By Kyriakos Iordanou, General Manager of ICPAC
I think that by now it has been well understood that Cyprus, being a member of the EU, having an open economy and primarily depending on its financial and professional services industry, is susceptible to external influences and vulnerable to changes or developments happening all over the world. After all, this is the result of the phenomenon of globalisation!
Cyprus is not immune from the rest of the world. Every change in the global environment touches upon Cyprus too, one way or another. So, all international initiatives and regulatory deliberations affect directly Cyprus’ economy.
Currently, there is a big international expedition to promote and ensure compliance against anti-money laundering and tax avoidance/evasion practices. On one hand, OECD develops its own tools, such as BEPS project and CRS, whilst, on the other, EU is working on the adoption of common tax rules for its member states and on combating aggressive tax planning schemes. Actually, on the 17th of June 2016, the European Council adopted the new AntiTax Avoidance Directive, which is expected to be officially released soon.
On top of the above were the revelations of the “Lagarde list” and “Panama Papers”, making thus the world looking as a quite cosy neighbourhood!
Hence, changes in the global economic landscape affect everybody. Should the west sneeze, east gets a flu! The same apply to Cyprus. We are not living in isolation.We have seen how the effects of the economic crisis in the USA back in 2008 and that of Greece in 2011 impacted little Cyprus. This is the fate of an international business centre with open economy and diversity, being vulnerable to all sorts of threats and changes.
To complement the above, the dawn of the24thof June 2016 found millions of people in the UK, Europe and all over the world stunned! The verdict of the people of United Kingdom to abandon the EU is indeed a game changer, the repercussions of which cannot be safely foreseen at the moment. Things will not be the same for UK nor for EU. We are actually entering unchartered territories, which we could so far only imagine. Inescapably, UK’ssuspended step into the uncertainty for its own and the EU’s cohesion, cannot leave Cyprus unaffected.
Let’s keep our fingers crossed and pray for sanity to prevail by everybody. But that by itself is not enough. There is a prodigious need for planning by all countries, in order to mitigate anyrisks from the BREXIT.
The same, and even more important, account for Cyprus and for all the public and private professional institutions. It calls for a collective approach on the day after and for measures that need to be taken in order to properly deal with these new challenges. It should be understood that this is not only a long term project, but an on-going one, which has to be designed from now.
The above are a sheer proof of how “petit” Cyprus can be influenced by changes, decisions and developments from all over the world. The only way to adequately address this issue is to take stock of the current state of affairs of the country and its economic activities, and proactively design the official strategies so that the economic environment of the country would be adaptive to the changing world. In addition, it is imperative to foresee the future based on what is coming and adapt the economic mix of the country, so that the risk of excessive dependence on a single sector is mitigated. At the same time, we should establish robust internal procedures and practices, being pre-emptive in incorporating best practices and upcoming regulatory obligations. We should be proactive enough to “beat uncertainty”.
We are living in interesting times, where one cannot be so sure of what tomorrow may bring. Countries and economies are in fact prone to changing environments. What we should do from our part, is to remain alert in order to entertain the new challenges and take advantage of the opportunities that may arise.