credit AA). Banks in Cyprus employ all modern methods of cross­border financing, including letters of credit, bills for collection, documentary credit, cash against documents, etc. U.S. Eximbank financing could also be applied in Cyprus for U.S. source equipment purchases. Eximbank is open for shortand long­term trade financing. Cyprus graduated from World Bank borrowing in 1992.

List of Banks with Correspondent

U.S. Banking Arrangements

The following banks offer correspondent U.S. banking arrangements in Cyprus:

Bank of Cyprus, tel: 357­2­37800, fax: 357­2­378327;
Cyprus Popular Bank, tel: 357­2­450000, fax: 357­2­449831;
Hellenic Bank, tel: 357­2­360000, fax: 357­2­454074; and
National Bank of Greece, tel: 357­2­441412, fax: 357­2­369349.

IX. Business Travel

Air traffic is served through the island's two international airports situated in Larnaca and Paphos. Cyprus Airways is the national carrier of Cyprus. Many international airlines including Cyprus Airways offer daily flights to major destinations in Europe and the Middle East. The two ports of Limassol and Larnaca serve the country's external trade and seaborne passenger traffic, acting also as transhipment centers for the region.

Travel advisory and visas: Cyprus enjoys a low crime rate, good hygienic conditions, and a modern array of goods and services. Visitors can call the Consular Section of the U.S. Embassy for travel advisories for the area (tel. 357­2­476100) or the U.S. State Department (tel. 202­647­0518). Any foreigner arriving in Cyprus must possess a valid passport. U.S. citizens do not need visas to enter Cyprus. Persons arriving with the intention to work must obtain special work permits.

The list of holidays observed by businessmen in Cyprus for 1996 are:

January 1 (New Year's Day)
January 6 (Epiphany Day)
February 26 (Clean Monday ­ Start of Lent)
March 25 (Greek Independence Day)
April 1 (EOKA Day)
April 12 (Good Friday)
April 13 (Holy Saturday)
April 14 (Easter Monday)
August 15 (Assumption Day)
October 1 (Cyprus Independence Day)
October 28 (OHI Day)
December 24 (Christmas Eve)
December 25 (Christmas Day)
December 26 (Boxing Day)

Businessmen should avoid making appointments on the above dates.

Traveling within Cyprus is by taxi and bus service or car hire. Taxis are metered. There is a satisfactory taxi service system between cities, and prices are considered reasonable. The cost for a taxi from the airport to Nicosia is around CP15.00 (USD30.00). Hiring a self drive car is between CP15.00 to CP20.00 (USD30.00 ­ 40.00) per day with unlimited mileage, depending on the season.

The principal languages in Cyprus are Greek and Turkish. English is widely spoken and understood especially in commercial and political circles.

The island's telecommunications system is quite advanced and efficient. More than 190 countries can be reached on a fully automatic direct dialing. Installation services are offered within a few days notice. Telefax service is available, as is the Internet.

Housing is available in various categories at relatively low prices by European standards. There are many good restaurants on the island. The food and water are considered safe.

X. Appendices

A. Country Data

Following statistics concern the government­controlled area of Cyprus, unless otherwise noted. Source: Government of Cyprus Department of Statistics and the Central Bank.

  • Population (1995): 645,000 in government­controlled area (in the northern part of the island, according to unofficial sources, the population is around 170,000)
  • Population Growth Rate: 1.3 percent
  • Religion(s): Greek Orthodox, Muslim, Maronite, Roman Catholic
  • Government System: Democratic, elected president
  • Languages: Greek, Turkish, English
  • Work Week:
Government: 7:30 AM to 2:30 PM
Offices: 8:00 AM to 5:30 PM with a lunch­break from 1:00 PM to 2:30 PM
Shops: Same as offices in the winter but in the summer 8:00 AM to 7:00 PM with a three­hour siesta from 1:00­4:00 PM

