GOLD Magazine Issue 48

30 st

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as a

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the international investment, finance & professional services magazine of cyprus529

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ISSUE 48MARCH 14 - APRIL 13, 2015PRICE €4.95

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INTERVIEwSMarc de Panafieu Constantinos HerodotouTheo Paphitis

SURVEyCEoconfidencegrows in Cyprus

PLUS: MoNEy / bUSINESSECoNoMyTAX & LEGALLIFESTyLE / oPINIoN

GREECEwhy the‘Grexit’won’t happen

HARRIS GEORGIADES

‘The Worst Is Now Behind Us’

+ yARoN bLooM, GEoRGE MoUSKIdES, EMILy yIoLITIS

4 Gold THE INTERNATIONAL INVESTMENT, FINANCE & PROFESSIONAL SERVICES MAGAZINE OF CYPRUS

22| ACTIONS SPEAK LOUDER THAN WORDSConstantinos Herodotou, Commissioner for Privatisations, on why he took the job and why he is absolutely determined to see it through.

25 | NICOSIA ECONOMIC CONGRESS 2015A preview of the biggest annual financial/economic event to be held in the capital.

26 | WHY THE ‘GREXIT’ WON’T HAPPENThose who think that Greece should be ‘allowed to fail’ do not realise the extent of the geopolitical shocks and the unfavour-able social and economic consequences of such an event on the rest of the eurozone, says Dr. Savvas Savouri.

30 | THE MULTIMILLIONAIRE SHOPKEEPERTheo Paphitis returns to Cyprus with a

6 814

Issue 48March 14- April 13, 2015

EDITORIALUP FRONTFIVE MINUTES WITH...

74 {money}

78 {business}

82 {economy}

84 {tax & legal}

86 {lifestyle}

FEATURES

68 | NO REGRETSGeorge Mouskides, Director of FOX Smart Estate Agency, has been through both the good and the bad times of the real estate sector but, he says, he has no regrets or complaints about his career choices.

few words for his homeland’s politicians

48 | EY CYPRUS INAUGURATES NEW NICOSIA OFFICESPhotos of the event.

50 | GOING IT ALONEThe partners in a relatively new legal firm have some fascinating suggestions regarding what can be done to revive the economy and allow Cyprus to regain its favoured position as an international finance centre of choice.

52 | OIL PRODUCERS OVER A BARRELWhat caused last year’s dramatic decline in oil prices and when – if ever – may we see a return to 2013 levels?

54 | CEO CONFIDENCE GROWS IN CYPRUSThe results of PwC Cyprus’ fourth country-specific survey, which sets out the views of more than 80 CEOs.

BEHIND US”

“THE WORSTIS NOW

HARRIS GEORGIADES

Harris Georgiades looks back over his 23 months as Finance Minister and confirms his optimism about

the country’s future.

16

26 30

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MANAGEMENT CONSULTINGPEOPLE & CHANGE SERVICES

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EDITORIAL

John Vickers,Chief Editor

[email protected]

Back to the Future

It’s often said that everything has to do with timing and here at Gold, we discovered the truth of this exactly two years ago when we published our March 14, 2013 is-sue. Containing the first interview with newly elected President Nicos Anastasiades, the cover bore his photo and the optimistic title “Cyprus Means Business”. Twenty-four hours later, the Eurogroup proposed the infamous bail-in to save the island’s

banks…I mention this simply to make the point that the timing of that particular cover story was somewhat unfortunate. I cannot help wondering, however, what excuse the island’s political establishment and most of the Greek-language media have for obsessing with the same story virtually every day for the past two weeks. Supposedly ‘secret’ documents are being presented by various parties that allegedly prove that the idea of bailing-in depositors in the country’s banks was first brought up months before the fateful Eurogroup meeting, as if this is actu-ally going to change anything. The only thing it achieves is to enable so many of the island’s publicity-seekers to get another 15 minutes of fame instead of having to behave sensibly and contribute to the efforts being made to stabilise the economy. You can be sure that, one year from now, the subject will still be monopolising the media as the parliamentary election cam-paign reaches its climax.

One is tempted to imagine that there is some kind of informal code of practice that all would-be politicians in Cyprus have to sign before they are allowed to address the media. It means that they constantly have to revisit past events in an effort to lay the blame on the shoulders of their opponents, while at the same time, failing to come up with any proposals whatsoever that might contribute positively to moving the island forward. We saw it when President Anastasiades decided to restart reunification talks after insisting on having a joint declaration of intent by both sides, and we saw it when he decided to halt those very same talks in the face of Turkey’s decision to send a seismic exploration vessel into Cyprus’ Exclu-sive Economic Zone. Eleven years have passed since the twin referenda on the UN Plan to reunite the island and still barely a week goes by without some MP or media columnist bring-ing it up.

Whatever our political affiliations, we should all be grateful to President Anastasiades for appointing Harris Georgiades as Minister of Finance two years ago. A real breath of fresh air in our past-obsessed political establishment, he is a straight talker who recognises the mistakes of the past but understands the futility of blaming whoever may have been responsible and shows remarkable (for Cyprus) self-control in not attacking previous administrations with anything like the acrimony they deserve. Faced with a House of Representatives that has frequently appeared to be bent on destroying the country’s chances of recovery for its own petty interests, he chooses to focus on the occasions when opposition MPs have sided with the Government and even thanks them for their support and cooperation (see this issue’s Cover Story).

Above all, Georgiades stands out from many of his colleagues because he has his sights fixed firmly on the future, not on the past, refusing to let populism and rhetoric deflect him from his mission to do what is best for Cyprus. This is why we decided that, as everyone else tries to take advantage of the second anniversary of Cyprus’ very own ‘Black Friday’ (15 March 2013), we would make the Minister of Finance only the second politician ever, apart from the President, to feature on the cover of Gold. Read his interview and you’ll understand why.

We are not suggesting that the mistakes and sins of the past should be buried or ignored. On the contrary. But we do believe that, for the sake of the country and coming generations, we urgently need to get back to the future in our discussions.


MANAGING DIRECTOR George Michail

GENERAL MANAGER Daphne Roditou Tang

MEDIA MANAGERElena Leontiou

EDITOR-IN-CHIEF John Vickers

JOURNALISTSEffy Pafitis, Chloe Panayides

CONTRIBUTORS TO THIS ISSUE Fred Balm, Andrew Lumley-Holmes,

Dr. Savvas Savouri

ART DIRECTION Anna Theodosiou

SENIOR DESIGNERAlexia Petrou

PHOTOGRAPHY Jo Michaelides

MARKETING EXECUTIVE Kevi Chishios

SALES & BUSINESS DEVELOPMENT EXECUTIVE

Phivos KarayiannisADVERTISING EXECUTIVES

Irene Georgiou, Christopher ConstantinouOPERATIONS MANAGER

Voulla NicolaouSUBSCRIPTIONSMyria Neophytou

PRINTERS Cassoulides Masterprinters

CONTACT5 Aigaleo St., Strovolos 2057, Nicosia, Cyprus

Mailing address: P.O.Box 21185, 1503, Nicosia, Cyprus

Tel: +357 22505555, Fax: +357 22679820e-mail: [email protected]

subscriptions: [email protected]

ISSN 1986 - 3543PUBLISHED BY IMH

INTERVIEWSMichael DobbsTim PotierColin Wright

INVESTMENTRecord-breaking sales for alternative assets

PLUS: MONEY / BUSINESSECONOMYTAX & LEGALLIFESTYLE / OPINION

BANKINGBank of CypruslaunchesPremier Club

+ DAI LINGYUN, SAVVAS SAVOURI, GEORGE & ALEXIS TSIELEPIS

THE INTERNATIONAL INVESTMENT, FINANCE & PROFESSIONAL SERVICES MAGAZINE OF CYPRUS

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UP FRONT

Director of CIM, told Gold. “It is Cyprus’ leading Marketing & Management event, attracting a high-calibre audience from Cyprus, the Middle East and Russia. In the past 7 years, more than 2,000 executives have attended the Summit, which is growing every year.” CIM has been Cyprus’ leading Business School since 1978 and, Hadjiyiannis said, it considers the annual Summit as a way of ‘giving back’ to the Cyprus business world which has supported its operations over the past 37 years.

“Apart from interactive sessions with the acclaimed speakers, the Summit provides an excellent platform for networking and for maintaining relationships with CIM alumni and associates. The fact that, on a Saturday morning, more than 300 senior executives choose to attend and 15 leading firms support the event through sponsorships, is sound evidence of the recognition that it enjoys. The CIM Summit is being upgraded every year and I can assure you that it’s here to stay!”

CIM SUMMIT 2015SATURDAY 28 MARCH, 8:30-14:00, BANK OF CYPRUS HEADQUARTERS (AYIA PARASKEVI), NICOSIAADMISSION IS FREE (REGISTRATION ESSENTIAL)


In a new book by

the Turkish Cypriot academic Niyazi Kizilyurek, the former President of Cy-

prus discusses a host of subjects, includ-ing his early life, studies and employment, his decision to run for the presidency in

the EU and subsequent membership of the

longstanding Cyprus Problem as essential if the island is to make use of its full poten-tial to grow and prosper. The book, which has also been published in Greek and

was translated by John Vickers, Chief Edi-tor of Gold.

NEW BOOK ABOUT EX-PRESIDENT

VASSILIOU

0,

The 2015 CIM Sum-mit takes

place at the Bank of Cyprus HQ in Nicosia at 9am on Saturday 28 March. The Summit is be-ing organised for the 8th consecutive year (admission is free) and the purpose is to inform local executives about the latest trends affect-ing the way they run their businesses. Every year, world-renowned academics and professionals are invited to share their knowledge

and experience; this year, Prof. Jack Lang (University of Cambridge), David Chaffey (CEO, SmartInsights) and Jonathan Gabay (ac-claimed consultant and author) will ad-dress the theme The Digital Era for Busi-ness, shedding light on new technologies that affect the busi-ness world and pro-vide opportunities for growth. “The Summit is highly on-hands and case study-focused,” Yangos Hadjiyannis, Deputy

CORRECTIONIn last month’s cover story, a number of the figures quoted were incorrect, due to printing errors. With regard to cdbbank, the figure for deposits should have been €395 million (not billion), for net loans €345 million (not billion), and assets €531.7 million (not billion). For Hellenic Bank, the the figure for deposits should have been €6.1 billion (not €61), for net loans €3.3 billion (not €33) and for assets €6.9 billion (not €69). For USB Bank, the figure for deposits should have been €621 million (not billion) and in the case of Piraeus Bank the corresponding figure should have been 1.2 billion (not million).We apologise for any confusion and inconve-nience caused.

CYPRUS-SOUTH AFRICA BUSINESS ASSOCIATION HOLDS FIRST NETWORKING EVENTT

he recently-founded Cyprus-South Africa Business Association will hold its first networking event on March 18. Speakers include Association President Maria Zav-rou, Antonis Mavrides,

Trade Officer at the South African Embassy in Cyprus, Angelos Gregoriades, President of the Cyprus Investment Funds Associa-tion, and Bert Pijls, CEO of Hellenic Bank. The Cyprus-South Africa Business Associa-tion operates under the auspices of the Cy-prus Chamber of Commerce and Industry, which supports it in its efforts to reinforce commercial and economic relationships between the two countries.

nMinPrrou

de Officer at the Soutyprus A

The Cyprus Institute (CyI) has been awarded a European Re-search Area (ERA) Chair grant of €2.5 million in the field of Solar Thermal Energy (STE).

Following what is described as a highly competi-tive process, CyI secured one of the 13 grants awarded out of the 88 proposals submitted from 15 countries. The grant – which constitutes recognition for the successful research work being pursued at the Institute – is intended to allow CyI to develop excellence on a European level in the relevant field.

Part of the European Commission’s Horizon 2020 research funding programme, the ERA Chairs are intended to support research or-ganisations in countries with low research and development investment, such as Cyprus, to attract and maintain high quality scientists from across the European Union and implement the structural changes necessary to achieve excel-lence in specific fields of research. The secured European funding will enhance and upgrade the Institute’s existing substantial activity in solar energy, aiding its strategic objec-tive of becoming an innovation hub for Cyprus, the Eastern Mediterranean and the Middle East.

Prominent Cyprus real estate and development firm Aristo Developers has further expanded its global reach through the

establishment of a new Head Office in Zhujiang New Town, Guang-zhou, China, marking another milestone in its broadening Asian operations. Tony Antoniades will be heading the company’s new China office, along with an established network of Satel-lite Offices in Beijing, Shanghai and Chengdu.“The new office, which has been established in line with our custom-er-oriented strategy, is bolstered with experienced professionals to meet customer needs,” commented Theodoros Aristodemou, CEO and Managing Director of Aristo Devel-opers.“We believe there is still tremendous opportunity to be tapped. Our en-hanced presence will further enable us to position ourselves as a leader in the Cyprus property industry, bringing us closer to our existing and potential clients, and our network of associates across China and beyond,” he concluded.

Aristo Unveils New China

Head Office

Cyprus Institute Secures €2.5m

European Research Area

Grant

CIPA SIGNS MoU WITH RUSSIAN INVESTMENT AGENCY

Within the framework of President Nicos An-astasiades’

to Moscow on February 24-25,

Agency (CIPA) signed a Memoran-dum of Understanding (MoU) with

-

President Nicos Anastasiades, his --

Angastiniotis and the Chairman of

cooperation and the exchange of information between the two

During the signing ceremony, Angastiniotis referred to the strong economic ties between Cyprus

cooperation between business-

“The signing of the Memoran-dum of Understanding sends a

ties between Cyprus and Russia and the deep friendship between

-eration with strategic partners

-

of the country, Angastiniotis

the Eastern Mediterranean an e le East.

g itsation hub for

d th Middln and the Middle E

CYPRUS- RUSSIA AGREEMENTS

President Anastasiades an d Russian President Vladimir Putin met in Moscow last month for

private talks and, later, the signing of a number of agreements. The two leaders signed the Joint Action Programme between the Republic of Cyprus and the Russian Federation for 2015-2017, which constitutes an umbrella document, covering

numerous areas of cooperation between the two countries. A Memorandum of Understanding (MoU) was signed between the Cypriot Ministry of Finance and the Russian Ministry of Education and Sciences on cooperation in the fields of research and technology.

The Protocol of the 8th Cyprus-Russia Intergovernmental Commit-tee for Economic Cooperation was

also signed, as was an MoU between the Ministries of Defence of the two countries for cooperation in the naval field. An agreement on military coopera-tion was also signed by the coun-tries’ Foreign Ministers. Moreover, the two countries agreed to cooperate in the fight against drugs smuggling and on combating terrorism.

UP FRONT


T H E F I R S T N A M E I N L O N G - T E R M L O Y A L T Y

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THE 10 HIGHEST-EARNING FOOTBALL CLUBS

T he 18th edition of the Deloitte Football Money League, which looks at the high-est earning clubs in the world’s most popular sport, is the most contempo-

rary and reliable analysis of the clubs’ relative fi-nancial performance. It reveals that Manchester United and Real Madrid are currently the only

clubs to earn over €500m in a season but notes that “such is the pace of growth seen at the largest clubs, it is possible that in next year’s edition, all of the top five Money League clubs will be generating in excess of half a billion euros for the 2014/15 season.” Below are the Ten Highest-Earning Foot-ball Clubs in the world.

1(1)

2(4)

3(3)

4(2)

5(5)

6(6)

7(7) 9(12)

8(8) 10(9)

)) 2)2))2)


UP FRONT

1. REAL MADRID 2014 REVENUE: €549.5M 2013 REVENUE: €518.9M DOMESTIC LEAGUE POSITION 2013-14: 3RDAVERAGE LEAGUE MATCH ATTENDANCE: 70,739

2. MANCHESTER UNITED 2014 REVENUE: €518M 2013 REVENUE: €423.8M DOMESTIC LEAGUE POSITION 2013-14: 7TH AVERAGE LEAGUE MATCH ATTENDANCE: 75,203

3. BAYERN MUNICH 2014 REVENUE: €487.5M 2013 REVENUE: €431.2M DOMESTIC LEAGUE POSITION 2013-14: 1STAVERAGE LEAGUE MATCH ATTENDANCE: 71,131

4. FC BARCELONA2014 REVENUE: €484.6M 2013 REVENUE: €482.6M DOMESTIC LEAGUE POSITION 2013-14: 2NDAVERAGE LEAGUE MATCH ATTENDANCE: 71,988

5. PARIS SAINT-GERMAIN 2014 REVENUE: €474.2M 2013 REVENUE: €398.8M DOMESTIC LEAGUE POSITION 2013-14: 1STAVERAGE LEAGUE MATCH ATTENDANCE: 45,420

6. MANCHESTER CITY2014 REVENUE: €414.4M 2013 REVENUE: €316.2M DOMESTIC LEAGUE POSITION 2013-14:1STAVERAGE LEAGUE MATCH ATTENDANCE: 47,166

7. CHELSEA 2014 REVENUE: €387.9M 2013 REVENUE: €303.4M DOMESTIC LEAGUE POSITION 2013-14: 3RDAVERAGE LEAGUE MATCH ATTENDANCE: 41,474

8. ARSENAL 2014 REVENUE: €359.3M 2013 REVENUE: €284.3M DOMESTIC LEAGUE POSITION 2013-14: 4THAVERAGE LEAGUE MATCH ATTENDANCE: 60,014

9. LIVERPOOL2014 REVENUE: €305.9M 2013 REVENUE: €240.6M DOMESTIC LEAGUE POSITION 2013-14: 2NDAVERAGE LEAGUE MATCH ATTENDANCE: 44,831

10. JUVENTUS2014 Revenue: €279.4M 2013 Revenue: €272.4M DOMESTIC LEAGUE POSITION 2013-14: 1STAVERAGE LEAGUE MATCH ATTENDANCE: 35,564


INTERVIEW

better value for consumers.

Gold: What would you propose in order to modernize and update the Cypriot FMCG sector, especially in terms of the way suppliers and supermarkets oper-ate?Y.B.: Based on my experience, the best way for retailers and suppliers to win during challenging times is to improve collaboration and focus on joint value creation. Collaboration should focus on both improving the shopping experience and optimizing the supply chain. A strong collaboration will enable both retailers and suppliers to provide the best service and value for money to the Cypriot consumer

Gold: What are your future plans for the Cyprus market? Can we assume that you are here to stay?Y.B.: We are indeed here to stay! We be-lieve in the Cyprus market.Over the past three years we have managed to build a great local team – I’m the only non-native employee in the company – that has enabled us to successfully establish a healthy business and to consistently grow the business year after year, despite all the challenges we are facing in the market. We strongly believe that the combination of a highly-skilled local team and Diplomat’s unique global capabilities and expertise give us a competitive advantage, which will eventually lead to us becoming the leading distribution company in Cyprus.

Gold: Give us a brief his-tory of Diplomat and how it has developed into the huge global organisation it is today.

Yaron Bloom: Diplomat actually started as a razor blade manufacturer in 1963. Diplomat Distributors Ltd was established In 1968 to distribute locally produced razor blades and imported personal care products. A very significant milestone in Diplomat’s history was 1994, when it was appointed as the ex-clusive distributor of Procter & Gamble products in Israel. In 2005, the company started to distribute also food products and it is currently exclusively distribut-ing global brands in Israel such as Heinz, Milka, Toblerone, Oreo, Kellogg’s, Kikkoman, Pringles and more. In 2008, Diplomat expanded globally, establishing operations in Georgia, followed by South Africa in 2010 and Cyprus in 2011. All began operations as the official and ex-clusive Distributor of Procter & Gamble, later expanding into other FMCG cat-egories such as food, representing Nestle and Mondelez.

Gold: What was behind the decision to set up Diplomat in Cyprus?Y.B.: It was taken at the request of Procter & Gamble, who asked Diplomat to build a fast operation in a new market, based on Diplomat’s proven best prac-tices and experience, adapted to differ-

ent market structures and needs and, of course, on its long-term partnership with the company.

Gold: What is your view of the fast-moving consumer goods (FMCG) sec-tor in Cyprus?Y.B.: Overall, I would say that the Cypriot market behaves in a similar way to other developed FMCG markets. Cyprus’ FMCG sector, consisting of hypermarkets and su-permarkets which account for 70% of the total FMCG sector turnover, is a developed and concentrated market in which the Top 5 retailers represent 70% of total FMCG sales. One difference between the Cypriot market and other markets that I have had the chance to work in relates to the large number of tour-ists compared to the size of the local Cypriot population, and they have different shopping needs and expectations.

Gold: What are your forecasts for the sec-tor in 2015?Y.B.: Our assumption is that, overall, the market will stay flat compared to 2014 but there will be differences in which categories do well (as happened last year) and we will face similar challenges to those faced in 2014. Cypriot consumers will continue to look for the best value-for-money proposition, not necessarily the cheapest. We also think that suppliers will look for ways to leverage synergy and scale, in order to reduce costs and improve efficiency. It will enable them to provide a better service to retailers as well as

five minutes with...

Yaron BloomCEO, Diplomat Cyprus

.

C O N G R E S S

5 t h N I C O S I A


HARRIS GEORGIADES

BEHIND US”

“THE WORSTIS NOW

By John Vickers, Photography by Jo Michaelides

EXACTLY TWO YEARS SINCE THE ECONOMY OF CYPRUS FOUND ITSELF ON THE VERGE OF COLLAPSE AND THE NEWLY ELECTED GOVERNMENT OF NICOS ANASTASIADES WAS FORCED TO TAKE DECISIONS THAT CONTINUE TO REVERBERATE TO THIS

DAY, AN OPTIMISTIC HARRIS GEORGIADES LOOKS BACK OVER HIS 23 MONTHS AS

FINANCE MINISTER.

THE INTERNATIONAL INVESTMENT, FINANCE & PROFESSIONAL SERVICES MAGAZINE OF CYPRUS Gold 17

Gold: When you were appointed Min-ister of Labour & Social Insurance in March 2013, I am sure you saw it as a challenge. But how did you feel a month later when the President asked you to be-come Minister of Finance, given the state of the economy and the banking sector?Harris Georgiades: Although we had been quite optimistic about the outcome of the Febru-ary presidential election, we were also aware of the very difficult situation that we would face as a new administration. When I took over as Minister of Labour, I was perfectly aware

that unemployment had soared from 3.5% to an all-time high of 15.5% and I ex-pected that it would continue its upward course and climax somewhere between 20% and 25%. I am very glad that we

have been able to stabilize unemployment and it’s now more or less where it was two

years ago and showing the first signs of de-escalation.

My appointment as Minister of Finance came just days after the collapse of one systemic bank, the near-col-

lapse of another bank and with the public coffers almost empty.

I AM VERY OPTIMISTIC ABOUT THE

CYPRIOT ECONOMY

COVER STORY


COVER STORY

On my first day in the job, I was informed that we only had reserves for another 30 days or so. I admit that the severity of the situation far exceeded what I personally and the Government had expected to inherit.

Gold: Did you ever doubt your ability to cope in such a vital post?H.G.: No, because ultimately it wasn’t my ability that was being called into question but rather the ability and resilience of the economy and its key productive sectors. As a Government, we did our best to offer support to those sectors, essentially by taking con-trol of the situation, agreeing swiftly on a support programme and getting down to work in several different directions at once, in the context of a broader effort. So it was not my personal ability but rather the fact that we were able to establish conditions of stability, combined with the resilience of our productive sectors, that spared us the worst.

Gold: Your success in formulating and overseeing the imple-mentation of the government’s policies is reflected in the Troi-ka’s reports, the upgrades by the credit rating agencies and the statistics that point to a faster return to growth than predicted. So how do you feel when the opposition is constantly ques-tioning your abilities?H.G.: I fully respect the role of the opposition and I have to ex-press my appreciation for its positive stance during these two years because we have had strong support regarding most of the difficult decisions that we have had to take. Let me remind you that during the latter years of the previous administration, my party was in op-position but it was consistently demonstrating a readiness to take difficult but necessary decisions, essentially pushing the Govern-ment of the time to do so. For the last two years, Cyprus has had a Government which does not need pushing. It is a Government that is absolutely ready to take the lead in implementing those dif-ficult but unavoidable decisions, And so far, I have to acknowledge that the House of Representatives, despite what may sometimes be seen as a critical stance, has been supportive. I am hopeful that this constructive approach will continue. We have come a long way. Together, the Government and the House have taken decisions which have enabled the economy to achieve much-needed stability and to secure growth prospects. We can still be constructive even when we disagree and we should always ensure that differences of opinion do not endanger the effort to fully secure the recovery of the country.

