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14 the international investment, business & finance magazine of cyprus

Managing Director: George Michail

general Manager:general Manager:gDaphne Roditou Tang

MeDia Manager: Elena Leontiou

eDitor-in-chief: John Vickers

Senior eDitor: Konstantine Ioannides

contributing eDitorStorStor : Antonis Antoniou, Stella Mourettou,

Maria PilidouContributors to this issue:

Alexander Apostolides, Haris Christoforou, Peter Economides, Isavella Frangou-Pavlou,

Evan Gavas, Matthew Kidd, Nathalie Kyrou, Miltiades Miltiadou, Fiona Mullen, Theodore Panayotou, Dr. Savvas Savouri, Pieter Verkade,

Eleni Vickers

Art DireCtCtC or: Andreas KoumisPhotogrAPhotogrAPhotogr PAPA hy: hy: h

Olesia Constantinou, Michael KyprianouMAMAM rArA keting rketing r exexe exex Cutive: utive: u

Kevi ChishiossALsALs esALesAL & es & es business

DeveLeveLeve oLoL PMentPMentPM exeCutive: Christos Kyriakides

ADADA vDvD ertising vertising v exexe exex Cutives: utives: uIrene Georgiou, Christopher Constantinou

oPerere ArAr tAtA ions Mtions Mt Aions MAions M nAnA AnAn gAgA er: ger: gVoulla Nicolaou

subsubsu Cririr PtPtP ions: tions: tThemoula Leonidou

Printers: Cassoulides Masterprinters

ContAContACont t:ACt:AC5 Aigaleo St., Strovolos 2057, Nicosia, Cyprus

Mailing address: P.O.Box 21185, 1503, Nicosia, Cyprus

Tel: +357 22505555, Fax: +357 22679820e-mail: gold@imh.com.cy

website: www.goldmagazine.com.cy

{editorial}

THE INTERNATIONAL INVESTMENT, BUSINESS & FINANCE MAGAZINE OF CYPRUS

ISSUE 06 SEPTEMBER 2011 PRICE €6.95

POWERED BY:

LAW FIRMS IN CYPRUS

5O TOP

THE

INTERVIEWS Philip HourquebieBarclays Wealth

PLUS: MONEY / BUSINESS ECONOMY TAX & LEGAL LIFESTYLE / OPINION

ENERGYNatural GasA blessing or a curse?

INVESTMENTWhere is Facebook’sSecret Sauce?

+ EXCLUSIVE INTERVIEW ALEXANDER DOWNER ON ‘THE PRICE OF FAILURE’

issnissn 1986 - 3543 1986 - 3543Truth and Justice: big words which in Cyprus, possibly for the first time since 1974, have acquired a significance that many of us have regrettably come to ignore over the years. It has taken the deaths of thirteen people - which would never have occurred with an even slightly more professional handling of the cargo of explosives that not only ruined countless lives but destroyed

the island’s biggest power station and caused incalculable harm to the economy - to turn the words ‘truth’ and justice’ into a powerful slogan that has echoed across the country and across generations. Even in laid-back Cyprus, it seems that there are limits to how much incompetence can be tolerated by the proverbial ‘man in the street’ who has finally taken to the streets to express his indignation with the government, the opposition and politics in general.

For more than 70 years, millions of children (and a good number of adults too) all around the world have been entertained by the adventures of the ultimate comic book superhero Superman who fights for ‘truth, justice and the American way.’ It is ironic, though no doubt realistic, that it takes a fictional character to display the kind of behaviour that most reasonable people would hope for and expect from their elected leaders. The explosion at the Mari naval base in July has galavanised popular feeling against the government like no other event in the island’s 51 years of independence. The perceived incompetence on the part of those who should have known better than to stack up almost 100 containers of explosives and munitions and leave them outside in the searing heat of the Cyprus summer coincided with the overdue acknowledgment that drastic measures need to be taken here and now if the country is not to go the way of Greece. People are asking who is to blame with regard to both situations. It is to be hoped that in the case of the explosion at Mari, the independent investigator, constitutional lawyer Polyvios Polyviou, will reach firm answers. As for the state of the economy, everyone knows that every political party that has ever exercised any amount of power in Cyprus has contributed to ensuring that an over-bloated and inefficient civil service has slowly but surely been taking a greater proportion of the state’s revenue. Those of us who are optimists like to think that the gravity of the situation has finally been understood by those who ask for our vote every five years and that they will finally do what US President Barack Obama has been urging the Democrats and Republicans in Congress to do: to put country over party.

As we note in the introduction to this month’s cover story presenting the Top 50 Law Firms in Cyprus, many of the island’s leading politicians, including three of its six presidents, many past and present party leaders and a number of sitting MPs are trained lawyers. The Cyprus Bar Association requires its members to demonstrate ‘an obligation of devotion’ to the fundamental principles of the profession, which include ‘the furtherance of truth and justice’. We do not expect our lawyers or politicians to be superheroes but we do have a right to expect that they are all men and women of principle. How they deal with the state of the economy will give everyone an indication of precisely how interested they are in truth and justice or whether, as has happened so many times before, things will simply be dealt with in ‘the Cypriot way’.

John Vickers,Chief Editor

TruTh, JusTice &The cyprioT way

PubliSheD by iMh

john@imh.com.cy

SCULPTED FROM ALUMINIUM. DESTINED TO SHAPE THE FUTURE.

Design, innovation and luxury have come together and the result is exhilarating. A range of advanced engines combines

with lightweight aluminium monocoque-construction for unprecedented performance, handling and efficiency.

The Jaguar XJ. The future is here, and it is beautiful.

» EXPERIENCE THE 2011 XJ AT:

JAGUAR.COM.CY

OFFICIAL FUEL ECONOMY FIGURES FOR THE XJ 3.0L V6 DIESEL S: EXTRA URBAN (5.6 L/100KM): URBAN (9.6 L/100KM): COMBINED (7.0 L/100KM): CO2 EMISSIONS 184 G/KM. Price does not include road tax and registration fees.

THE ALL NEW XJ 3.Od «LUXURY» ¤76.500

gold_14-15_inn.indd 14 8/31/11 11:57:52 AM

the international investment, business & finance magazine of cyprus 15

SCULPTED FROM ALUMINIUM. DESTINED TO SHAPE THE FUTURE.

Design, innovation and luxury have come together and the result is exhilarating. A range of advanced engines combines

with lightweight aluminium monocoque-construction for unprecedented performance, handling and efficiency.

The Jaguar XJ. The future is here, and it is beautiful.

» EXPERIENCE THE 2011 XJ AT:

JAGUAR.COM.CY

OFFICIAL FUEL ECONOMY FIGURES FOR THE XJ 3.0L V6 DIESEL S: EXTRA URBAN (5.6 L/100KM): URBAN (9.6 L/100KM): COMBINED (7.0 L/100KM): CO2 EMISSIONS 184 G/KM. Price does not include road tax and registration fees.

THE ALL NEW XJ 3.Od «LUXURY» ¤76.500

gold_14-15_inn.indd 15 8/31/11 11:57:52 AM

©2011 KPM

G Lim

ited, a Cyprus lim

ited liability company and m

ember of the KPM

G netw

ork of independent mem

ber firm

s affiliated with KPM

G International C

ooperative (”KPMG

International”), a Swiss entity. A

ll rights reserved.

Grasp knowledge into your hands

KPMG AcademyUpcoming Seminars: October 2011

Investment Funds and Investment Fund Management: The Cyprus Reality*

06-07/10/2011

International Tax Principles*10/10/2011

IFRS Update Seminar *13/10/2011

VAT on Trade Promotion Schemes24/10/2011

* The programmes have been approved by the HRDA. Enterprises participating with their employees who

satisfy HRDA’s criteria, are entitled to subsidy

These seminars may contribute to Continuing Professional Development requirements.

For more information please contact:Persa Papademetriou

T: +357 22209053F: +357 22513294

E. ppapademetriou@kpmg.com

Visit our website at: www.kpmg.com.cy

or our web tv at: www.kpmgcy.tv

Every three years, UBS Wealth Management Research publishes

an in-depth study on prices and earnings, updating it in intervening years. According to the most recent (2011) issue of the “Prices and Earnings” study of purchasing power around the world, Oslo, Zurich and Geneva are the world’s most expensive cities. Just down the ranks are Copenhagen, Stockholm and Tokyo. By contrast, prices for the selected basket containing 122 goods and services were particularly low in Mumbai, Manila and Delhi. The American cities surveyed now show lower price levels than in previous years. UBS economists attribute this in economists attribute this in great part to the depreciation of the US dollar against many of the world’s other currencies. Meanwhile, Venezuela’s capital Caracas suffers from high inflation; this, together with its pegged currency, resulted in higher prices, lifting its position

in the price rankings. Should Venezuela devalue its currency again, it would result in a downward shift. Nicosia ranks 40th in this list, just below Lisbon and above Miami.Employees in Zurich, Sydney and Luxembourg benefit from the highest purchasing power based on their net hourly wages. Among surveyed emerging markets, which hover around a similar level, Doha and Shanghaiexhibit high gross domestic product growth and, as a consequence, were able to increase their positions in the rankings. Nicosia came surprisingly high on the list, ranked 10th

just below Chicago and above Montreal.above Montreal.

