Cyprus - Special Advertising Section

Nation's Business, Sept, 1989

Cyprus

For thousands of years, the island of Cyprus, with its soothing climate and strategic Mediterranean location, has been a jewel cherished by empire builders. The Persians, Egyptians, Romans, Byzantines, Francs, Venetians, and Turks all conquered the island, and it was not until 1960 that Cypriots gained independence from the British, the last foreign rulers.

At that time, Cyprus was poor and underdeveloped; its economy was dominated by agriculture. The Cypriots and their new democratic government made economic development a priority, investing in infrastructure and setting up an institutional and regulatory framework that would attract and foster investment. Their success was remarkable.

From 1960 through 1973, the nation's gross domestic product grew at an annual average of 7 percent in real terms. The 1974 Turkish invasion temporarily disrupted that growth, but the Cypriots quickly rebounded with what many international economists termed an "economic miracle." Growth in GDP averaged 11 percent a year during 1975-80. It continued strongly during 1981-88--at an annual average rate of 5.6 percent--while inflation was brought down to 3.4 percent. As a result, Cyprus now enjoys a high standard of living, a fast-growing export industry, and a thriving tourist trade.

Significantly, the island has become an increasingly important international business center, with more than 5,000 foreign investors participating in onshore industrial and other projects or managing their offshore affairs from the island. About 600 offshore companies maintain regional headquarters in Cyprus. Among them are 50 well-known multinationals such as Pepsi, National Cash Register, Linotype, Raychem, Reuters, Atlas Copco, Barber Green, Dresser, Intergraph, Johnson Wax, and Banque Nationale de Paris. To these companies, Cyprus is an excellent base of operations for doing business in Europe, Africa, and the Middle East.

Any visitor to Cyprus quickly understands why tourism has become an important industry, growing at about 20 percent a year. The island, with its mild Mediterranean climate, is a pearl with sweeping beaches and high, forested mountains. The island's long history, spanning thousands of years, is evident everywhere in the Hellenic temples, Roman villas, Byzantine monasteries, Venetian fortifications, and other relics of past civilizations.

Hotels, restaurants, taverns, pubs, discos, and nightclubs serve tourists at reasonable prices, making the island a vacation bargain. Regular airline service with 350 scheduled flights is provided by 28 airlines, led by Cyprus Airways, which flies to 19 major foreign cities, including London, Paris, and Munich.

But as the number of foreign companies on the island indicates, there is much more to the Cypriot economy than tourism. The government combined the island's many advantages with tax incentives and a Customs Union Agreement with the European Community to attract foreign investment.

For example, manufacturing, much of it for export, has become one of the largest sectors of the economy in generating income and employment.

"Manufacturing is a very important sector, contributing about 15 percent to GDP and representing 70 percent of domestic exports," says a top-level spokesman for the republic's Ministry of Finance. "The sector is characterized by relatively small, family-owned, labor-intensive, but flexible units, concentrating on the production of consumer goods mainly in the fields of clothing, footwear, food processing, chemicals, and paper products," the Finance Ministry official continues.

As the economy has grown and become more diverse, so has the island's economic stability, high-lighted by low inflation, near-full employment, good labor relations, a current-account surplus, and fast-accruing foreign-exchange reserves now covering nine months of imports.

The nation's infrastructure--an area that has received close attention from the government since 1960--now compares favorably with advanced industrial countries. For example, Cyprus' automatic telecommunications service is ranked fourth-best in the world after those of the U.S., the United Kingdom, and Australia. With three satellite earth stations and three submarine cable systems, the island provides direct-dial service to more than 120 nations with 95 percent of the world's telephones. The remainder can be reached with the help of an operator. All modern telecommunications services, including facsimile, also are available.

The transportation infrastructure is similarly well-developed. Cyprus has two international airports in Larnaca and Paphos, 30 miles and 100 miles from the capital of Nicosia. Port facilities include two new multipurpose ports of Limassol and Larnaca, the new industrial port of Vassiliko, and three specialized oil terminals at Larnaca, Dhekelia, and Moni. Shippers are increasingly using the main ports of Limassol and Larnaca as regional warehouse and distributing centers.

The prime location of Cyprus is one reason the ports have become busy, with 100 shipping lines including the island in their regular schedules and more than 4,500 ships docking at island ports each year. Situated in the middle of the Mediterranean Sea, Cyprus traditionally has been an economic bridge linking Europe, the Middle East, and North Africa. It has been called a "European country at the threshold of the Middle East." Many foreign companies have found it an excellent base of operations for trading with the Arab world, and it is one of the very few meeting places between Arabs and people from Israel.