Andreas Demetriades: High-end buyers are "cash rich" but "time poor" and expect a fairly comprehensive service environment

Attracting foreign direct investment (FDI) is at the heart of the Cyprus Association of Large Investment Projects’ development strategy, as it is a key driver of economic growth, says its President, Andreas Demetriades.

In an interview for the "IN Business Forecasting 2025" series, Demetriades explains that the market for large complex projects is expected to diversify significantly and become much more competitive, noting that potential buyers and/or users will be high-end and will want a high-end level of service provision.

In this context, these buyers and/or users of the projects are "cash rich" but "time poor" and will expect a fairly comprehensive service environment.

He also reveals that the Association is planning a series of business missions, seeking to promote large developments to find new capital.

How do you think the Cypriot economy will perform in the new year? How optimistic are you about its prospects?

Our economy has demonstrated flexibility, adaptability and resilience to adverse external conditions. If we manage to capitalise on the positive economic developments in the coming years and at the same time implement the required reforms, we will succeed in creating a resilient economy, with great future potential and high rates of economic growth.

However, several downside risks remain. Ongoing tensions in the Middle East could disrupt supply chains and increase production costs.

The tourism sector, a key contributor to the external balance, remains vulnerable to these risks. In addition, energy prices pose a threat due to Cyprus' high dependence on oil and limited integration into the European electricity market.

Inflation is expected to slow and wage growth will remain high, supporting household purchasing power and consumption. The government budget balance is expected to remain in surplus, supported by continued strong revenue growth and moderate expenditure increases.

Risks to the fiscal outlook arise mainly from the challenges of implementing certain large investment projects, such as the construction of a liquefied natural gas terminal, which may burden the public budget through the so-called state guarantees and other requirements.

Who do you see as the biggest risks to our country's economy? What should be considered in order to ensure its growth trajectory?

The ongoing wars in Ukraine and the Middle East, as well as general geopolitical instability, are having a negative impact on the international scene, with worrying consequences in various sectors of the Cyprus economy.

On the other hand, due to its small size and rapid adaptability, the Cypriot economy can find ways to offer a high standard of living to its citizens and substantial growth opportunities in its business sector.

Cyprus should delve into the internal structure of its existing economic model and modernise it.

This requires structural reforms in vital sectors, significant changes in the way the public sector operates, simplification of legislation and regulations, digitalisation of public services, and reduction of bureaucracy.

Attracting foreign direct investment is a lever for growth

What should Cyprus do to become an even more attractive destination for foreign investments? And how important, in your opinion, are they for its economy?

The benefits of attracting foreign investment are very positive because they contribute to increasing liquidity and the inflow of foreign capital from abroad, create additional jobs, employ highly skilled individuals, promote know-how and good practices, and increase the country's wealth, which is spread among all citizens.

Attracting foreign direct investment is at the heart of the development strategy of the Cyprus Association of Large Investment Projects, as it is a key driver for economic growth, amidst today's ever-changing international environment.

Our Association has set as its long-term priority to create a friendly business climate, in order to overcome the obstacles that discourage or drive away investments and foreign investors, by developing a constructive dialogue with the relevant state bodies.

Our goal must be to create a resilient, extroverted, dynamic and flexible economy, which requires the modernisation of the state and the green and digital transition.

In this context, there is a need to simplify and digitise the existing complex, time-consuming and costly environment in which businesses and investors are required to operate.

At the same time, there needs to be fiscal discipline and the state payroll needs to be contained.

Among the state's priorities must be ensuring the sustainability of the General Health Insurance System, the modernisation of the tax system, the decentralisation of services, the expansion of public service working hours, the acceleration of the licensing system, the rapid delivery of justice, while the lack of specialised and unskilled personnel also needs to be effectively addressed.

"Cash-rich" buyers, but "time-poor"

Regarding your sector of activity, how do you estimate that 2025 will unfold? Are there any issues that concern you?

The growth of our Association's member sector is expected to remain strong in 2025, particularly if financial conditions and interest rates ease.

The structure of the banking sector in Cyprus is an important factor influencing the promotion and implementation of major developments, as it has not been competitive in recent years with the collapse of the Cyprus Popular Bank and the Cooperatives.

The banking sector is highly concentrated and has weak competition, which according to European Central Bank data is the most concentrated in the European Union. Reduced competition in the banking sector results in higher lending rates and lower deposit rates.

Therefore, every effort should be made, in collaboration with the state, to increase the competitiveness of the banking sector by attracting additional prime banks.

What are the biggest trends/changes you expect to occur in your sector and what are the most significant challenges?

It is expected that the market for large complex projects will diversify significantly and become much more competitive.

The type of buyer and/or user of our members' projects is expected to have high expectations in terms of quality, both for the accommodation and the level of services offered by the project as a whole.

Potential buyers and/or users will be high-end and will want a high-end level of service provision. These buyers and/or users are “cash rich” but “time poor” and will expect a fairly comprehensive service environment since they will spend minimal free time on the project.

Business missions to promote major developments

What can we expect in terms of your organization's plans and development strategy in 2025? What moves do you intend to make in this direction?

Our constant goal is to promote the implementation of major private developments in Cyprus for the benefit of society as a whole, through serious, studied, scientific and professional action.

Cyprus has several comparative advantages in the sectors of tourism, hospitality, higher education, medical tourism and capabilities in the provision of high-quality specialized medical services to users in neighbouring countries, in technology, communications and IT.

We hope that as an Association we will contribute, in cooperation with the state, so that our country continues to be a promising investment destination. It is worth noting that in cooperation with the state we are planning a series of business missions, seeking to promote major developments in order to find new capital.

Our members, through the continuous contacts they maintain abroad, promote our country, focusing on the Cypriot economy and the investment opportunities it provides, with the interest being admittedly encouraging.

Our ongoing presence at international business forums will also be important, where the advantages that Cyprus offers as an investment destination, the incentives it offers to foreign investors and the projects of our Association members are presented.

We should capitalise on the geostrategic position and comparative advantages of our country, in order to highlight Cyprus as a regional business centre, a centre for the provision of high-quality medical and pharmaceutical health services and high-quality higher education, as well as research, new technologies and IT, and digital and green skills.

With the discoveries of significant hydrocarbon reserves, the opportunities that exist in the critical sectors of energy and energy networks should be evaluated and exploited.

Key to this effort is the strategic convergence and coordination between the state and businesses, so that we can work collectively to create a new modern development model, which will aim at increased investments, enhanced international competitiveness, the resilience and adaptability of the economy, extroversion, innovation and ensuring environmental and social sustainability.