Gold: Knowing what has happened with the foreclosures leg-islation, I think you’re being very diplomatic but, as someone who has been involved in party politics from quite a young age, you know how these things work. Do you believe that, were your party (DISY) in opposition rather than in govern-ment, it would have reacted differently from your opponents in the House of Representatives?H.G.: I think our record as an opposition party is there for eve-ryone to evaluate. We were actually more ready and willing than the Government to take difficult decisions. You say that I’m being diplomatic but my attitude is actually a very deliberate attempt

not to burn our bridges of cooperation with the House. I am willing to accept criticism and to listen to different opinions and I’m not suggesting that everyone should agree with my own policy choices or with the economic policy of the Government. But something more important is at stake here and we should all be able to behave responsibly and sensibly, irrespective of whether we are

ON MY FIRST DAY IN THE JOB, I WAS

INFORMED THAT WE ONLY HAD RESERVES

FOR ANOTHER 30 DAYS OR SO


in opposition or government. We need to ensure that day-to-day politics do not jeopardize what our fellow citizens have achieved and what the productive sectors of the economy have achieved. We’ve at last been able to breathe easy after the unprecedented climax of the crisis two years ago and we ought to make the best use of the posi-tion we are now in, which should essentially be interpreted as a vote of confidence in our efforts and our future prospects and encourage us to continue the effort.

Gold: Presumably you have seen for yourself the truth of the old saying that it is easier to be in opposition than in government?H.G.: It is definitely easier but we have shown that we’re up to the challenge. I believe that my party has always been a party of respon-sibility. That was the hallmark of its founder and I think that we are continuing this political tradition of being the voice of responsibility and reason in Cypriot politics. As a nation we have paid the price over the years for failing to follow the course of rationality and rea-son. I try not to take emotional decisions and, as Finance Minister, I certainly can’t base my actions on whether they will be popular. When we were in opposition, we always recognised that we needed to encourage the Government to act. Delaying or postponing deci-sions always makes things more difficult and, regrettably, many dif-ficult decisions have had to be taken during the past two years but, as a result of them, I believe that our future now lies entirely in our own hands. If we continue the present effort, if we work together, if the Government and opposition both behave responsibly and we don’t go back to the practice of postponing and delaying decisions, we will definitely succeed. I am very optimistic about the Cypriot economy. There will always be external factors and risks but it is now up to us to ensure that we not only overcome the crisis – one that we basically caused through our own failings – but we lay the foundations for a much more viable and healthy growth model with-out the excesses and the imbalances of the past.

Gold: Doesn’t it disappoint you when the other political par-ties reject your calls for a unified front in order to deal with the country’s problems?H.G.: I don’t let such things affect me. It’s not personal. It has to do with the future of this country. As Winston Churchill said, “If you’re going through hell, keep going” and that’s my motto. I don’t give up in the face of adversity. I believe in what we’re doing and I believe in the prospects for Cyprus. If there are political difficulties,

let’s try and deal with them. I know that we are on the right course and I am determined to do the job.

Gold: Do you feel that, within the Eurogroup for example, you are considered an equal by your counterparts from the other eurozone countries? Or is there a view that the smaller countries are less important in the process?H.G.: Theoretically we are all equals but, at the same time, one has to understand that the influence of a larger member state will be more significant than that of a smaller one. What a smaller state can do in order to be considered as a credible participant around the table is to show a constructive attitude. Our approach is one of con-structive participation; it is a positive stance and definitely not one of entrenchment and self-imposed isolation, nor is it based on rhetoric for domestic consumption. Such an approach would not deliver any influence or add anything to our role within bodies such as the Eu-rogroup. We need to be aware of the realities of the situation and, at the same time, feel confident that, by maintaining a credible stance, we not only cater for our own best interests but also participate ac-tively in the common endeavour of the European people.

Gold: You were forced to carry out a rather delicate balancing act recently of being seen to support the new Greek government (which is very anti-Troika) while believing that, in the case of Cyprus at least, implementation of the Memorandum of Under-standing (MoU) to the letter is the correct policy. How did that feel?H.G.: Ultimately there was no dilemma. We have a very clear in-terest in ensuring that Greece remains a member of the eurozone and stays on the path to economic recovery. This is exactly why we were perfectly able to support what was eventually the Eurogroup’s unanimous decision to offer a four-month extension to the Greek programme. It was offered because the new government in Athens undertook a clear commitment to continue with the implementa-tion of a very ambitious reform and consolidation programme. That commitment, which the Greek Finance Minister conveyed to the Eurogroup, includes a balanced budget with a primary surplus, an acceptance of privatisation as a very useful tool that will attract investment, a commitment in favour of reforming the public admin-istration, the taxation and welfare systems. And, of course, all these are meant to ensure the continuing participation of the country in the eurozone. There isn’t a single issue with which I disagree; in fact, the pil-

WE NEED TO ENSURE THAT DAY-TO-DAY POLITICS DO NOT JEOPARDIZE WHAT OUR FELLOW

CITIZENS HAVE ACHIEVED


lars which were presented by the Greek government are exactly the same pillars that constitute our own programme of economic reform and consolidation. Ultimately, what I and the other ministers supported was what the Greek government presented: a com-mitment in to fiscal consolidation, economic reform and a continued presence in the eurozone.

Gold: The MoU with the Troika will expire this time next year. Will Cyprus be ready to go it alone by then?H.G.: Inevitably, we must re-establish sustainable access to the international capital markets if we want to do away with the Troika and the Memorandum.

This will not be achieved with words, slogans, rhetoric or vocal opposition but by credible actions that facilitate the re-establishment of such market access and I think this is a perfectly achievable objec-tive. It was a huge step in the right direction that we were able to tap the markets only a year after the commencement of the effort and we stand ready to repeat the exercise. We also need to see some confi-dence in our domestic political process.

Gold: But the end of the MoU will certainly not mean an end to the country’s obligations, regard-ing issues such as privatisation, etc?H.G.: It will definitely not signal the end of pru-

COVER STORY

I CHOOSE TO SEE

THE GLASS HALF FULL

RATHER THAN HALF

EMPTY


dently managing our public finances. I think that, by now, we should all have learned a very simple lesson: just like a household or a business, an economy cannot keep spending more than it earns. So even without the Troika, our ambitious plan of structural reforms to bring positive changes to the administration and to the way that the state interacts with the private sector will continue. Economic policy – and primarily the effort to maintain a competitive edge – is a never-ending process and I can assure you that we shall continue to implement much-needed reform and ensure fiscal consolidation until the very last day of our administration.

Gold: How difficult is it for you, as Finance Minister, to per-suade ordinary people that things are bound to improve if we follow the policies advocated by the Troika, which the opposi-tion and much of the media are happy to demonise?H.G.: I choose to see the glass half full rather than half empty. I know that many of our fellow citizens and many local businesses are going through difficult times and it is clear that some have been worse hit than others. At the same time, I believe that there is now a general recognition that it was our own mistakes that led us into this difficult situation and that our own actions and our determination to continue this effort will get us out of it. I repeat that I do not expect everyone to agree fully with each and every policy stance that we, as a Government, are promoting. But I think that, despite a range of dif-fering opinions that may exist, we do have the consent of our fellow citizens to continue and complete this effort.

Gold: Looking back over your two years in this post, are there things you would have done differently?H.G.: I have to be honest and say that I am not entirely satisfied with what we have achieved. I wish we had done more during the first two years of our administration. We have done enough but there is more to do and I only wish we had been able to do things more quickly. One has to realise that the executive branch of govern-ment is not alone in the decision-making process so, inevitably, some issues are going to take more time. Despite our occasional frustration and our desire to move faster, I think that we have to acknowledge certain realities and to do our best under the circumstances.

Gold: How optimistic are you that Cyprus will complete the programme of reforms? Aren’t you worried that domestic poli-tics will affect your plans in the run-up to the 2016 parliamen-tary elections?H.G.: I would be less than truthful if I told you that I don’t have any concerns. I do and whilst expressing my appreciation for the constructive stance of the parliamentary parties so far, I would em-phasise strongly that this needs to continue. But let me also say that the really difficult decisions are now behind us. We are not going to propose any new taxes or, indeed, anything that will burden house-holds and businesses. There is no possibility of a repetition of the unprecedented decisions that affected our banking sector two years ago. So the decisions that lie ahead are very positive ones, which do not justify political or social opposition because they favour changes that we desperately need. I don’t think there is anyone in Cyprus who disagrees over the need to reform the public administration, the welfare system or the healthcare system, or the need to take the step – as one of the last countries in Europe – to implement very limited and specific privatisations. Even on such a sensitive issue, we are absolutely ready to ensure the rights and benefits of the employees so if that is established, as is our intention, there should be no grounds for opposition, either ahead of a parliamentary election or not. I hope that we shall continue to have the support of the public and the political parties when it comes to the promotion of a very posi-tive reform agenda.

Gold: When future historians are looking back at this period, how would you like to be remembered?H.G.: To tell you truth I would not object if I am not really remem-bered! If a Finance Minister is remembered, there is always a risk that it’s not for a good reason! What I definitely wish is to be able to leave office with a clear conscience and a sense that I did my bit as a member of the Government of President Anastasiades in fac-ing up to a very difficult situation that was regrettably allowed to escalate and playing a part in creating conditions of stability and good future prospects for the country. If I am able to say that to myself, then I think that my venture into politics will have meant something.

AS A NATION WE HAVE PAID THE PRICE OVER THE YEARS FOR FAILING TO FOLLOW

THE COURSE OF RATIONALITY AND

REASON

I BELIEVE IN WHAT WE’RE DOING AND I BELIEVE IN THE PROSPECTS FOR CYPRUS

PRIVATISATION


ACTIONS SPEAKLOUDERTHAN WORDS

Constantinos Herodotou, Commissioner for Privatisations, knew that he would face plenty of opposition when he took the job but he is absolutely determined to see it through.

By John Vickers Photograph by Jo Michaelides

In March 2013, Constan-tinos Herodotou was a successful investment banker in London, doing the job to which he had dedicated most of his professional life. When he became aware of the details of the Memo-randum of Understand-ing with the Troika of international lenders, he decided that he ought to try and do something to help.

“It was a sense of knowing that I could do the job and so be use-ful at a crucial time for Cyprus,” he recalls. “All the Cypriots I know who were living abroad at the time of the bail-in were emotionally affected by what had happened, as I was, and when the post of Commissioner for Privatisations came up, I knew that, hav-ing done a lot of these transactions and advised on more than €47 bil-lion, I was in a position to make a contribution. From a career perspec-tive or for financial rea-sons it didn’t make sense at all!”

Having spent his en-tire professional career abroad, there was obvi-ously a risk involved in returning to Cyprus and being responsible for such an important project – one facing

considerable popular opposition, it should be noted. Despite lots of sleepless nights (“I’m not exaggerating when I say that when I was made the offer I couldn’t sleep at night. Once I had accepted it, things got worse.”), and an aware-ness of the huge respon-sibility he would shoul-der, Herodotou took the big step and moved to Cyprus, determined to get the best possible outcome for the semi-government corporations that had been earmarked for privatisation.

“I came here to ensure that certain things are done in the best way possible and to maximize the chances of a very good outcome,” he says. “That’s the only way to deal with such transac-tions. I knew from the start that a huge part of the population might be against it or they may not understand the rea-son why I came here.”

He agrees that his lack of any evident ties with the establishment in Cyprus is an advantage. “I think it makes it easier for people to accept and understand that there is nothing else behind my being here,” he says. “It adds to the credibility of my true motivation for coming.”

Is it safe to assume that the Commissioner for Privatisations is in favour of the transfer of ownership from the pub-lic to the private sector in every instance? He is doubtless familiar with examples – including some in the UK – where the process has been viewed by some as a failure.

“I don’t think we should generalize when

it comes to privatisa-tions, or any type of investment for that mat-ter,” he explains. “You have to look at each case on its own merits and it requires a complicated analysis. You’re right that there are good examples and bad ex-amples and that’s how it works. Having the knowledge, or the advi-sors with the knowledge, you have to look at prec-edents – that’s the basis of any financial transac-tion – and see what has worked and what hasn’t, what applies and what doesn’t, and then decide how to manage it ac-cordingly.”

The idea of replacing inefficient state-con-trolled practices with a more streamlined man-agement makes sense to most people, but in the case of a profit-making organisation such as Cyta (selected as the first to be privatised), isn’t there something to be said for the idea of making it more ef-ficient while keeping those profits for the state rather than a private company?

The two things are not mutually exclusive, he says. “If you bring in the right investors, the valuation of the com-

pany today will be on its future profitability, which should include the contribution of the more agile management that will be brought in. So you will get that enhanced profitability as a lump sum today. Moreover, whether in the form of dividends going forward or tax on higher profitability, the Government will always receive a contribution.”

On the basis of the Privatisations Law, a number of objectives are to be achieved through privatisation, of which value maximization is only one. Others in-clude bringing more products to consumers at better prices, bringing foreign investment into the country and creat-ing new employment positions. Although the timing of the intermedi-ate deliverables of the original timetable has changed, the final target date remains and, Hero-dotou says, is achievable without compromising. “We have now brought in the advisors [Citi-group, PwC, Antis Tri-antafyllides & Sons LLC in a consortium with Shearman & Sterling LLP, and Roland Berg-er] which is a critical first step,” he explains,


A NUMBER OF OBJECTIVES ARE TO BE ACHIEVED THROUGH PRIVATISATION, OF WHICH VALUE MAXIMISATION IS ONLY ONE


PRIVATISATION

“because having the right advi-sors with the relevant experi-ence and a global footprint is necessary for the analysis to be carried out in a proper way and in order to instill confidence in the type of investors we want to see in Cyprus – and in Cyta. We have to look at it from their point of view. They need to see that this is a proper serious process so it’s a win-win situation on both sides. It doesn’t guarantee us the end result but if we start on that basis we have a good chance of getting there. So we are now working on the preparation of the transaction and we’re work-ing with the management of Cyta to make all our analyses and prepare everything before launching the process towards the investors. That will happen in a couple of months’ time, with the idea of finalising be-fore the end of 2015. That was the original deadline and it has not changed.”

Although Herodotou has stated publicly that he intends to have the employees of the organisations that have been chosen for privatisation in-volved at every step, the staff unions at Cyta were complain-ing not long ago that they were being kept in the dark. This is not true, says the Commis-sioner, noting that a couple of months after his arrival on the island he invited all five unions to a meeting to update them. “I explained the processes and I promised them that I would update them whenever there was news. Last month, once we had the advisors on board, we had another meeting. The truth is that between those two meetings there wasn’t much else to say but now the process is starting, we’ll be meeting much more regularly.”

Herodotou adds that he has held meetings with Cyta’s Board of Directors and the top management of the organisa-tion. In fact there are now weekly calls with the manage-ment. He has also met once with all the political parties and will soon have another round of talks with them. “There has been a real effort to be all-inclusive and transparent, so that everybody knows what we’re doing and how we’re ap-proaching it. The whole point is to achieve the best possible outcome for Cyta; we are now working with the management in this preparation phase and they will be involved in the transaction execution phase. They have already identified a core team to work with the advisors, so things are progress-ing.”

Given the power of the trade unions and the fact that, for various reasons, the opposition parties in parliament seem bent on fighting the process every step of the way, is he optimistic that he can get a deal with the employees and management? He admits to being concerned but the reason is that, on the basis of the Privatisations Law, issues concerning employee benefits, status, etc will be dealt with by the unions and the Joint Advisory Committee, and not the Privatisation Unit. “The law is also clear that the issue has to go through parlia-ment and I think that’s the right thing to do as it affects everyone in the country,” he says. “My approach has been to show that the process is being carried out in the best way pos-sible; it’s open and transparent and it has clear objectives; they are receiving constant informa-tion on that level. That’s as much as I can do. The rest will

be up to the elected representa-tives of the people.”

At present there is no specific model for the type of company that will be created in the place of each of the semi-government corporations. There will first be expressions of interest, at which stage various entities will be fil-tered out. “Everyone will have to fulfil the same criteria and that stage will be fully transpar-ent so that everyone knows how the filter works,” Herodo-tou points out. “Those proceed-ing further will then have to sub-mit their plans for the organisa-tion and also reveal their financial capability for implementing and delivering those plans. That’s why it’s a complicated process. It’s not a single option with just one cri-terion – price. There will be a list of criteria, which will form part of the analysis and the evaluation that the advisors will carry out.”

It has already been decided that Cyta will not be broken up, meaning that its landline, mobile and broadband services will stay together. “There is no question of the operations of the company being split up and I have told the management, unions and em-ployees that they have no reason to fear that,” he says, elaborating that “The process is all about how to enhance the organisation versus the competition vis-à-vis market share, bringing new products, enhancing revenue and profit lines. It’s not about breaking up or doing something different with Cyta.”

Constantinos Herodotou’s vision for the new Cyta is of an organisation that is even big-ger than today, more agile and competitive not only locally but regionally which, by implication, means a bigger product range, possible new business divisions and new employment positions. “Let’s not forget that there are

connections between Cyprus and the rest of Europe that can give further upside and, if we end up with an investor that has a re-gional presence, you can imagine how things may come together. Hopefully that’s the picture we will see a few years from now.’

Does he think that the ma-jority of Cypriots will ultimate-ly share his view that, thanks in part to his work, the future Cyta will be providing a much better service than today?

“This is a key objective,” he admits, but he adds that to have a chance of achieving it, a lot of work and coopera-tion will be needed among all stakeholders – the Privatisation Unit, the advisors, the manage-ment, Board and employees of Cyta, the Government, the House of Representatives. “So many people need to be pull-ing in the same direction but I believe that it can be done,” he says.

He thus remains undaunted by the task and the noisy op-position to it. “I have worked on complex and demanding transactions in the past,” he notes, “and hopefully people will see more than mere good intentions and recognise what we have done so far and the way we are approaching the issue in order to obtain the best possible result for Cyta. That’s what gives me comfort and keeps me going. This is just the first step and there’s a long way to go. We will be criticized – there is no financial transac-tion out there that will not have some criticism – and that is something I am prepared for but, at least in terms of the big deliverables, I believe that we’ll eventually have something that everybody is happy with. Hopefully actions speak louder than words.”

THE LAW IS CLEAR THAT THE ISSUE HAS TO GO THROUGH PARLIAMENT AND I THINK THAT’S THE RIGHT THING TO DO


NICOSIAECONOMICCONGRESS 2015

Last year’s autumn fore-cast by the European Commission stated that the recession in Cyprus had been milder than anticipated and a mod-

est economic recovery is expected to begin in 2015 and strengthen in 2016, in line with the rest of the EU. Cyprus’ public finances are forecast to improve significantly as a result of the govern-ment’s efforts and improvements in the economy. Inflation was close to zero in 2014, due to weak domestic cost pres-sure; however, it is expected to increase gradually in 2015.

Organisers: Gold Magazine and the Institute of

Main sponsor:Sponsor:Communication sponsors:

Coordinator: IMHFor further information, contact IMH: Tel: e-mail: Website:

THE NICOSIA ECONOMIC CONGRESS HAS ESTABLISHED ITSELF AS THE BIGGEST FINANCIAL/ECONOMIC EVENT IN THE CAPITAL

The Government has stated its determination to continue with the strict implementation of the programme of reforms for the complete restoration of Cyprus’ economy and reputa-tion as a regional business centre. It is generally believed that the recession has completed its cycle; unemployment is finally declining after several years, public finances are under control and Cyprus can now look to the future with optimism.

THE CONGRESSNow in its 5th year, the Nicosia Economic Congress – organised by Gold Magazine and the Institute of Certified Public Accountants of Cyprus (ICPAC) – is the meeting place for senior business executives, economists, financi-ers, policy- and decision-makers and govern-ment officials, who will discuss the European Economic Outlook for 2015-2016, the state of the Cyprus economy two years after the Eurogroup’s decisions of March 2013, the restructuring of the banking sector, the road

to privatisation, measures to tackle unemploy-ment and the future of the Cooperative Bank-ing system in Cyprus.The Nicosia Economic Congress has estab-lished itself as the biggest financial/economic event in the capital. A key objective is to pro-vide members of the Institute of Certified Public Accountants of Cyprus (ICPAC) and the broader business world with comprehensive information on the latest economic trends and developments in Cyprus and around the world. Hosting distinguished international speakers who will analyze and give their own forecasts for the economy and markets; it addresses all owners and managers of companies and organisations who are actively involved in the decision-making process. This one-day event will bring together influ-ential and innovative minds in the finance and accounting sectors as well as economic deci-sion- and policy-makers. Among the confirmed keynote speakers are:

• Harris Georgiades, Minister of Finance of the Republic of CyprusThe State and Prospects of the Cyprus Economy• Constantinos Petrides, Under-Secretary to the President Redeveloping the Growth Model for Cyprus• Constantinos Herodotou, Commissioner for PrivatisationsThe Cyprus Privatisation Process • Enam Ahmed, Director, Western European

team of the sovereign group, Fitch Ratings, UK How Credit Rating Agencies View the Prospects for the Economy of Cyprus

Other presentations will deal with The Eco-nomic Outlook for Greece and the Next Steps, The State of Banking in Cyprus, The Prospects for the Cyprus Economy as Viewed by Foreign Institutions such as the European Commission and the European Central Bank, and Economic Forecasts for the Next Two Years.There will also be a panel discussion featuring the CEOs of the largest audit firms in Cyprus.

CONFERENCE

THURSDAY 21 MAY 2015, HILTON PARK HOTEL NICOSIA


GREECE

26 Gold THE INTERNATIONAL INVESTMENT, FINANCE & PROFESSIONAL SERVICES MAGAZINE OF CYPRUS26 Gold THE INTERNATIONAL INVESTMENT, FINANCE & PROFESSIONAL SERVICES MAGAZINE OF CYPRUS

WHY THE ‘GREXIT’

WON’T HAPPEN

THOSE WHO THINK THAT GREECE SHOULD BE ‘ALLOWED TO FAIL’ DO NOT REALISE THE

EXTENT OF THE GEOPOLITICAL SHOCKS AND THE UNFAVOURABLE SOCIAL AND

ECONOMIC CONSEQUENCES OF SUCH AN EVENT ON THE REST OF THE EUROZONE.

By Dr Savvas Savouri

History is peppered with milestone events which have had an impact far out of proportion to the number of those directly involved. After all, just think of Winston Churchill’s honouring of the RAF after the Battle of Britain with the words “never was so much owed by so many to so few”. Now reflect on a Greek population of eleven million – representing barely 3% of the overall population of the eurozone – with a national debt of €360 billion. For Greece one might well cry, “Never was so much owed by so few to so many.”

The ancient Greeks had a tradition of small numbers doing things far out of proportion.

The most famous instance of this was when three hundred Spartans fended off a vastly superior force at Thermopylae, defending the pass long enough for the battle against Xerxes of Persia to turn in favour of Greece. In many ways, the story of those Spartans contains ele-ments that are relevant to where Greeks col-lectively stand today. For just as the Spartans formed a bulwark protecting all of ancient Greece, so do modern Greeks stand between the rest of Europe and economic catastrophe.

It is universally accepted that, had the 300 Spartans not put up such a valiant defence at

Thermopylae, the city states – whose federa-tion was, in effect, ancient Greece – would have succumbed. As it was, Greece survived until its next challenge. We should be no less confident that, if Greece were to exit the euro-zone sometime in 2015, economic and social contagion would sweep throughout the federa-tion which is the EU.

Let me be very clear. Those who claim that Greece should be “allowed to fail” so as to be held up as an example to others of to behave – as a sacrificial lamb or a scapegoat, as it were – fail to appreciate the epidemic which a “Grexit” would trigger. Of course, Brussels would endeavour to contain Greece by expel-ling it from the EU in an effort to deny it ac-cess to crucial export markets, while removing the freedom of its nationals to work across the EU’s Single Labour Market. However, the idea the EU could hermetically seal Greece, making it some sort of North Korean-style autarky, is nonsense. If Greece were to be expelled from, or exit the eurozone, this could not fail in the first instance to negatively hit its immediate neighbours.

In the wake of a “Grexit”, Greek people and products would find whatever means they could to evacuate. For the likes of Cyprus (within the euro area), Bulgaria and Croatia (outside it but very much within the EU), and Serbia and FYROM (just outside the EU but keen to join and with currencies closely “pegged” to the euro), the consequences of Greece being expelled from the EU would be severe economic pressures created by the escap-ing of people and goods from the country.

There would also be serious social and ethnic unrest across a Balkans region which, in all too recent memory, has been the stage for bitter deadly conflict.

Were the contagion from Greece to be simply confined to the Balkans, the cost to the EU would be high enough. My fear, however, is that it would be impossible for the effect of a “Grexit” to be isolated to just a handful of its neighbours. The reality is that neighbours have other neighbours and the resulting domino ef-fect would see a Greek crisis spread all the way to Iberia and the Baltic. Let me be very clear

on something else: it is inconceivable that a “Grexit” would not trigger Russian involve-ment in the crisis. Moscow would almost cer-tainly take the chance to offer rescue capital to Athens in return for “concessions”, quite possibly including a commitment that Greece leave NATO and provide Russia with a Med-iterranean base (we might well be seeing the beginnings of something similar in Cyprus). Remember that with Montenegro and Ser-bia, Russia is not short of sympathetic nations across the region. The standoff between the EU and Russia in Ukraine could easily see the opening up of another confrontational front were a “Grexit” to go ahead. Is this far-fetched? Make no mistake, a “Grexit” would trigger geopolitical shocks as well a unfavour-able social and economic consequences.

