By Yiannis Antoniou
The Cyprus flag continues to have a prominent position in global ratings and is continuing to grow in spite of the damage caused by the Turkish embargo, the relevant minister Marios Demetriades, Minister of Transport, Communications and Works, has told our magazine.
He also referred to the excellent dynamic enjoyed by the Cyprus’ shipping industry, resulting from a beneficial taxation system, the credibility of our flag, and the high level of services offered by our country.
What is shipping’s contribution to the Cyprus economy?
The shipping sector can be divided into two categories: Registry, that is to say use of the Cyprus flag, and Shipping Activity, companies that are active in Cyprus, have a physical presence in our country, carry out shipping activities, and employ people.
In numbers and financially, this translates to a contribution of between 6% and 7% of our GDP, a particularly significant percentage. The largest contribution comes through companies that operate in the shipping sector and employ around 4,500 people.
How many companies are we talking about?
Around 200 companies operate in Cyprus, most concerning foreign interests.
The Cyprus fleet is amongst the 11 largest in the world and takes third place in the EU, with a 12% share. This is a small drop in comparison to the past.
Cyprus has always had a high position when it comes to the ships registered under its flag. Although our fleet has been continuing to grow in over the past few years, it has fallen a bit behind on world listings. This to a large degree is due to the Turkish embargo that does not allow ships (with a Cyprus flag) to approach Turkish ports. This is certainly something that creates a disadvantage for ships with the Cyprus flag. In spite of this, though, our flag continues to have a prominent place in global listings and continues to grow because there are a lot of advantages for ships with the Cyprus flag. These include the credibility of the flag, the favourable tax environment, and of course, service-related issues. The service provided by the Merchant Shipping Department is excellent and something that shipping company officials are sure to tell me whenever we meet.
After a lot of discussion, the House unanimously approved legislation for the creation of an Undersecretariat for Shipping which is expected to begin operating in March 2018. What changes will this bring about?
Over the past 3.5 years we have undertaken a number of studies on the changes that have to be made within the shipping sector. A study prepared by Ε&Υ provided us with the five pillars on which we have to act. Some of the measures that were suggested have already been implemented.
Strengthening our local offices, using the private sector to promote our flag, and using different measures to attract ships and companies to Cyprus.
And the Undersecretariat.
Yes. One of the suggestions was strengthening shipping administration. Various models were considered, such as the autonomy of the Merchant Shipping Department or the creation of an Undersecretariat for Shipping. Ultimately, we decided on the second one, which was also part of the President of the Republic’s pre-election programme and which is something that will materialise on March 1, 2018.
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How will this help in practical terms?
It will definitely help because there will be a political supervisor who will deal exclusively with shipping. The creation of an undersecretariat, however, must also be accompanied by some institutional changes when it comes to the structure of the Merchant Shipping Department itself.
Essentially, through this law, the Merchant Shipping Department will be transferred from the Transport Ministry to the new undersecretariat. In addition, we have carried out a study which lays out the structure of shipping administration under this undersecretariat. Based on this study, we have already briefed the Public Administration and Personnel Department and dialogue is already underway for it to be implemented. Some of the changes will get underway from now and others from after March 1. Of course, the new undersecretary will have the opportunity and ability to move ahead on sectors necessary for the changes to shipping administration to proceed.
Will be undersecretariat be situated in Limassol like the House wants?
Nothing has been decided on yet but in my opinion, it should be situated where most of the shipping companies are situated, which is Limassol. This is what the House and the shipping stakeholders wish and something that I also agree with.
To what degree have the goals of making Cyprus an international centre of shipping activity and the further promotion of the Cyprus flag as a high-quality option been achieved internationally?
The shipping sector is very competitive. Everyone is trying to attract a piece of this huge market and we have to be faster and more effective. Unfortunately, very often procedures in the public sector do not allow us to be effective and flexible.
There are still a lot of issues working against us. For example, for two years now we have been trying to hire an extra person, a local collaborator, at our office in the UK. These types of practices contradict contemporary shipping administration practices.
Have we had a transfer of company offices from Greece because of the crisis (there)?
It is true that some shipping companies have indeed moved their offices or opened offices outside Greece. As can be expected, some of these chose Cyprus. This is natural given the close relations between the two countries, our country’s very good infrastructure, and of course our many similarities when it comes to culture, language etc. So, it is an expected development.
Are there hidden opportunities within Brexit for the attraction of companies that are active in the large shipping industry?
Brexit does create opportunities, we have undertaken some efforts and are waiting for the results. It is important for us to continually promote our country and improve on our shortcomings. I must say that in recent years we have succeeded in the systematic promotion of our country through overseas visits and/or seminars and/or conferences in Cyprus. This year there were conferences by two major organisations which plan to repeat next year. We have also been strongly promoting the advantages of our country’s shipping services.
Five years ago there was a radical change to the taxation system. Were incentives given to shipping companies? Did they pay off?
You are obviously referring to the Tonnage Tax approved by the EU. It is true that this change has paid off significantly. We are seeing a continuous upward trend in the number of companies being registered, a huge rise to the tune of approximately 60%. I would also like to mention that because of the increase in companies coming to Cyprus, a shortage of staff has been created in some departments. So, in cooperation with the industry, we are continually trying to create the infrastructure for training in shipping. This was achieved with the creation of specialised shipping departments at the University of Nicosia as well as through the creation of postgraduate programmes such as the one at Frederick University.
As the government, we encourage such initiatives in many ways, such as through funding scholarships and subsidising the employment of trainees on ships.
Have the changes at the ports helped?
To what degree have the changes at the ports, appointing private companies to carry out work, helped develop shipping activities?
At this time, Cyprus is the largest ship management centre in Europe and one of the largest in the world, something that constitutes a great success. Indeed, in the last few years, Cyprus has managed to attract large shipping owners, not just operators. In Cyprus, the port management sector was in the hands of the state but the monopolising of a series of services did not allow for further development. This is why we moved ahead with an important reform, which included the acquisition of some monopolies. We attracted some companies with international reach through the tender contest that we announced. We are now in the midst of a similar process for Larnaca port and marina.
There has been a lot of discussion about the prospects the discovery of hydrocarbons in the area of Cyprus have created for shipping. How do things stand?
The harbour infrastructure management sector in Cyprus can provide scope for significant development. Our ports are already been used as a base for support activities by companies in the sector in our area. It is exactly for this reason that we have made plans and moved head with the creation of additional port infrastructure as this will be required in the coming tears. We need to invest in this sector.
Have the problems that arose when the management of Limassol Port was passed on to the private sector already been resolved?
The problems we have at Limassol Port were overcome within the first month and we now have an increase in productivity to the tune of over 50% compared to before. This is in the sector of ship service as well as in domestic commerce. I would like to take this opportunity to underline that have plans for additional harbour infrastructure, more information on which we will be able to provide before the end of the year.
Such as the creation of an industrial harbour in the Vassiliko area. We have prepared plans which have already been submitted for the issuing of an environmental permit.