MethodologyIn 2009, a standardized survey of prices and wages in 73 cities around the world was conducted by a number of independent price surveyors. The questionnaire used for the survey covered 122 different goods and

services, and included 112 questions pertaining to wages, payroll deductions and working hours for 14 different occupations. Over 30,000 data units flowed into the survey evaluation. Since the basket of goods and services contains only a limited selection, the study adjusted the individual components based on their weighting in the European consumer price index. The weightings of the individual items in the basket were designed so that all the prices added up to the approximate monthly consumption of an average European household. In 2011, UBS Wealth Management Research adjusted the most important indices from the 2009 survey indices from the 2009 survey for cumulative inflation, GDP growth and changes in foreign exchange rates.The UBS study “Prices and Earnings” 2009 as well as the 2010 and 2011 updates can be found online at: www.ubs.com/pricesandearnings

{news briefing}

the world’s Most expensive cities

1 Oslo 139.1

2 Zurich 135.0

3 Geneva 133.1

4 Copenhagen 118.4

5 Stockholm 117.5

6 Tokyo 112.6

7 Sydney 107.7

8 Helsinki 103.5

9 Toronto 102.8

10 Singapore 102.4

11 Vienna 102.0

12 Paris 100.9

13 Luxembourg 100.1

14 New York 100.0

15 London 99.8

16 Munich 99.7

17 Montreal 99.4

18 Frankfurt 98.0

19 Sao Paolo 96.5

20 Dublin 95.7

21 Brussels 93.3

22 Rome 92.8

23 Lyon 92.2

24 Auckland 91.7

25 Barcelona 90.9

26 Rio de Janeiro 90.9

27 Dubai 89.7

28 Istanbul 89.5

29 Amsterdam 88.2

30 Madrid 88.1

31 Los Angeles 88.1

32 Tel Aviv 87.6

33 Berlin 87.5

34 Milan 84.5

35 Seoul 84.5

36 Chicago 82.3

37 Hong Kong 82.3

38 Athens 80.1

39 Lisbon 79.9

40 Nicosia 79.7

OSLO, ZuRICH AND GENEVA TOP THE LIST. NICOSIA RANKED 40th

VIGELAND SCuLPTuRE PARK, OSLO

Excluding RentNew York = 100City

gold_18-21_inn.inddgold_18-21_inn.inddgold_18-21_inn.inddgold_18-21_inn.inddgold_18-21_inn.inddgold_18-21_inn.inddgold_18-21_inn.inddgold_18-21_inn.inddgold_18-21_inn.inddgold_18-21_inn.inddgold_18-21_inn.inddgold_18-21_inn.indd 8/31/118/31/118/31/118/31/118/31/118/31/118/31/118/31/118/31/11 11:58:38 11:58:38

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gold_3-11_inn.indd 5 8/31/11 12:01:31 PM

gold_3-11_inn.indd 8 8/31/11 12:01:38 PM

gold_3-11_inn.indd 9 8/31/11 12:01:38 PM

12 the international investment, business & finance magazine of cyprus

COVER STORYThE TOp 50 Law FiRmS in CYpRuS

70 {money}

76 {business}

84 {economy}

88 {tax&legal}

92 {lifestyle}

14 16 18 22

issue 06 september 2011

32

52

FEaTuRES

inTERESTinG TimESby matthew Kidd 24

ThE DEbaTE: “Can CYpRuS aVOiD an Eu baiL-OuT OF ThE ECOnOmY?” by alexander apostolides (yes) and fiona mullen (no) 26

maLiCE in wOnDERLanDby eleni vickers 60 COnnECTinG wORLDSby george mavrocostas 66

ThE LaST wORDby peter economides 98

+ OpiniOn

28 | ThE pRiCE OF FaiLuREInterview with Alexander Downer

52 | naTuRaL GaS: a bLESSinG OR a CuRSE?Cyprus needs to invest wisely

56 | 2020 EnERGY TaRGETS COuLD bE miSSEDThe European Commission is concerned

62 |whERE iS FaCEbOOk’S SECRET SauCE?The simple recipe for sustained corporate success

28

EDiTORiaLEYE wiTnESSnEwS bRiEFinGCOmmODiTiES/FOREX waTCh

gold_12-13_inn.indd 12 8/31/11 11:57:25 AM

the international investment, business & finance magazine of cyprus 13

gold_12-13_inn.indd 13 8/31/11 11:57:26 AM

16 the international investment, business & finance magazine of cyprus

Monday, August 8I am on a tube train bound for Ladbroke Grove in West Central London, going for lunch with my cousin in Portobello Road. For

some time I have been relishing the prospect of visiting the UK this summer and leaving behind the sweltering heat, daily power cuts and an atmosphere of political discontent that pervaded almost every conversation in Cyprus. And here I am in the big city at last. When the Circle Line train stops at Edgware Road station, a police officer steps on board and diligently scans the carriage before getting off again at Paddington. Londoners are normally unfazed by such things but today there is a distinct nervous tension in the air. Only two days earlier rioters and looters left Tottenham ablaze following a protest against the police shooting of Mark Duggan and now it seems that Londoners are bracing themselves in the expectation of more trouble to come.

Getting off the train at Ladbroke Grove and arriving at Portobello Road, I am dismayed to find that that The Fat Badger, my favourite pub and eatery in the area, has been turned into a Pizzeria (imaginatively re-named Pizza East Portobello). Nonetheless we decide to try it for old times’ sake and the food turns out to be reasonably good. Having chosen to snub the obvious choice of pizza in favour of lasagne, I catch up with my cousin’s news before heading for my beloved Bayswater. This area was my home for over three years while I was studying at the University of London and it’s where I’m scheduled to meet up with three of my old school and college friends for a quick reunion at the Prince Albert pub on Queensway High Street.

En route towards W2, I notice that the local residents appear to be increasingly nervous. Shop owners stand outside their businesses, scanning the street as stall traders begin packing up, despite the presence of plenty of tourists. I assume that this has something to do with the recent rioting in Tottenham and because, despite being one of the ‘hippest’ areas of London, Larch Grove, Portobello Road and Notting Hill host their fair share of council estate-type tower blocks together with all the inner-city social issues that come with them. Given recent weekend news reports of social

media postings inciting more lawlessness, it is not unimaginable that trouble could kick off here too.

At 7:45pm I am on Queensway being greeted by my four old friends who are waiting for me outside Bayswater station. After some manly hugs they mockingly chide me for my lateness and we head towards the Prince Albert pub opposite. I can’t help thinking how untouchable Queensway seems to be from the troubles and nervousness engulfing

the rest of London. With its proud Arab, Asian and Greek residents and business owners, what idiot would dare come through here looking for trouble? As we sit outside the pub, chatting away, drinking our pints of Directors Ale and enjoying the hustle and bustle of Queensway, we notice that the shops around us, which usually stay open until late, have begun one by one to turn off their lights and pull down their shutters. Despite my certainty that this

16 the international investment, business & finance magazine

{eyewitness}

Out Of the frying Pan and intO the fireAfter the Cyprus explosion, gOld beArs witness to london’s implosion

By K. Ioannides

gold_16-17_inn.indd 16 8/31/11 11:57:57 AM

the international investment, business & finance magazine of cyprus 17

area would not be affected, it now seems that the state of nervousness that swept along Portobello Road and Larch Grove an hour earlier has started to infiltrate Bayswater too. Nonetheless my friends and I remain unperturbed and, prompted by those who have joined us directly from work, we decide to split into two groups: the hungry and the still-thirsty. Despite my lunchtime lasagne experience I am eager to investigate what food prices are like in London these days and so I join Team Hungry, temporarily leaving the remaining two drinkers in the pub.

I soon wish I hadn’t as I’m outvoted on the choice of dining venue with the others opting to grab a quick McDonald’s twenty or so metres further down the road. But I stick with them and, standing at the fast food counter, I’m struck by how much healthier the UK menu choices seem to be. Not that it makes the slightest difference to me as I opt for a Big Mac Meal as usual.

Unaccustomed to fast food actually living up to its name in Cyprus (why does it take so long to be served here?), I am happy to find myself snugly situated in the basement section of the restaurant within a couple of minutes and my friends and I tuck into our burgers with the obvious appetite of those who have consumed a little too much beer a little too quickly.

As we are discussing family and work issues in between MSG-laden bites, we suddenly hear a commotion as a wave of panicking shoppers and tourists floods in to take cover from something happening on the street outside. Three or so members of the McDonald’s staff then lock the doors and usher everyone down to the basement section where we are sitting.

“Excuse me everyone!” shouts a stout young McDonald’s employee. “In the interests of your own safety, please do not attempt to leave the restaurant or the basement area… there is trouble on the street outside!”

I can’t help reflecting on the fact that if a rioter wants to set fire to global capitalism’s most prolific brand, my friends and I don’t stand much of a chance trapped in the basement of a McDonald’s restaurant. After a while I suggest that we leave and, prompted by a lull in the noise outside, we persuade the doorman to unlock the door to let us back onto the street. Once outside we immediately head back towards the pub and, after being petitioned by our friends inside the pub, the landlord unbolts the doors and let us in. A second wave of would-be rioters meanders past the bolted glass door and a ‘hoodie’ in a grey matching tracksuit takes a brick and tries to smash one of the pub’s windows. Thankfully the brick bounces off and, seeing the mass of people inside and a lack of support from his peers, the young man decides against trying again.

The tourists in the pub look decidedly panicked and some Scandinavians are worriedly asking other patrons what they should do. However, they soon take heart from the Londoners who seem to be more

animated by the fact that they are lucky enough to have ringside seats for the action, good company and some stiff drinks, than by any sense of fear.

By 10pm the police have effectively cordoned off Queensway to traffic as the troublemakers disperse north towards Westbourne Grove. Most shops and restaurants remain closed, however, to avoid being potential targets should the would-be rioters decide to return. The local Arab shop owners have remained notably defiant and stayed open throughout, preferring to make their presence known and to physically protect their businesses in case the rioters decide to ‘break and loot’. As a mark of respect for their courage we stop at the street’s Moroccan nargileh café and contemplate the evening’s events. Three of the five of us are parents and we cannot help reflecting on what differentiates our own parents, ourselves and our children from the rioters with whom we have just come face to face. They seemed to be both young and old, black and white, and predominantly though not exclusively male. What did unite them, however, was a sense of absolute fearlessness; the idea that as a pack they were to be feared, a law unto themselves. After some discussion, the strongest common denominator linking the five of us that we can come up with (and which perhaps the rioters do not share) is that we were all raised in unbroken homes with good role models and with respect for our fathers, teachers and the law firmly

instilled in us. None of these are things for which we were pro-actively responsible; we were just lucky to be born into such an environment.

Upon leaving the café after an hour of Moroccan tea and nargileh, we discover that the police have shut down all the surrounding tube stations. This leaves us with no choice but to seek a cab to take us to our final destination of the evening. At this point I check my mobile phone and discover five or so missed calls and fretful text messages from my mother and brother who are appealing to me to leave London as riots, fires and looting have been reported all over the city as well as in Birmingham, Manchester and Liverpool. I text back and assure them that I am fine and in a taxi bound for home.

