Andreas Tsouloftas: Working to create an unrecognisable, better Limassol

Andreas Tsouloftas, President of the Limassol Chamber of Commerce and Industry (LCCI), examines the need to rein in soaring costs and unclog the supply of residential properties, and looks at how new developments are transforming Limassol into the country’s financial centre.

Last year (which marked the LCCI’s 60th anniversary), you said that soaring costs and prices had been more damaging to the Limassol business scene than the sanctions imposed on Russia due to its invasion of Ukraine. Is that still the case? If so, how does the Chamber believe that this challenge should be tackled?

Certainly, increased costs and prices, especially in the container space, remain a big issue for the business world in Limassol and for the economy at large. However, after a year and a half of inflationary pressures, shipping costs have fallen significantly, even though they are still significantly higher than three years ago. The cost of fuel, which affected most of the companies, has also dropped. It appears, then, that we are on the right track. However, despite inflation in Cyprus dropping from almost 7% to 4%, the European Central Bank’s back-to-back interest rate hikes continue to put pressure on companies and the economy. As LCCI, we have asked Finance Minister Makis Keravnos to exercise his influence on the local banks through the Central Bank of Cyprus to rein in interest rates, and that has borne fruit since local banks will absorb the shockwave from the latest increase announced by the ECB, alleviating the pain felt by households. We have also asked for an increase in interest rates for deposits, which was also adopted, with deposit rates going up to 1.5% and, in certain cases, to 2%. The other big issue we are dealing with concerns increased tariffs at the port, in some instances by 70%, which we didn’t expect since assurances were given that the commercialisation of the island’s ports would either lower tariffs or leave them untouched. Indeed, besides offering improved service, commercialisation has increased state revenues at the expense of companies, which in turn pass on the additional cost to the consumer. The matter was discussed with the President, as well as with the Finance and Transport Ministers, all of whom have assured us that the Government will take measures. Our view is that, if the concession agreement cannot be renegotiated, the Government should cover the extra cost for the benefit of the consumer. At the same time, by transforming Limassol Port into a logistics hub and increasing transhipment trade in the region, port management companies and the Government will increase their revenues, which may somewhat offset the rising costs. As for the matter of sanctions, although they have had an effect on the economy, I do not consider this to be a major issue at the moment. In fact, we have no choice but to live without the Russian oligarchs and their business activities in the country but, of course, this does not apply to all Russians.

You also noted last year that the arrival of businesspeople from Ukraine had somewhat offset the negative effects of inflation and the sanctions. Can you give us specific examples?

Some 20,000 Ukrainians have now come to Cyprus, the majority of whom have chosen Limassol as the base of operations for their companies and staff. At the same time, the arrival of Israeli businesses and investments in the city, particularly in the high-tech and property sectors, is another big positive. Over the past year, the tech industry in Cyprus has seen impressive growth of close to 40% with the latest information suggesting that it is contributing over 10% to the country’s GDP, surpassing shipping, in which Cyprus is considered a global leader. When I took office, my mandate included the diversification of the Cyprus economy by finding alternative pillars that remain robust during crises – the high-tech industry is one of those. On top of that, the demands of the growing tech industry can help open up new career opportunities for young Cypriots. We have even observed companies hiring young people with no specialisation and training them on the job. We will soon see the tech industry absorbing more personnel from sectors like retail or hospitality, offering better compensation packages and work conditions. The arrival of these businesses has also highlighted the need to improve our infrastructure, from schools to hospitals to green parks. For example, Yakir Gabay, the Israeli businessman, is planning an €800 million investment in Ayia Phyla to build his own technology park, which will include a private school and a medical institution. All these are far more important and profitable to the country than the few Russian oligarchs we lost. We must help these companies grow their presence since they not only create career opportunities for a number of Cypriots but also significantly contribute to the economy, raising the standard of living for all.

One negative effect of the mass relocation of companies and their staff to the city has been a severe contraction in the availability of housing options and office space. What are the Chamber’s suggestions for resolving this issue?

Indeed, the real estate market is saturated. In terms of office space, there are three large construction projects due in the next few months that will definitely help unclog the supply side. For housing, the situation is worse. We have suggested to the Ministry of Interior that it should offer more incentives to developers interested in residential buildings for rent, such as changing the regulations governing the building density coefficient. I think this will help solve the residence problem in Limassol, by attracting more investors, and I do not see why it hasn’t happened so far. Of course, when the war in Ukraine ends, we expect some of the arrivals to return home, which should allow the market to breathe.

As regards the housing problem, many professionals have chosen to move out of the city centre to the suburbs. Does this present an opportunity to raise the level of business activity in those areas? Has the Chamber undertaken any initiatives to foster growth in them?

It is true that the contraction in the housing market has pushed people to the outskirts, with everything occupied within a 20-mile radius. While it would be a pleasure to see these areas develop more, since the LCCI serves the entire district of Limassol, we don’t expect a lot of movement to rural areas. That said, Exness, which employs around 1,000 people in Limassol, is planning a large housing development for its employees on the western outskirts of the city.

Are there any promising new business sectors in the city that could follow the ICT industry’s path and grow into a major pillar of economic activity?

The sky’s the limit for the tech sector and it’s hard to see other sectors following the same path. Nevertheless, the Government has placed energy security as a priority and, with Limassol expected to be the location of regasification units, we expect an uptick in gas companies looking to set up a base of operations in the city. This would evidently not only lower energy costs but also raise the standard of living across the entire country. In addition, the City of Dreams Mediterranean integrated casino resort is expected to contribute close to 3% to the country’s GDP, changing Cyprus’ tourism product from seasonal to year-round, while the area around the casino resort will also see a lot of development. Additionally, after two years of delays, urban planning permits for the Aktaia Odos area have finally been announced, and there are six or seven large projects in the pipeline. With the removal of the old Karnayio shipyard and the development of the Aktaia Odos seaside road, the area is expected to become the financial centre of Limassol and, by extension, of Cyprus, with high-rise commercial and residential buildings, plenty of green areas and parking spots. You will soon see an unrecognisable – and better – Limassol!

This interview first appeared in the June edition of GOLD magazine. Click here to view it.