In short, European nations, seemingly safe because of their distance from Greece, would not be safe at all; they would not be safe from the economic consequences of a “Grexit,” nor from the adverse social implications. As for trying to quantify or estimate in some clinical accounting way the “cost” of a “Grexit”, this is impossible to calculate because it is unprec-edented and because the cost would not be confined to a loss of value in property and other assets but would involve the destruction of social infrastructures and communities.

As much as I believe that a “Grexit” would trigger an extremely unpleasant domino effect across Europe, I am not convinced that this is the mainstream view in Berlin. To explain the consequences of Athens and Berlin seeing things so differently, let me spend a moment

considering game theory, in which Yanis Varoufakis, Greece’s new Finance Minister, is a specialist.

Because Varoufakis is so perfectly aware of the negative “externalities” (the technical phrase for the really nasty side-effects which spread outwards when a shock happens) that would result from a “Grexit”, he believes that Berlin is also aware of these. And because he is convinced that Germany is “wise”, he also believes Berlin would cooperate with Athens to avoid Greece, the eurozone and indeed the wider EU all entering into a “prisoner’s trap”

IF GREECE WERE TO EXIT THE EUROZONE SOMETIME IN 2015, ECONOMIC AND SOCIAL CONTAGION WOULD SWEEP THROUGHOUT THE FEDERATION WHICH IS THE EU


problem – or certainly the problem as Berlin sees it – is that, having got what it wanted, Athens could simply renege on its promises. So the Greece problem would simply return when its next tranche of bailout capital had been exhausted – or as Germany sees it, frittered away in inefficiency and excess. For many in Germany (and indeed elsewhere across “Hard Europe”), the “Greek boil” needs to be lanced now, or to mix our metaphors, the Greek can must not be kicked down the road.

Let me now return to my rather glib apho-rism that, in the case of Greece, “Never was so much owed by so few to so many”. There are two issues which we need to reflect on here. For one, the debt is barely €40,000 per Greek, equivalent to the price of a good German-made car. And on the issue of German cars, we must not forget that during its period of “debt fuelled growth”, Greece was a voracious importer of a great many German-made cars. Indeed, Greece was an importer of German-made kitchen appliances, German-made home electronics and German-made machinery. So too was Spain and so was Portugal. In fact, many of the eurozone nations, which the Ger-

mans are hounding to introduce more thrifty spending habits, spent a great deal of money on German goods and, in so doing, indebted themselves whilst enriching Germany.

Since the Germans have insisted that we look at Greece very clinically with numbers I will keep to this numerical rule in what fol-lows. The data in Chart 1 shows that since joining what was known as the European Eco-nomic Community (EEC) in 1981, Greeks have spent $100 billion more on German goods than Germans have spent on Greek imports. In Chart 2 we see much of the $100 billion surplus that Germany has earned from Greece was amassed relatively recently (since 2000). Sticking with numbers, of its overall debt obligation of $360 billion, Greece is accountable to Germany for just over $70 billion. According to my simple arithmetic, the net balance of what Greeks have spent on German goods over what Germans have spent on Greek imports, puts Germany up $30 bil-lion. It makes one think just who has exploited who? So what then is my outlook?

Where we are can be summarised as the three ”fors”: whilst the Greeks want debt for-giveness many in Germany want to foreclose on Greece. The compromise is debt forbear-ance. And this is the outcome that I genuinely expect will be reached. The Greek funding requirement will be bridged long enough, I believe, not only for other eurozone nations to elect anti-austerity governments but for Germany to realise that the austerity it has imposed on others has sent its own economy into recession.

GREECE

(what game theorists call an outcome that is the worst option for all players as opposed to what it could have been if they had cooper-ated). I, however, am far from convinced that Berlin appreciates the consequences of a “Grexit”. Instead, I see the Germans viewing their position relative to the Greeks and others across “Soft Europe” as a “master-servant” one. In this context, Berlin believes that if it were to compromise with Athens, this would un-dermine its authority over other nations with similarly bad fiscal habits.

Quite simply, Germany believes that were it to compromise with Greece, it would create an entirely different set of negative externali-ties. Berlin, moreover, sees the risk of “moral hazard”: forgive the Greeks and you will only encourage them to misbehave again. Sticking to the terminology of game theory, the Ger-mans see the situation as if it were an “implicit bad faith model”. Let me try to explain.

Suppose Berlin gives the Greeks the debt forgiveness they are pleading for, in return for promises from Athens that it will improve its fiscal housekeeping by restructuring the civil service and be better at tax collection. The

1981 1986 1991 1996 2001 2006 2011

14

12

10

8

6

4

2

0

Billio

ns, U

SD X

10

Value of Exports (FOB) Value of Imports (CIF)

CHART 1: GREEK TRADE WITH GERMANY, $BN

Source: IMF – Direction of trade statistics

1981 1986 1991 1996 2001 2006 2011

1009080706050403020100

Billio

ns, U

SD

CHART 2: GERMANY’S CUMULATIVE TRADE SURPLUS WITH GREECE

THE AUSTERITY THAT

GERMANY HAS IMPOSED

ON OTHERS HAS SENT ITS

OWN ECONOMY INTO RECESSION

info: Dr. Savvas Savouri is a Partner and Chief Economist of Toscafund.

By John Vickers


INVESTMENT


heo Paphitis is one of the UK’s most popular entrepreneurs, thanks in part to his participation in the popular BBC TV se-ries Dragons’

Den from 2005-2012 as one of the five “Dragons” – venture capitalists willing to invest their own money in business ideas in exchange for equity in the companies. By the time he became a TV celebrity, he had already gained a reputation for turning fail-ing companies into highly successful and profitable businesses. As a result of some of them, he was reported last year to have an estimated net worth of £210 million.

ends. Cyprus is an independent nation, one that’s very proud and hugely capable; one that punches way above its weight outside Cyprus but, unfortunately, way below what it could be achieving inside Cyprus.”

If the blame for Cyprus’ misfortunes is to be laid at someone’s feet, it is the island’s politicians who need to take a good look at themselves, Paphitis says.

“Nobody in their right mind is going to invest in Cyprus until the politicians put the right laws in place to protect people’s investments. You can have as many confer-ences as you like but you can’t insult the intelligence of sophisticated investors. No matter how much they like the projects, they will do serious due diligence and if they can’t secure their investment, why should they invest in us?”

The UK, where most of Paphitis’ busi-nesses are based, is currently enjoying positive economic results and he acknowl-edges that with unemployment now under control and interest rates low, people have started to feel more confident. “Bearing in mind that so much of the UK’s GDP is consumer-driven, as long as that continues, things will be looking good for the present government with an election coming up in May”.

David Cameron has promised to hold a referendum on Britain’s place in the EU. Does Paphitis foresee any possibility of the British people voting to leave the European Union?

“I’d be very surprised,” he says. “When

INVESTMENT


push comes to shove, I would expect that a more practical, logical decision will be taken. I think the EU has overstepped the mark in many ways and it needs to reform. There’s a bunch of politicians sitting in Brussels and taking decisions without con-sidering the feelings of the people. They need to realize that there is some very strong anti-Europe feeling around and to temper some of the powers and activities that the EU exerts on sovereign nations.”

In Paphitis’ view, the EU is already “far too close to a federalist relationship, which was never the intention” and he cites this as the reason why many people in the UK are unhappy with how the Union func-tions. “Being part of a common market or an economic union is undoubtedly the best thing for the United Kingdom,” he says, adding, “But each country should be re-sponsible for its own political decisions.”

For Theo Paphitis himself, business is booming. His highly successful ventures now include stationery chain Ryman, the homeware specialist chain Robert Dyas and lingerie retailer Boux Avenue. The com-bined group currently comprises 349 stores with 3,600 employees who serve over 28 million customers a year.

“2014 was a good year with record profits,” he enthuses, “and Boux Avenue is expanding overseas. We’ve just opened up in Dubai, Abu Dhabi and North Africa and we’re planning for Saudi Arabia so it’s a pretty big expansion in this area of the world. We’ve got some structural issues that need to be dealt with first but there’s no reason why Cyprus shouldn’t be the next stage.”

Most people know Theo Paphitis thanks to his seven years on Dragons’ Den, from which he ‘retired’ at the end of the 2012 series. “I missed it at first but I’m doing other things now, including a regular slot on The One Show on BBC1 so that keeps my ‘thespian hobby’ going,” he says but, despite the wealth, the public profile and the fame that TV invariably brings, he has a very clear picture of what he is:

“Ultimately I’m a shopkeeper. That’s what I do for a living and I never want to forget it.”

Last month he was back in his birth-place – Limassol – for the Cyprus Investors Summit at the Four Seasons Hotel, which is where he talked to Gold. Although real estate is not his usual investment area, he was interested to see what kind of projects were being pitched to the forty or so fund managers and investors attending the event. As someone who is proud to be a Cypriot (“I shout it from the rooftops,” he says), he has always kept a close watch on what’s happening on the island – indeed, he owns a number of companies here – and he is acutely aware of its good points... and its failings.

“There are some fantastic efforts being made to get the country back on a sound footing,” he says. “This is an incredible island and it should never have failed in the first place. And it certainly has no reason to fail going forward. But I know what Cypri-ots can be like – I am one myself! You’ve heard the saying about ‘snatching defeat from the jaws of victory’ and that is exactly what we’ve managed to do single-handedly. I just hope that we don’t continue to do that.”

Paphitis recognises that “there are people doing some great work to try and get this economy back on its feet” and he repeats that “Cyprus should never have found itself in this position” but he is aware that the island is perceived in a very negative light by many outsiders.

“When I meet people and we talk about Cyprus, I often hear remarks about there being no financial probity here, about cor-ruption, recklessness, laziness and more and I get very upset about this because such a description of the Cypriots is not one that I recognize.”

Traditional links with Greece, during what has been a critical time since the gov-ernment of Alexis Tsipras came to power, are also causing confusion about Cyprus among foreign observers, Paphitis believes. “I was very pleased to hear [Bank of Cyprus CEO] John Hourican’s comment about not allowing the ‘noise’ that’s going on in Greece to affect us,” he notes, adding that, “Of course we have cultural links and a common language but that’s where it


he Firm’s clientele comprises a respectable volume of High Net Worth Corporations and Individuals around the globe. An assembled multilingual team of highly skilled and experienced professionals – including lawyers, accountants, tax advisors and ad-ministrators – allows us to quote “professional excellence”. The diversified composition of our team, and its close affiliation with the law firm I.Frangos & Associ-ates LLC, allows us to provide a wide range of services, not limited within the boundaries of merely corporate and fiduciary matters. The Council of Ministers decision dated 19/03/2014, by virtue of which amendments were made to the Scheme for Naturalization of Investors in Cyprus by Exception, as intended by the Government, has proved to be attractive to for-eign investors. Consequently, the interest expressed by both existing and new clients regarding the

aforesaid has increased substan-tially over the past year. This is firstly, due to the benefits attached to Cyprus citizenship including but not limited to free move-ment within the European Union and secondly, the attractiveness and flexibility offered by the said scheme. The most significant highlights of the scheme are as follows:• There are no Greek language proficiency requirements.• There is no requirement to re-side in Cyprus.• The timeframe for the comple-tion of the examination process is merely 3 (three) months.• Cyprus citizenship may also be acquired by the family members of the investor, without any fur-ther financial requirements.• The acquisition of Cyprus citizenship does not require the renouncement of existing citi-zenship, which may thereby be retained.• A combination of investments is available, thus allowing the inves-tor to spread investment risks. • Investments are required to be maintained for no longer than 3 (three) years from the date of ap-proval of the application by the Council of Ministers.• There is the option of apply-ing under a Major Collective Investment Scheme, whereby 5 (five) or fewer investors may col-lectively invest the total amount

BYBLOSERVE MANAGEMENT LTD IS A LICENSED FIRM AUTHORIZED TO PROVIDE, INTER ALIA, SPECIALIZED CORPORATE MANAGEMENT, TRUST AND FIDUCIARY SERVICES.

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CONTACT DETAILS BYBLOSERVE MANAGEMENT LTD. Address: 10, Patron Street, CY-6051, Larnaca | Tel: (+357) 24812575 Fax: (+357) 24812583 | e-mail: [email protected] | Website: http://bybloserve.com/

BYBLOSERVE MANAGEMENT LIMITED

Iosif FrangosAdvocate (LLB, LLM)

Executive PartnerBybloserve Management Ltd.

“HOW SUCCESSFUL HAS THE CITIZENSHIP THROUGH INVESTMENT SCHEME BEEN? WHAT AMENDMENTS, IF ANY, WOULD YOU MAKE TO ITS PRESENT TERMS AND CONDITIONS?”“Improvements could be

not see the need to impose on the investor the obligation to purchase a residence of at least €500,000 in addition to his obligation to invest €5,000,000. The value of the residence should be inclu-sive together with any pay-able VAT. Furthermore and from a practical perspective, it appears that the format of the relevant application form (M.127) is outdated and does

nature of the said regime. In addition, the application re-

quires the signatures of three Cyprus citizens as references in favour of the applicant. In

to identify such persons, as they are not permitted to be the advocate, agent or rela-tive of the applicant. In many cases, the investor-applicant

to acquire Cyprus citizenship by way of investment and therefore, may not have such acquaintances at his dis-posal. Reputable citizens or organisations from the inves-tor’s country of residence should be eligible to vouch for the latter’s good charac-ter as well.”

Iosif Frangos, Advocate (LLB, LLM)

Executive PartnerBybloserve Management

Ltd.

SPECIAL PROMOTIONAL FEATURE

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of €12,500,000. This reduces the investment threshold to €2,500,000.As a Firm, we have for many years been involved in the provi-sion of immigration services and our primary objective has always been the provision of high standard services characterized by immense professionalism and tailored to the specific necessities of each client. With regard to the acquisition of Cyprus citizenship, our Firm is a fully equipped “one stop shop”, with separate Real Estate, Legal, Corporate and Banking Departments. Clearly,

our Firm can undertake the entire procedure from the commencement of all initial investment proceedings until the final conclusion of the nat-uralization process for both the investor and his family. Hard work, a client-based service, a constant personal relationship, a high-speed response, flex-ible and competitive pricing and, most of all, honesty and trust allow us to fully satisfy the expectations of our clients. Our local knowledge and pro-fessional expertise are at your disposal.


Professional Excellence

Corporate & Banking Services

Legal & Advisory Services

Fiduciary Services

Accounting & Bookkeeping Services

Tax Planning

Immigration Services (Citizenship, Residency)

Bybloserve Management Ltd 10 Patron, 6051 Larnaca, Cyprus, +357 24812581, [email protected]

www.bybloserve.com


hristos Patsalides LLC and its affiliate company, Christos Patsalides Corporate Management Ltd, employ experienced and accomplished lawyers, accounting and tax consultants with advanced

studies and excellent legal training in their field of expertise.The firm has a broad practice, offering a full range of quality services to its international clients, with the resources and experience to advise them on transactions and projects domestically and internationally.

Our aim is to provide our clients with concrete and cost-effective solutions; to sustain and further enhance our international network of associations; to keep up to date with all developments

related to our fields of practice; and to carry out our work with integrity and professionalism.

In regards to the Scheme for Naturalization of Investors in Cyprus by exception Scheme, we offer a comprehensive one-stop package service. Together with our affiliate company, Christos Patsalides Corporate Management, and our selected external team associates, we undertake all the required legal and administration services from beginning to end, guaranteeing a smooth settling down for the client

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and his family in their new country of residence.

For the Citizenship Through Investment Scheme, we offer all the required Legal Services including the preparation, gathering of all required information and data, drafting and submission of the application forms for Citizenship on behalf of the applicant to the Ministry of Interior in Cyprus, and all the Consultancy Services required.

We undertake to guide you through the whole procedure, beginning with the finding


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CHRISTOS PATSALIDES LLCTHE LAW FIRM WAS FOUNDED IN 1996 BY ITS FOUNDING AND MANAGING PARTNER CHRISTOS PATSALIDES.


of an investment (project) suitable to your needs and a residential property for acquisition, and we guarantee that we will handle your application successfully.

Citizenship by Investment is a process whereby a country, by way of exception, grants citizenship to eligible applicants that make a certain significant investment into its local economy.

With the granting of citizenship you can immediately travel freely, reside and work with the European Union, freely transfer any amount of money from any EU Member State to another, purchase property in any EU Member State and invest in any activities of your choice.

By choosing Cyprus, you are also choosing the lowest

corporate tax in Europe at 12.5%, full access to EU law, no withholding taxes on dividend payments, interest and royalties; you are choosing mild winters and warm-to-hot summers, English-speaking private schools, a thriving tourism destination and a rich history and culture.

While the Cyprus economy has shown resilience following the financial crisis and the bail in that occurred two years ago, foreign investment has decreased significantly. Through the new Citizenship Through Investment Scheme, we can offer a custom-made solution, based exactly on the client’s needs, from a variety of options and choices.

Since the introduction of the Scheme, there has been a shift towards new investment in large-scale projects in real estate, residential and

commercial units. The new Scheme has created a niche market, offering alternative,

CONTACT DETAILS CHRISTOS PATSALIDES LLC Address: Tel: Fax: e-mail: Website:

“THE NEW SCHEME CREATED A NICHE MARKET, OFFERING ALTERNATIVE, CUSTOM MADE SOLUTIONS

TO THE INVESTORS, MAKING CYPRUSAN EVEN MORE COMPETIVE MARKET’’

custom-made solutions to investors, making Cyprus an even more competitive market.

“HOW SUCCESSFUL HAS THE CITIZENSHIP THROUGH INVESTMENT SCHEME BEEN? WHAT AMEND-MENTS, IF ANY, WOULD YOU MAKE TO ITS PRESENT TERMS AND CONDITIONS?”

In our experience the Citizen-ship Through Investment

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International Migration Solutions We have flattened the world’s migration opportunities for you to walk through

Our International Migration team can assist you with the following:

Permanent Residence Permit – Regulation 6 (2)

Acquiring Cyprus Citizenship by Exception / Naturalization

Why Deloitte

• We possess in-depth knowledge of the related legislation and procedures

• We offer independent advise in regards to different investment options• We cooperate only with reputable organisations that can provide you

with attractive quality investment options • We are prompt in handling the associated documentation and

procedures• We act as your professional liaison with the local authorities• Confidentiality is our cornerstone

Permanent Residence Permit – Regulation 6 (2)

The Permanent Residence Permit – Regulation 6 (2) refers to individuals who have fully and freely at their disposal a secured annual income, high enough to allow a decent living in Cyprus, without having to engage in any business, trade or profession.

Associated requirements include:• Evidence of a steady income from abroad of at least €30.000, from

sources other than employment in Cyprus i.e. certificates of dividends, certificates of fixed deposits, pension statements, rents or salary advice. The necessary minimum income, if applicable, is increased by €5.000 for each dependent.

• Confirmation letter from a Cypriot Bank, showing deposits of a minimum capital of €30.000 in an account, from sources other than employment in Cyprus. The capital should be transferred from an International Bank to a local Cypriot Bank and it should be pledged for at least a period of three years.

• Title deed or purchase agreement of a residential property, issued on the name of the applicant. The minimum market value of the property should be €300.000 plus VAT and proof of payment for at least €200.000 excluding VAT. The VAT rate of 5% is applied for first residences with a total area not exceeding 275 square meters in accordance with the architectural plans (after the exception of up to

88 square meters for common areas).The first 200 square meters are subject to 5% VAT and anything above 200 square meters is subject to the standard rate of VAT, currently19%.

Additional conditions & requirements: • Affidavit regarding the income of the applicant• Confirmation that the applicant does not intent to work or to be

engaged in any form of business in Cyprus• Apostil clean criminal record from country of origin• Apostil birth certificate • Medical insurance certificate that covers in-patient and out-patient

treatment• Curriculum vitae• Copy of passport• Documents regarding dependents (if applicable) i.e. apostil marriage

certificate, apostil birth certificate for children, apostil clean criminal record for spouse and children over the age of 18, medical insurance, copy of passport

Applicants should visit Cyprus at least once every two years.

It takes approximately 3 months for the Permanent Residence Permit to be issued, from the date of submission of the required documentation.

To apply for citizenship and become a Cypriot citizen, a third country national should have held Permanent Resident status and resided in Cyprus for at least 7 years.

Acquiring Cyprus Citizenship by Exception / Naturalization

A non-Cypriot citizen will be eligible to obtain Cyprus citizenship if one of the following criteria is met:

1.Investment in government bondsThe applicant must have purchased state bonds of the Republic of Cyprus amounting to at least €5 million.

or

2.Investments in financial assets of Cypriot companies or organisationsThe applicant must have purchased financial assets in Cypriot companies or organisations (e.g. bonds / securities / debentures registered and issued in the Republic of Cyprus) amounting to at least €5 million. It is noted that the financial assets can be purchased either at issuance or subsequently by the market.

or

3.Investment in real estate, land development and infrastructure projectsThe applicant must have made an investment of at least €5 million for the purchase or construction of buildings or for the construction of other land development projects (residential or commercial developments, developments in the tourism sector or other infrastructure related projects).

or

4.Purchase or creation or participation in Cypriot businesses or companiesThe applicant must have made an investment in the purchase, creation or participation in businesses or companies that are based and operating in the Republic of Cyprus, amounting to at least €5 million. It must be proved that the businesses and companies have physical presence in Cyprus and that they employ at least five Cypriot citizens.Prerequisite for the fulfilment of this criterion is the conversion of deposits into shares.

or

5.Deposits in Cypriot BanksThe applicant must have personal fixed term deposits for three years in Cypriot banks or deposits of privately owned companies or trusts in the Republic of Cyprus (in which s/he is the beneficiary owner) amounting to at least €5 million.

or

6.Combination of the aforementioned criteria 1 to 5The applicant is required to have a combination of the above criteria amounting to at least €5 million.

or7.Persons whose deposits with the Popular Bank Public Company Ltd have been impaired due to the measures implemented after the 15th of March 2013The applicant has incurred an impairment in deposits amounting to a total of at least €3 million.In the case where the applicant has incurred an impairment in his/her deposits under €3 million, s/he may apply, having made additional

investment through the criteria 1 to 5, in order to balance the required amount of the aforementioned criteria.

or

8.Collective investmentsThe Council of Ministers shall have the right on specific cases, to amend the above mentioned parameters 1 to 4, as following:I. The amount that needs to be invested is €2.5 million for investors

participating in a special collective investment scheme, provided that the total value of the investment is at least €12.5 million

II. The amount that needs to be invested is €2 million for investors participating in a special collective investment scheme, provided that the total value of the investment is more than €12.5 million; this provision (II) will be valid until the 1st of June 2014

Additional conditions & requirements: • Purchase agreement of property - The minimum market value of the

property should be €0.5 million (plus VAT). The amount should be transferred from an International Bank to a local Cypriot Bank. Title Deeds / Receipt for lodging the contract with the Lands and Surveys Department issued on the name of the applicant. Receipts for paying the agreed purchase price.

• Other personal documents i.e. valid passport, clean criminal record, birth certificate, marriage certificate, CV, etc. are also required for the applicant and his/her dependents.

The Ministry of Interior or the Ministry of Finance can ask for any additional documents if deemed necessary through the process.

It takes approximately 3 months for the Citizenship by exception / naturalization to be issued.

Notwithstanding compliance with the above conditions, the decision to grant Cyprus citizenship by exception / naturalization remains at the absolute discretion of Council of Ministers.

It should also be noted that the above regulations are subject to change, at any time, following a decision of the Council of Ministers.

Contacts

George A. PantelidesPartner, Consulting Services LeaderTelephone: + 357 22 360300E-mail: [email protected]

Pieris M. MarkouPartner, Tax & Legal Services LeaderTelephone: + 357 22 360300E-mail: [email protected]

www.deloitte.com/cy


he criteria set down at the com-mencement of the implementa-tion of the scheme were quite reasonable under the circum-stances. The scheme has succeeded in attracting a limited number of reputable solid well established international businessmen and their families. The fact that they have chosen to invest and in most cases settle on the

island is an investment in the future of Cyprus.It must be pointed out that the Government Department responsible for processing the application has in our experi-ence proved to be efficient, positive and very supportive and is a credit to the Govern-ment.Our firm provides the full range of legal services related to the application for the securing of citizenship includ-ing:

• Legal advice and assessment on each case • Preparation of application forms for certificate of citizen-ship • Preparation of application forms for passport and ID issuance

• Submission of above appli-cations to the Ministry of In-terior, Civil Registry and Mi-gration Department, enclosing all the documentsrequired as specified in the “Scheme for Naturalization of Inves-tors in Cyprus by Exception on the basis of subsection (2) of section 111A of the Civil Registry Laws of 2002-2013” and follow up with Migration Department • Attendance at Supreme Court with potential clients to swear oath of allegiance once the Certificates of Naturaliza-tion are issued• Identifying investments whether real estate and/or collective investment funds which meet the needs of each individual client• Legal advice and assistance

IN PRINCIPLE, THE INTRODUCTION OF GRANTING CYPRUS CITIZENSHIP BY EXCEPTION IS AN EXTREMELY POSITIVE MOVE BY THE GOVERNMENT AS AN INCENTIVE TO ATTRACT THE GENRE OF INVESTORS WHO OUR SMALL COUNTRY NEEDS IN ORDER TO RE-ESTABLISH ITS CREDIBILITY AND RELIABILITY AS AN IMPORTANT INTERNATIONAL BUSINESS CENTER IN EUROPE.