As the night comes to an end and the taxi pulls up outside my friend’s house in South Woodford, I can’t help thinking of how quickly my perception of Cyprus has changed yet again. Yes, we do have serious problems but our recent tragedies would seem to stem from inadequacy and incompetence at the top. In England and elsewhere in Europe, such as Norway following the recent bombing and shootings in Oslo, society seems to be imploding from within. Taking heart in the fact that our problems appear easier to fix, I try to look on the bright side, grateful that, for the time being at least, Nicosia is not going up in flames at the hands of our own children.

i am grateful that, fOr the time being at least, nicOsia is nOt gOing uP in flames

at the hands Of Our Own children

gold_16-17_inn.indd 17 8/31/11 11:58:08 AM

©2011 KPM

G Lim

ited, a Cyprus lim

ited liability company and m

ember of the KPM

G netw

ork of independent mem

ber firm

s affiliated with KPM

G International C

ooperative (”KPMG

International”), a Swiss entity. A

ll rights reserved.

Grasp knowledge into your hands

KPMG AcademyUpcoming Seminars: October 2011

Investment Funds and Investment Fund Management: The Cyprus Reality*

06-07/10/2011

International Tax Principles*10/10/2011

IFRS Update Seminar *13/10/2011

VAT on Trade Promotion Schemes24/10/2011

* The programmes have been approved by the HRDA. Enterprises participating with their employees who

satisfy HRDA’s criteria, are entitled to subsidy

These seminars may contribute to Continuing Professional Development requirements.

For more information please contact:Persa Papademetriou

T: +357 22209053F: +357 22513294

E. ppapademetriou@kpmg.com

Visit our website at: www.kpmg.com.cy

or our web tv at: www.kpmgcy.tv

Excluding RentNew York = 100

19 19 19 19 19 19 19 19 19 19 19 19

22 the international investment, business & finance magazine of cYPrus

In August, Standard and Poor’s surprisingly downgraded the US’s credit rating for the first time ever, right after an agreement was reached on raising the US debt ceiling. Investor worries sent gold prices higher, fuelling gold’s previous bullish momentum, which reached a record high of US$1912/oz, from around US$1600/oz at the beginning of the month. Conditions in Europe were not optimistic either. France narrowly escaped downgrade danger while the European Central Bank has been injecting money into Italian, Spanish and other government bonds to hold down their borrowing costs. Investors are now eagerly expecting the Fed to release its next round of loosening monetary policy (QE3), due on 20 September, and it is likely to take more stimulus to boost the ailing economy. Libya’s unrest eased as rebels seized the capital of Tripoli, while uncertainty arises from Asia as Japan’s rating was downgraded by Moody’s, further supporting gold prices. However, CME increased the margin requirement on gold futures on August 24, causing gold to tumble.

Global stock markets experienced sharp falls in August on fears of another recession and the persistent European debt crisis. According to the World Federation of Exchanges, the markets lost about US$3 trillion between 1 and 5 August but the subsequent rebound only brought back a few billion dollars. The S&P 500 has dropped 12.7% so far in August, touching low at 1101. It is not expected that the US government and the Fed will take drastic measures, such as another round of bond buying, since US debt has reached unprecedented levels. Meanwhile, cheap capital will still be available for an extended period as a way to fuel economic growth. More clues will be revealed at the next Fed meeting on 20 September.

US StockS oil

Gold

By Isavella Frangou-Pavlou

info: iSavella FranGoU-PavloU is Sales and Marketing Manager at Manager at Manager KAB Strategy (Cyprus) Ltd (CySEC-License No. 058/05)

commodities forex watch

Source: kaB-Metatrader

Source: kaB-Metatrader

Source: kaB-Metatrader

{commoditiescommodities

{commoditiescommodities

forex{commoditiesforex watch{commodities watchforex watchforex{commoditiesforex watchforex{commodities watch}

Oil prices tumbled in August from around US$98 to US$75/Oil prices tumbled in August from around US$98 to US$75/barrel on global debt issues, and then turned into consolidation around the US$85/barrel level. The US economy stalled in August. Annualized GDP slid to 1.3%, the trade gap widened, consumer sentiment fell, and housing starts and home sales still pointed to a slowdown in the housing market. Traders suspect a double-dip recession and US stock market fell sharply over the month. The eurozone displayed similar economic slowdown signs, with Germany’s GDP only increasing by 0.1%; and France’s GDP gaining very little in the second quarter, a bearish environment that pressured oil prices. OPEC recently announced that its members are not concerned about oil price fluctuations and that it is not going to cut production. The situation in Libya is stabilizing and oil supply in that country may recover slowly.

gold_22-23_inn.indd 22 8/31/11 11:59:37 AM

the international investment, business & finance magazine of cYPrus 23

The pound did better than the euro in August, reaching a 1.661 high. The street riots put temporary pressure on the currency but a subsequent surge recovered all the losses. The British economy depends heavily on its European neighbours and hence sterling follows the euro closely. The BoE meanwhile has very limited choices to rescue the sluggish economy as its big brother is also lacking. Nevertheless, Britain is not a member of the eurozone, thus it is partly sheltered from the debt crisis. Technically, the pound is more volatile than the euro which makes it riskier. Bullish fluctuation still dominates the latest trend. 1.661 could be the top for the short term, though is still too early to determine whether a reversal of that trend has begun. The euro will provide a reliable guide but traders should mind the volatility.

GBPUSd

The euro fluctuated in August on the bullish side, showing support between 1.410 and 1.40. The debt crisis and a weakening German economy continue to weigh on the euro. The only hope for a stronger euro depends on whether the Fed implements another round of bond purchasing, further weakening the dollar, which seems unlikely. Adding to the downside, the European banking industry does not seem to be holding up well against pressure tests, which is a time bomb that may be triggered by any of the PIIGS (Portugal, Italy, Ireland, Greece and Spain). There is not much that the ECB can do to help its economy recover in the short term. The re-launched bond purchasing programme and unchanged interest rates will continue to be implemented to boost growth rates. The key is Germany, and if its economy further deteriorates, the eurozone will lose its backbone.

eUrUSdUSdJPY

This research report or summary has been prepared by KAB Strategy (Cyprus) Ltd (CYSEC Licence No. 058/05) and KAB Financial Advisory Ltd from information believed to be reliable. Such information has not been independently verified and no warranty, representation or warranty, express or implied, is made as to its accuracy, completeness or correctness. This report is provided for information purposes only. Nothing in this report should be considered to constitute investment advice. It is not intended, and should not be considered, as an offer, invitation, solicitation or recommendation to buy or sell any of the financial instruments described herein. Leveraged products incur a high level of risk and can result in the loss of all your invested capital. KAB Strategy (Cyprus) Ltd and its affiliates accept no liability whatsoever for any direct or consequential loss arising from the use of this document or its contents.

Source: kaB-Metatrader

Source: kaB-Metatrader

Source: kaB-Metatrader

{forex roundup}

On August 24, the Japanese government unveiled a series of unusual steps aimed at curbing the yen’s rise without directly intervening in the currency markets. These included a $100 billion fund to encourage more M&A activity abroad by Japanese businesses in order to sell and thus weaken the yen and a rule requiring major financial institutions to report currency-trading positions to better monitor the FX market. However, it is doubtful that such measures will contain the currency’s movement in global markets. Market speculation is that the BoJ will take action again in the short term to stop yen from rising but it is likely to have a temporary effect. Further easing of monetary policy may be a more effective way to deal with the rising yen, but the government is reluctant towards it. And this indecision will support yen in continuing to gain strength.

gold_22-23_inn.indd 23 8/31/11 11:59:39 AM

26 the international investment, business & finance magazine of cYPrus

{the debate}

info: AlexAnder Apostolides is a Lecturer on Lecturer on Lecturer Economics and Economic History at the European University of Cyprus. of Cyprus. of FionA Mullen is Director of Director of Director Sapienta of Sapienta of Economics Ltd, which analyses and explains economic trends to local and international clients.

Yes!

There are several reasons to doubt that Cyprus can avoid entering an EU support mechanism. The first is the sheer size of the budget deficit. In the past two years, the budget deficits for the full year have been 2.6 times the budgets in the first half of the year. If the same pattern is followed this year, then the budget deficit will reach €1.7 billion or around a Greek-sized 9% of GDP, even without adding extra electricity costs. The second is the financing requirement. As well as a fat second-half deficit, we need to find €1.4 billion between now and the end of February to roll over maturing debt. And that excludes any additional costs relating to rebuilding Vasilikos (which, if we are lucky, will come from the European Investment Bank). Interest rates on Cyprus’s international bonds are prohibitive at the moment, so the government will have to ask local banks to fund the €2 billion or more it will need.

At the moment, the Cypriot banks appear to have plenty of liquidity. But one remarkable characteristic of this financial crisis is the ability of the international markets to fulfil their own worst fears simply by thinking about them. The vicious cycle for Cyprus has already started. Central Bank Governor Athanasios Orphanides has warned that Cyprus might have to enter a support mechanism. The international media is now talking as though it is a certainty. Now our local banks will have to answer questions from investors, rating agencies and lenders not only about their exposure to Greece but their exposure to the Cyprus government as well. That might make them reluctant to lend to the government (at least at an affordable price) and hey presto!, the government cannot roll over its debt and has to go cap in hand to the EU for support.

And that brings me to my final reason, namely the weakness of what is now a minority AKEL government. Even if parliament passes the package that is due to be put to parliament a few days after this piece is being written, it is not certain that opposition DISY and DIKO will support the second package that will probably be necessary to avoid another downgrade. What better way to secure a DISY or DIKO presidency in 2013 than to make sure President Christofias is humiliated into asking the EU for financial support?

The Mari explosion has meant that all government targets are nowunreachable. The deficit will be significantly larger that what was expected by the EU, and the downgrading of the government’s credit rating makes borrowing at current interest rates unsustainable. The need to borrow money for current needs is compounded by the fact that approximately €10 billion of government debt will expire between now and August 2013 and needs to be rolled over with significantly higher interest rates than before.

