How international investors view Cyprus and the country's prospect for more FDI

A growing sense of optimism for attracting more foreign direct investment (FDI) to Cyprus, following their decrease in 2022 (€4.8 billion) and 2023 (€4.2 billion) from the average of the 2018-2021 period (€5.7 billion), emerges from the EY Attractiveness Survey, and more specifically from EY's Attractiveness surveys, which are conducted by the company around the world, on various regions.

The research highlights the comparative advantages and weaknesses of Cyprus as a FDI destination and presents the intentions of international investors.

It is noted that the field research, which was carried out as part of the third edition of the EY Attractiveness Survey Cyprus 2024, was conducted in March and April 2024 through online surveys, in which a representative panel of 100 executives of foreign companies located in 13 countries was placed.

Approximately 64% of investors who participated in the survey have activities in Cyprus.

Investor intentions and comparisons

More than half of the investors who participated in the survey (57%) are seeking to establish or expand their current activities in Cyprus within the next year (the corresponding percentage in the 2022 survey was 29%).

However, compared to the wider European region (at 72%), Cyprus still lags behind in popularity.

As in previous years, popular responses to the question of the type of investments that participants intend to make in Cyprus include sales and marketing offices (53%), manufacturing (40%), supply chain and logistics (37%) - which remains a solid choice, despite falling two places from the first place it held in 2022 - and headquartering (33%).

The decline in supply chain and logistics selection, according to the report, “may indicate that investor expectations for this category may not have been fully met.”

This is followed by business support services (call centers, shared services, etc.), training centres (32%) and Research and Development (30%). The option "other" received 7%.

The trends

The unexpected element that emerges from the report is the popularity of “manufacturing”, which, unlike in the past, is among the first choices. According to the report, this is a general trend that is also occurring in the rest of Europe.

Another notable trend concerns educational centres, which seem to be gaining interest from international investors.

Regarding R&D activities, the intention to create or expand such activities in Cyprus has also increased significantly compared to 2022, which comes as a result of the government's continuous efforts to establish Cyprus as an innovation hub.

Why would they consider Cyprus as an investment destination?

Taking into account the increased interest of investors in establishing or expanding their activities in manufacturing and supply chain and logistics, amidst geopolitical tensions, survey participants were asked to comment on the attractiveness of Cyprus for related activities.

Regarding manufacturing activities, respondents described the transition to additive manufacturing methods (44%), such as 3D printing, and relocating activities closer to their home market (43%) as the key strategies they would consider implementing.

Reducing supply chain dependence on single and dominant countries of origin (36%) is the third reason why respondents would consider Cyprus as an investment destination, increasing their manufacturing presence in Europe (34%) the fourth, operating more regional supply models (33%) the fifth and nearshoring, i.e. the trend for industry suppliers to move closer to their customers (28%) their sixth.

The current geopolitical tensions in the Middle East seem to have opened the window for considering the possibility of transferring part of their production activities (from Lebanon and Israel) to Cyprus, in order to benefit from the increased security as well as Cyprus' presence in the EU.

The option "none of the above" received 5%.

What drives them to FDI?

When asked about the reasons that might lead them to be interested in FDI, participants cited adapting to the regulatory environment and addressing sustainability issues as the main reasons.

According to the results of the survey, today sustainability seems to be more important to investors than growth and cost reduction.

In fact, this position was particularly popular in the case of companies operating in industrial sectors, chemicals and pharmaceuticals, and high technology (i.e., sectors with a relatively high carbon footprint).

Click here to read more about the survey and its findings.

(Sources: InBusinessNews/EY)