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DER ARAKELIAN-MERHEJE LLC

on all real estate acquisitions commencing with Purchase Agreements through to final transfer and registration of title deeds• Legal advice and services re-lated to collective investment funds• Legal advice and full range legal services related to estab-lishing Cypriot companies as vehicles of investment in which-ever field• Tax consultancy on all issues related to the above described issues• Estate planning for high net worth individuals

THE FIRMThe founder of the firm has been practising law in Cyprus since 1984, particularly in the areas of Company, Commercial


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“HOW SUCCESSFUL HAS THE CITIZENSHIP THROUGH INVESTMENT SCHEME BEEN? WHAT AMENDMENTS, IF ANY, WOULD YOU MAKE TO ITS PRESENT TERMS AND CONDITIONS?”

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type of investors our home-

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and International Business enterprises. The firm has been involved in international joint venture projects over the last twenty years, including the pro-vision of legal and tax planning advice to IP, marketing, min-ing, real estate, shipping, ship management and ship owning companies, water processors/bottlers, healthcare/health sup-plements producers, oil and gas drilling firms as well as to ancillary products and services groups, as well as to interna-tional groups involved inseveral other trading/services areas worldwide.The firm’s underlying principle is to offer clients the best pos-sible personalized and tailor-made service.

AREAS OF PRACTICECompany Law, International Business Companies (Registra-tion andAdministration), Commer-cial Law, International Tax Planning, Employment Law, Administration of Estates, Wills and Succession, Eastern European Trade, Distribution Agreements, Leases and Leas-ing, Shipping, Joint Ventures, Trusts and Estate planning,

Debt Collection, Private Inter-nationalLaw.

THE FOUNDERNairy Der Arakelian-Merheje was born in Nicosia and ad-mitted to the Cyprus Bar in 1983. After obtaining her LL.B Hons at the University of Reading (1979) and The Law Society Solicitors’ Final Qualification Examination ( London, 1980), she was ap-pointed the first Internal Legal Advisor of the Louis Tourist Group before joining the Law office of Tassos Papadopoulos & Co., where she handled international corporate clients and practised Commercial, Company and Private Interna-tional Law for seven years. She subsequently opened her own Law Office which maintains an international client portfolio and which has now become Der Arakelian-Merheje LLC as of 2011. She is a member of the Cyprus Bar Association, the International Tax Special-ists Group, the Avrio-Advocati network of European Lawyers, Rotary International and the Rotary Club Nicosia-Aspelia.She speaks Greek, English, French and Armenian.

PARTICIPATION IN PUBLICATIONS:

1. Practising Law Institute (PLI) Outbound Acquisi-

tions: European Holding Com-pany Structures, USA.

2. The Legal 500 – Europe, Middle East & Africa –

2015

CONTACT DETAILS DER ARAKELIAN-MERHEJE LLC Address: Tel: Fax: e-mail: Website:

3. Competition Laws of Europe on Competi-

tion Law Direct, Maitland Walker

4. Who’s Who Legal – Private Client 2014

5. CorporateINTL 2014

THE GOVERNMENT DEPARTMENT RESPONSIBLE FOR PROCESSING THE APPLICATION HAS IN OUR

EXPERIENCE PROVED TO BE EFFICIENT, POSITIVE AND VERY SUPPORTIVE


oreign investors can rely on EY for an exceptional client service experience offered by profession-als with in-depth knowledge. EY Cyprus’ well-established relation-ships with local government bodies ensure close collaboration with the relevant authorities for a punctual and stress-free process and confidentiality. Our experi-enced team of hand-picked staff will tailor their service to your needs and concerns to guarantee that all regulatory requirements are met.

OUR SERVICESEY Cyprus’ value proposition includes:Assistance in the application process:• Guidance on required steps, application requirements and economic criteria• Evaluation of an applicant’s specific details and tailoring a successful strategy to meet ap-

plicant’s requirements• Support in the preparation of required documents• Consultations with the Min-istry of Interior and Ministry of Finance• Check application(s) to ensure they meet quality standards• Continuous monitoring and communication of the applica-tion status to investor(s)• Upon approval, assistance with obtaining a Cyprus passport and identity card for all family members

Assistance in the identification and evaluation of investments and assistance in execution of investment transactions:• Identification and assessment of potential target investment(s), e.g. valuation, feasibility study• Thorough due diligence on real estate and other investment(s)• Legal review of transaction doc-uments for selected investment(s)• Transaction structuring assis-tance and other buy-side services, e.g. setting up investment vehicles• Identify and quantify tax impli-cations for selected investment(s)

IN A GLOBALIZED ECONOMY WHERE ORGANISATIONS ARE CONSTANTLY REQUIRED TO RESPOND TO CHANGE AND UNCERTAINTY AND CLIENT EXPECTATIONS ARE INCREASINGLY MORE DEMANDING, EY CYPRUS PROVIDES A COMPLETE VALUE PROPOSITION FOR FOREIGN INVESTORS (NON-CYPRIOT CITIZENS) AND THEIR FAMILIES WHO WISH TO ACQUIRE CYPRUS CITIZENSHIP BY NATURALIZATION, ON THE BASIS OF THE DECISION BY THE COUNCIL OF MINISTERS OF THE REPUBLIC OF CYPRUS DATED 19 MARCH 2014.

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CONTACT DETAILS EY CYPRUS Address: Tel: Fax: e-mail: Website:

EY CYPRUS

“How successful has the Citizenship through Invest-ment scheme been? What amendments, if any, would you make to its present terms and conditions?”“The Cyprus Citizenship by

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the Scheme by foreign inves-

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BUILDING A BETTER

WORKING WORLD

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t KPMG, our guiding philosophy is to provide our clients with the highest quality service. Through our peoples’ high academic and professional qualifications and experience, KPMG can deliver value-adding solutions for demanding and complex projects. Quality service is a total and continuing commitment.

KPMG Cyprus has a fully dedicated Immigration team that can provide specialized assistance for obtaining Cyprus citizenship offered to foreign investors. Our experienced team has a 100% success record on all submitted Cyprus Citizenship applications.

KEY FACTS OF THE NEW CITIZENSHIP SCHEMEIn March 2014, the Cyprus Government, through the Ministry of Interior, announced changes to the criteria for the granting of Cypriot Citizenship by exception to foreign investors, in an effort to further promote foreign investment in Cyprus.

The new Cypriot Citizenship scheme gives the option to foreign investors to invest in a variety of sectors of the Cyprus economy, such as through the acquisition of Cyprus Government Bonds, investment in financial instruments and shares of public companies, investment in real estate located in Cyprus, the establishment of, or participation in, Cyprus businesses that have operations in Cyprus and fixed deposits in a Cyprus banking financial institution. The foreign investor may also choose a combination of any of the available criteria. The requested investment amount in any of the aforementioned criteria is €2.5 million or €5 million, as explained below.

KPMG IS A GLOBAL NETWORK OF PROFESSIONAL FIRMS PROVIDING AUDIT, TAX AND ADVISORY SERVICES. WE HAVE 162,000 OUTSTANDING PROFESSIONALS WORKING TOGETHER TO DELIVER VALUE IN 155 COUNTRIES WORLDWIDE. KPMG IN CYPRUS TRACES ITS ORIGINS BACK IN 1948 AND TODAY IT IS ONE OF THE LARGEST AUDIT AND ADVISORY FIRMS IN THE CYPRUS MARKET.

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Costas Markides, Board Member, KPMG Limited

Board Member, KPMG Limited

Michalis Halios, Board Member, KPMG Limited

Sylvia Loizides, Board Member, KPMG Limited

Tassos Yiasemides, Board Member, KPMG Limited

The Cyprus Government has implemented with great success an innovative investment category, that of major collective investments of at least €12.5 million. Under the Collective investment criteria, each individual investor is required to invest a reduced amount of at least €2.5 million.

Further to the financial criteria that should be satisfied, the investor should have a clean criminal record and be the owner of a permanent residence in Cyprus with a value of at least €500,000, net of VAT.

KPMG LTD


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“HOW SUCCESSFUL HAS THE CITIZENSHIP THROUGH INVESTMENT SCHEME BEEN? WHAT AMENDMENTS, IF ANY, WOULD YOU MAKE TO ITS PRESENT TERMS AND CONDITIONS?”

Costas Markides, Board Member, KPMG Limited

KPMG’S SERVICESAt the outset, we assist our clients by providing them with the relevant analysis of the investment criteria that the foreign investor may elect, depending on their personal circumstances.

Furthermore, we advise on the required documents that should accompany each investment criterion as well as an overview of the application process.

We examine each investor’s circumstances and advise accordingly in order for the individual to meet the terms and conditions, as well as the financial criteria, in the most effective and efficient way.It is then up to the client to proceed with the most appropriate investment (e.g. acquisition of real estate, bank deposits, government bonds etc.) and provide us with the requested supportive documents for the application.

It should be noted that where the client decides to invest in Cyprus Government retail bonds, KPMG Cyprus can also assist with the process for acquiring the bonds from start to finish.

Once everything is in place and the investment has been finalised, the relevant supporting documentation of the investment should be provided to us in order to proceed with the preparation of the submission package. Subsequently, we proceed with the submission of the application form on behalf of the client, together with the supportive documentation and the payment of the relevant submission fee.

Our immigration team constantly monitors the status of the application in order to ensure that it is properly progressing without delays and that no further documentation/clarifications are required by the Cyprus Authorities.

The timeframe for the completion of the examination process is approximately 3 months.

Once approval is granted by the Ministry of Interior, we proceed with the relevant steps in order for the naturalization certificate and a Cyprus passport to be issued. Once the investor’s Cyprus passport has been issued, our team can assist

CONTACT DETAILS KPMG LIMITED Address: Tel.: Fax: Website: Costas Markides, Board Member, Tel.: email:

ONCE THE INVESTOR’S CYPRUS PASSPORT HAS BEEN ISSUED, OUR TEAM CAN ASSIST THE INVESTOR’S DEPENDENTS WITH THEIR APPLICATION IN ORDER

TO ACQUIRE CYPRUS CITIZENSHIP AS WELL

the investor’s dependents with their application in order to acquire Cyprus Citizenship as well.

OTHER IMMIGRATION SERVICESFurther to our citizenship services, KPMG Cyprus can also assist third country nationals intending to take up permanent residency in

Cyprus, with their application for an Immigration Permit.

In addition, KPMG Cyprus may also assist companies with their registration at the Civil Registry and Migration Department , as well as assisting in obtaining the relevant work and temporary residence permits for European Union and third country national individuals and their dependents.


ince 2009, S&A has been the fastest growing professional services provider in Cyprus, as a result of having one of the strongest technical teams on the island, adopting a service minded approach unseen among our competitors, and

being the most cost efficient tier-1 provider in Cyprus.

S&A clients comprise of some of the world’s largest multina tional public and listed corporations, including banks and investment firms, oil companies, real estate developers, leading law and accounting firms and High Net Worth Individuals. We have built a reputation as being one of only a handful of Cyprus firms outside the Big Four with the technical ability to provide clients with high level tax and VAT advice. We work with many of the world’s largest international tax and accounting firms, including the Big Four, to

provide high- level Cypriot and international tax advisory services.

It is estimated that every year, several thousand people spend a collective $2 billion to acquire a second or even third passport. Just as investors will diversify an investment portfolio, High Net Worth Individuals (HNWIs) are increasingly looking to diversify their passport portfolio. The option has proven popular with Chinese and Russian citizens, as well as those from the Middle East.

Cash-strapped EU countries have taken notice as Citizenship by Investment programmes are now offered

SAVVA & ASSOCIATES IS A LEADING INDEPENDENT PROVIDER OF GLOBAL BUSINESS SERVICES IN THE FIELDS OF TAXATION, CORPORATE ADMINISTRATION, ACCOUNTANCY, FIDUCIARY, INVESTMENT FUNDS, INTERNATIONAL TRUSTS, SPECIAL-LICENSE COMPANIES AND BUSINESS ADVISORY SERVICES BASED IN CYPRUS AND CANADA.

SSAVVA & ASSOCIATES

Stella C. KoukounisAdvocate - Head of Corporate

Founder of SK Law Group

Charles SavvaManaging Director of Savva & Associates

Phot

ogra

phy:

Jo

Mic

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ides

by many EU members, including Cyprus. HNWIs from non-EU countries can now acquire and enjoy EU citizenship more easily than ever.

The Cypriot scheme ranks high among other competing EU Citizenship by Investment programmes, and most citizenship advisors now agree that it is the most favourable in the EU. Some of the main advantages of the Cypriot Citizenship scheme include: • There is no requirement to make a donation to the local government, unlike in the case of Malta.• There are no residency requirements, meaning that


THE CYPRUS

CITIZENSHIP

GUIDE


“HOW SUCCESSFUL HAS THE CITIZENSHIP THROUGH INVESTMENT SCHEME BEEN? WHAT AMENDMENTS, IF ANY, WOULD YOU MAKE TO ITS PRESENT TERMS AND CONDITIONS?”“The success of the Cyprus Programme is evident, as investment into the Cypriot economy from the Citizenship through Investment and Permanent Residency schemes reached over €1billion for the period between March 2013 and early December 2014. At a time when foreign investments

March 2013, it is clear that the present administration’s policy to encourage naturalization through investment has been vastly successful. It is important to note that similar schemes are implemented by other EU countries such as Malta,

Hungary, Portugal, Ireland and the UK, despite the European Commission’s scepticism over the ease by which EU citizenship is granted by each member state. However, we feel there is room for further enhancement. Some of the improvements that should be considered are:• A reduction of the investment threshold for single applicants to €2 million for all investment routes.• The ability for the cash collateral granted over cash deposits to be transferred out of Cyprus.• Further tax incentives to be

In fact, all three potential improvements are currently being considered by the Government, which is actively looking to further enhance the current scheme.”

Stella C. KoukounisAdvocate, Head of Corporate

applicants are not required to live on the island prior to or during the application, or even after citizenship has been granted.• Successful applicants receive a Cyprus passport within 3 to 4 months of filing an application, which is by far the fastest route to EU citizenship.• There is currently no quota on the number of citizenships to be granted.• While the current investment threshold is €5 million, a Group Investment Scheme exists which allows most applicants to reduce their investment to €2.5 million.Some additional facts that steer applicants towards the Cypriot programme are:• The application process itself is simple and straightforward, requiring the completion of a single application form, execution before a court registrar in Cyprus or at a Cypriot embassy abroad, and filing at a designated department within the Ministry of Interior.• The government costs for the application are very reasonable. The fees paid to the Government for filing the application and issuance of the naturalization certificate of the main applicant are €7,000.

• There is a wide range of investment route options, offering applicants flexibility as to how to structure their investment. All investments must be held for a three-year period.• Once the main applicant and his/her spouse are granted citizenship, an application for citizenship can be submitted for their dependents (minors, or adults up to the age of 28 who are financially dependent on their parents), without further investment requirements.The S&A Group covers the full spectrum of professional services required by our international clients. Our Group also includes the following affiliate companies:SK Law Group, a licensed Law Firm, headed up by Advocate Stella C. Koukounis, offering a full range of legal services with a particular focus on corporate, commercial, tax, intellectual property and trusts law matters. SK Law Group is well positioned to provide an extended range of legal services and support to foreign investors, and has recently been honoured with a 2015 Client Choice Award, recognising partners around the world that stand apart

for their excellent customer service. S&V Audit Services a licensed Audit Firm, headed up by Panayiotis Vassiliades, who was previously an audit manager with PwC Cyprus for 10 years.Our team of highly experienced professionals in

CONTACT DETAILS SAVVA & ASSOCIATES Address: 75, Prodromou Avenue, 1st Floor, 2063 Nicosia | Tel: (+357) 22516671 | Fax: (+357) 22516672 e-mail: [email protected], [email protected] | Website: www.savvacyprus.com

THE CYPRIOT SCHEME RANKS HIGH AMONG OTHER COMPETING EU CITIZENSHIP BY INVESTMENT

PROGRAMMES, AND MOST CITIZENSHIP ADVISORS NOW AGREE THAT IT IS THE MOST FAVOURABLE IN THE EU

the S&A Group can advise you further on obtaining Cypriot Citizenship through Investment or any other residency permit. For a free consultation contact Charles Savva at [email protected] or Stella C. Koukounis at [email protected] or visit www.savvacyprus.com


EY Cyprus Inaugurates

EY officially inaugurated its brand new Nicosia premises on March 4, 2015, unveiling its innovative ‘Workplace of the Future’ design concept.The firm’s Nicosia operations are now located in the Jean Nouvel Tower. The new

premises offer a modern and flexible workspace, equipped with collaborative technology of the highest standard.Addressing the inauguration ceremony, Andreas Demetriou, Country Managing Partner of EY Cyprus, commented that the implementation of the ‘Workplace of the Future’ concept at the firm’s offices was a major step for its employees.“We were asked to adapt, and so we did,” he said. “Today, change penetrates every aspect of our lives, and the current economic crisis consistently provides additional obstacles to achieving positive change. For this reason, it is extremely important to EY to ensure its constructive contribution to the Cyprus economy.”

PRESENTATION

Bert Pijls, Hellenic Bank, John Hourican, Bank of Cyprus, Michalis Kammas, Association of Cyprus Banks

Stavros Pantzaris, EY, Pavlos Photiades, Photos Photiades Group, Andreas Demetriou, EY

Michalis Athanasiou, Bank of Cyprus, Christiana Diola, ICAEW, Yiannakis Theoklitou, EY, Andreas Avraamides, EY, Eliza Livadiotou, Bank of Cyprus, Gabriel Onisiforou, EY

Stavros Pantzaris, EY, Dakis Joannou, art collector

Constantinos Yiorkatzis, Mayor of Nicosia Christis Christoforou, Deloitte

Harris Georgiades, Minister of Finance, Bert Pijls, Hellenic Bank, John Hourican, Bank of Cyprus

Andreas Demetriou, EY

Oil & GasCONFERENCE

GOINGIT ALONEThe partners in a relatively new legal firm have strong views – and some fascinating suggestions – regarding what can be done to revive the economy and allow Cyprus to regain its favoured position as an international finance centre of choice. By John Vickers

In 2012, lawyers Thomas Keane and Christina Vgenopoulou took the decision to set up a new firm, Keane Vgenopoulou & Associates LLC, with an underlying philosophy built on a proactive and commercial minded ap-proach to the provision of legal advice. Having been with one of the largest law firms on the Island, as partner and associate respectively, “We decided to

move in a new direction,” Keane says, “and al-though we are a full service law firm, we want-ed to focus in particular on the corporate and finance areas. Our intention was to offer the same high-quality service but out of a smaller practice. This allowed us to be more hands-on with clients, understanding their business and their needs better and, in that way, able to provide a better and more complete service.” It’s not so much a matter of size, Vgenopou-lou adds. “The essence is that it should be an effective operation, and that has to do with the quality of the people we employ and the way we work.” Some of their peers may have thought that the time they decided establish the new firm – 2012, when Cyprus was begin-

ning to feel the full effects of the global finan-cial crisis – was rather unfortunate but they don’t share this view.“There’s no good or bad time to set up a busi-ness,” Keane insists, though he admits that 2012 was not without its challenges. “It was challenging time for everybody, no matter how big or small, new or old their companies were,” says Christina Vgenopoulou, “but sometimes it can be better to set up an operation during such times. Business is constantly changing and anyone starting something new is going to take the new reality into account. An existing organisation, especially a big one, faces prob-lems in keeping up with the changes to the business environment whereas we were able to implement them from day one. We’re very glad that we took the decision when we did.”Thomas Keane recalls how one of their clients told them that some of the best, longest-lasting and strongest businesses had been established during a downward trend. “I think there’s a lot of truth in that, he says, “and if, as a newly established business, you can survive the downward elements, you will certainly grow even bigger when things are looking up. Our


business is now growing daily, which is a good thing to be able to say.”When asked the inevitable question about how the events of March 2013 affected the firm, their reaction is immediate and quite surpris-ing: the two partners burst into laughter! The cause would appear to be relief that the worst is now over rather than the idea that there was anything funny about that period.“March 2013 affected us in a number of ways, some of which we are still experiencing, but not always in a negative manner. Cyprus be-came a very different and sometimes difficult place to do business,” explains Keane. “For example, the banking system, which is finally starting to recover, is still a very difficult sector to operate in. Something as simple as open-ing bank accounts has become exceedingly difficult to do. Fortunately, trust in – and the credibility of – the banks is now returning, as it is to Cyprus as a whole but we believe that we haven’t yet seen the full fallout of what happened. That will come with the foreclo-sures and insolvency legislation. I predict that there will be quite a lot of insolvency work as companies – big, small and medium size – are forced to liquidate or reorganise.”As is normal with the advent of a financial crisis, 2013 saw a slowdown in certain areas of the firm’s business, particularly corporate finance and capital markets work, although it didn’t come to a complete stop, but at the same time, as Christina Vgenopoulou explains, it produced new areas of work: “Refinancing and the restructuring of loans and a certain amount of consolidations are just two of them, which there hadn’t previously been much call for. So things have been changing and the flex-ibility of a newer, smaller firm has enabled us to adapt to these changes.”Nonetheless, since 2013 and even today, exter-nal events and causes are making it challenging to attract new work because, as Thomas Keane explains, to bring in new work and new clients you have to be ‘out there’. “That doesn’t neces-sarily mean getting on a plane and travelling to different countries but we have to present and promote both ourselves and Cyprus, which means trying to convince people that Cyprus remains a good place to do business in and through,” he says. “One thing that has impact-ed on how we work is the fact that we have not been able to rely on government bodies to put us back on the map so we are having to do it ourselves. Cyprus cannot afford to always be reactionary, viz. reacting to situations around it and benefiting from them. Cyprus needs to be proactive and needs to promote what it can offer to the international business community and that needs to be in sound, tangible sectors.

THE COURT SYSTEM IN

We think that the government, with the help of the professional firms, needs to look at other areas where they can promote Cyprus.”One such area is investment funds, which has received considerable publicity over the past year. Vgenopoulou makes the point that “Cy-prus finally has all the elements in place to pro-mote itself as a fund jurisdiction of choice but not enough is being done in that direction. We are not going to compete with Ireland and Luxembourg as the main jurisdictions but Cyprus does have considerable benefits to offer the fund industry as a tier-2 player.” The firm has many suggestions for areas that can be promoted more expansively and for new areas to consider. Keane expresses the view that the professional firms need to listen carefully to the clients’ needs and Cyprus needs to listen to the needs of the international markets. A fascinating suggestion by Keane Vgenopoulou & Associates LLC – which has never been discussed to my knowledge – is aviation. “Cyprus is a strong jurisdiction for shipping and ship finance and there is no reason why it could not become a major aircraft finance and leasing jurisdiction,” Keane enthuses. ‘‘Ireland is currently the Number 1 player in the market but Cyprus also ticks all the boxes with its proven legal system, a broad network of double tax treaties and its status a low tax jurisdiction. According to the Airbus Global Market Survey 2012-2031, between now and 2031(i.e. over the next 20 years), the number of passenger planes is going to dou-ble, the number of cargo planes will increase by 80%, and the number of passengers being carried will double, so within a very short space of time a lot of new aircraft are going be delivered and put into some own-ership and leasing structures. Cyprus would be perfect for this. Whilst new legislation would be needed to consolidate the position of Cyprus, the necessary basic elements are there already.”The legal profession in Cyprus has changed enormously over the past decade, in part due to the vast amount of European leg-islation that has come into force since the island joined the EU. In fact, says Thomas Keane, it has been constantly evolving since he came to the island in 1992 but he acknowledges that “as a consequence of our EU accession we have been forced to be more involved in the process of legislation and its implementation, both as individual lawyers and as firms. We have seen the upside and the downside of the European system and we cannot afford to simply stand idle and not try to influence the develop-ment of EU laws and regulations. In the

EU there is a wealth of legislation, some of which is of direct effect and direct applicabil-ity without the member states doing any-thing, and some which has to be transposed into local law. The profession has been forced to keep up with that and to learn areas of law that it might not have been involved in before.”Has the profession been able to cope with the number of directives that have had to be transposed into Cyprus law? Keane and

Vgenopoulou’s shared view is that it has not. “The larger firms may be able to cope if, like their counterparts in other EU member states, they have specialist departments, the personnel and the resources to keep up-to-date and to monitor what’s coming out of Brussels,” says Keane, noting that most of the smaller firms have neither the resources nor the necessary level of exposure to a whole host of legislation. “People here tend to hold the view that, because it’s not legislation that is produced in Nicosia, as Cyprus lawyers we shouldn’t be expressing a view on it,” says Vgenopou-lou, “and that if we want to learn about it we should be going to London or Brussels or Paris. We take a very different view. As Cyprus lawyers we need to know Cyprus law and EU law which, after all, supersedes do-mestic legislation.” Their suggestions for improving the situa-tion include the publication of information and opinions, backed by well-reasoned argu-ments, on aspects of EU law. In addition to planning a book on Cyprus law, they are currently working on a monthly EU briefing. Part of their mission is to keep their clients fully informed of all legal developments across all sectors.There is too little informa-tion and there are few available legal resources at present, they say, and the partners regret that “the typical view of our colleagues is not to share” but they remain determined to press ahead with this particular venture. They also propose that local conferences featuring both local and overseas speakers would be another good way of trying to update and inform both the profession and the judiciary.