With bold leadership, however, there is a way out of the crisis without resorting to an EU bailout which would entail an unprecedented surrender of our fiscal sovereignty. The current debt to GDP ratio of Cyprus is lower than the EU average and Cypriot banks have been successfully drawing liquidity in order to weather these turbulent times without government support. The new Finance Minister has managed in record time to produce an emergency package of measures that tackle some of the government’s structural deficit, with the unions accepting compromises that were previously off the table. These measures are a good start in tacklingthe government deficit long-term but they do not address the mosturgent problem: the government still needs an awful lot of cash in hand between now and 2013. With the exception of additional taxincreases placed on already stressed firms and consumers, bold anddeep cuts in government wages are needed in order to save money today. It is time for the President to understand that his legacy hasto be the elimination of government sector privileges and chronic taxevasion, and for him to take measures that were deemed unthinkable prior to this economic crisis.

The signs that the political will exists to achieve the above objectives are good. Unlike their counterparts in Greece, the opposition partieshere are united in demanding greater and bolder compromises and the unions will support a further reduction of some of theirprivileges, provided that an initiative is introduced to catch those who are currently not paying their fair share of tax. If the budget for2013 is agreed on time and contains further measures to cut the civilservice wage bill, innovative taxation and ways to reduce tax evasion, then the greatest capitulation of our sovereignty since the adoption of the Euro can be avoided. Cyprus can survive without the EU support mechanism... but only with very painful sacrifices by all.

CAn CYprus Avoid An eu bAil-out oF the eConoMY?

by Fiona Mullen

one remarkable characteristic of this financial crisis is the abilitY of the

international markets to fulfil their own worst fears simPlY bY thinking about them

the President’s legacY has to be the elimination of government sector Privileges and chronic tax evasion

by Alexander Apostolides Fiona Mullen

no!

gold_26-27_inn.indd 26 8/31/11 12:00:32 PM

the international investment, business & finance magazine of cYPrus 27

ThE EUrOzONEIS CUrrENTLYrrENTLYrrIN ThE MIDSTOF ITS WOrSTPErIODSINCE ITSINCEPTIONAND WE ArErEr

NOW AT ThE WOrSTPOINT OF ThE DEBT CrISISThAT STArTEDrTEDr EIGhTEENMONThS AGO. Contagion has already spread to Ireland, Portugal, Cyprus, Spain, Italy and even France is starting to feel the pain. The unwinding of fiscal imbalances, asset bubbles and over-leverage is a protracted, painful and disinflationary process. Without control of monetary policy, crisis-hit countries are being forced to adopt large and unprecedented medium-term austerity measures.

There are examples in the past of debt crises that were successfully overcome, mainly with external help, but these episodes involved countries with the power to control their monetary policy and on every occasion a devaluation of their currencies and/or increase of the money supply was a basic step in their struggle to regain competitiveness. however, the countries of the eurozone have delegated their monetary authority to the European

Central Bank, which has sole responsibility for the price stability of the whole euro area. With Germany, the largest partner, growing at the fastest pace since the end of the global recession in 2009 and commodity prices shooting through the roof, the eurozone average for inflation remains above the 2 % ECB target (close to 3% in fact) thus forcing the ECB to paradoxically start hiking rates during a severe debt crisis. This results in placing an extra burden on the highly- indebted countries in the form of increased borrowing costs and a loss of competitiveness due to the higher exchange rate of the euro.

Surprisingly, and despite the widespread debt crisis, the euro has been able to appreciate since the start of the year against all but one of its other major counterparts (the Swiss Franc). The euro has appreciated between 2% and 3% against the Japanese yen, Sterling and even the Australian dollar while against the US dollar the gains stand at around 9 % for the

year! We are of the view that the euro’s persistent strength has more to do with the apparent weakness of the US dollar and the divergence between the policies of the ECB and the US Federal reserve. The US authorities reserve. The US authorities r(both the Fed and the Treasury) are “unofficially” but clearly targeting a weaker dollar and all their actions in recent years have been in divergence with the policies adopted in the eurozone. This year the ECB has started hiking interest rates while the Fed has only recently finished its second round of Quantitative Easing (printing US dollars and buying back US Treasuries, thus increasing the money supply) with US interest rates stuck at 0% and the markets already pricing a 30 % chance of another round of bond buying in the US. In this environment, where investors are using cheap dollars to fund their investments, the lack of a credible and liquid alternative to the US dollar makes the euro their only choice, especially for the high growth economies like China, russia and India. Consequently, as long as the US authorities continue their current policy of targeting a weaker dollar and the risk of a eurozone breakup or default do not materialize, the long-term trend of the euro is bound to remain upward.

{advertorial}

Amid EurozonE FEArs, the euro reMAins strong

the lACk oF A Credible And liquid AlternAtive to the us dollAr MAkesthe euro the onlYChoiCe For investors

gold_26-27_inn.indd 27 8/31/11 12:00:33 PM

30 the international investment, business & finance magazine of cyprus 30 the international investment, business & finance magazine of cyprus

use - I’ve been there - so they will have to be rebuilt. If they didn’t have an insurance policy, and it’s hard to get coverage that includes war, they will have written the loss off financially. The point is that if they have to rebuild, then obviously there will be some revenue streams as well. It’s hard to know what the net cost would be. In any case, rebuilding isn’t a must. Famagusta will be rebuilt only to the extent that it’s worth rebuilding. It’s obviously very desirable but it doesn’t have to be done.

Gold: Leaving aside the financial cost of making a federal Cyprus viable, what broad economic advantages do you see from a settlement?A.D.: I see several. Natural Gas is potentially a very big issue for Cyprus. We’ll find out soon enough how much gas there is and how much it is worth. Presumably it will take some years yet to get the revenue flowing but it could be quite a boon to Cyprus and it’s come at not too bad a time. However, if Cyprus is still divided there is always the potential for a dispute which increases the sovereign risk of the project and creates a degree of uncertainty. The two sides make perfectly clear claims and they’re absolutely certain of the rightness of their cause but they both need to be satisfied with each other’s position. Cyprus being reunited is going to make this project much better. So let’s say that the Greek Cypriots are able to establish that they have sovereignty over this gas field. Will the Turkish Cypriots say that they deserve a share of the revenue? What share are they going to get? What sort of an argument is this going to cause? I don’t know the answers to these questions but their existence creates an element of uncertainty. With a settlement you eliminate that and the whole island can share in the bounty of Natural Gas.

Gold: What about trade with Turkey?A.D.: The issue of trade is huge. Turkey is a market of over 70 million people. There are around 800,000 Greek Cypriots in Cyprus and they will suddenly have this huge new market opening up to them, particularly in terms of tourism and financial services. For example, 8-9 million Turks travel abroad every year, which is more than four times the number of visitors to either side of Cyprus. Turkish tourists can go to the north of Cyprus - and they do - but if they could take holidays throughout Cyprus, this would create enormous new opportunities for the tourism industry. There would also be similarly tremendous opportunities for the export of financial services - banking, accountancy services and so on - in which the Greek Cypriots have a certain competitive advantage.

Gold: Until the recent problems caused by the Cypriot banks’ exposure to Greek debt and the damage to Vasilikos power station, many Greek Cypriots would probably have argued that things are fine as they are.A.D.: But they are not, as I’ve explained. People need to recognise the financial costs of failure: Turkey will have to pay compensation to the Greek Cypriots for the loss of their property and the Greek Cypriots will have to pay the Turkish Cypriots for the loss of their property. There are significant financial problems now - it’s not

my job to be a commentator on that but it’s perhaps fair enough to say that they obviously exist and the President is wrestling with the budget to deal with them - and if you add to that the failure of the talks and the bills that will come with it, that’s going to be quite a serious problem, to put it mildly. I don’t think people are awake to this and to what I would call ‘the price of failure’.

Gold: How would reunification affect the island’s ambitions to become a regional financial centre?A.D.: Cyprus has a wonderful opportunity here, born out of a comparative advantage in terms of expertise and geography, a good reputation for the rule of law and - something we shouldn’t underestimate - the fact that a lot of professional people here speak English. These things really matter in terms of using a country as a financial centre. The use of English matters given that 90% of all international business is conducted in English. That figure may start to decline a bit because of the growth of China but even if you do business with China you do it in English. So Cyprus has this advantage and many others. But there is one disadvantage: to the outsider, even though the status quo has remained for 37 years, Cyprus looks unstable. It’s split. There are more Turkish troops in Cyprus than there are American troops in South Korea. I’m sorry to say this but it’s all a matter of perception. And to the outside world, the perception is that if Turkey judges that it needs all those troops here, then something must be wrong.

Gold: Perceptions are not necessarily correct, though, are they?A.D.: I’m not talking about the rights and wrongs of this, I’m talking about the impression that many people have, whether the situation on the ground is different or not. Nicosia is properly described as ‘Europe’s last divided city’ but what kind of a perception does this create? Am I going to use a place with a buffer zone, barbed wire and armed soldiers in observation posts staring at each other across ruined buildings as a major financial centre? Beirut was once the great financial centre of the Middle East until it had its political problems. Dubai has been making a really heavy push to try and replace it but Cyprus has every imaginable advantage - including quality of life advantages - and a fantastic opportunity to become a regional financial centre. But as long as it remains divided, its potential will be limited. Cyprus is very heavily dependent on Russian money and Russian transactions which is fine, of course, but others are not mainly using Cyprus and a successful agreement would certainly encourage them to do so. In life, a lot boils down to economics. There are economic costs of failure and there are economic opportunities flowing from success. We’ll see what happens in Cyprus. We want success.

to the outsider, even though the status quo has remained for 37 years,

cyprus looks unstable

gold_28-31_inn.indd 30 8/31/11 12:01:01 PM

gold_28-31_inn.indd 31 8/31/11 12:01:02 PM

A.G. PAPhitis & Co. LLCNumber of Lawyers: 6Head of the Firm: Angelos Paphitis (Managing Partner)

Themis Tower 6th Floor, Corner of Anastasi Sioukri & Olympion, Limassol3034Offices: Limassol, Athens, Dubai

25731000Fax: 25761004

www.agpaphitis.com

AndreAs CouCounis & Co.Number of Lawyers: 5Number of Partners: 3Head of the Firm: Tasos Coucounis (Managing Director)