B. Domestic Economy
(in USD million, except where noted)
Item1995 1996(est.)1997(est.)
GDP8,532.08,750.0 9,500.0
Real GDP Growth (pct)5.0 3.84.0
GDP per capita (USD)12,370.0 13,384.014,400.0
Govt. Spending (pct of GDP)34.5 34.034.0
Inflation (pct)2.63.0 5.0
Unemployment2.62.6 2.8
Foreign Exch. Reserves4,114.0 4,240.04,600.0
Average Exchange Rate
­­ (USD 1.00 = CP)0.45 0.470.46
Foreign Debt (CP)1,100.0 1,000.0950.0
Debt Service Ratio (pct)8.7 9.010.0
U.S. Economic Assistance15.0 15.015.0

C. Trade
Item1995 1996(est.)1997(est.)
Total Country Exports1,127.0 1,160.01,230.0
Total Country Imports3,573.0 3,850.04,300.0
U.S. Exports480.0540.0 623.0
U.S. Imports15.017.0 17.0
U.S. Share of Imports (pct)13.4 14.014.5

Trade Balance with three leading partners in 1995: U.S., USD ­465 million; U.K., USD ­271 million; and Italy, USD ­345 million.

Principal U.S. Exports: tobacco and cigarettes, office machines and data processing equipment, cereals, electrical equipment, and animal or vegetable oils and fats.

Principal U.S. Imports: clothing, footwear, canvas, dairy products, and miscellaneous food items.

D. Investment Statistics

In 1995 the Central Bank of Cyprus issued 153 permits for foreign equity participation totalling USD 44 million (compared with 131 permits and USD 18 million in 1994). The stock of foreign equity participation in Cyprus since 1986 is estimated at USD 301 million in projects costing around USD 656 million. For more details, please refer to Section VII, Paragraph G.

E. U.S. And Country Contacts:

Ministry of Foreign Affairs

Minister: Mr. Alecos Michaelides, tel: 357­2­300700
Permanent Secretary: Alecos Shambos, tel: 357­2­300713
FAX: 357­2­451881

Ministry of Finance

Minister: Mr. Christodoulos Christodoulou, tel: 357­2­302137 FAX: 357­2­367471
Permanent Secretary: Mr. Antonis Malaos, tel: 357­2­302164 FAX: 357­2­366080

Ministry of Commerce and Industry

Minister: Mr. Kyriacos Christofi, tel: 357­2­374444
FAX: 357­2­375323
Permanent Secretary: Mr. Michael Erotokritos, tel: 357­2­303264 FAX: 357­2­375120

Ministry of Communications and Works

Minister: Mr. Adamos Adamides, tel: 357­2­302199
FAX: 357­2­441022
Permanent Secretary: Mr. Vasos Pyrgos, tel: 357­2­302278
FAX: 357­2­475024

Ministry of Agriculture and Natural Resources

Minister: Mr. Costas Petrides, tel: 357­2­302245
FAX: 357­2­445156
Permanent Secretary: Dr. Avraam Louca, tel: 357­2­302247
FAX: 357­2­445156

Ministry of Health

Minister: Mr. Manolis Christofides, tel: 357­2­303157
FAX: 357­2­368883
Permanent Secretary: Mr. Achilleas Patzinakos, tel: 357­2­302284 FAX: 357­2­368540

Electricity Authority of Cyprus

General Manager: Mr. Andreas Hadjipaschalis,
tel: 357­2­462001 FAX: 357­2­363215

Cyprus Telecommunications Authority

General Manager: Mr. Sparsis Modestou,
tel: 357­2­310202 FAX: 357­2­494940

Cyprus Ports Authority

General Manager: Mr. Joseph Bayata,
tel: 357­2­450100 FAX: 357­2­365420

Country Trade Associations/Chambers of Commerce

The Cyprus Chamber of Commerce and Industry is the major contact for business orientation and is located in Nicosia, Cyprus. Contact: Mr. Panayiotis Loizides, Secretary General (tel: 357­2­449500 FAX: 357­2­449048). There are chambers in four other towns. There are also trade associations governing most of the professions. Most of the trade associations are housed within the Chamber's building. Contact: Mr. Thasos Katsourides, Secretary, tel: 357­2­449500 FAX: 357­2­449048.