“The judiciary are, unfortunately, heavily overworked and the system is not conducive to speedy dispute resolution,” says Thomas Keane, adding that the system needs to be reformed and judges must know and understand that, with regard to their par-ticular area of expertise, they need to keep up-to-date with EU legislation. Christina Vgenopoulou echoes his view: “We strongly believe that the court system in Cyprus needs to be reformed drastically, with the creation of

specialist courts – in particular a commercial court – and with judges who have sufficient years of experience in the area of commercial law which is complex and dynamic. We also believe that mediation and arbitration should be used a lot more. In commercial disputes, especially, they make for much more swift and easy solutions to any disputes that may arise.”Keane adds that a Court of Arbitration set up to deal with complex commercial disputes-with a distinct set of rules would be extremely beneficial. ‘‘Businessmen want and need swift action on all levels. They can’t afford to wait years for what may ultimately be a pyrrhic victory and when cases go to court they may be decided on procedural grounds rather than on the essence.”Three years after setting up their own firm, Thomas Keane and Christina Vgenopoulou are happy with what they have achieved so far and look forward to further growth as they take on new business and new clients, while investigating new opportunities that mirror Cyprus as a country that is develop-ing and finally emerging stronger from its recent crisis.“We want to maintain our basic philosophy of keeping our hands-on ap-proach towards clients. That won’t change,” says Keane, while his partner cites the area of specialist publications as one in which she is especially interested: “Don’t forget that we are lawyers and in our profession there has always been an intellectual challenge. To me, this is a very important aspect. There is much more to a law firm that finding clients and we all need to deal with – and enjoy – that intellectual challenge which attracted us to the profession in the first place.”


LEGAL PROFESSION

WE ARE LAWYERS AND IN OUR PROFESSION THERE HAS ALWAYS BEEN

AN INTELLECTUAL CHALLENGE

CYPRUS NEEDS TO BE REFORMED DRASTICALLY


The price of oil is only to a certain extent the result of supply and demand. Developments in, and expectations of, the glob-al economy, the proven reserves in oil producing countries, new tech-

nologies in exploration and exploitation, and environmental concerns among others influ-ence the perception of the value of a barrel of crude oil. During the post-Second World War era, the expanding Western economies depended mainly on supplies from the prolific Middle East and, for three decades, the price remained relatively stable, between US$2.50 and US$9.00 per barrel.

The next 30 years would see a dramatic change that, through a number of fluctuations due to interference from producing coun-

When the crude oil price reached US$110 per barrel in December 2013, few economists foresaw the decline that would reach close to half that level by December 2014. What caused this decline, at what price may it bottom out and when – if ever – may we see a return to 2013 levels?

OIL PR

ODUC

ERS OVER

By Fred BalmChairman,

Emergo Group

BARREL

tries, would result in a per barrel price north of US$100. Traditionally, the upstream and downstream oil industry has been controlled by a limited number of large conglomerates. The high oil price incentivized medium- and small-size companies to enter the industry, supported by cheap market capital during low interest rate periods. This flow of funds benefitted the expanding service companies allowing them to introduce new innovative technologies to the producers, who increased production as a result. However, the dawn-ing of the Asian economies, especially China, the positive developments in Europe, North America and developing countries, caused pressure on pricing since the increased demand outpaced production during the last decennia of the 20th century.

Then technology completely changed the game.

ENERGY


East has created societies with a standard of living requiring an oil price far above the cost of production, which obviously was not the case during the first 30 years after the Second World War. According to the Canadian Orga-nization of Oil Producers, the break-even point in North America is at about US$60 per bar-rel. Significantly below that level, middle and small producers will not survive. Wood Mack-enzie claims that 32 potential European oilfield developments, able to produce 4.9 billion barrels of oil, may be mothballed if the price is below $60 per barrel (The Economist).

OPEC may be expected to follow the de-cline and the time it lasts before it decides what the impact of low pricing was on the supply side and whether it needs to intervene by sig-nificantly reducing production. The problem is, however, that falling demand and price adjustments are structural and not cyclical; net energy importing countries may adapt their policies accordingly.

After perestroika and glasnost, the rejuvenated

oil industry in Russia became a significant exporter of oil and gas. As a result of high oil prices and the steady supply of natural gas to the European market, the standard of living in Russia gradually improved. But depending too much on income from energy exports was to the detriment of developments in other industrial sectors (a vulnerability compared to ‘Dutch Disease’ by Frances Coppola). Energy exports totalled approximately $300 billion per year, representing nearly 70% of Rus-sia’s foreign currency and half of its annual budget. The falling oil price spells disaster for Russia, and while the rouble is falling in line with it, a recession is now unavoidable. How long it may last is anybody’s guess. Be-side market fluctuations, Moscow’s Ukraine position and Western sanctions will have an unpredictable impact on stability in Russia and may determine the Kremlin’s ability to maintain current policies.

Unlike OPEC, Russia’s ability to increase or decrease production and supply is hampered, not only by pricing but also by not widely publicized problems in its oil industry. Russia badly needs to develop new resources, and this is the main reason for cooperation with West-ern companies like Exxon. It also needs access to the capital markets. Once-prolific Siberian production is declining fast and, without devel-oping shale deposits there and without devel-oping Arctic resources, Russia’s dependence on energy related revenues will be under pressure. Could a decrease in oil and gas exports from

Sixty-five years ago, a well stimulation technique called hydraulic fracturing was in-vented. It would take half a century, technical improvements and high oil prices to develop this technology into the present game-changer. In combination with ultra deep drilling, multi-directional coiled tubing allowing a multitude of feeders from one wellbore and innovative exploration solutions, technology – rather than supply and demand – has changed the equa-tion.

Fracking has been mentioned by several commentators as the most important innova-tion of the 21st century, ahead of iPhone, Facebook, etc. How could that be?

When previously inaccessible oil and gas be-came accessible and oil could be extracted from shale rock formations, self-sufficiency in en-ergy production suddenly became within reach of the world’s largest oil importer, the USA.

Shale oil and gas extraction is now spreading around the world and countries from China to Argentina are in the process of developing and

exploiting their own reserves. Canada, with its oil sands and new extraction technology, now ranks as number three in the world in oil re-serves. Mexico, for many years granting a mo-nopoly to its National Oil Company, opened its industry to foreign competition, which will increase production. The NAFTA (USA-Canada-Mexico) has the potential to become a net energy exporter.

Supply and demand, however, is still a factor and the weak economic growth of recent years, together with the increase in alternative energy sources, has slowed demand. But infrastructure is in place, many wells are drilled and oil for the foreseeable future will flow from wells in non-OPEC (Organisation of Petroleum Ex-porting Countries) countries.

OPEC, with 40% of the world’s oil produc-tion, is still a force to be reckoned with. But its dramatic impact on the western economies as a result of the oil supply and energy crises of the ‘70s is a thing of the past. OPEC is, in theory,

still able to influence the price of oil, but production should be significantly reduced to have the desired effect. OPEC Secretary-General Abdallah Salem ei-Badri made it very clear when he stated that no production cuts should be expected for the foreseeable future. Why is that?

OPEC intends to hang on to its market share and is able to do that for an extensive period at per barrel prices much lower than the present market dictates, but not indefinitely. The steady flow of dollars towards the Middle

Russia have a positive impact on the price of oil? Not really, there is overhang enough in the market to compensate for any shortfall.

With giant conglomerates like Lukoil, Gazprom and Rosneft, the technical ability and infrastructure is available, but there may not be enough capital flowing back into the industry to finance developments. With the Bazhenov field, Russia may have the largest shale oil reserves in the world – many times the US Bakken formation – but without Western cooperation in exploration, well-service tech-nology and capital, it may take many years before Russia can benefit from what it terms this ‘hard to recover’ oil.

At present the Russian oil industry is suf-fering from the withdrawal of Western service companies complying with applicable laws. To quote Dmitry Lebedev (Financial Times, 29 October 2014), “The Russian oil services industry is in bad shape; it always was. It’s like having an old Russian Lada instead of a Mer-cedes.”

Past price fluctuations lasted about 6 months on average. Based on this, it would be fair to assume that in mid-2015, the price level may move upwards of US$60-70 per barrel. This time, however, the fundamentals are different. Oil production is no longer the prerogative of traditional producers and the Middle East. Shale formation produc-tion has brought many new players to the game and natural gas as a source of energy is increasingly replacing oil. Although the benefits of low oil prices will stimulate the economy in non-producing countries, a sig-nificant increase in demand is not predicted and an increase in production will shift away from countries that depend to a large extent on oil exports. Efforts to stop developments in shale formations will not succeed; the potential is too lucrative and neither OPEC nor Russia can afford to influence the price through significantly lower production. For the next 6-12 months, the Western oil companies will have to live with a price level of US$50 per barrel or less. Budgets will be adjusted and cost-cutting will be deep – the past boom increased costs dra-matically – and, as a result, the break-even price point will shift. A gradual increase to US$60-70 levels near the end of 2015 seems feasible. Given the dramatic increase in reserves and the large number of players in the shale oil market, a US$100 per bar-rel price may not return for the foreseeable future.

A US$100 PER BARREL PRICE MAY NOT RETURN FOR THE FORESEEABLE FUTURE

BUSINESS SURVEY


CEO Confidence Grows in Cyprus


PwC’s 18th Annual Global CEO Sur-vey, in which more than 1,300 CEOs from across the world took part, was launched at the opening of the Annual Meeting of the World Economic Fo-rum in Davos, Switzerland, in January 2015, painting a picture of cautious optimism. Even though a smaller percentage of CEOs compared to last year – 30% in the eurozone and 37%

globally – believe that global economic growth will improve over the next 12 months, confidence in the ability of their own company to achieve revenue growth has increased. In the context of the global survey, PwC Cyprus carried out, for the fourth consecutive year, a country-specific survey, which sets out the views of more than 80 CEOs. In Cyprus, the local survey recorded higher levels of confidence than in 2013, as 39% of respondents believe that the global economy will improve.

Among the conclusions of the local survey, the results of which were presented earlier this month, are the following:

GROWTH PROSPECTSSome 42% of CEOs in Cyprus (53% in the eurozone and 61% globally) believe that there are better growth prospects for their organisation compared to three years ago. CEOs are confident about their company’s prospects for revenue growth, but are especially concerned about economic, policy and social threats and how these will affect their business. Geopolitical uncertainty (82%), government response to fiscal deficit & debt burden (75%), increasing tax burden (73%) and access to affordable capital are the issues that CEOs in Cyprus are most concerned about.

When asked which countries (excluding Cyprus) they con-sider most important for their overall growth prospects over the next 12 months, the United Kingdom with 38%, Russia with 27% and Germany with 15% rank in the first three places of the participants’ responses.

It is worth noting that percentages for the United Kingdom and Russia have increased from 27% and 24% respectively since last year, while for Germany it has decreased from 19% in 2014.

It is obvious that problems with the Russian market and the possible impact of de-offshorisation on the Cypriot economy have not affected the responses of CEOs to this question.

By contrast CEOs both globally and in the eurozone con-sider the United States as the most important country for their overall growth prospects, followed by China and Germany. It is interesting to note that, for the first time in five years, the

US ranks higher than China in the preferences of CEOs glob-ally.

The steps taken in the direction of ensuring economic sta-bility have contributed to the confidence expressed by CEOs in Cyprus. When asked about their company’s prospects for revenue growth over the next 12 months, 63% said they are confident, compared to a mere 32% in last year’s survey. This percentage has almost doubled since last year, confirming the positive climate over the last few months, as a result of politi-cal and economic stability. Corresponding global percentages stand at 84%, similar to last year, while an increase of 11% has been recorded in the eurozone, up from 71% in 2014 to 82% in 2015.

It should be noted, however, that according to these figures and compared with last year (83%), CEOs in Cyprus are cur-rently less concerned about the government’s response to the fiscal deficit and debt burden. This could be attributed to the smooth implementation of the obligations undertaken by the State under the Memorandum of Understanding (MoU) with the Troika, or perhaps because they acknowledge that certain measures have already been adopted and steps are being taken to address the island’s fiscal deficit. CEOs are, however, begin-ning to express concerns about over-regulation, which is the primary concern both globally (78%) and in the eurozone (83%).

The results of the survey are also interesting in terms of the three-year outlook, as CEOs in Cyprus say they are confident about the prospects of their own company, at a percentage of 82% compared to 75% last year. It is worth noting that in 2012, only 32% of CEOs in Cyprus stated that they were con-fident about the future of their business. This rate skyrocketed to 94% in 2013 but fell to 75% in 2014 after Cyprus signed the Memorandum of Understanding with the Troika. This year it increased to 82%, offering cause for optimism.

The corresponding percentages of 88% for the eurozone and 93% worldwide have remained stable over the last few years, without significant variations.

RESTRUCTURINGAccording to PwC Cyprus’ survey, CEOs plan to initiate a se-

ries of restructuring activities in the coming 12 months, in order to respond to contemporary challenges and to the needs of their business. Entering into a strategic alliance or joint venture (69%) and outsourcing a business process or function (56%) appear to have gained ground compared to last year. The implementation of a cost-reduction initiative is however, once again, the leading option with 85%. The survey’s findings reveal that CEOs in Cyprus continue to believe in cost-reduction, even though the corresponding percentage has decreased from 93% in 2014.

80% of CEOs in Cyprus stated that they now look for a much broader range of skills when

hiring than they did in the past


BUSINESS SURVEY

The survey results reveal an issue that PwC believes requires attention. In Cyprus, 43% of CEOs stated that they don’t feel threatened by a significant competitor emerging from other in-dustries. To the next questions, however, on how likely it will be that organisations will increasingly compete in new sectors other than their own, 66% of the respondents said that this is likely while 60% stated that their organisasion has entered or considering to enter a new industry.

It is quite a paradox that CEOs in Cyprus do not see compe-tition rising while, at the same time, they are open to the pros-pect of extending their operations to other sectors.

TECHNOLOGYResearch, technological advancement and innovation are the driving forces behind competitiveness. Digital technology has changed our daily lives and how we view things, giving busi-nesses a different kind of value. In Cyprus, 93% of CEOs consider the Internet of Things to be very important for their organisation while 81% are mostly interested in data mining and analysis, followed by mobile technologies for customer engagement, at 75%.

When asked to what extent digital technologies create value for their organisation, 89% of CEOs in Cyprus replied that it contributes to operational efficiency and 82% to data and data analytics.

Moreover, the overwhelming majority of CEOs in Cyprus (93%) believe that they should be champions in the use of digital technologies and promote them across their company, while 87% think there should be a clear vision of how digital technologies can help achieve competitive advantage. Similar rates have been recorded for both of the above in the eurozone

It is quite a paradox that CEOs in Cyprus do not see competition rising while, at the same time, they are open to the prospect of extending their operations to other sectors

(86% and 87% respectively) and globally (86%).Beyond the importance of the use of technology, the need to

integrate digital technologies into the strategy of an organisa-tion is another interesting finding. In addition, the proper use of technologies by CEOs themselves is thought to set a good example. It is worth noting that the “revolution” brought about by social media, in less than a decade, has also touched management at the most senior level. In fact, information technologies and social and communication media have trans-formed organisations, highlighting the fact that the “digital illiteracy” of leaders is considered an important disadvantage, and dictating the need to change traditional management methods. CEOs therefore recognise the important role of new technologies and are making efforts to integrate them, both in the context of their own governance and in the broader opera-tional framework of their business.

PERSONNELHalf of CEOs globally state that their headcount will increase over the next 12 months. However, 21% expect a decrease, this rate being almost the same as last year. The corresponding fig-ures in the eurozone are 36% and 33% respectively. In Cyprus, CEOs appear to be a lot more confident about a potential increase in their headcount compared to last year, with 37% expecting an increase, in comparison to a mere 17% in last year’s survey. It is worth noting that only 8% of CEOs in Cy-prus believe their headcount will decrease. This rate has regis-tered a significant decline, when compared to 23% in 2014. It therefore appears that CEOs largely believe that their business has stabilised and that it is no longer necessary to reduce their headcount in order to contain costs.

Implementing a strategy to promote talent diversity and in-clusiveness is now a priority for all businesses, as talent is every-where, irrespective of race, nationality or preferences. What is important is for companies to have the ability to locate talent anywhere, adapt it to their own business needs and, obviously, retain it. Companies need people who can think and work dif-ferently, so as to tap into the full potential of their workforce and achieve a competitive advantage.

More than half of the CEOs (57%) reported that their busi-ness implements some kind of strategy that promotes talent diversity and inclusiveness. The corresponding rates for the eurozone and globally stand at 65% and 64% respectively.

In Cyprus, 88% of CEOs believe that the adoption of practices that promote talent diversity and inclusiveness has enhanced customer satisfaction, while 85% report that it has enhanced business performance. For 87% of CEOs in the eu-rozone and 91% globally, attracting talent is the greatest ben-efit resulting from this process.

The finding confirms, once again, the paramount impor-tance that leaders attach to a quality workforce.

Finally, 80% of CEOs in Cyprus stated that they now look for a much broader range of skills when hiring than they did in the past, while 68% believe in and equip their employees with new skills through continuous learning or mobility pro-grammes.

SPECIAL SUPPLEMENT

OIL & GASSERVICESIN CYPRUS

T industry has maintained a rather -

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• AMATHUS CORPORATION LTD

• DELOITTE

• EY CYPRUS

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• SHIPCON GROUP

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CONTENTS

Amathus Corporation Ltd is a multidimensional group of companies, established in Cyprus in 1943 and providing

services to the Oil & Gas industry since 2008.

The Oil & Gas Industry is an increasingly important element of Amathus business profi le and strategic plans.

Ongoing opportunities in this sector make for exciting challenges in specialised handling of cargo, logistical and

maritime support for drilling and onshore bases.

Throughout Amathus Corporation, preventive and systematic HSEQ work is an integral part of everyday business.

The company and its key subsidiaries, Amathus Aegeas Ltd and Amathus Travel Ltd have established integrated

management systems for Health, Safety, Environment and Quality, which are certifi ed by LRQA and CYS/IQNet

respectively.

Committed to support the Oil & Gas community, the company is also registered with FPAL (supplier number

10054007) to ensure that buyers have immediate and full access to the company’s records.

Dedicated and committed to support the Oil & Gas development in the Eastern Mediterranean Basin, Amathus is

well positioned to provide full logistical support to Oil & Gas operators and OFS companies, supporting the local

exploration program and ongoing operations in the region.

Please contact Mr Iasonas Lanitis, Business Development Manager – Oil & Gas, by telephone +35725362145, or by

email [email protected], to discuss how Amathus can deliver your requirements and exceed your expectations.

Amathus Aegeas Ltd, is a leading cargo transportation

and logistics company in Cyprus off ering a

comprehensive range of logistical and maritime

support services to international and domestic clients.

Established in 2005 following the merger of the

Shipping Division of Amathus Corporation Ltd with

Aegeas Navigation Ltd, Amathus Aegeas consolidates

more than 70 years of experience and expertise of its

founding partners to off er world class services with a

local approach.

Amathus Aegeas, a member of THLG (The Heavy Lift

Group), provides logistics and value added services to

oil & gas companies for the support of off shore drilling

operations and onshore bases. The service scope

ranges with the requirements of clients and covers all

logistics disciplines in the supply chain.

With the know-how and a successful track record in

handling cargoes for the oil & gas industry, Amathus

Aegeas is fully equipped to take on the challenges of

this demanding industry.

Amathus Travel Ltd, established in 1947 (IATA since

1987), is a leading corporate travel management

company in Cyprus and the local partner of FCm Travel

Solutions. FCm Travel Solutions is one of the world’s

leading travel and expense management companies

with a global network of partners delivering global

service consistency, savings and cost controls to clients

worldwide.

FCm Marine & Off shore Travel Services is a specialist

division of Amathus Travel/FCm providing a locally

dedicated travel and personnel support service to the

maritime and oil & gas sectors. Working with major

oil & gas companies and handling crew changes since

2008, Amathus Travel has developed the expertise to

provide unparalleled fl exibility and speed of service

with guaranteed bottom line savings.

Working with Amathus Travel, oil & gas companies

benefi t from a dedicated local team of experienced

consultants with vast knowledge of the industry,

globally competitive fares and 24/7 support worldwide.

LOGISTICAL SOLUTIONS FORTHE OIL & GAS INDUSTRY

Amathus Corporation Ltd is a provider of logistical support services to the Cyprus Maritime

and Oil & Gas industry. With more than 70 years of experience in the industry, we provide

win-win logistical solutions for onshore and off shore support.

SERVICES PROVIDED

Logistical Support

Logistics

Freight forwarding

Ocean and air charters

Customs clearance

Warehousing, storage,

packing and distribution

Management of the logistics supply

chain

Project cargo administration

Assistance in setting up base opera-

tions and conducting

business in Cyprus

Maritime Support

Marine operations

Ship agency

Ship husbandry

Bunkering

Provision of supplies

Chartering

Stevedoring

Cargo handling

Personnel Support

Travel Management

Corporate Travel

Crew Changes

Local Accommodation

Transportation

Car rentals and transfers

Conferences and events

Recreational activities

D E L I V E R I N G S O L U T I O N S T O T H E O I L & G A S I N D U S T R Ywww.amathus.com

SUPPLIER NUMBER - 10054007

D eloitte’s oil & gas professionals understand the business of oil & gas and work with clients to understand their specific goals and drivers.

We recognise the political uncertainties, the risk, the challenges and opportunities in their working environment.

We help our clients address many of these challenges by providing a range of services to companies in all segments of the oil & gas industry, from supermajors and national oil companies through to independents, oilfield services and energy trading businesses.

We serve most of the world’s larger oil & gas companies and contribute to research and analysis of industry issues and trends discussed in various events and conferences where industry leaders share their insights.

Deloitte’s Oil & Gas practice has expert presence in every continent and each major oil & gas centre around the globe. Our scope of services spans the entire spectrum of the corporate functions as well as analytical price forecasting, geological analysis and reservoir audits, well head planning and operations and deep sea platform and equipment decommissioning to name a few. Innovation is an inexhaustible resource in the industry and Deloitte’s professionals who make up the Deloitte Oil & Gas practice are no different as they keep the flow of ideas steady and on target.

Committed to service excellence, Deloitte is ready to provide you with the global network coupled with pragmatic local execution capabilities. We tailor and improve our services to help drive. Our going research in our Centers of Excellence is focused on anticipating and validating changes. We bring these trends and this understanding to our clients as new solutions and proven services.

In Cyprus, we were involved in the Oil & Gas industry from the very beginning. For the past six years we have been serving the major industry players with the provision of CRS certifications, audit, tax advisory, VAT advisory and human capital services. Furthermore, with the support of the Petroleum Service Group of Deloitte International, which employs 3,100 professionals in specialisms across Oil & Gas Analysis, Economic Modelling, Information Solutions and Geographic Information Systems, we can offer the support needed to succeed.

We serve every segment of the Oil & Gas industry and we serve them where they operate. It is not a coincidence that Deloitte member firms serve 63% of the world’s top 60 oil & gas companies and 43% of national oil companies.

Through a dedicated group of experts with relevant expertise and experience we weave a global Oil & Gas practice which is complemented by very deep subject matters experts in various critical components of the Oil & Gas Value Chain.

Our people provide support in tax, audit, consulting and financial advisory services/corporate finance as well as on industry specific technical issues, which equip our clients with the prerequisites to succeed. Our internal resources ensure that our teams have access to up to the minute market intelligence, can respond promptly to industry developments and are able to provide informed comment and background information to clients.