Suite 101-102, 9, Archbishop Makariou III Avenue, Lazaros Center, Larnaca (P.O. Box 40519, Larnaca 6305)Larnaca (P.O. Box 40519, Larnaca 6305)Larnaca (P.O. Box 40519, LarnacaOffices: Nicosia, Larnaca, Paphos

24822460Fax: 24626106

www.coucounis.com

AndreAs neoCLeous & Co LLCNumber of Lawyers: 126Number of Partners: 17Head of the Firm: Andreas Neocleous (Chairman)

Neocleous House, 195, Archbishop Makariou III Avenue, Limassol 3030Offices: Nicosia, Limassol, Moscow, Prague, Kiev, Sevastopol, Brussels, Budapest

25362818 25362818Fax: 25110001

www.neocleous.com

AndreAs sofoCLeous & CoNumber of Lawyers: 8Head of the Firm: Andreas Sofocleous (Founder & Managing Partner)

Proteas House, 155, Archbishop Makariou III Avenue, Limassol 3026Offices: Limassol, Moscow, Kiev, Tbilisi

25849000 25849000Fax: 25849100

www.sofocleous.com.cy

Antis triAntAfyLLides & sons LLCNumber of Lawyers: 28Number of Partners: 3Head of the Firm: Antis Triantafyllides (Founder) George Triantafyllides (Managing Partner)Stelios Triantafyllides (Managing Partner)

2-4, Archbishop Makariou III Avenue, Capital Center, 9th floor, Nicosia (P.O. Box 21255, Nicosia 1505)Offices: Nicosia

22360000 22360000Fax: 22670670

www.triantafyllides.com

n Antonis PAsChALides & CoNumber of Lawyers: 9Number of Partners: 3Head of the Firm: Charalambos Carlos Paschalides (Managing Partner)

29, Stasikratous Street, Suite 201, Nicosia 1065Nicosia 1065NicosiaOffices: Nicosia, London

22661661Fax: 22672333

www.paschalides.com

cover story

• advised one of the largest european developers on its acquisition of the Cyprus companies holding a Romanian portfolio worth €220 million in a cross-border transaction involving austria, england, Romania, Cyprus and switzerland. Carried out the extensive due diligence on the 3 Cyprus companies involved and handled their transfer to their new shareholders.• was involved in the re-financing of one of the largest Moscow shopping centres advising the client on the collaterals to secure the transaction which was in the amount of $100 million dollars granted as a loan.• Yiannaki BRos Hotels ltd v. HelleniC Bank PuBliC CoMPanY ltd. the issue raised was whether the fact that

the parties had reached agreement on the settlement of the debt created estoppels to bring an action against the bank for alleged economic requirements in the field of conversion of foreign currency. the action was brought for €1.7 million euros, a significant amount at Cyprus banking level, and antonis Paschalides & Co. won the appeal for Hellenic Bank.• Yiannakis kallikas v. HelleniC Bank PuBliC Co ltd was one of a series of cases regarding the 1999 Cyprus stock exchange crash for which antonis Paschalides & Co successfully represented Hellenic Bank. the case involved an investor account with a scale of action at €500,000 to €2 million. the firm won the appeal for Hellenic Bank and the case is now considered a leading case in Cyprus banking law.

notAbLe CAses: Antonis PAsChALides & ConotAotAot bLLLbbbbbbbbototAotAototAotAotAotAnn

gold_32-51_inn.inddgold_32-51_inn.inddgold_32-51_inn.inddgold_32-51_inn.inddgold_32-51_inn.inddgold_32-51_inn.inddgold_32-51_inn.inddgold_32-51_inn.inddgold_32-51_inn.inddgold_32-51_inn.inddgold_32-51_inn.inddgold_32-51_inn.inddgold_32-51_inn.inddgold_32-51_inn.inddgold_32-51_inn.inddgold_32-51_inn.inddgold_32-51_inn.inddgold_32-51_inn.inddgold_32-51_inn.inddgold_32-51_inn.inddgold_32-51_inn.inddgold_32-51_inn.inddgold_32-51_inn.inddgold_32-51_inn.inddgold_32-51_inn.inddgold_32-51_inn.inddgold_32-51_inn.inddgold_32-51_inn.inddgold_32-51_inn.inddgold_32-51_inn.inddgold_32-51_inn.inddgold_32-51_inn.inddgold_32-51_inn.inddgold_32-51_inn.inddgold_32-51_inn.inddgold_32-51_inn.inddgold_32-51_inn.inddgold_32-51_inn.inddgold_32-51_inn.inddgold_32-51_inn.inddgold_32-51_inn.inddgold_32-51_inn.inddgold_32-51_inn.inddgold_32-51_inn.inddgold_32-51_inn.indd 34 34 34 34 34 34 34 34 34 34 34 34 34 34 34 34 34 8/31/118/31/118/31/118/31/118/31/118/31/118/31/118/31/118/31/118/31/118/31/118/31/118/31/118/31/118/31/118/31/118/31/118/31/118/31/118/31/118/31/118/31/118/31/118/31/118/31/118/31/118/31/118/31/118/31/118/31/118/31/118/31/118/31/118/31/118/31/118/31/118/31/118/31/118/31/118/31/118/31/118/31/118/31/118/31/118/31/118/31/118/31/11 12:02:35 12:02:35 12:02:35 12:02:35 12:02:35 12:02:35 12:02:35 12:02:35 12:02:35 12:02:35

20 the international investment, business & finance magazine of cyprus

google to buy MotorolaMobility for $12.5bn for $12.5bn forInternet giant Google has announced a deal to buy Motorola

Mobility for $12.5bn (€8.71bn). The boards of both companies have unanimously approved the deal, which should be completed by the end of this year, or early in 2012. Earlier this year, Motorola split into two separate companies. Mobility develops and manufactures mobile phones, while Motorola Solutions covers wider technologies for corporate customers and governments. The deal would allow Google to “supercharge” its Android operating system, used in many Motorola handsets, a joint statement said, noting that Google

would continue to

run Mobility as a separate business.Motorola was once one of the world’s most successful mobile phone manufacturers but in recent years it has fallen behind the likes of Apple, Samsung and HTC.

hsBC sells Us credit carddivision to Capital oneHSBC, Europe’s largest bank, has agreed the sale of its US credit card division to

Capital One Financial as part of its ongoing restructuring. The sale includes the US division’s MasterCard, Visa, private label, and other credit

card operations. Under the deal HSBC will receive cash and Capital One shares. The sale does not include the credit card arm of HSBC Bank USA, which has assets of about $1.1bn. The sale of the unit, which has assets of about $30.4bn (€21.18bn), is part of a $3.5bn global cost-cutting plan under new chief executive Stuart Gulliver. HSBC said it would make a post-tax gain of about $2.4bn on the sale. In

August, HSBC announced plans to shed nearly half of its underperforming US

branch network, selling 195 outlets to First Niagara Financial Group for $1bn and closing 13 more.

saga group to acquire Alliedhealthcare InternationalAllied Healthcare International Inc., a leading homecare provider of health and social care in the United Kingdom and Ireland, has entered into a definitive agreement to be acquired by Saga Group Ltd. The aggregate purchase price for all outstanding shares of Allied common stock, including outstanding options, will

be approximately €122 million. Completion of the transaction is expected to occur in the fourth calendar quarter of 2011. John Ivers, Chief Executive Officer of Saga Healthcare, said,

“Our strategic intent has been to grow our healthcare division organically and through

carefully selected acquisitions. I am therefore delighted that Allied is joining the Saga Group. Saga

will be the UK’s pre-eminent provider of domiciliary care”. The Saga Group is the UK’s leading provider of products and services specifically designed for people aged 50 and over.

deals ofdeals ofdeals the of the of month the month the1.

2. 3.

Three of Europe’s biggest banks have seen their second quarter profits slashed as a result of writedowns on Greek debt holdings while a fourth has reported a half-year loss after making a massive provision for Greek debt. The move reflects acceptance among lenders to Greece that they will not receive back the full value of loans.

Second-quarter profits at soCIété générAle, France’s second-biggest bank, have fallen as a result of its exposure to Greek sovereign debt. SocGen’s net profit for the quarter fell to €747m, down 31% from a year ago. The bank, which holds about €2.65bn of Greek sovereign bonds, made a €395m writedown on its Greek debt holdings. Société Générale also

warned that its 2012 profit target would be “difficult to achieve”.

BnP PArIBAs, which has the biggest exposure to Greek debt among France’s banks, has also set aside €534m to cover its expected Greek losses but it managed to post a second quarter net profit of €2.12 billion. French banks are among the biggest holders of Greek debt and could end up taking a loss of 21% on its value as a result of the bailout.

Meanwhile, CoMMerzBAnk, Germany’s second largest bank, has seen its second quarter profits all but wiped out by a €760m writedown of its Greek debt. Second-quarter net profit fell by 93% from the same period a year ago to €24m

after the debt revaluation. The bank says that it is still expecting full-year profits to beat last year’s and that it will continue to pursue its goal of reaching a €4bn operating profit by 2012.

royAl BAnk of sCotlAnd also lent money to the Greek government which might now not be paid back in full as a result of the country’s debt crisis. As a result of making a £733m (€833) provision for its exposure to Greek government bonds, RBS, which is 84%-owned by UK taxpayers, reported losses after tax of £1.4bn (€1.59bn) for the six months to 30 June. However, the bank reported an improvement in its core operating profit to £1.7bn from £1.1bn in 2010.

eUroPeAn BAnk ProfIts hIt By greek deBt wrItedown

{news briefing}

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the international investment, business & finance magazine of cyprus 21

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www.allgeier-dms.net

gold_18-21_inn.indd 21 8/31/11 11:58:58 AM

24 the international investment, business & finance magazine of cyprus

May you live in interesting times”, the saying (or, some say, curse) goes. For a British High Commissioner in Nicosia, the last few months have certainly been that. Let

me give you a flavour of my inbox.For both Cyprus and the UK the year has been dominated by

the challenging economic environment. One of the significant changes to the work of the Foreign and Commonwealth Office under the current government is a greater emphasis on our role in support of the UK economy and in reporting on the economic situation in our host nations. Although the UK is outside the eurozone, developments within it are of great importance to us: we want it to flourish. It has been challenging to try to understand how developments elsewhere in it affect Cyprus, and what Cyprus can do to protect itself from threats to its prosperity. As for the UK, we have had to undertake some very tough austerity measures to tackle the economic crisis; part of my job is to reassure people here that the measures are having the right impact, leaving Britain still very much ‘open for business’. The economic health of each of our two countries is strongly affected by developments in the other, in areas ranging from financial services to tourism, education to health. So there is a lot to follow and try to push in the right direction (involving all parts of the High Commission, from the commercial team to the consular, and the British Council too).

