Experts consider ICT sector’s €4 billion impact on Cyprus’ economy

Stakeholders at the recent TechIsland Summit discussed the ICT sector’s ever-growing impact on Cyprus’ economy, suggesting that the close to €4 billion estimate on this impact currently in place, could grow to a significantly larger figure in the coming years.

They were speaking during a panel discussion entitled, ‘The Tech Effect: Transforming Cyprus’s Economic Landscape’ which followed a presentation by Moderator Christophoros Anayiotos, Board Member, KPMG on a relevant report entitled ‘ICT sector’s impact on Cyprus’ economy'.

The panel was made up of Alexey Gubarev, Board Member at TechIsland, Co-founder and Board Member at Palta, Christiana Erotokritou, Member of the Parliament Republic of Cyprus & Chairwoman of Finance Committee, Elena Grigorian, CEO of MY.GAMES and Marios Tannousis, CEO, Invest Cyprus.

Among other things, the panelists discussed and assessed the current landscape, identified key challenges, and suggested areas for improvement.

Early in the discussion, Tannousis noted that both the current and the previous governments had introduced incentives that proved to be very successful for existing and new tech companies to set up shop in Cyprus.

He noted that these incentives not only concerned tax policies and targeted at companies but also aimed at individuals, including assistance in family reunification.

Also underlining the role of the government’s Business Facilitation Unit, Tannousis said, “We have a package as Cyprus, helping foreign tech companies to find it easy to set up and expand.”

He noted that the ICT sector’s contribution to Cyprus’ GDP, according to Invest Cyprus’ figures, stood at an estimated 15%, adding, “Companies are doing very well but we need to maintain this momentum and do better, to be competitive.”

On her part, Grigorian acknowledged that while the state had done a lot of work over recent years, a simplification of the naturalisation process would increase the arrival of talented and highly skilled workers. “This will benefit not only the tech sector but their economy in general,” she suggested, adding that steps could also be taken to integrate the families of IT specialists into the workforce.

The CEO of MY.GAMES also noted the role of income tax in both attracting talent and benefitting the local economy.

Joining the discussion, Gubarev pointed out that along with a growing industry, an estimated 80% of the salaries of the highly-skilled workers from overseas remained in Cyprus.

He also said that he believed the ICT sector’s 15% contribution to Cyprus’ GDP was a conservative estimate, adding that, “In my view this is only the beginning, we can go to 20-25%.”

Erotokritou, in her intervention, underlined that, in her opinion, government policies had until now been mostly based on immigration and tax regime. “I don’t speak for the state, but I believe we need to boost the sector on other grounds as well,” she said.

“It is time to align targets and the speed of public and private sector. Otherwise we will not be able to achieve our targets,” Erotokritou also cautioned.

On this, Tannousis suggested that an ideal solution would be a one-stop shop but that, until then, the BFU, “which is doing excellent work,” was a good route for companies to take.

The experts from Cyprus also acknowledged that work could be done to speed up licensing, including for the formation of schools, and the tax reform.

Another area that requires attention would be a startup visa, along with more attention placed on the health sector and education. Education and the shortage of schools in particular, was also touched upon in another of the TechIsland Summit panels.

On this topic, Grigorian underlined, “All of us are suffering from the shortage of international schools on the island. We need to solve this issue as soon as possible,” she said that tech companies could assist the effort in terms of input on IT courses and as part of their ESG practices, but added, “We are ready to help but the IT sector cannot solve the school shortage.”

Gubarev continued the discussion on the ICT’s role within the economy of Cyprus, noting, “Seven or eight years ago if a Cypriot studied IT, they could not find job in Cyprus. Now they have started coming back.” Tannousis concurred, noting, “The brain drain is becoming a brain gain.”

But Gubarev also noted investing in schools was not as profitable as investing in offices or apartments.

“For investors, there need to be big financial benefits,” he said, while going on to note that the expense of putting a child through state school was more expensive for the government than paying for a child to go to private school. “So more private schools would reduce the burden on the government. We need to look for incentives to build schools all over Cyprus,” he said.

Returning to the theme of ‘The Tech Effect: Transforming Cyprus’s Economic Landscape,’ Erotokritou elaborated on the progress being made on the island’s tax reform.

The MP said that she believed the current tax system as being relatively fair and described creating a new tax regime as something that required delicate balance, “We want Cyprus to have a competitive edge. We want Cyprus to be number one but this does not mean that changes can’t come our way but also for nobody to have any unpleasant surprises along the way.”

Gubarev pointed out that salaries had grown significantly in the last decade, giving the example of a Junior Administrator being paid €850 10 years ago and €1,500 to €1,700 today. “The average salaries are going up much fast in the tech sector,” said.

Erotokritou went on to note that she considered the ICT sector to be future of the economy in Cyprus and called on the public sector to speed up procedures to help keep the island an attractive option for companies.

Gubarev said that while Cyprus has made a great effort to bring established companies to Cyprus, more focus should now be given to encouraging startups to come to establish themselves on the island.

Tannousis noted that startup-related efforts were already underway, “As of last year we have taken initiatives through the Deputy Ministry of Research, Innovation and Digital Policy and Research and Innovation Foundation to bring in and support startups from all over the globe, India, Saudi Arabia and other, Euromed regions.”

He said that efforts were made to facilitate their establishment in Cyprus as well as their scaling up, including to other locations in Europe. “We will continue to do this and it is something we are ready to work on with TechIsland and the entire cluster,” he said.

Click here to see Anagiotos’ presentation on the findings of KPMG’s report on ‘ICT sector’s impact on Cyprus’ economy.’