For more information about our services to the Oil & Gas Industry, contact Nicos Papakyriacou, Head of Deloitte’s Cyprus Oil & Gas Services (email: [email protected] tel.: 22360300) and/or visit our website www.deloitte.com/cy

Expert partners for the oil & gas industry

Naturally resourceful

Deloitte’s oil & gas practice has a presence on every continent and in each major oil & gas center around the globe

• 3,000+ experienced professionals, combining a dedicated group with subject matter specialists in the various oil & gas sectors.• Our oil & gas practice regularly publishes thought leadership and insights to help clients stay ahead.• Our clients include supermajors, majors, independents, national oil companies (NOCs), oilfield service companies, logistics and shipping companies.

Working with the global Oil and Gas industry

Our global oil & gas practice

Americas

• Over 2,000 oil & gas practitioners.

• Three oil & gas Centers of Excellence

(CoEs) in the Americas – Calgary,

Houston, and Rio de Janeiro.

• All of the major Latin American NOCs

are our clients.

• Deloitte Center for Energy Solutions

co-located in Houston and

Washington, DC.

Europe, Middle East and Africa

• Over 1,350 oil & gas practitioners.

• Five oil & gas focused CoEs – in

Geneva, Johannesburg*, London,

Moscow and Oslo.

• Home to Deloitte’s Petroleum Services

Group, based in London.

* Opening Q3 2015

Asia Pacific

• Over 250 oil & gas practitioners.

• Two CoEs – Hong Kong/Beijing

and Perth.

• Deloitte’s Country Services Groups*

assist companies investing and

operating in China, Korea and Japan

and are working closely with Chinese,

Japanese and Korean companies

seeking overseas assets, acquisitions,

expansions and supply.

* China Services Group (CSG), Korea Services Group (KSG), Japan Services Group (JSG)

Our centers of excellence• The Deloitte Centers of Excellence (CoEs) provide a forum for innovation, thought leadership, ground breaking research, and industry

collaboration to help our clients solve the most complex oil & gas challenges.

• CoEs are regional and global resources of deeply experienced oil & gas professionals with the ability to answer complex industry questions and provide purposeful insights. Our 10 oil & gas CoEs across the globe, offer interaction through seminars, roundtables and other forms of engagement, where established and growing companies can come together to learn, discuss and debate.

Calgary*

London*

Houston*

Rio de Janeiro*

Johannesburg#

Oslo^

Moscow^

Rotterdam^

Geneva^

Hong Kong/Beijing*

Perth** Tier 1: inclusive of all services and solutions^ Tier 2: focus on specific services, solutions,

reports and research based on market demands or specific clients. E.g., the Geneva CoE focuses on energy trading.

# Tier 2 opening Q3 2015

Deloitte Oil & Gas Naturally Resourceful

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CONTACT INFORMATIONEY Cyprus

Address:

Tel: Fax:e-mail:Website:

SPECIALPROMOTIONAL FEATURE

EYCyprusVisit:ey.com/cy

Ioannides Demetriou LLC is a full-service commer-

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standards (ISO 9001:2008).

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standards of service to clients.

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Ioannides Demetriou LLC continued

advising on all legal aspects relating to

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worked in a number of independent

and largest concluded wind farm

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Power Plant at Larnaka International

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Ioannides Demetriou LLC

SPECIALPROMOTIONAL FEATURE


-nides Demetriou LLC acted as legal ad-

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tal and procurement issues related to

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its directors and lawyers have a special -

ergy sector. We recently calculated that -

rience of nearly 100 years in the energy sector. This is unique in Cyprus. We

it was the sole provider of energy to the -

tained our status as energy sector lead-ers

lawyers and participating in international

speakers.

us as its legal advisors in the two hydrocar-

the EAC and the Cyprus energy sector are undergoing radical change and are facing

-es. The EAC is playing a pivotal role as the

for the purposes of power production and we are involved in advising the EAC in con-

process to a successful conclusion.

with the latest legislative trends and legal directions in the energy sector. The Energy

in which key energy sector institutions and -

recognition outside Cyprus; we are cur-rently in discussions with potential energy

Ukraine”.

CONTACT INFORMATIONIoannides Demetriou LLC

Address:

Tel:Fax:e-mail:Limassol:

Tel:Fax:e-mail:Website:


Services delivered within the ShipCon Group

Quality partner from Cyprus in the area of

Oil Spill Response & Protection of Marine

Environment spill prevention & response.

IEMS Holding Cyprus is an international

company specializing in the provision of

complete solutions in oil spill response

Our services include Oil Spill Response,

Response Centre Management, Equipment

Management, Consultancy, Emergency

Response Vessels, SPRAG, Environmental

Remediation & Investigation Services and

oil spill response training and contingency

planning for oil spill releases and crisis

management.

IEMS Cyprus is able to provide purpose built

emergency response vessels and equipment

for Tier 1, Tier 2 and Tier 3 services.

IEMS Cyrpus has an extensive network of

training, consulting and research that can

satisfy any requirement for expertise in the

area of marine environment protection

services.

Quality International Educational & Training

Provider in the areas of Oil & Gas, HSSE,

Marine & Civil Protection.

The Levantine Training Centre (LTC) is a

centre of excellence providing quality

educational and training services for

professionals involved in the areas of Oil & Gas

(HSSE), Marine industry and Civil Protection.

non-accredited courses covering a wide range

towards the Continuous Professional

Development (CPD) of professionals.

The LTC courses are conducted in association

with International Training Providers of

unparalleled quality and accredited by world

wide known institutions, such as the Energy

Institute (EI) of UK and the International

Association of Drilling Contractors (IADC) as

well as world wide known professional bodies,

such as NEBOSH, IOSH, OPITO, Edexcel.

The majority of LTC courses can be delivered

as classroom, open/distance learning and

e-learning thus satisfying the needs of all

professionals.

Services delivered within the ShipCon Group

Quality partner from Cyprus in the area of

Oil Spill Response & Protection of Marine

Environment spill prevention & response.

IEMS Holding Cyprus is an international

company specializing in the provision of

complete solutions in oil spill response

Our services include Oil Spill Response,

Response Centre Management, Equipment

Management, Consultancy, Emergency

Response Vessels, SPRAG, Environmental

Remediation & Investigation Services and

oil spill response training and contingency

planning for oil spill releases and crisis

management.

IEMS Cyprus is able to provide purpose built

emergency response vessels and equipment

for Tier 1, Tier 2 and Tier 3 services.

IEMS Cyrpus has an extensive network of

training, consulting and research that can

satisfy any requirement for expertise in the

area of marine environment protection

services.

Quality International Educational & Training

Provider in the areas of Oil & Gas, HSSE,

Marine & Civil Protection.

The Levantine Training Centre (LTC) is a

centre of excellence providing quality

educational and training services for

professionals involved in the areas of Oil & Gas

(HSSE), Marine industry and Civil Protection.

non-accredited courses covering a wide range

towards the Continuous Professional

Development (CPD) of professionals.

The LTC courses are conducted in association

with International Training Providers of

unparalleled quality and accredited by world

wide known institutions, such as the Energy

Institute (EI) of UK and the International

Association of Drilling Contractors (IADC) as

well as world wide known professional bodies,

such as NEBOSH, IOSH, OPITO, Edexcel.

The majority of LTC courses can be delivered

as classroom, open/distance learning and

e-learning thus satisfying the needs of all

professionals.

For enquires regarding any ShipCon related service, please contact

Agnieszka Radomiak, Director, ShipCon Group of Companies

Spyrou Kyprianou 5 Mesa a Geitonia, Limassol, Cyprus

Telephone: + 357 25334250

FAX: +357 25255262

E-mail: [email protected]

Group Websites: www.shipcon.eu.com, www.levantine.eu, www.iems-cyprus.com

ShipCon Group: Your Quality Partner in the areas of HSSE,

ShipCon has participated in the development and implementation of more than 50 EU funded projects under

LIFE+, H2020, MED, ERASMUS, FP7, ENPI MED, which secured a total budget in excess of 15 Million Euros.

Since 2012, ShipCon Group of Companies has extended its service portfolio to include essential accredited HSSE and Oil & Gas

management training and the provision of equipment and trained personnel to provide marine environment protection services.

be attained in Cyprus and throughout the Eastern Mediterranean region.

ShipCon Limassol Ltd., the parent company of ShipCon Group of companies, is a dynamic and fast growing

ShipCon has pa

LIFE+, H2020,

ShipCon Limas

Con Group of Companies has e

SHIPCON GROUP: DELIVERING SOLUTIONS...TIMELY & EFECTIVELY


NO REGRETSOver the past 10 years, the fortunes of the local real estate sector have resem-bled a roller-coaster ride as prices rose sharply, only to slump dramatically and then start to recover slowly. George Mouskides, Director of FOX Smart Estate Agency, has been through both the good and the bad times but, he says, he has no regrets or complaints about his career choices.

REAL ESTATE

By John Vickers | Photograph by Jo Michaelides

W hen George Mouskides and his partner George Ma-vreas set up their own estate agency in 2007, they justifiably felt that their decision had been an in-spired one. It was a year that saw an unprecedented number of property sales in Cyprus – over 21,000, of which more than 11,000 were to non-residents. Mouskides had previously served as the general manager of CLR Investment Fund Ltd, as well as Assistant Vice President Analyst at Moody’s Investor Service in Limassol but eight years ago, it was hard to argue with the idea that real estate was the sector to be in. Mouskides and Mavreas originally bought CLR’s share in the US real estate franchise RE/MAX and set up offices in Nicosia and Limassol. “The booming market at the time helped us get off the ground,” Mouskides recalls, “but in 2008 RE/MAX decided that it didn’t want to stay in Cyprus due to the legal framework governing the estate agency business in Cyprus, which was surprisingly strict compared to that in the other 65 countries in which the company was operating. So we had to take a decision on how to move for-ward and we decided to set up our own brand.”Mouskides originally became interested in real estate as an invest-ment, some years before the US sub-prime crisis was to turn the world upside-down and it was clearly an extremely profitable sector.“We had started looking at real estate in 2004-2005 when the market was booming and we made several good investments which paid off,” he says. “In 2006, we started setting up the agency busi-ness and disengaged from the investment side. It was definitely a good time and prices continued to rise until the middle of 2008. Our first year was exceptional, given that, on average, from 2000-2013, the number of property sales was 13,000.”Those were the days! Mouskides believes that the market will eventually stabilize at 10,000 and, for 2015, he expects about 6,000 transactions. Going back seven years, he is grateful that he and his partner understood that the approaching crisis was not going to pass Cyprus by.“We realised early on that the American problem was coming to our neighbourhood,” Mouskides says, “especially when the UK began facing problems. We had tourists, permanent residents and buyers of property from the UK and when we started seeing UK property values falling, we knew it was only a matter of time before the British lost interest in our market.” In fact, things turned out to be even worse than he had expected. Not only did the British stop buying property in Cyprus after 2008, but they started selling too. The bubble burst.

Prices started falling around the middle of 2008, by which time

Marina Theodorouxxxxxxxxxxxxxxxxxxx

The first people who should be investing in Cyprus are the Cypriots themselves


while we may have had some upgrades, we still have a long way to go before we are where we were four years ago.”

Mouskides recently wrote an article in Gold about the Immov-able Property Tax, which he described as ‘inhuman and absurd’. If it were in his power to take measures to help the industry, what would Mouskides do, apart from abolishing the IPT?

“I would restructure the taxation of real estate” he says. “Real estate is a medium-to-long-term investment and at present the taxes are excessive. We could halve capital gains tax from 20% to 10% and reduce transfer fees for buyers. 8% is much too high. The other problem with taxes is that they are too complicated. Nobody knows how much they will have to pay next year. The stability and pre-dictability of taxes is one of the most important ingredients of any investment.”

What’s more, some taxes are simply unfair, according to George Mouskides.

“If I have a house worth €1 million but I owe €900,000 to the bank, I should be taxed on the difference, not on the €1 million, which I am unable to pay.”

Another longstanding problem concerns the issuance of title deeds, and sorting out the huge backlog is one of Cyprus’ obliga-tions under the Memorandum of Understanding signed with the Troika (“As if we needed them to tell us that we have to fix this problem,” says Mouskides wryly). However, he goes on, even if a title is issued, it is issued in the name of the developer, not the buyer. If these properties are mortgaged by a bank, it will not transfer the title to the buyer unless it is paid. “This is a major legal issue and the Government needs to spend more time on it. It has already caused us so much bad publicity abroad in recent years.”

Have there been times when Mouskides has seriously regretted entering the property sector?

He laughs at this suggestion. “No, I’ve done various jobs in my life and I have no regrets or complaints. And now that my eldest son, who has just obtained his degree in real estate from Reading University, has decided to follow in my footsteps, I can’t afford to think that way!”

Beyond the joking, his attitude suggests that there are signs of improvement in the buying/renting sectors. Does he think that sell-ing prices are currently too low or have they actually been corrected from an artificially high level?

“They were too high,” he agrees, “and the main reason was too much liquidity in the market. Today’s prices are around the levels of 2006 and I would say that they are leveling off. Indeed, some of today’s prices may be bargains.”

So how optimistic is he of seeing a revival of the real estate sector’s fortunes in 2015?

“I don’t expect to see miracles happening overnight but the trend is starting to look positive. Today there are places available for sale or rent that were never going to be put on the market – commercial plots in the town centres, parcels of land on the seafront – so in that sense things have actually improved. The market is now stabilizing and I am confident that it will soon be growing again.”

REAL ESTATE

it was clear that FOX would be facing problems. A couple of meas-

ures taken at the end of 2008 were to prove essential in helping the

agency survive the crisis. “Firstly, we decided to go into rentals in

a big way because we knew that if people couldn’t buy they would

have to rent,” Mouskides explains. “And secondly, we decided to

pay off all our debts and to remain debt-free until things improved.

So to this day, FOX doesn’t owe a cent to anybody.”

Apart from events that were beyond our control, George

Mouskides believes that there are several things that Cyprus could

and should have done in order to protect the sector when it was

booming.“We should never have allowed the banking sector to grow so

big,” he says. The Government and the Central Bank should have

had their eyes and ears open and been aware of what was going on

outside the country but, instead, they ignored some very loud warn-

ings. “I think we actually went into a denial stage in 2010, with

many people thinking that we had escaped the worst,” Mouskides

explains. “In fact all the problems were still there. We had not solved

any of them: inefficiencies in the civil service and the market and

oligopolies that we just ignored. As for steps that could have been

taken specifically for the real estate market, the Central Bank could

have increased the percentage that buyers had to pay as a deposit

(buyers’ own contribution). To be fair, it tried to do this but all the

developers opposed it and so it was left at 20%.”

Although Mouskides and his colleagues in the broader real estate

sector have suffered a great deal over the past two years, there seems

to be little public sympathy for the sector as a whole. Does he think

that this is a result of the link between the big developers and their

huge non-performing loans?

“It’s true that the banks allowed the top 10 developers to over-

borrow,” he acknowledges. “They over-leveraged their businesses

and when the crisis hit, there was no way to take corrective meas-

ures. They had borrowed a lot of money to buy land for future

development at what turned out to be the worst possible time.

Should they have managed their business better? Probably yes. But

the banks should have been more prudent about over-lending to

one group or one individual. The network of bankers, political par-

ties and big business may have led to them to not carry out their due

diligence properly.” He understandably makes the point that it is

rather unfair to link a small estate agency with a big developer since

they are involved in totally different businesses. “The overall real

estate sector extends way beyond construction,” he notes, adding

that “It’s huge but, unfortunately, we still haven’t done enough to

make it sustainable.” For two years, the government and its advisors have been telling

everyone that the key to economic recovery is foreign investment

and, of course, property remains one of the main potential areas of

investment. How difficult is it to get investors to look at Cyprus in

confidence today?In the view of George Mouskides, the first people who should

be investing in Cyprus are the Cypriots themselves. “I would say

that the Government has not done enough to spearhead develop-

ment coming from within the country,” he says, noting that foreign

investment is always welcome but “unless we appear to the outside

world that we’ve fixed our problems, stabilized the economy, etc.,

they’re not going to come.”

The Director of FOX Smart Estate Agency recognizes that steps

have been taken to attract foreign investment, including the “Citi-

zenship Through Investment” scheme and the measures by which

third country nationals may obtain permanent residence. “But we

need to do more, such as taking measures that will encourage the

rating agencies to continue upgrading Cyprus. Let’s not forget that,

We realised early on that the American problem was coming to our neighbourhood



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{March 14 – April 13, 2015}

78 Business Needs to Focus on People and Purpose Products and profits are not enough, Deloitte’s annual survey reveals

ISSUE

48

84 Mini One-Stop-Shop brings new VAT rulesThe new MOSS scheme.

82 {economy}82 Back to an Asian-led World Economy?The shift of global economic power to emerging economies is set to continue.

79 Gender Parity: Now is the TimeEY highlights how more supportive en-vironments can be created for women to succeed

80 The Virtuous CircleHow Social Progress develops with and helps attract foreign direct investment

81 Complexity of Corporate Secretarial Activities

in Cyprus GrowsInternational corporate governance is increas-ingly demanding the attention of multinational companies and their boards of directors.

86

THE INTERNATIONAL INVESTMENT, FINANCE & PROFESSIONAL SERVICES OF CYPRUS Gold 73

74 Wells Fargo the Most Valuable Bank BrandNew study shows Chinese banks overtaking major US names

76 How to Achieve Financial IndependenceWhy do some professionals making €2 million a year quickly go bankrupt, while someone on an average income can retire and have no financial worries?

77 Easier Credit Conditions Across the Board According to the European Central Bank’s January 2015 bank lending survey (BLS), credit standards for all loan categories continued to ease in net terms in the fourth quarter of 2014.

78 {business}

74 {money}

86 Good TimingAs the world awaits the launch of the much-publicised Apple Watch, when it comes to timepieces Jaeger-LeCoultre reigns supreme.

90 A Day In The LifeEmily Yiolitis

86 {lifestyle}

MONEY: The Wealth Chef: Recipes to Make Your Money Work Hard, So You Don’t Have To By Ann Wilson 77

TAX & LEGAL: Power of Persuasion: Essays by a Very Public Lawyer By Sir Louis Blom-Cooper 85

LIFESTYLE: The SunriseBy Victoria Hislop 89

+ BOOK REVIEWS

85 ’Don’t pull a Cyprus’, Forbes publisher urges GreeceThe publisher of Forbes magazine penned an open letter to Greece’s new Prime Minister Alexis Tsipras and Finance Minister Yanis Varoufakis.

84 {tax&legal}

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Wells Fargo the Most VALUABLE BANK BRAND


NEW STUDY SHOWS CHINESE BANKS OVERTAKING MAJOR US NAMES

he annual list of the world’s most valuable bank brands, published by The Banker on 30 January, reveals that America’s banks remain the most valuable in the world. Sixty American bank

brands feature in the global top 500, with a cumulative brand value of $201bn.

For the third consecutive year, San Francisco-based Wells Fargo leads the over-all ranking with a brand value of just less than $35bn, a $4.68bn increase on its 2014 value. Wells Fargo is not just the most valu-able banking brand in the US, but across the world. However, there is no room for complacency. JP Morgan chief executive Jamie Dimon recently expressed concerns

that overregulated Western banks might be superseded by Chinese brands. The results of this year’s Brand Finance Banking 500 would appear to bear Dimon’s fears out; The biggest movers in the top 10, however, were China’s lenders, several of which have seen significant increases in brand value that have helped them move up the rank-ing. Moreover, when ranked by the brand value they have added this year, five of the top six are Chinese. China Construction

Bank has added more than any other, $7,463 billion since the 2014 study.

“The Chinese economy has been doing well for a number of years but I think this has been the first year, in terms of brand value, when Chinese banks have climbed up the tables and stood out,” says Bryn Anderson, chief operating officer of Brand Finance.

ICBC moved into second place from sixth, while China Construction Bank went from ninth to fourth position and showed the largest growth globally in brand value. Agricultural Bank of China also improved its ranking from 10th to eighth place, with 9th position now oc-cupied by Bank of China, which moved up three places from 12th.

Anderson says that this movement is not just down to the financial results of these lenders – although profits do play an im-portant role – but that it is owing to other

banking

THIS HAS BEEN THE FIRST YEAR,

IN TERMS OF BRAND VALUE, WHEN CHINESE

BANKS HAVE STOOD OUT

{MONEY}


bank, you experience its brand. In practi-cal terms, we have very specific guidelines and frameworks for employees about how we communicate a house view, the impor-tance of how we communicate that view, and what products we tend to recommend to clients with certain requirements.”

Jervoe also notes that spontaneous refer-rals, particularly from clients that have the most challenging requirements, are highly valuable. “You get famous for stuff that most people can’t do,” he says.

On a country basis, the US remains the largest player by aggregate banking brand value, and is worth almost $202bn. As was the case in last year’s ranking, it is followed by China and the UK but, in a change from 2014, fourth place is now oc-cupied by Canada, which moved up from sixth position. Anderson says that Canadi-an brands have always remained very solid and show steady, reliable progress.

If the UK is the largest European country by aggregate banking brand

value, it is France that is home

to the largest single lender by this mea-sure. Paris-based BNP Paribas continues to top the European banking brand list – it is worth about $11.5bn – even though it experienced the biggest decrease in brand value globally, with a $5.27bn decrease in its overall value. This can be largely explained by France’s deteriorating economic outlook, says Anderson. The country’s aggregate brand value decreased by 19% compared with the 2014 ranking.

BNP Paribas is followed by Dutch lender ING and Russia’s Sberbank, which

were also in the top three in last year’s list. The North American list is also largely un-changed, with Chase and Bank of America following, although at some distance, Wells Fargo.

In Latin America, Bradesco replaced Santander as the most valued brand in the region, with a $12.4bn valuation, up $1.79bn compared with 2014. Luiz Carlo Angelotti, head of investor relations at Bradesco, believes that the bank’s strength is its ability to work with any type of client, including less affluent individuals and mi-croenterprises.

“We have a strong balance sheet and high credibility in the Brazilian financial system. We are present across the whole country and have an ‘open-door’ policy: we don’t just serve a small selection of clients. We can of-fer [products and services] for all social class-es and company sizes,” he says, adding that technology is crucial to this policy, and that Bradesco will invest 5bn reais ($1.87bn) in IT infrastructure this year.

Brand Finance’s Anderson says: “[Bradesco] invested a lot to increase its market share and customer base in lower and middle classes. The income growth from these classes was more than 30% in the past three years in Brazil, much more than the rest of the population. Bradesco was the only one to customise products and services to fit their needs and it has invested in new technologies such as touch ID apps and digital cheque deposits.”

Effective communication, strong con-nection with the local community and state-of-the art technology are clearly all components of a good banking brand. However, the secret of a good brand may be distilled to an even simpler concept, as Wells Fargo’s chief marketing officer, Jamie Moldafsky, points out when she quotes the lender’s founder, Henry Wells, who in 1864 said: “We have one very power-ful business rule. It is concentrated in one word: courtesy.”

PARIS-BASED BNP PARIBAS CONTINUES

TO TOP THE EUROPEAN BANKING BRAND LIST

softer factors and to these banks’ efforts to be seen as international players. “We saw this through scores such as familiarity, pref-erence and brand satisfaction. These are the most emotive factors [of our calculations] and Chinese banks have done better than in the past in this area,” he says.

Scores in these categories are measured through surveys of both retail and corpo-rate clients.

Wells Fargo also topped the ranking in the retail banking category and, again, Chinese lenders made impressive moves in this list, including ICBC, which ranked in fourth place, up from seventh last year. As was the case in the 2014 ranking, ICBC, China Construction Bank, Bank of China and Agricultural Bank of China dominate the top four places in the wholesale banks list.

The wealth management ranking, how-ever, presents a different and perhaps more conservative picture. Aside from the dis-tinct lack of any emerging market brands in the top 10, UBS’s lead continues to char-acterise this ranking. Johan Jervoe, head of brand management at the Swiss-based bank, says that brand values colour any relationship between employees and clients. He draws a parallel to his previous experi-ence at a very different brand.

“I used to work for McDonald’s, and when you walk into a restaurant you walk into the brand,” he says. “So when you sit down with a wealth manager, when you talk to the front or back office of a private

TOP 10 BANKING BRANDS1. WELLS FARGO (US) $34.925 million2. ICBC (CHINA) $27.459 million3. HSBC (UK) $27.280 million

4. CHINA CONSTRUCTION BANK (CHINA) $26.417 million

5. CITI (US) $26.210 million

6. BANK OF AMERICA (US) $25.713 million

7. CHASE (US) $24.819 million8. AGRICULTURAL BANK OF CHINA (CHINA) $22.714 million

9. BANK OF CHINA (CHINA) $20.392 million

10. SANTANDER (SPAIN) $18.700 million


{MONEY}

Most people think wealth means hav-ing a high-income job and while it’s easier to amass assets if you have more money com-

ing in each month, the true secret to increasing your net worth is this: Spend less than you make and use the excess to generate passive income and growth on your money. What is wealth? Everyone has a different defi-nition depending on their circumstances, but I believe that it’s all about having sufficient pas-sive income to maintain your current standard of living. Your total assets (i.e. what you own) minus your total liabilities (what you owe) gives you a number that is your net worth. You can then use a figure of 5% to determine how much passive income could be gener-ated. For example, if a portfolio has a value of $1,000,000 it would be safe to assume that a passive income of $50,000 per annum could be maintained.