The energy sector is an area I have had to get to grips with here, more than in any previous posting I have had. British companies have been involved for some years in seeking to help Cyprus make the transition to liquefied natural gas as the prime fuel for its electricity generation. Cyprus’ decision to take this route is in turn a response to the concern we all share to manage our environment in a more sustainable way. And recent months have seen confidence growing here that Cyprus may have its own reserves, which, if confirmed, will create huge new opportunities, and also challenges.

But the summer has been overshadowed by the tragedy of the

explosion at the naval base, the loss of life and the impact on the island’s electricity supply. Our response, like those of Cyprus’ other friends, has been to look at how we can help. As a symbol of that, on the day of the explosion a large number of personnel from the Bases took the initiative to go to Limassol hospital to offer blood. I am pleased that in the weeks since, the UK has provided experts in handling explosives and in managing the power supply.

That’s not all. This has been an important period for the settlement process too, with negotiations entering an intensive phase. The challenge is huge, particularly against the current economic and political backdrop, but so are the potential gains, for all Cypriots, the region and the wider international community. The UK fully supports the process; we try hard to find productive ways of delivering that support, while not interfering in what must be a Cypriot-led process.

Both the UK and Cyprus face interesting times in 2012 as well. For Cyprus there is the six-month EU Presidency; we have been working with the Cyprus Government to see how we can help it to meet the challenge successfully. In the meantime the UK is preparing for the 2012 Olympic Games which will be a celebration of not only sporting prowess but also the important themes of inclusiveness and environmental sustainability. I look forward to a series of events in Cyprus celebrating the Games, and, who knows, even a Cypriot medal.

info: Matthew Kidd is the British High Commissioner to Cyprus

{opinion}By Matthew Kidd

interesting tiMes

Part of My job is to reassure PeoPle here that tough austerity

Measures are having the right iMPact, leaving britain still very

Much ‘oPen for business’

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Audit and Assurance

Accounting

Taxation

Corporate Finance andBusiness Advisory

Talk to us.We’ve got the answers.

As a team, we value connecting highly effective individuals

with our clients. We work as a cohesive force - with our

clients and with each other - because we are committed in

providing quality business solutions.

Offices in Cyprus, Romania, Bulgaria, Moldova.

BAKER TILLY

KLITOU

©2011 Baker Tilly Klitou and Partners Ltd. All rights reserved. “Baker Tilly Klitou” refers to Baker Tilly Klitou and Partners Ltd, registered in Cyprus, which is an independent member of Baker Tilly International, a worldwide network ofaccounting firms. “Baker Tilly” is a trademark of the UK firm, Baker Tilly UK Group LLP, used under licence.

www.bakertillyklitou.com

We Share Your Vision

gold_24-25_inn.indd 24 8/31/11 12:00:01 PM

the international investment, business & finance magazine of cyprus 25

�

�

�

�

Audit and Assurance

Accounting

Taxation

Corporate Finance andBusiness Advisory

Talk to us.We’ve got the answers.

As a team, we value connecting highly effective individuals

with our clients. We work as a cohesive force - with our

clients and with each other - because we are committed in

providing quality business solutions.

Offices in Cyprus, Romania, Bulgaria, Moldova.

BAKER TILLY

KLITOU

©2011 Baker Tilly Klitou and Partners Ltd. All rights reserved. “Baker Tilly Klitou” refers to Baker Tilly Klitou and Partners Ltd, registered in Cyprus, which is an independent member of Baker Tilly International, a worldwide network ofaccounting firms. “Baker Tilly” is a trademark of the UK firm, Baker Tilly UK Group LLP, used under licence.

www.bakertillyklitou.com

We Share Your Vision

gold_24-25_inn.indd 25 8/31/11 12:00:11 PM

28 the international investment, business & finance magazine of cyprus

The Price of failure

On 18 March this year, Cypriot President Demetris Christofias took part in his 100th meeting since April 2008 with the representative of the Turkish Cypriot community (currently Dervis Eroglu, previously Mehmet Ali Talat) in UN-sponsored talks aimed at reuniting the

island. Since reaching that particular milestone the talks have continued and UN Secretary-General Ban Ki-moon is urging the two sides to push for an agreement by the autumn. The European Union would clearly like to see a united Cyprus taking over the EU presidency on 1 July 2012. Gold spoke to Alexander Downer, Special Adviser to the UN Secretary-General on Cyprus, about the economic cost of failure to reach an agreement and the opportunities that will arise in case of a successful conclusion to the negotiations.

Gold: You have said in the past that if the Cyprus talks fail, billions of euros will have to be paid by the Greek Cypriots and Turkey. What did you mean by this?Alexander Downer: The biggest single expense in the end is going to be compensation for the loss of property and Turkey will end up by getting a lot of the bills, though not just Turkey. So unless they can negotiate an agreement here, all of these claims will be litigated - that will itself cost money too - and the payouts could cost Turkey anything up to €25 billion while for the Turkish Cypriot properties in the south it could cost the Greek Cypriots anything up to €15 billion. There is a very real and a very heavy direct financial cost for failing to reach an agreement and I don’t think people always understand this.

Gold: Others say that if agreement is reached, the cost of compensation will be the same. In this sense, it could be argued that there is no financial gain attached to reaching an agreement.A.D.: It is true that reaching an agreement will, inter alia, involve compensation but with an agreement, other things can happen: some cases can be resolved though exchange; in some, compensation will have to be paid; and in others the owners of the properties will be able to have them reinstated.

Regarding exchange, conceivably all of the Turkish Cypriot property in the south of the island could be exchanged for Greek Cypriot property in the north. If it were all exchanged - which isn’t necessarily what would happen, of course - the costs in terms of

compensation would be near to zero. In some cases, compensation will have to be paid, it’s true. It is also true that there is a cost to reinstatement. Don’t forget that 75% of the land in the north of Cyprus is owned by Greek Cypriots but if there is what we call a ‘current user’ on the property, that person will have to be rehoused so that the owner can have the property reinstated. But while there is no denying that there will be costs to any agreement, they will be a fraction of what will have to be paid without one. It is really important to understand that.

Gold: How accurate are the sums you’re talking about?A.D.: They should be regarded merely as illustrative. The numbers need to be understood for what they are. If you made an estimate of the value of all this ‘disputed property’ and you allocated that estimate between the Greek Cypriots and the Turkish Cypriots, these (€25 billion and €15 billion respectively) are the sort of values you’d be talking about. At present they are all ‘back of the envelope’ numbers and the actual cost of an agreement would depend on the distribution between exchange and compensation. Without an agreement it might not end up costing Turkey as much as the estimated €25 billion because the Immovable Property Commission in the north would decide how much compensation has to be paid. My point is that with an agreement there can be a very big saving and the costs can be massively reduced. Money will still have to be raised. The Greek Cypriots say there should be a donors’ conference, somebody may put some money directly in and also money will have to be borrowed.

Gold: What do you say to those who argue that the cost of the reconstruction of Famagusta, for example, would be prohibitive?A.D.: It’s not a net cost but a gross cost. If you build an apartment block in Famagusta, you’re not going to use every single apartment for yourself. If you are the owner of an apartment block in Famagusta, presumably you will sell some of the apartments. People own all those buildings but they have degraded beyond

Interview by John Vickers

If talks on the reunIfIcatIon of the Island do not end In agreement, cyprus and turkey wIll face massIve fInancIal and economIc costs

cyprus has every imaginable advantage and a fantastic opportunity

to become a regional financial centre

gold_28-31_inn.indd 28 8/31/11 12:00:49 PM

the international investment, business & finance magazine of cyprus 29

AlexAnDer Downer

gold_28-31_inn.indd 29 8/31/11 12:01:01 PM

32 the international investment, business & finance magazine of cyprus

law firms iN CYPrUs

5O5O5O5O5O5O5O5O5O5O5O5O5O5O5O5O5O5O5O5O TOP

THE

cover story

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the international investment, business & finance magazine of cyprus 33

Cypriots have traditionally had a very limited outlook when it comes to possible professions for their children. Top of the list for those with stability as

their first priority has always been the civil service, closely followed by a position in a semi-government organisation. Others, whose ambitions include concepts such as prestige and social standing - not to mention a presumption of considerable financial reward - have usually chosen the medical and the legal professions.

It should perhaps come as no surprise that many of Cyprus’ leading politicians, including three of its six presidents and many past and present party leaders, have studied law and/or worked in the profession.

The Cyprus Bar Association, which has been the professional body for lawyers on the island since 1960, currently has more than 2,200 members.

This is quite a staggering number for a country of 870,000 people (Republic of Cyprus), since it means that there is one

lawyer for every 395 people, making it joint 4th with Spain in the world (the US ranks first with 1 for every 265, followed by Brazil with 326 and New Zealand with 391).

In recent years, as Cyprus has grown in stature as a regional centre for professional services and thousands of foreign companies have set up offices here, the more successful and specialized Cypriot law firms have found themselves in great demand. Students continue to enter the profession in record numbers, possibly attracted by the perceived prestige and impressive lifestyle and also by the possibility of a chance to change things for the better, even on a local or individual scale.

Being a lawyer is not easy, as all four of our interviewees on the following pages suggest. For a start, there are not many professions that require their members to demonstrate “an obligation of devotion” to the fundamental principles of the profession, which include “the furtherance of truth and justice in a spirit of independence, freedom and dignity” (Advocates’ Code of Conduct Regulations of 2002).

