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International Investment - Investing in Cyprus PDF Print E-mail
Tuesday, 03 February 2009 15:38
A largely overlooked island has great potential in a number of areas.

Cyprus is perhaps not the first country to spring to mind when considering international investment opportunities. Although the civil war and subsequent division of the island are now nearly 35 years in the past, such conflict inevitably leaves an element of doubt regarding the wisdom of financial commitment. But a new era certainly appears to be dawning, particularly in the northern part of the island.

In December a conference was held at the London Stock Exchange focusing on the business and financial potential of investing in Northern Cyprus. The conference was hosted by YAGA, the Cyprus Turkish Investment Development Agency (a member of the World Association of Investment Promotion Agencies) together with CTCC (the Cyprus Turkish Chamber of Commerce in the UK).

Map of CyprusNorthern Cyprus now offers some of the most competitive business and investment
opportunities in Europe. There are also a wide range of incentives for investors from
overseas and 'fast-track' procedures to get these investments started.
The country provides many opportunities to businesses, with extremely low
labour rates compared with the rest of Europe. It is also outside the Eurozone, 
which its southern neighbour joined this year, though Euros are freely accepted
there. (Its currency is the Turkish lira). The cost of living there is substantially
cheaper than in most Eurozone countries. It also offers higher business growth
rates than many countries in the EU.
Despite, or perhaps because of many years of trade restrictions, the country
has been largely free from the see-saw swings of recent currency movements
and offers excellent and so far largely unexploited opportunities for investment.
The prospects for reaching an accord between the Turkish Cypriots and Greek
Cypriots look better than they have ever done and if agreement is reached, this
should regenerate the investment potential of the whole island.
A study on the benefits of reunification recently carried out by the PRIO in
Norway showed that the potential economic benefit of reunification is Euros 1.6
billion annually for the Cyprus economy across selected sectors.
      ( )
Northern Cyprus can also claim a strong underlying growth rate with a buoyant tourist sector. While the pan-European downturn has inevitably had its effect on Northern Cyprus to some degree, until the middle of 2008, the average economic growth rate ran at an average of 10 to 12 per cent a year (consistent since 2004) – one of the highest in Europe.

* Tourism looks set to increase, despite the downturn elsewhere in Europe
  and is predicted to increase by at least six per cent next year. (The country
  currently has at least 12 five-star hotels, many B&Bs and is visited by around
  700,000 tourists a year).
* The Northern Cyprus Tourist Office expects this to hold steady and even
  increase in the near future, as more travellers discover the advantages of the
  country's competitive holiday prices and low cost of living, together with its
  perennially sunny climate and natural beauty.

Cyprus is the third largest island in the Mediterranean. The capital city is Nicosia (Lefkoşa) and the total population, according to the 2006 census, was 264,000.
The island straddles the crossroads of Europe, the Middle East, Asia and Africa. The currency is the Turkish lira, or YTL.
A strong free market approach underpins the economy. A new air of political willingness, characterised by intensive negotiations towards the ultimate goal of reunification, is indicative of the new spirit that pervades the island. The general economic indicators, as evidenced by the graphics above, are decidedly positive. A similar picture emerges when Fixed Capital Investments are considered.

Economic Outlook

GNP Per Capita (USD) & Inflation Rate (%)

 line graph

                                                                                                                                                             Fixed Capital Investments (Prices in YTL)

Block chart Fixed capital investment







Fixed Capital Investments 2007


The volume of foreign trade and the number of tourists and net tourism revenues paint a similarly positive picture.

Foreign Trade (Million USD)

line hart of foreign trade (Milion USD)

Number of Tourists & Net Tourism Revenues


The legal framework for foreign direct investment (FDI) in Northern Cyprus is also highly favourable.

The government policy for investment is welcoming and supportive. For example, there are no limitations on transferring proceeds from the island, and the government operates a variety of Investment Incentive Schemes. These include provisions such as generous investment allowances in priority development areas, exemption from custom duties, and a zero rate of VAT on both imported and locally purchased machinery and equipment. Tax allowances for both initial investment and annual depreciation for wear and tear are similarly extensive.

The growth rate in Northern Cyprus in recent years has been nothing short of spectacular, as the following illustration demonstrates.

Growth Rate in EU Countries and Northern Cyprus (%) (2002-2007)

 Block chart growth rate

“YAGA” Cyprus Turkish Investment Development Agency

The Agency provides an extensive range of services to investors before, during and after the investment process, with a one-stop-shop approach conducted in full confidentiality and free of charge. YAGA supports investors through the administrative and bureaucratic processes involved in obtaining licenses and starting a business.

The Agency provides relevant information and consultancy on the area’s legal framework, the investment climate, sector specific information and incentives to help investors take advantage of investment opportunities. It acts as a facilitator in the provision of land and incentives, and undertakes studies and provides recommendations and advice to improve the investment climate.

YAGA carries out both local and international promotional activities with the objective of attracting both local and foreign direct investment. The Agency reports to the Prime Minister.

YAGA has what is essentially a private sector approach but with state support, and boasts international membership of WAIPA - (World Association of Investment Promotion Agencies) .

Investment Opportunities

Analysis by the Peace Research Institute of Oslo (PRIO)

New business with Turkey (exports - goods and services)€ 510 million
Construction Sector                            € 393 million
Real Estate Sector          € 155 million
Tourism Establishments € 316 million
Education Sector    € 162 million
Lawyer Companies  € 103 million
New FDI (other then Construction and real estate)    € 184 million
Total   € 1.8 billion

The motto here is very clearly, “All investments are welcome”. Some of the most enticing opportunities exist in the areas of marina and yacht building; special interest tourism; health tourism (including the provision of five star ‘care centres’) and conference tourism. ICT and the field of higher education are also promising avenues for investment.

So why Northern Cyprus? It may initially appear an unlikely investment hot spot, but on examination there are a host of advantages on offer. Government policies are welcoming and supportive, and the specialist investment development agency YAGA offers a range of services. It is a small but fast growing economy, with low costs of labour and office and residential property. And it is also one of the most beautiful islands in the world. Not perhaps the soundest reason for investment – merely the icing on the cake.



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