Country Market Research Firms

There are many market research bureaus operating in Cyprus. Listed below are a few that can be used by U.S. businessmen:

Middle East Marketing Research Bureau Ltd., P.O.Box 2098, Nicosia (tel: 357­2­335333).

Amer Agency for Middle East Research Ltd., 2 Limassol Road, Nicosia (tel: 357­2­312800).

M. & R. Euroresearch Ltd., 34 Theodotou Street, Nicosia, Cyprus (tel: 357­2­360832).

Country Commercial Banks

The commercial banks operating in Cyprus are the following:

Bank of Cyprus, 51 Stassinos Street, Ayia Paraskevi,
Nicosia (tel: 357­2­37800, fax: 357­2­378327)

Cyprus Popular Bank, 39 Arch. Makarios III Ave., Nicosia (tel: 357­2­450000, fax: 357­2­449831).

Hellenic Bank, 92 Digenis Akritas Ave., Nicosia. (tel: 357­2­360000, fax: 357­2­454074)

National Bank of Greece, 36 Arch. Makarios III Ave., Nicosia (tel: 357­2­441412, fax: 357­2­369349).

Arab Bank, 28 Santaroza Str., Nicosia (tel: 357­2­457111, fax: 357­2­457890)

Lombard Natwest Bank, St. Lenas Square, Nicosia. (tel: 357­2­474333, fax: 457870)

The local banks are open to the public five days a week from 8:15 a.m. to 12:30 p.m. The facilities offered by them are the same as by European banks and include cash points, credit cards and checking accounts. The offshore banks are open to the offshore community only, from 8:30 a.m. to 5:30 p.m.

U.S. Embassy Trade Personnel

The Embassy Commercial Department and the Commercial Library are in the main compound. An American Commercial officer is assigned to the Embassy for a three­year tour. A Cypriot Commercial Specialist, a Cypriot Economic Assistant, and a Cypriot Commercial Librarian are available to assist U.S. Businessmen. The Embassy's telephone number is 357­2­476100 Ext. 2520. FAX number: 357­2­465944. E­Mail:

Washington­Based USG Country Contacts

Washington­based USG country contacts include the Cyprus Desks at the Department of State (tel: 202­647­6113) and Department of Commerce (tel: 202­482­3945), the Overseas Private Investment Corporation (OPIC) (tel: 202­336­8474), Eximbank (tel: 202­566­8990), and Trade and Development Agency (tel: 703­875­4357).

U.S.­Based Multipliers Relevant for Country

The Embassy is connected to Washington with multipliers such as the Electronic Bulletin Board (EBB) the National Trade Data Bank (NTDB) and the Commerce Business Daily Magazine. The Commercial Department of the Embassy alerts USDOC of any Government tenders and upcoming major projects. USDOC in turn uses the above multipliers.

F. Market Research

At present there are no Industry Sector Analysis reports (ISAs) available in Cyprus.

List of USDA/FAS/Commodity Reports and Market Briefs

The Agricultural Attache responsible for Cyprus, Tel Aviv and Greece is resident in Athens (Address: Office of Agricultural Affairs, American Embassy, 8, Makedonon Str. GR­101 60 Athens, Greece; or PSC 108, APO AE 09842; Telephone numbers 301­721­2951 and 301­643­1289, fax. number 301­721­5264). Any USDA/FAS/Commodity reports are available from the Agricultural Office in Athens. The AGATT visits the post occasionally, at which time appointments are made for interested parties.

G. Trade Event Schedule

The major trade events scheduled on a yearly basis are:

(A) The U.S. products pavilion at the Cyprus International Trade Fair which usually takes place the last week of May and first week of June. This is an exhibitor­financed event.

(B) The State Fairs Authority organizes specialized exhibitions such as the Offitec (office equipment) October 23­27, 1996, Furniture Exhibition, November 13­17, 1996 and Horeca Mediterranean (hotel and restaurant equipment) November 27 ­ December 1, 1996.

Some U.S. companies participate at these specialised exhibitions. Listings of these fairs are sent to the Department of Commerce and are available from the Desk Officer (tel. 202­482­2177).

[end of document]

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