To achieve financial independence, we need to increase our net worth number and start to generate passive income from it (capital gains, income and dividends without requiring any work or labour). Once you have a portfolio of private businesses, stocks, bonds, mutual funds, real estate and other cash generators, you can sit by the pool all day. It’s also very difficult to wipe out a well-constructed port-folio.

If you had to stop working right now, how long could you keep up your purchasing pat-tern for cars, clothing, music lessons, college tuition, video games, etc.? The average person isn’t educated to think about this, which is why however much some people earn, they are

still left wondering why financial independ-ence and security continue to allude them, always seemingly just out of grasp.

The only way to take advantage of in-vestment opportunities is to have the money to invest until you reach a point where the returns generated on your assets can change your life. Earning a 10% return on $10,000 is only going to net you $1,000 be-fore taxes – not too bad but hardly earth-shat-tering – but the same return on a $1,000,000 portfolio is $100,000, despite requiring roughly the same effort and research.

Amassing wealth and becoming financially independent is a slow process that takes time. Do small things every day: cut your expenses, generate extra income and put the money into investment and tax-efficient accounts. With time it will build. As each new opportunity appears, you can react on a larger scale than with your previous investment. Over time the interest, dividends, and capital gains that your money has earned will begin to generate their own interest, dividends, and capital gains, and on and on in a virtuous cycle.

Einstein called compound interest “the 8th wonder of the world” and it’s how €100,000 now can grow to $1,083,471 over 25 years at 10% per annum. Starting with nothing, a saving/investment of only €100 per month will be worth €133,789 over 25 years at 10% per annum.

If you have not started yet, the only way you can have more money left over at the end of the month is to either increase revenue (your income) or reduce your expenses. Make a plan, go through your current bank statements and see where you can make changes. It’s that sim-ple: Increase revenue, cut costs or both then use the surplus to invest for your future.

Use tax breaks – saving your money in the most tax-efficient way is important.

Depending on your nationality and country of residence, there may be several options available to you to allow you to reduce or eliminate tax on your wealth and/or your income.Finally, where do you put the money?I have four simple but key rules when sourc-ing investments for my private clients:• Diversify: Don’t put all your eggs in one basket. Buy a mix of assets and buy assets according to a risk level you are comfortable with. • Buy Quality: Buy the best quality invest-ments you can afford. If you have the choice of three equity funds and one has been con-sistently ranked in the top 10% for returns over the last 5 years, buy it above the others. If purchasing property, buy it in the best loca-tion you can afford.• Focus on Income: Try to buy assets that produce income. It can help to lower overall risk and, with regular income flowing into your portfolio, you can choose how and where to re-invest it.• Take a long-term view: The value of all in-vestments fluctuates over time. Have patience and if you have followed the rules above you should develop some nice returns over the long term.

If you follow these basic rules and ideas you should soon see your wealth begin to increase. The only decision you need to take is to start today. And the greater your wealth becomes, the more I would encourage you to seek pro-fessional tax and or investment advice.

WHY DO SOME PROFESSIONALS MAKING €2 MILLION A YEAR QUICKLY GO BANKRUPT, WHILE SOMEONE ON AN AVERAGE INCOME CAN RETIRE AND HAVE NO FINANCIAL WORRIES?

EINSTEIN CALLED COMPOUND INTEREST

‘THE 8TH WONDER OF THE WORLD’

By Andrew Lumley-Holmes

HOW TO ACHIEVEFINANCIAL INDEPENDENCE

Andrew Lumley-Holmes is an independent financial adviser with Finsbury Private Wealth Management. e-mail: [email protected] or (+357) 96418652.info:


loans

{MONEY}

ACROSS

Easier Credit Conditions

THE BOARD

According to the European Central Bank’s January 2015 bank lend-ing survey (BLS), credit standards for all loan categories continued to ease in net terms in the

fourth quarter of 2014. Euro area banks re-ported a net easing of credit standards on loans to non-financial corporations (specifically, a net percentage of -5%, after -2% in the previ-ous quarter) which was in line with banks’ expectations as expressed in the previous survey round. Banks continued to ease credit standards for loans to households in net terms with overall net easing supported by ongoing competitive pressures across all loan categories. Concerning terms and conditions, banks indicated a further considerable narrowing of margins on average loans, while reporting in net terms only a slight narrowing of margins on riskier loans suggesting a further intensifica-tion in banks’ risk differentiation.

Rising net loan demand continued to be re-ported, in particular for loans to non-financial corporations and for consumer credit, while the reported increase in net demand for hous-ing loans stabilised at elevated levels. For loans to enterprises, financing needs relat-ed to fixed investment in particular contrib-uted to the increase in net loan demand by euro area enterprises in the fourth quarter of 2014, recording the first significantly positive contribution since mid-2011. Other financing needs likewise continued to contribute to the positive net loan demand (11%, from 13% in the previous quarter). These reflected in partic-ular the demand for debt restructuring and the financing needs for mergers and acquisitions, as well as for inventories and working capital.

Looking ahead, banks expect an increase in demand in net terms across loan categories for the first quarter of 2015.

Cross-country disparities in lending supply conditions continued to decline in the fourth quarter of 2014 for loans to enterprises, while partially increasing for loans to households. Among the largest euro area countries, credit standards on loans to enterprises were eased in net terms particularly in Italy and to a more limited extent in France, while remaining un-changed in Germany and Spain and continu-ing to tighten in the Netherlands. According to euro area banks, in the fourth quarter of 2014 their access to funding further improved in net terms for all main market instruments and for short-term retail deposits, but develop-ments were again heterogeneous across the largest euro area countries. For the first quarter of 2015, banks expect further considerable net easing of their access to retail and wholesale funding. With regard to regulatory and super-visory action, banks continued to strengthen their capital positions in the second half of 2014, albeit less strongly than in the first half of the year. Banks reported a decline in their risk-weighted assets after a marginal increase in the first half of 2014 mainly driven by a further reduction in riskier loans. At the same time, banks provided more indications that recent regulatory and supervisory actions are

having a positive impact, such as improve-ments in banks’ funding conditions and an

easing in overall lending conditions.

BANKS EXPECT AN INCREASE IN DEMAND IN

NET TERMS ACROSS LOAN CATEGORIES FOR THE

FIRST QUARTER OF 2015

THE WEALTH CHEF: RECIPES TO MAKE YOUR MONEY WORK HARD, SO YOU DON’T HAVE TO BY ANN WILSON (HAY HOUSE UK, 2015)

R.R.P. £12.99 (£8.50 FROM AMAZON.CO.UK)

I

THE WEALTH CHEF RECIPES

BOOK REVIEW

HE WEALTH CH

BBBORRRE


{BUSINESS}

Business should focus on people and purpose, not just products and prof-its in the 21st century according to Deloitte Touche Tohmatsu Limited’s (Deloitte

Global) fourth annual Millennial Survey re-leased last month. This and other findings from the survey suggest businesses, particularly in developed markets, will need to make significant changes to attract and retain the future workforce.Deloitte Global surveyed tomorrow’s lead-ers, from 29 countries, on effective leadership and how business operates and impacts society. Millennials (those born after 1982) overwhelmingly believe (75%) businesses are focused on their own agenda rather than help-ing to improve society.

“The message is clear: when looking at their career goals, today’s Millennials are just as interested in how a business develops its people and how it contributes to society as they are in its products and profits,” said Barry Salzberg, CEO of Deloitte Global. “These findings should be viewed as a wake-up call to the business community, particularly in de-veloped markets, that they need to change the way they engage Millennial talent or risk being left behind.”

Only 28% of Millennials feel their current organisation is making full use of their skills. More than half (53%) aspire to become the leader or most senior executive within their current organisation, with a clear ambition gap between Millennials in emerging markets and developed markets. Some 65% of emerging-market based Millennials said they would like to achieve this goal, compared to only 38% in developed markets. This figure was also higher among men.

the list of businesses, each selected by 11% of respondents.

Millennial men were somewhat more likely to say they would like to secure the ‘top job’ within their organisation than women (59% vs. 47%). Women were also less likely to rank their leadership skills at graduation as strong; 27% of men vs. 21% of women rated this skill as strong. However, when asked what they would emphasize as leaders women were more likely to say employee growth and develop-ment (34% compared to 30%), an area that many Millennials felt was lacking within their current organisations.

While overall Millennials did not feel their organisations make full use of their skills (only 28% say their organisation makes full use of their skills), this figure falls significantly among Millennials in developed markets to just 23%. In addition, it falls below 20% in Japan (9%), Turkey (15%), South Korea (17%) and Chile (19%). When asked to es-timate the contributions that skills gained in higher education made to the achievement of their organisation’s goals, Millennials’ average figure is 3%.

Today’s Millennials place less value on vis-ible (19%), well-networked (17%), and tech-nically-skilled (17%) leaders. Instead, they define true leaders as strategic thinkers (39%), inspirational (37%), personable (34%) and visionary (31%).

“Millennials want more from business than might have been the case 50, 20, or even 10 years ago,” said Salzberg. “They are sending a very strong signal to the world’s leaders that when doing business, they should do so with purpose. The pursuit of this different and better way of operating in the 21st century begins by redefining leadership.” To download the full report, visit: www.deloitte.com/millennialsurvey.

PRODUCTS AND PROFITS ARE NOT ENOUGH, DELOITTE’S ANNUAL SURVEY REVEALS

Additionally, the survey found large global businesses have less appeal for Millennials in developed markets (35%) compared to emerg-ing markets (51%). Developed-market based Millennials are also less inclined (11%) than Millennials in emerging markets (22%) to start their own business. Other notable findings from the survey include:

For six in 10 Millennials, a “sense of purpose,” is part of the reason they chose to work for their current employers. Among Millennials who are relatively high users of social networking tools (“super-connected Millennials”), there appears to be even greater focus on business purpose; 77% of this group

report their company’s purpose was part of the reason they chose to work there,

compared to just 46% of those who are the “least connected.”

Technology, media, and telecommunica-tions (TMT) ranked the most desirable sector and the one to provide the most valuable skills according to Millennials. Men (24%) were nearly twice as likely as women (13%) to rank TMT as the number one sector to work in. Among broader sectors, leadership is perceived to be strongest in the TMT sector (33%). This percentage was three times higher than second-ranked food and beverages (10%), and four times that for third-ranked banking/fi-nancial services (8%). In addition, when asked about the businesses that most resonated with Millennials as leaders, Google and Apple top

THESE FINDINGS SHOULD BE VIEWED AS A WAKE-UP

CALL TO THE BUSINESS COMMUNITY

Business Needs to Focus onPEOPLE AND PURPOSE

millenials


{BUSINESS}

women

Calling on organisa-tions to do more to accelerate progress, EY published a report last month that highlights how more supportive

environments can be created for women to succeed and help companies and economies achieve greater economic returns.The survey of leaders in 400 companies around the world was commissioned from Longitude Research by EY in response to an October 2014 report from the World Economic Forum that predicted it would take until 2095 to achieve global gender equality in the workplace.

The report, Women. Fast forward: The time for gender parity is now, looks at the biggest barriers and accelerators to women’s career advancement. Interestingly, men and women both believe that more female leader-ship leads to stronger companies, suggesting that closing the gender gap may be, at this point, less reliant upon education and more dependent upon men and women working together to create supportive working environ-ments that allow all talent to flourish.

While 33% of women and 30% men agree that women must take a proactive approach to their own careers, this will not be enough to accelerate change. Men and women work-ing together to demonstrate how women’s careers can progress, eliminating conscious and unconscious bias and establishing progressive policies are also needed.

Mark Weinberger, EY Global Chairman and CEO, says: “As we think about the keys to growth, business, nations and economies cannot afford to wait another 80 years to fully engage the talent represented by the world’s women. For EY, as for others, accelerating women’s progress is essential not only to cre-ating a better working world but also to our success as a business. As an organisation, we are focused on making a difference both inter-nally and externally – and believe it’s time to accelerate our efforts.”

Inspired by a large and growing body of research that supports the economic benefits

GENDER PARITY: NOW IS THE TIME

of gender equality and women’s advancement in the workplace, the survey asked men and women at management and C-suite levels for their personal experiences of factors that sup-ported or blocked women’s progression, with the aim of identifying what organisations can do to accelerate progress. Tellingly, companies EY identified as “high performers” within the survey – those growing at more than 20% on an annualized basis over the past three years – appear to be doing more than others to en-courage women’s advancement.

The report identified three clear steps that organisations can take to help accelerate gender equality:ILLUMINATE THE PATH TO LEADERSHIP Good opportunities for progression are consid-ered a top enabler by men (26%) and women (35%), suggesting that organisations must work harder to make the path ahead clearer to women, demonstrate what is possible and show them career opportunities that match their skills and ambition. SPEED UP CULTURE CHANGE WITH CORPORATE POLICY CHANGEThe twin enablers of work/life balance and flexibility are high on the women’s list of ac-celerators. From its own experience and what the high-performer responses suggest, EY says informal flexibility for both men and women is highly effective in helping all employees bal-ance their personal and professional lives.

ESTABLISH A SUPPORTIVEENVIRONMENT AND WORK O ELIMINATE CONSCIOUS ANDUNCONSCIOUS BIASMen cited unconscious bias as the number one barrier for women in the workplace. Some 27% of men said that, in their own experience, having a supportive culture is the best way to support women’s career advancement. To advance women, EY recommends that leaders must spread an organisation-wide message that bias is unacceptable.

Beth Brooke-Marciniak, EY Global Vice Chair of Public Policy, says: “Without a little nudge, it’s easy to gravitate toward colleagues and leaders who think, look and act like we do. Unconscious bias on the part of those in power is undoubtedly partly responsible for the glacial pace of change.”

The survey’s high performers are ahead of the curve, often offering flexible work arrange-ments for men and women, setting goals to increase numbers of women in leadership and offering programmes that expose women to all company operations and functions. From these indicators, EY says that building bridges to leadership for women likely helps build a healthier company culture, which leads to bet-ter performance and improves the bottom line.

Uschi Schreiber, EY Global Vice Chair – Markets and Chair of Global Accounts Committee, says:“We need strong role models and women leaders, greater accountability aimed at increasing diversity and inclusiveness, and a concerted effort to overcome conscious and unconscious bias. And that’s not all. Women leaders need to look to their legacy and place themselves in stewardship roles to make their organisations better places for fu-ture generations of women.”

COMPANIES IDENTIFIED AS “HIGH PERFORMERS”

APPEAR TO BE DOING MORE THAN OTHERS TO ENCOURAGE WOMEN’S

ADVANCEMENT

{BUSINESS}

With increased eco-nomic growth and globalisation, 2015 is set to be a banner year for foreign direct investment (FDI) in many countries around the world.

This increase in capital showcases the need for countries to look beyond financial figures and understand what impacts FDI. In support of this effort, a report developed by Deloitte UK, in conjunction with the Social Progress Im-perative (SPI), has found that the right policies can spur a virtuous circle where rising social progress in a country attracts FDI which in turn can be used to drive further progress.

The new report, Foreign Direct Investment and Inclusive Growth: The impacts on social progress, compares data from the Social Progress Index, a holistic measurement of growth and performance beyond GDP for 132 countries (Cyprus is not included), and FDI metrics.

“While the economic benefits of FDI inflows are well understood, the contribution of FDI to social progress is less clear cut,” said Steve Al-mond, Deloitte Global Chairman. “This report demonstrates how the Social Progress Index can act as a guide for business and other organisa-tions to make smarter strategic investments and shows governments that policies focused on driving social progress can attract FDI, which in turn advances both economic and social development.”

The report found that FDI can encourage a country’s future social progress through specific support – such as investments in healthcare and education – and indirectly through em-ployment and higher incomes. In addition, social progress factors such as infrastructure, education, and personal and political security

can help attract overseas investment. Equally important for FDI are quality of life factors, such as tolerance and inclusion, as they help attract the international workforce and invest-ment required for highly skilled industries such as finance.

However, in terms of social progress, not all FDI is equal and the virtuous cycle is not guaranteed. Governments must put in place complementary polices to really drive social progress through FDI. For instance, coun-tries such as Brazil, Russia, India and China (BRICs) or Kazakhstan attract significant levels of FDI without realizing higher social progress. This can occur in many instances including when rapid economic growth exceeds the pace of social progress, when FDI is disproportion-ately directed to certain industries such as natu-ral resources, when the political environment deters investment or when countries are caught in poverty traps.

According to the report, social progress can explain some of the trends in FDI and FDI can explain some of the improvements in social progress. The report reveals how different ele-ments of social progress evolve across stages of economic development, and how social progress contributes to countries’ climbing this ladder of development. With the majority of FDI now flowing into emerging economies, understanding what factors can drive develop-ment will help these countries to better leverage this nuanced relationship.

“This report demonstrates that the relation-ship between business and society can be sym-

biotic, not conflictual,” says Michael Green, Executive Director of the Social Progress Imperative. “It shows that, in the right circum-stances, FDI delivers real benefits to the lives of ordinary people above and beyond its eco-nomic impact. Yet, crucially, it also shows how business thrives best in healthy societies.”

Full details about the report are available at: www2.deloitte.com/global/en/pages/about-deloitte/articles/fdi-and-inclusive-growth.html

ABOUT SOCIAL PROGRESS IMPERATIVE AND THE SOCIAL PROGRESS INDEXThe Social Progress Imperative’s mission is to improve the lives of people around the world, particularly the least well off, by advancing global social progress by: providing a robust, holistic and innovative measurement tool – the Social Progress Index; fostering research and knowledge-sharing on social progress; and equipping leaders and change-makers in business, government and civil society with new tools to guide policies and programmes. Social progress is defined as the capacity of a society to meet the basic human needs of its citizens, establish the building blocks that al-low citizens to improve their lives, and create the conditions for individuals and communi-ties to meet their full potential.

The Social Progress Index is an aggregate index of social and environmental indica-tors that capture three dimensions of social progress: Basic Human Needs, Founda-tions of Wellbeing, and Opportunity. The Index measures social progress strictly using outcomes of success, not how much effort a country makes. For example, how much a country spends on healthcare is much less important than the health and wellness actu-ally achieved by that country, which is what outcomes measure.


foreign direct investment

HOW SOCIAL PROGRESS DEVELOPS WITH AND HELPS ATTRACT FOREIGN DIRECT INVESTMENT

THE RELATIONSHIP BETWEEN BUSINESS AND SOCIETY CAN BE SYMBIOTIC, NOT

CONFLICTUAL

THE VIRTUOUS CIRCLE


During the past year, the compliance responsi-bilities shouldered by in-house Secretariat and Legal teams have continued to grow to

include FATCA compliance, anti-bribery and corruption, the effects of the OECD’s BEPS project and changes in international company law. The expansion of responsibilities of in-house teams is a result of various factors, including an increase of internal and external stakeholder pressure, increased regulation and the continued expansion of multina-tional companies into new jurisdictions. The uncertain economic environment coupled with an ever-increasing compliance workload mean that in-house teams are often unable to cover adequately all areas of compliance; as a result, resources need to be deployed carefully. This drive for efficiency and an increasing demand for real-time information underpin the need of multinational companies to source accurate global information.

TMF Group’s recently-published Global Benchmark Complexity Index 2014 provides a valuable source of information for in-house teams needing to understand and predict where annual company secretarial compliance may be challenging. This is particularly acute when a multinational is considering expansion into new jurisdictions. An appreciation of a jurisdiction’s complexity informs the timescale to set up a legal entity and for it to be opera-tionally-ready, the level of technical expertise required during the establishment phase and the effective performance of ongoing compli-ance obligations in that jurisdiction.

The study collates and ranks the objective and subjective questions to determine a juris-

{BUSINESS}

diction’s complexity. The information has been compared with that from last year’s to provide an understanding of a ju-risdiction’s complexity in relation to its global peers. The survey repeated the questions posed in the 2013 study in order to investigate and rank jurisdictions according to their complex-ity from a company secretarial perspective. In addition to repeating the questions posed in last year’s study to compile the Global Bench-mark Complexity Index, this year introduced additional insights relating to the compliance topics that are trending globally. The insight provided by the Group’s local offices has pro-duced an illuminating view of the compliance challenges faced by multinationals and their in-house functions.

A comparison of the results of the 2014 and 2013 studies produces some expected results, with Argentina holding on to its top ranking as the world’s most complex jurisdiction and Ire-land continuing to be one of the least complex. However, unexpectedly, certain jurisdictions have significantly changed their complexity ranking since last year and the study explores some of the reasons which may have contrib-uted to these results.

Where a change in ranking has occurred, it is often not attributed to its own change of cir-cumstances but that of its peers. For example, the enactment of the Hong Kong Companies Ordinance and the subsidiary legislation, effec-tive 3 March 2014, reduced its complexity by 12 global ranking positions but also increased the relative complexity ranking of a number of

other jurisdictions. This may ex-

plain why Cyprus rose from 60th

place to 36th in the rankings, despite attempts to simplify issues for international companies operat-ing on the island. The responses to the so-called ‘subjective ques-tions’ saw Cyprus ranked 63rd out of 81 jurisdictions, in other words 19th least complex. This suggests that local knowledge and exper-tise is an essential element of understanding a jurisdiction’s complexity, with jurisdictional nuances fundamentally affecting the answers provided.

INTERNATIONAL CORPORATE GOVERNANCE IS INCREASINGLY DEMANDING THE ATTENTION OF MULTINATIONAL COMPANIES AND THEIR BOARDS OF DIRECTORS. IN ITS SECOND GLOBAL STUDY, TMF GROUP’S IN-HOUSE GLOBAL TEAM EXAMINED THE COMPLEXITY OF CORPORATE SECRETARIAL ACTIVITIES IN 81 JURISDICTIONS, DRAWING COMPARISONS AGAINST 2013’S INAUGURAL REPORT AND PROVIDING INSIGHT INTO THE COMPLEXITY OF INTERNATIONAL SUBSIDIARY COMPLIANCE. KEY

FINDINGS• Jurisdictional complex-

change year on year. How-ever, when a change does occur it is often attributable to the enactment of new legislation.• New legislation may have a positive or negative impact upon a jurisdiction’s complexity and subse-quent Benchmark Index ranking.• Local knowledge and expertise is an essential element of understanding a jurisdiction’s complexity, with jurisdictional nuances

answers provided.• Whistleblowing and cyber security top the compliance agenda of multinationals’ boards of directors.

COMPLEXITY OF CORPORATE SECRETARIAL ACTIVITIES IN CYPRUS GROWS

2014 2013 COUNTRY1 1 Argentina

3 2 Bolivia

5 14 South Korea

7 7 Poland

9 5 Indonesia

36 60 Cyprus

2 17 Brazil

4 4 UAE

6 30 Mexico

8 35 Paraguay

10 6 Thailand

GLOBAL BENCHMARK COMPLEXITY INDEX

ARGENTINA HOLDS ON TO ITS TOP RANKING

AS THE WORLD’S MOST COMPLEX JURISDICTION

survey


he global economic power shift away from the estab-lished advanced economies in North America, Western Europe and Japan will con-tinue over the next 35 years – despite

a projected slowdown in Chinese growth after around 2020.

This is one of the key findings from the latest report from PwC economists entitled The World in 2050: Will the shift in global economic power continue? It presents long-term projections of potential GDP growth up to 2050 for 32 of the largest economies in the world, covering 84% of total global GDP.

The report indicates that the world economy is projected to grow at an average of just over 3% per annum from 2014-50 – doubling in size by 2037 and nearly tripling by 2050. But there’s likely to be a slowdown in global growth after 2020, as the rate of expansion in China and some other major emerging economies moderates to a more sustainable long-term rate, and as working age population growth slows in many large economies.

John Hawksworth, PwC Chief Economist and co-author of the report, comments: “There are different ways of comparing the size of economies, but we project that China will be the largest economy by 2030 on any measure. However, we also expect its growth rate to slow markedly after around 2020 as its population ages, its high investment rate runs into diminishing marginal returns and it needs to rely more on innovation than copy-ing to boost productivity. Eventual reversion

to the global average has been common for past high growth economies such as Japan and South Korea and we expect China to follow suit.

“India has the potential to sustain its higher growth rate for longer and become a $10 trillion economy by around 2020 in purchas-ing power (PPP) terms, or around 2035 at market exchange rates. But this relies on India making sustained progress on infrastruc-ture investment, institutional reforms and boosting education levels across the whole population.”

The report also contains projections based on GDP at market exchange rates, without this relative price adjustment. On that basis, China is projected to overtake the US around 2028, while India would clearly be the third largest economy in the world in 2050, but still some way behind the US.