But we need lawyers and we need good

ones. In attempting to compile a list of the leading law firms on the island, Goldconsulted various sources, including the Legal 500, and submitted questionnaires to a large number of firms. The resulting alphabetical list of 50 is, we believe, a fairly accurate selection of those firms with a deserved reputation for excellence. They range from truly huge international operations such as Andreas Neocleous & Co LLC, which employs well over 100 lawyers, to smaller firms with only four. There may be firms omitted from the list that, according to a different, equally objective assessment, ought to have been included. For reasons of their own, not all the companies we approached wanted to be included in the list. No firm has paid to be included in the list, nor has payment of any kind been sought.

We hope that the list of the island’s leading law firms will be used as a reliable guide by anyone seeking legal assistance. We also present interesting information about specific cases by seven of the firms on the list and interviews with four lawyers who answered our identical questions with very different answers.

gold_32-51_inn.inddgold_32-51_inn.inddgold_32-51_inn.inddgold_32-51_inn.inddgold_32-51_inn.inddgold_32-51_inn.inddgold_32-51_inn.inddgold_32-51_inn.inddgold_32-51_inn.inddgold_32-51_inn.inddgold_32-51_inn.inddgold_32-51_inn.inddgold_32-51_inn.inddgold_32-51_inn.inddgold_32-51_inn.inddgold_32-51_inn.inddgold_32-51_inn.inddgold_32-51_inn.inddgold_32-51_inn.inddgold_32-51_inn.inddgold_32-51_inn.inddgold_32-51_inn.inddgold_32-51_inn.inddgold_32-51_inn.inddgold_32-51_inn.inddgold_32-51_inn.inddgold_32-51_inn.inddgold_32-51_inn.inddgold_32-51_inn.inddgold_32-51_inn.inddgold_32-51_inn.inddgold_32-51_inn.inddgold_32-51_inn.inddgold_32-51_inn.inddgold_32-51_inn.inddgold_32-51_inn.inddgold_32-51_inn.inddgold_32-51_inn.inddgold_32-51_inn.inddgold_32-51_inn.inddgold_32-51_inn.inddgold_32-51_inn.inddgold_32-51_inn.inddgold_32-51_inn.inddgold_32-51_inn.inddgold_32-51_inn.inddgold_32-51_inn.inddgold_32-51_inn.inddgold_32-51_inn.inddgold_32-51_inn.inddgold_32-51_inn.inddgold_32-51_inn.inddgold_32-51_inn.inddgold_32-51_inn.inddgold_32-51_inn.inddgold_32-51_inn.inddgold_32-51_inn.inddgold_32-51_inn.inddgold_32-51_inn.inddgold_32-51_inn.inddgold_32-51_inn.inddgold_32-51_inn.inddgold_32-51_inn.inddgold_32-51_inn.inddgold_32-51_inn.inddgold_32-51_inn.inddgold_32-51_inn.inddgold_32-51_inn.inddgold_32-51_inn.inddgold_32-51_inn.inddgold_32-51_inn.inddgold_32-51_inn.inddgold_32-51_inn.inddgold_32-51_inn.inddgold_32-51_inn.inddgold_32-51_inn.inddgold_32-51_inn.inddgold_32-51_inn.inddgold_32-51_inn.inddgold_32-51_inn.inddgold_32-51_inn.inddgold_32-51_inn.indd 33 33 33 33 33 33 33 33 33 33 33 33 33 33 33 33 33 8/31/118/31/118/31/118/31/118/31/118/31/118/31/118/31/118/31/118/31/118/31/118/31/118/31/118/31/118/31/118/31/118/31/118/31/118/31/118/31/118/31/118/31/118/31/118/31/118/31/118/31/118/31/118/31/118/31/118/31/118/31/118/31/118/31/118/31/118/31/118/31/118/31/118/31/118/31/118/31/118/31/118/31/118/31/118/31/118/31/118/31/118/31/11 12:02:35 12:02:35 12:02:35 12:02:35 12:02:35 12:02:35 12:02:35 12:02:35 12:02:35 12:02:35 12:02:35 12:02:35 12:02:35 12:02:35 12:02:35 12:02:35 12:02:35 12:02:35 12:02:35 12:02:35 12:02:35 12:02:35 12:02:35 12:02:35 12:02:35 12:02:35 12:02:35 12:02:35 12:02:35 12:02:35 12:02:35 12:02:35 12:02:35 12:02:35 12:02:35 12:02:35 12:02:35 12:02:35 12:02:35 12:02:35 12:02:35 12:02:35 12:02:35 12:02:35 12:02:35 12:02:35 12:02:35 12:02:35 12:02:35 12:02:35 PM PM PM PM PM PM PM PM PM PM PM PM PM PM PM PM PM PM PM PM PM PM PM PM PM PM PM PM PM PM PM

the international investment, business & finance magazine of cyprus 35

APostoLou & Co. LLCNumber of Lawyers: 5Number of Partners: 2Head of the Firm: George & Christos Apostolou (Managing Partners)

10-12, Grigoris Afxentiou Avenue, Ayios Dometios, Nicosia 2360Offices: Nicosia

22028888Fax: 22028887

www.apostoloulaw.com

Areti ChAridemou & AssoCiAtes LLC LAw firmNumber of Lawyers: 9Number of Partners: 3Head of the Firm: Areti Charidemou (Managing Partner)

21, Vasilis Michaelides Street, Limassol 3026Offices: Limassol

25508000Fax: 25508032

www.aretilaw.com

C. P. erotoCritou & Co LLCNumber of Lawyers: 6Number of Partners: 3Head of the Firm: John Erotocritou (Senior Managing Partner)

Libra Tower, 4th Floor, 23, Olympion Street, Limassol 3035 (P.O. Box 50437, Limassol 3605)Offices: Limassol & Nicosia

25363665Fax: 25341500

www.cperotocritou.com

C.d. messios LLCNumber of Lawyers: 5Number of Partners: 1Head of the Firm: Constantinos Messios (Managing Partner)

Office 401, Galaxias Center, 36, Ayias Elenis Street, Nicosia 1061Offices: Nicosia, Athens

2246 0446 2246 0446Fax: 22761176

www.messios.com

ChristodouLos G. VAssiLiAdes & Co LLCNumber of Lawyers: 29Head of the Firm: Christodoulos G Vassiliades (Managing Director)

Ledra House, 15, Ayiou Pavlou Street, Agios Andreas, Nicosia 1105Offices: Nicosia

22556677 22556677Fax: 22556688

www.vasslaw.com

Christos PAtsALides L.L.CNumber of Lawyers: 8Number of Partners: 3Head of the Firm: Christos Patsalides (Managing Partner)

31, Evagoras Avenue, Evagoras Building, Suites 41, 42 & 43, Nicosia 1066Building, Suites 41, 42 & 43, Nicosia 1066Building, Suites 41, 42 & 43, NicosiaOffices: Nicosia

22677677 22677677Fax: 22674422

www.patsalides.com.cy

n ChryssAfinis & PoLyViou LLCNumber of Lawyers: 25Number of Partners: 2Head of the Firm: Polyvios Polyviou (Senior Partner), Stella Polyviou (Managing Litigation Partner)

Anemomylos Building, 8, Michalaki Karaoli Street, Nicosia 1095Karaoli Street, Nicosia 1095Karaoli Street, NicosiaOffices: Nicosia

22361000 22361000Fax: 22678011

www.cplaw.com.cy

Chrysses demetriAdes & Co. LAw offiCeNumber of Lawyers: 50Number of Partners: 19Head of the Firm: Christos Mavrellis (Senior Partner)

13, Karaiskakis Street, Limassol 3032 (P.O.Box: 50132, Limassol 3601)Offices: Limassol & Nicosia

25800000 25800000Fax: 25587191

www.demetriades.com

CLerides, AnAstAsiou, neoPhytou LLCNumber of Lawyers: 12Head of the Firm: Stavros Clerides

6, Kolokotroni Street., Limassol 3032Offices: Limassol

25274050 25274050 25274050Fax: 25370704

www.cyplaw.com

• tHe MeRgeRs and aCquisitions teaM, headed by Managing Partner P.g. Polyviou, has advised a client on an offshore acquisition of a Russian Bank and a ukrainian Bank by a national banking institution for €700m and €80m respectively, by far the largest acquisitions by a Cypriot institution abroad as well as the biggest onshore deal worth €288m of the leading Construction and development company in Cyprus – by an investment fund listed on aiM.defended a Cypriot Bank on hostile takeover bid by another, the bid being eventually withdrawn.• suCCessfullY oPPosed an inteRiM oRdeR issued by the limassol family Court freezing more than $160 million worth of assets situated in the British virgin islands, Cyprus, the

united kingdom and elsewhere.successfully opposed an interim order issued by the district Court of nicosia freezing more than $6 billion worth of assets situated in Russia, Cyprus and elsewhere.• CHallenged an adMinistRative deCision to fine the four Petroleum Companies operating in Cyprus (€41 million collectively) of the Cyprus Commission for the Protection of Competition by way of Recourse before the full Bench of the Cyprus supreme Court. in May 2011 the said decision has been quashed a decision of the supreme Court of Cyprus.advised a seychelles based Company which is minority shareholder in a Cyprus Company in a dispute of almost $20 million.

