Stelios Demetriou: Multi-level benefits from Cyprus's accession to the Schengen Zone

The potential accession of Cyprus to the Schengen Zone can act as a powerful growth driver, as Stelios Demetriou, Partner and Head of Strategy and Transactions at EY Cyprus, explains.

In an interview with InBusinessNews, he also notes that such a development can mark a decisive step towards the country's European integration and send positive messages to international investors, strengthening confidence in Cyprus as a stable and predictable business environment.

"Through the facilitation of investments and free movement, new prospects are emerging for the country, provided, however, that they are strengthened by substantial reinforcement of infrastructure and rational utilisation of available resources," points out Demetriou.

In the same context, he refers to a series of challenges that the country, as well as businesses will face, having to manage increased competition from other Schengen countries.

We must be particularly careful and take seriously the fact that, with our accession to the Schengen Zone, we will face more direct competition with other member countries, which already have a stronger presence in the field of investment and the establishment of multinational companies, he added.

What are the main opportunities that will arise for the Cypriot economy from a potential accession of Cyprus to the Schengen Zone, particularly with regard to the investment and entrepreneurship sector?

Cyprus's accession to the Schengen Zone can act as a powerful lever for development and mark a decisive step towards the country's European integration.

Through the facilitation of investments and free movement, new prospects emerge for the country, provided, however, that they are strengthened by substantial reinforcement of infrastructure and rational utilisation of available resources.

The expected benefits are multiple and multifaceted. Reducing bureaucracy will facilitate visa-free travel for both businesspeople and travelers, thereby boosting business transactions and cross-border trade.

In particular, short and professional trips are expected to benefit significantly from the abolition of controls at the EU's internal borders. At the same time, an increase in passenger traffic, including immigration, is expected, further strengthening the interconnection of Cyprus with the European area.

Our accession to the Schengen Zone is also expected to create a favorable environment for attracting foreign direct investment (FDI), enhance business expansion within the single European market and create new opportunities in the real estate sector.

In addition, tourism and interest in organising international conferences and events may increase, significantly contributing to the upgrading of the country's international image.

However, successful integration also poses challenges. It requires upgrading control mechanisms, strengthening data exchange and effectively managing security issues, which entails increased demands on public administration and possible additional budgetary costs.

At the same time, the risk of excessive dependence on external economic factors should be prevented by formulating a resilient and flexible national strategy.

How do you anticipate that joining the Schengen Zone will affect Cyprus' position as a business and investment hub in the European Union? Are there any sectors, such as headquartering and investment funds, for example, that you believe will benefit the most?

With our participation in the Schengen Zone, we acquire a powerful tool to further consolidate our position as a business hub in the wider region.

Cyprus is expected to strengthen its competitiveness and upgrade its international profile, making the country more attractive both for companies considering relocating their headquarters, and for investment funds that emphasise flexibility and seamless mobility within the European market.

At the same time, conditions will be created for the further development of similar high-value-added services - such as legal, advisory and compliance services - that strengthen the ecosystem supporting international businesses.

However, in order to effectively exploit this advantage, we must be particularly careful and take seriously the fact that, with our accession to the Schengen Zone, we will face more direct competition with other member countries, which already have a stronger presence in the field of investment and the establishment of multinational enterprises.

This makes it even more necessary to design policies that will ensure the diversification and long-term attractiveness of the country, as well as coordinated investment in infrastructure, education and the specialisation of human resources.

What challenges do you see arising for businesses in this scenario?

The challenges facing businesses are real, but not insurmountable. Increased competition from other Schengen countries, which already have an established presence and experience in the field of investment and international business, is one of the main pressure factors.

Businesses may additionally face increased costs and more regulatory requirements in matters of security and compliance, while effective management of security and migration flows will also be critical for the stability and smooth functioning of the business environment.

These challenges, however, can be addressed if targeted policies and investments are implemented.

We consider it imperative to strengthen human resource training and management, in order for businesses to remain flexible, resilient and competitive in a more demanding and rapidly changing environment.

At the same time, active support from the State, through support tools and programmes adapted to the new requirements, will be crucial.

With proper preparation and cooperation between the public and private sectors, these challenges can be transformed, so to speak, into opportunities.

The benefits of joining the Schengen Zone, combined with coherent support strategies, have the potential to overcome the difficulties and contribute decisively to the further development of the Cypriot business community.

How will Cyprus' accession to the Schengen Zone contribute to strengthening the country's image as a reliable member of the single European market?

Cyprus's accession to the Schengen Zone is a development that significantly strengthens the country's image as a reliable member of the single European market. Our full integration into the European space sends positive messages to international investors, strengthening confidence in Cyprus as a stable and predictable business environment.

At the same time, the country's reputation is strengthened in matters of security, institutional credibility and alignment with European standards.

Besides, our recent upgrades to investment grade summarise and reinforce the generally positive climate for Cyprus.

However, in order to translate this development, namely our membership in the Schengen Zone, into a sustainable advantage, we must consistently and steadily proceed with the implementation and maintenance of European standards.

Ongoing compliance, while necessary, may be somewhat burdensome for smaller businesses, particularly in areas such as security and regulatory compliance.

Nevertheless, the overall impact on the country's image is expected to be positive, with significant prospects for strengthening international credibility and attracting investment.

(Source: InBusinessNews)