These projections assume, however, that emerging markets will follow broadly growth-friendly policies. In practice, not all may do so and therefore not all of these economies will fulfil the potential indicated by the PwC growth projections, although some could also exceed the projections if they can accelerate their investment rates and institutional reforms.

John Hawksworth comments, “Europe needs to up its game if it is not to be left behind by this historic shift of global economic power, which is moving us back to the kind of Asian-led world economy last seen before the Industrial Revolution. The US may hold up better, provided it can remain at the global technological frontier.”

Mature markets in North America and Europe will, nonetheless, remain very significant players in the global economy for decades to come even if their growth rates

average only around 2%. PwC’s analysis shows, for example, that average income levels per person (at PPPs) in 2050 will still only be around 40% of average US levels in China and around a quarter of US levels in India. Advanced economies will also, generally speaking, still be easier and lower risk places to do business given their political and institutional strengths.

John Hawksworth concludes: “Recent experience has underlined that relatively rapid growth is not guaranteed for emerging economies, as indicated by recent problems in Russia and Brazil, for example. It requires sustained and effective investment in infra-structure and improving political, economic, legal and social institutions.

“It also requires remaining open to the free flow of technology, ideas and talented people that are the key drivers of economic catch-up growth. Overdependence on natural re-sources could also impede long-term growth in countries such as Russia, Nigeria and Saudi Arabia unless they can diversify their economies over time.

“In short, while our analysis confirms that emerging markets have huge potential, they can also be an institutional minefield – both managers and investors need to tread carefully.” A copy of the full report The World in 2050 Will the shift in global economic power continue? is available at www.pwc.com/world2050

{ECONOMY}

projections

Back to an Asian-led World ECONOMY?

REPORT PREDICTS THAT THE SHIFT OF GLOBAL ECONOMIC POWER TO EMERGING ECONOMIES IS SET TO CONTINUE

ADVANCED ECONOMIES WILL STILL BE EASIER

AND LOWER RISK PLACES TO DO BUSINESS

electronic services

Mini One-Stop-Shop brings new VAT rules

{TAX&LEGAL}

From 1 January 2015, all telecommunications, broadcasting and electronic services have been subject to VAT in the place where the end customer is estab-lished, has its permanent

address or usually resides, irrespective of its VAT status. These changes are likely to have a substantial impact on businesses falling within the purport of these rules, including their VAT filing obligations, IT systems settings, pricing and contractual obligations. The Mini-One-Stop-Shop (MOSS) of Cyprus is an online electronic portal, to allow for the simplified implementation of the new Council Regulation (143/2008), under which the supply of telecommunica-tions, broadcasting and electronic services, to private individuals or non-business cus-tomers will be taxed in the Member State of the customer and not the Member State of the supplier. This allows taxable persons to avoid registering in each Member State of consumption, in which they do not have an establishment, to account for the VAT due for their supplies to other Member States of the European Union, using this Web Portal and hence being identified in Cyprus.

VARIOUS “QUALIFYING BUSI-NESSES” ARE IMPACTED BY THESE CHANGES, INCLUDING:• Telecommunication/broadcasting com-panies• Cloud computing service providers• On-line gaming operators• Payment handlers (e.g. cloud broker)

WHAT IS THE MOSS SCHEME?The MOSS scheme allows businesses sup-plying B2C telecommunication services, television and radio broadcasting services and electronically supplied services to customers in other Member States to account for the VAT due on those supplies by means of a web portal in the Member State in which they are identified.This scheme, which is optional, is a simplifica-tion measure that therefore allows qualifying businesses to avoid registering for VAT in each of their customers’ countries. Instead, qualify-ing businesses which are registered for the MOSS scheme in a Member State (referred to as the ‘Member State of Identification’), electronically submit quarterly MOSS VAT returns detailing supplies of telecommunica-tions, broadcasting and electronically supplied services to B2C customers in other Member States (referred to as the ‘Member States of consumption’), along with the VAT due. These returns, together with the VAT paid, are then transmitted by the Member State of Identification to the corresponding Member States of consumption via a secure communi-cations network.

DOES THE MOSS SCHEME APPLY TO YOU?Currently, telecommunications, broadcast-

ing and electronic services, when supplied by a business

established within the EU to non-taxable persons (e.g. private individu-

als, certain charities and public bodies) are taxed in the Member State where the

supplier is established. However, this VAT treatment changed on 1 January 2015, so as to be brought in line with identical supplies provided by businesses established outside the EU.If your business transacts with customers es-tablished in various EU countries, this is likely to create new administrative and economic burdens since your business may now need to deal with multi territorial VAT obligations and

VAT rates. To avoid multiple VAT registra-tions throughout the EU, the so-called mini one stop shop (‘MOSS’) scheme, which came into force on 1 January 2015, can be used, reducing the administrative burden associated with the changes at hand.

WHO CAN REGISTER FOR THE MOSS SCHEME?Any business that makes B2C supplies of telecommunications, television and radio broadcasting services and electronically sup-plied services to customers in other Member States (hereinafter “Qualifying Business”) may register for the MOSS scheme. Once a Quali-fying Business registers for the MOSS scheme, its B2C supplies to customers established in all EU countries, other than those supplied in an EU country in which the Qualifying Business has a fixed establishment or a VAT registra-tion, must be reported in the Member State of Identification under the scheme.Two different sub-schemes fall under the MOSS scheme. One sub-scheme applies to non-EU based qualifying businesses (the “non-Union scheme”) and another for EU based qualifying businesses (the “Union scheme”).

ARE THERE ANY GUIDELINES TO THE LEGISLATIVE CHANGES?The Mini-One-Stop-Shop (MOSS) of Cyprus portal can be accessed at https://moss.tax.mof.gov.cyFollowing last year’s publication of legislation on the registration and reporting rules for the 2015 MOSS for businesses making B2C sup-plies of telecommunications, broadcasting and electronic services within the EU, guidelines have now been published by the EU Commis-sion aimed at providing a better understanding of the legislation, along with functional and technical specifications of the MOSS scheme.The guidelines can be accessed athttp://ec.europa.eu/taxation_customs/ re-sources/documents/taxation/vat/how_vat_works/telecom/explanatory_notes_2015_en.pdf

IF YOUR BUSINESS TRANSACTS WITH

CUSTOMERS ESTABLISHED IN VARIOUS EU COUNTRIES, THIS IS LIKELY TO CREATE

NEW ADMINISTRATIVE AND ECONOMIC BURDENS



The publisher of Forbes magazine, Steve Forbes, used his publica-tion earlier this month to pen an open letter to Greece’s new Prime Minister Alexis Tsipras

and Finance Minister Yanis Varoufakis. Forbes points out that Greece’s situation is “desperate” and he goes on to say that, “Your own citizens have no faith in you, as evidenced by the massive cash withdrawals from Greek banks and the exodus of capital from Greece to supposedly safer havens.”The publisher acknowledges that the new government does have “something of a case” in its objection to raising Greece’s “already horrific 23% VAT.” And agrees that the pre-sent program isn’t working. “But your ideas – higher taxes on the “rich,” more government bureaucrats, virtually no privatization, higher minimum wages – are worse,” he says.Forbes goes on to tell Tsipras and Varoufakis that, “If you’re serious about saving your coun-try and rescuing its people from a more dread-ful economic catastrophe, there are basic steps you should take that would promptly promote economic growth” and suggests how Greece “can put away” its “beggar’s cup for good”.

TAXATION “Adopt your own 10% flat tax. Then go one better and slash your corporate tax rate to 10%. While you’re at it, whack your VAT to 15%, which will demonstrate your commit-ment to the downtrodden. As for your ridicu-lously high payroll tax of 45%, knock it down to 10% as well.Of course, the Troika and everyone else will scream that you can’t afford to do this. Your answer is that you can’t afford not to. Tax eva-sion in Greece is endemic. Your hideous tax system is one reason that Greece has a large informal economy.”

PRIVATISATION. Forbes describes privatisation as “an easy source of considerable cash that would enormously lighten the pressure on your budget.” He notes that prior governments have dragged their feet and have even been unwilling to complete a

census of what the government actually owns and how many people work for these entities. “This is irresponsible in the extreme,” he says, adding, “And your govern-ment has drastically scaled back what its pre-decessors were reluctantly going to do.” The publisher also advises Tsipras and Varoufakis to “stop trashing former Greek residents or those of Greek descent who want to help out by investing in Greece. The government should welcome such investors with open arms, not suspicion.” BUSINESS“Make the process of setting up a business in Greece easy. Greece has made some progress in enabling people to set up legal enterprises, but the process still takes too long and offers opportunities for bureaucrats to demand that palms be greased. Use New Zealand as your model: It takes only a few keystrokes online to apply to open a new business there.”

LEGISLATIONSuffocating laws that ostensibly preserve jobs by making it expensive and difficult to fire employees end up making businesses reluctant to hire or, just as likely, encouraging businesses to hire workers off the books, says Steve Forbes. “Some progress had been made on this issue, which you, perversely, want to undo. Unions will howl, but a collapsed economy with soaring unemployment isn’t a pleasant prospect.”

CURRENCY“Don’t even think of abandoning the euro. Your drachmas wouldn’t, as the cliché goes, be worth the paper they’re printed on. Greeks would shun them, which would leave the euro (and the dollar) as the de facto currency. Such a move would wreck what’s left of Greece’s banking system, and the economy would crater, making recent hard times look like paradise. And, for goodness’ sake, don’t pull a Cyprus and confiscate bank deposits. As for capital controls, if you carry out the above true growth reforms, capital will pour into your depressed economy.”

POWER OF PERSUASION: ESSAYS BY A VERY PUBLIC LAWYER BY SIR LOUIS BLOM-COOPER (HART PUBLISHING,

2015)


L ouis Blom-Cooper was a lead-ing advocate who grew up with the advent of a distinctive brand of public law. His range of public

activities, both inside and out of the court-room, saw him dubbed by his colleagues as a polymath practitioner. They included his chairmanship of numerous public en-quiries into child abuse and mental health, media contributions and innovation in penal reform. This book is a collection of his es-says, prefaced by a self-examination of his unorthodox philosophy towards the law in action. It covers a variety of socio-legal top-ics that express his ambition to inform the public on the workings of the legal system. This involves a discussion of the history of Britain’s unwritten (and, in the author’s

Convention on Human Rights and portrays its international origins. It also opines on crime and punishment in the functioning of the courts and elsewhere, and the political shift from the penal optimism of the 1970s to the reactionary punitiveness of the post-1990s.

BOOK REVIEWBBBORRRE

‘DON’T PULL A CYPRUS’, FORBES PUBLISHER URGES GREECE

Forbes closes by asking the Greek gov-ernment to “prove us skeptics wrong by

resolutely putting your country on the road to becoming the Hong Kong/Singapore/Switzerland of the Mediterranean. Success would be your best revenge.”

greece

{TAX&LEGAL}

IF YOU CARRY OUT TRUE GROWTH REFORMS, CAPITAL

WILL POUR INTO YOUR DEPRESSED ECONOMY

Steve Forbes

timepieces

{LIFESTYLE}

GOOD Timing

In today’s intricate world of change, lit-tle remains precious, particularly among modern consum-ers. As once-coveted luxury items become more commonplace – in correlation with an increase in personal wealth among the world’s most affluent individuals – their demand concurrently

falls in regions most affected by recent financial woes. Disproving this trend, however, and transcending the test of time is the ever-intriguing Swiss watchmaking

industry, of which iconic manufacture

d’horlogerie Jaeger-LeCoultre reigns supreme. Despite an emerging decline – however modest – in the luxury-goods market following the seismic Global Financial Crisis, the appeal of masterfully crafted Swiss chronographs has, in fact, recorded an increase. Indeed, the industry, which fiercely guards its ‘Swiss Made’ accreditation, was last valued in 2013 at some $21.3 billion, with exports having grown at an average annual rate of 7.2% over the last 10 years according to Credit Suisse.

The appeal of the Swiss timepiece is two-fold: in addition to the allure of creating a personal collection of horological master-pieces, for the chronograph enthusiast this compilation may prove to become an es-sential component of his or her investment strategy. “Building a portfolio of watches is almost the same as doing it with stocks and bonds,” claims Steve Kivel, Owner of Central Watch. Watch investment alone, according to Kivel, has become a billion dollar industry, by far outperforming its fellow-luxury accessories.

It is Swiss Manufactures such as the legendary Jaeger-LeCoultre which have secured this stature, attesting to an eternal worldwide devotion to the crafted chrono-graph.

Since its inception in 1833, creations by Jaeger-LeCoultre have been laying mile-stones in the history of fine watchmaking. Born in the Vallée de Joux, these unique creations encapsulate the expertise of the men and women of the Manufacture, guid-ed by the enduring quest for excellence, perpetual inventive- ness, a willing-ness to question its fundamentals and a desire to rise to the wildest challenges.

The men and women of the Grande Maison have

focused on the constant pursuit of perfection, per-

petuating the values of au-thenticity, know-how and refinement, cher-ished by the founder Antoine LeCoultre.

In creating the small workshop that was to become the manufac-ture Jaeger-LeCoultre, Antoine gave rise to one

of the finest watch brands. He devoted his life to the quest for absolute reliability and his achievements in the field of precision and mechanisation contributed to making his valley the acknowledged haven of beau-tiful horological complications and fine craftsmanship.

Each of the 400 patents and the 1,242 calibres bearing the Jaeger-LeCoultre sig-nature are a reminder of their passion for quality and innovation, Marc de Panafieu, Regional Brand Director of Jaeger-LeCoul-tre tells Gold.

“The prestige of the Manufacture Jaeger-LeCoultre comes from the unique combi-nation of our long history – of more than 180 years – and our spirit of invention,” he confides. “Since 1833, our watchmak-ers have been designing and producing innovative time pieces which are perceived as great milestones in the field of horology: the Reverso, the Geophysic, the Master Ultra Thin, the Caliber 101, the Duome-tre…”

Though the financial crisis has struck many global sectors and altered the luxury-goods market to a significant degree, De Panafieu is not perturbed as regards its im-pact on the brand. “The manufacture Jae-ger-LeCoultre was created in 1833, which

is more than 180 years ago. Through-out the years there have been many challenges along the way but we have always managed to overcome them.”

Customers, he reveals, are now more fervently seek au-


AS THE WORLD AWAITS THE LAUNCH OF THE MUCH-PUBLICISED APPLE WATCH, WHEN IT COMES TO TIMEPIECES JAEGER-LECOULTRE REIGNS SUPREME MARC DE PANAFIEU, REGIONAL BRAND DIRECTOR OF JAEGER-LECOULTRE, TALKS TO GOLD.By Effy Pafitis

SINCE 2000, SWISS WATCHMAKERS HAVE MORE THAN DOUBLED

THEIR EXPORTS

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focupurs

petuapetua

Regional Brand Director


timepieces

Indeed, this emotion will transcend generations, as de Panafieu and many other watch enthusiasts intend on passing timepieces from their personal collection on to their children. The Regional Brand Director is confident his children will cherish for years afterwards, adding, “I am not sure I can say the same about my smartwatch.”

This may be the reason for traditional Swiss chronographs’ prominent position in the hearts – and collections – of inves-tors: “Smartwatches may be a useful tool to some, but really we find collectors coveting fine timepieces,” says Reginald Brack, International Head of Retail for watches at Christie’s in New York.

The affecting attribute certainly trans-lates to impressive revenues: since 2000, Swiss watchmakers have more than dou-bled their exports, valued at more than 20 billion Swiss francs in 2013, according to the Federation of the Swiss Watch In-dustry.

Indeed, the Federation’s latest statistics reveal that 2015 got off to an exemplary start for exports – at 1.6 billion francs, their value was up 3.7% in January of this year compared to the same month of 2014.

The best performances, furthermore, were noted from the most expensive watches: timepieces costing more than 3,000 francs in export price saw their value increase by 7.5%. The 500-3,000 francs

segment registered a decline of 4.8%, while chronographs priced below 200 francs saw volumes con-tract by 2.6%.

Therefore, while it appears the lower end of the market is vulnerable to the Apple machine and similar new age smartwatches, high-end Manufactures likely have little to fear.

JAEGER-LECOULTRE’S

2015 NOVELTIES

1Master

Calendar Meteorite

2Rendez

Moon

3-

billon Moon

4

Paille

5Master Grande

-

Calendar

6Celestial

Rose Gold

7Master Grande Tradition Orbital

5Master

Grande Tradition -

cation in Rose Gold

thenticity, not in spite of, but in light of the emerging market alterations; within the Middle East, India, Turkey, Levant, Greece and North Africa, for which he is Regional Brand Director, de Panafieu has noted an increase in product knowledge and a growing number of watch connoisseurs. “We are noticing a growing demand for craftsmanship and heritage brands, from men but also from women. They seek out legitimate Maisons with a strong history and identity, which can deliver true content in terms of high-end watch making.”

“Jaeger-LeCoultre is all of this,” he affirms with confidence.

Indeed, De Panafieu’s faith in the resilience of the Swiss watchmaking industry is shared by others, even in the face of new-age threats such as the rising prominence of smartwatches.

“There’s a kind of man who calls a watch a timepiece. This is the kind of guy – and it usually is a guy – who doesn’t worry about battery life or even accuracy, at least when it comes to the device strapped to his wrist. And he probably won’t change his ways now that Apple has launched its long-awaited Apple Watch,” muses Bloomberg’s Stephen Pulvirent.

No doubt, the Apple Watch will keep good time – this isn’t, however, likely to keep the makers of high-end timepieces in Switzerland up at night, he reflects.

De Panafieu concurs. “I do not see this new generation of smartwatches as a threat to our market because al-though we are talking about watches, the purpose is radically different. I actually meet more and more people wearing both at the same time: a “traditional” watch on one wrist and smartwatch on the other one.”

The smartwatch, he explains, offers the wearer a plethora of information, “including health-related informa-tion,” while the other, in addition to presenting plenty of detail depending on the complication, “is filled with history, craftsmanship, authenticity... emotions!”

THE APPLE WATCH WILL KEEP GOOD TIME BUT THIS ISN’T LIKELY TO

KEEP THE MAKERS OF HIGH-END TIMEPIECES

IN SWITZERLAND UP AT NIGHT

THE SUNRISEBY VICTORIA HISLOP (HEADLINE REVIEW, 2014)


W takes place in a place or

setting rather than the characters and

BOOK REVIEW

The Swiss watch industry has survived many other disruptions, says Jean-Claude Biver, director of timepieces for LVMH, most notably the quartz crisis, the eco-

nomic upheavals caused by the advent of quartz watches in the 1970s and early 1980s, which largely replaced mechanical watches. It caused a decline of the indus-try, which chose to remain focused on traditional mechanical watches, while the majority of world watch production shifted to Asian companies that embraced the new technology.

“It has gone through crises and restruc-tures,” Biver notes. “It’s an industry with a lot of cash, a lot of R&D development, a lot of marketing skills, and a very strong and structured distribution network.”

Having emerged stronger following its dedication to traditional form, the industry does not appear to have the intention of shunning it any time soon; hence Jaeger-LeCoultre’s devotion to its iconic pieces. Of rumours indicating that the watchmaker’s supremely iconic Reverso will undergo a radical change in the coming year, De Panafieu’s comments are ambiguous: “The Reverso is a timeless icon which has built its status over the years and continues to enjoy great success amongst watch lovers more than 80 years after its birth. Having said that, Jaeger-LeCoultre is always in motion; our watchmakers are constantly looking for new ways to re-invent the art of watchmak-ing and this includes the Reverso of course. It will for sure continue to grow but remain true to what it is.”

The brand’s most recent ‘motion’ came in

the form of its exclusive unveiling of some eight 2015 ‘novelties’ – the latest additions to Jaeger-LeCoultre’s offering – in January at the SIHH in Geneva.

Through this new collection, the manu-facture in the Vallée de Joux was keen to share its fascination for the movements of the heavenly bodies, drawing upon these inexhaustible sources of inspiration and us-ing them as a privileged means of expressing its expertise.

To embody the magnetic beauty of the sky, moon and stars, Jaeger-LeCoultre opted for materials directly related to its source of inspiration, such as meteorite stone and la-pis lazuli. Meteorites, the shooting stars that cross the sky while leavinga luminous trail, were crafted by the artisans of the manufac-ture, in order to reveal the beauty they have concentrated across the ages.

Of the eight opulent 2015 fine watch-making creations released, which does de Panafieu favour? “I am proud of all the nov-elties, but I like two of them in particular: the Duometre Sphero Tourbillon Moon, because its moon phase complication will have one day difference after 3,887 years! And the Master Calendar with meteorite dial, because every dial is unique and is actu-ally made of meteorite material which is 4 billion years old!”

Finally, as de Panafieu is clearly the “kind of man who calls a watch a timepiece”, what can he divulge of the chronograph is he cur-rently wearing? “I am wearing a Duometre Unique Travel Time with a pink gold case. This timepiece is amazing because one can set a second time zone with a difference in

minutes also, and not only in hours. In my case, I frequently travel to Iran

or India, which are countries with 30 min-utes time difference vs. the GMT hour, so it is very useful for me.”

BUILDING A PORTFOLIO OF WATCHES IS ALMOST THE SAME AS DOING IT

WITH STOCKS AND BONDS


strategic partnership

PRESENCE IN CYPRUS

f some

Julianne Moore won an Oscar. My favourite actors are Edward Norton, Michelle Pfeiffer and Cate Blanchett.I read a lot, especially fiction. I love the way it carries me away. The last novel I enjoyed very much was A Spool of Blue Thread by Anne Tyler. I’m also an avid magazine reader of anything from Monocle toWired toVogue. My broad reading tastes are reflected in the range of music I listen to, from pop music, in-cluding new artists like Lana Del Rey, to classical. I don’t play an instrument but for Christmas I bought myself a baby grand player piano, so in the evening I can put Mozart or Wagner and enjoy having the piano play itself while I unwind with a glass of red wine. I love travelling very much so I often take short breaks to get away from it all, either alone, with the children or with friends. My favourite place of all, and the one I always go back to, is New York. There is something going on there 24 hours a day and, because I’m quite a restless person, I like the fact that people are restless around me. Anything goes there and I like that. I also love cities that you can walk in and New York is one of those, like London, Florence or Paris. I don’t think that I will stay in this profession forever. My rest-less nature means that I don’t like to stay at something for too long so at some stage I will prob-ably do something else, perhaps more business-oriented than legal work. I’m not expecting to throw a retirement party here!”


“I get up at 7am and have breakfast with my two children before taking them to school. This is actually a pleasure for me because it’s often the only time that I can catch up with them! Once I’ve dropped them off I come to the office where I have a fairly regular routine when I’m here – I travel a lot for work purposes and I’m away almost every other week – though anything might hap-pen. I might receive an e-mail asking me to go to Kazakhstan the next morning! So it’s an ex-citing job but not one that al-lows me to plan too far ahead. Although there were no lawyers in my family, I wanted to become one from a very early age, even though I didn’t know what lawyers actually did when I was 10 years old. I had an idea in my head that I would be very good at it and I later enjoyed being on the debating teams at school and university, so that strengthened my deter-mination to deploy my talent in law! I did my first degree at Oxford University and later studied for my LLM in Euro-pean Law in Fiesole, a small village overlooking Florence. It was a difficult decision to come back to Cyprus but the fact that I have always had to travel a lot means that I have never felt claustrophobic living on a small island. In fact I am quite grateful for it because now, with a family, I can see its ad-

A Day in the Life

Emily YiolitisThe founding partner of Harneys Aristodemou Loizides Yiolitis LLC

work.

vantages. I certainly have no regrets at all about my choice of career and I consider myself really fortunate in that my two partners here are my childhood friends. We had always said that when we grew up we’d set up an office together and, after working for a few years in other firms, we made it a reality. Coming to the office every day and being with my oldest friends is the best thing. If there is anything bad about this job, I would say it’s stress. I never really know where the next day will take me or what the next turn of a deal will be, so I have to be prepared for absolutely anything. That can be a good thing but during live negotiations, for example, deci-sions often have to be taken there and then, which can defi-nitely be stressful.I try to have lunch every day, either at the office cafeteria or at home with the children, before spending the rest of the afternoon at the office. I try to go to the gym for an hour before returning home around 7.30pm. When I’m there I can’t ‘switch off’ completely but I won’t take work home unless it’s something like an ar-ticle I need to write. That said, I often have phone calls after midnight since there’s never a convenient time for everyone around the world, so work frequently comes and finds me. In the evening I will sit down

with the children, put them to bed and then I’ll usually go out for dinner around 9pm. I’ll be back around 10.30pm and go to sleep. I hardly ever watch television, though at the week-end I might sit and watch 5-6 episodes of Downton Abbey, for example. I keep up with what’s coming to the cinema so I’ve already seen The Theory of Eve-rything and Still Alice for which

I enjoyed

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GOLD Magazine Issue 48

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Transcript of GOLD Magazine Issue 48