• tHe MeRgeRs and aCquisitions tea

n notAbLe CAses: ChryssAfinis & PoLyViou LLC

• advised one of the largest european developers on its acquisition of the Cyprus companies holding a Romanian portfolio worth €220 million in a cross-border transaction involving austria, england, Romania, Cyprus and switzerland. Carried out the extensive due diligence on the 3 Cyprus companies involved and handled their transfer to their new shareholders.• was involved in the re-financing of one of the largest Moscow shopping centres advising the client on the collaterals to secure the transaction which was in the amount of $100 million dollars granted as a loan.• Yiannaki BRos Hotels ltd v. HelleniC Bank PuBliC CoMPanY ltd. the issue raised was whether the fact that

the parties had reached agreement on the settlement of the debt created estoppels to bring an action against the bank for alleged economic requirements in the field of conversion of foreign currency. the action was brought for €1.7 million euros, a significant amount at Cyprus banking level, and antonis Paschalides & Co. won the appeal for Hellenic Bank.• Yiannakis kallikas v. HelleniC Bank PuBliC Co ltd was one of a series of cases regarding the 1999 Cyprus stock exchange crash for which antonis Paschalides & Co successfully represented Hellenic Bank. the case involved an investor account with a scale of action at €500,000 to €2 million. the firm won the appeal for Hellenic Bank and the case is now considered a leading case in Cyprus banking law.

notAbLe CAses: Antonis PAsChALides & Co

gold_32-51_inn.indd 35 8/31/11 12:02:35 PM

38 the international investment, business & finance magazine of cyprus

CostAs indiAnos & Co., – AdVoCAtes & LeGAL ConsuLtAntsNumber of Lawyers: 8Number of Partners: 2Head of the Firm: Anthony Indianos (Managing Partner)

4, Diagoras Street, Kermia Building, 6th Floor, Offices 601 & 602, Nicosia 1097Floor, Offices 601 & 602, Nicosia 1097Floor, Offices 601 & 602, NicosiaOffices: Nicosia & Larnaca

22675231Fax: 22669678

www.indianos.com.cy

CostAs tsirides & Co. LLCNumber of Lawyers: 8Number of Partners: 2Head of the Firm: Alexandros Tsirides (Managing Partner)

Grivas Digenis Avenue, Panagides Building, 2nd Floor, Limassol (P.O.Box 56250, Limassol 3305)Offices: Limassol

25820810Fax: 25359772

www.tsirides.com

dr. K. Chrysostomides & Co LLCNumber of Lawyers: 29Number of Partners: 8Head of the Firm: Dr. K. Chrysostomides (Founding Partner)

1, Lampousas Street, Nicosia 1095 1, Lampousas Street, Nicosia 1095 1, Lampousas Street, NicosiaOffices: Nicosia, Limassol,Brussels

22777000Fax: 22779939

www.chrysostomides.com

frAnGos & AssoCiAtes LLCNumber of Lawyers: 6Number of Partners: 1Head of the Firm: Iosif Frangos (Founder)

10, Patron Street, Larnaca 10, Patron Street, Larnaca 6051 10, Patron Street, Larnaca 6051 10, Patron Street, LarnacaOffices: Larnaca

24812581 24812581 24812581Fax: 24812583

www.frangoslawoffice.com

GeorGe y. yiAnGou & CoNumber of Lawyers: 25Number of Partners: 4Head of the Firm: George Yiangou (Managing Partner)

12-14, Kennedy Avenue, Kennedy Business Centre, 2nd Floor, Office 203, Nicosia (P.O.BOX 24293, Nicosia 1703)Nicosia (P.O.BOX 24293, Nicosia 1703)Nicosia (P.O.BOX 24293, NicosiaOffices: Nicosia

22767630 22767630Fax: 22760918

www.yiangou.com.cy

GeorGe Z. GeorGiou & AssoCiAtes LLCNumber of Lawyers: 13Number of Partners: 1Head of the Firm: George Georgiou (Managing Partner)

1st Floor, 1, Eras Street, Nicosia 1060 1st Floor, 1, Eras Street, Nicosia 1060 1st Floor, 1, Eras Street, NicosiaOffices: Nicosia

22763340 22763340Fax: 22763343

www.gzg.com.cy

GeorGiAdes & myLonAs – AdVoCAtes & LeGAL ConsuLtAntsNumber of Lawyers: 10Number of Partners: 3Head of the Firm: Yiannos Georgiades (Managing Partner)

2, Ayios Pavlos & Kadmos Street 3rd Floor Wisdom Tower, Nicosia 1701Floor Wisdom Tower, Nicosia 1701Floor Wisdom Tower, NicosiaOffices: Nicosia, Larnaca, Athens, London

22819292 22819292Fax: 22778444

www.gmadvocates.com

GeorGiAdes & PeLidesNumber of Lawyers: 10Number of Partners: 7Head of the Firm: Marcos Georgiades (Managing Partner)

Eagle House, 10 th Floor, 16, Kyriakos Matsis Avenue, Ayioi Omoloyites, Nicosia1082Offices: Nicosia

22315939 22315939Fax: 22315553

www.cypruslaw.com.cy

hArris KyriAKides LLCNumber of Lawyers: 7Number of Partners: 2Head of the Firm: Harris Kyriakides (Managing Partner)

115, Faneromenis Avenue, Antouanettas Building, Larnaca 6031 (P.O. Box 40089, Larnaca)Offices: Larnaca

24828244 24828244Fax: 24818877

www.kyrlaw.com.cy

cover story

• legal advisoRs in a MajoR aRBitRation Case in a dispute between ocean tankers andf the government of Cyprus over sums due for the delivery of 8 million tons of drinking water to Cyprus from greece under a supply contract worth €35 million. the case attracted attention in lloyds list, a major source of news and information for the shipping industry.• legal advisoRs foR tHe fiRst wind faRM to be constructed and operated in Cyprus. legal advice in all stages of the project including international project finance, negotiations with government departments and authorities, drafting completion and execution of documentation and agreements, evaluation and provision of Cyprus

law advice on agreements and legal documents.• legal advisoRs to PetRolina (Holdings) Public ltd in the case initiated by the Commission for the Protection of Competition against the oil companies for alleged price fixing. the Commission had imposed a total fine of €44 million. the judgment of the Commission was reversed. a very high-profile case tried by the full Bench of the supreme Court of Cyprus• legal advisoRs to HeRMes aiRPoRts which is responsible for the design, building, management and operation of the two international airports of Cyprus under a 25-year concession by government; estimated investment in excess of €800m.

notAbLe CAses: ioAnnides demetriou LLC

• legal advisoRs in a MajoR a

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42 the international investment, business & finance magazine of cyprus

hAViArAs & PhiLiPPou LLCNumber of Lawyers: 6Number of Partners: 4Head of the Firm: Andreas Haviaras (Managing Partner)

20, Stasandrou Street, Office 101, Nicosia 1060Offices: Nicosia

22764001 22764001Fax: 22764 003

www.hphlaw.eu

n ioAnnides demetriou LLCNumber of Lawyers: 6Number of Partners: 18Head of the Firm: Pambos Ioannides (Managing Partner and Director)

2, Diagorou Street, Era House Floors 7-12, Nicosia 10977-12, Nicosia 10977-12, NicosiaOffices: Nicosia, Limassol

22022999Fax: 22022900

www.idlaw.com.cy

KAKoyiAnnis P.L. & CoNumber of Lawyers: 5Number of Partners: Head of the Firm: Agapios Kakoyiannis (Founder)

Centre Point, 2nd Floor, Corner of Kinira & N.Nikolaides St, PaphosOffices: Paphos

26932392 26932392 26932392Fax: 26934240

www.kakoyiannislawoffice.com

KinAnis LLCNumber of Lawyers: 15Head of the Firm: Christos Kinanis

12, Egypt Street, Nicosia 12, Egypt Street, Nicosia 12, Egypt Street, Nicosia 1097 12, Egypt Street, Nicosia 1097 12, Egypt Street, NicosiaOffices: Nicosia

22558888 22558888Fax: 22662500

www.kinanis.com

KorPus PrAVA CorPorAte serViCes LtdNumber of Lawyers: 5Number of Partners: 2Head of the Firm: Artem Paleev (Director)

84, Grivas Dighenis Avenue, Limassol3101Offices: Limassol, Moscow, Kiev

25582848 25582848Fax: 25582868

www.korpusprava.com

KyriACos th. miChAeLides & Co LAwNumber of Lawyers: 6Number of Partners: 3Head of the Firm: Kyriakos Michaelides (Founder)

66, Ippocratous Street, Nicosia1015 (P.O. Box 21548, Nicosia 1510)(P.O. Box 21548, Nicosia 1510)(P.O. Box 21548, NicosiaOffices: Nicosia

22452400 22452400Fax: 22761878

www.ktmlaw.com

L. PAPAPhiLiPPou & CoNumber of Lawyers: 23Number of Partners: 15Head of the Firm: Leandros Papaphilippou (Senior Managing Partner)

1, Costakis Pantelides Street, 3rd Floor, Nicosia 1010Nicosia 1010NicosiaOffices: Nicosia, Athens

22674141 22674141Fax: 22673388

www.papaphilippou.eu

LeLLos P demetriAdes LAw offiCeNumber of Lawyers: 7Number of Partners: 6Head of the Firm: Lellos Demetriates (Managing Partner)

Chanteclair House, 2, Sophoulis Street, Nicosia (P.O.Box 21646, Nicosia 1511)Offices: Nicosia

22676060 22676060Fax: 22676061

www.ldlaw.com.cy

m.eLiAdes & PArtners LLC in niCosiANumber of Lawyers: 7Number of Partners: 3Head of the Firm: Marios Eliades (Managing Partner)

Corner Evagorou & 1, Menandrou Street, Frosia House, 4th Floor, Nicosia 1066Street, Frosia House, 4th Floor, Nicosia 1066Street, Frosia House, 4th Floor, NicosiaOffices: Nicosia

22667730 22667730Fax: 22667740

www.eliades.eu

PRoPosed MeRgeR of two european companies both engaged in the dairy business carried on in numerous countries and in particular on the Cyprus aspects of the transaction involving a Cyprus joint venture with foreign and Cyprus shareholders. advised on corporate and commercial matters, finance issues, international tax planning and issuing legal opinion to the european Bank for Reconstruction & development (value contributed into the jv amounted to $2.5 billion). • advised one of tHe tHRee laRgest Banks in Russia in relation to two term facility agreements in the aggregate amount of $816 million granted to a swiss-registered gas supply group.

• PRovided adviCe and assistanCe to Russia’s third-largest copper producer in relation to various financing transactions involving Cyprus companies and loans in the aggregate amount of $300 million obtained from a Russian bank. assisted and acted as an escrow agent in a loan facility granted to an international group of companies by a Russian bank - apparent value of assets secured by the escrow usd $3.2 billion.• advised a CYPRus PuBliC CoMPanY with respect to the listing of its shares on the Hong kong stock exchange (Hkse). the listing was the first ever implemented by any Cyprus company.

notAbLe CAses: PAtriKios PAVLou & AssoCiAtes LLCnotAotAot bLe e e e LLbototAotAotototAotAotAnn

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46 the international investment, business & finance magazine of cyprus

mArKides, mArKides & CoNumber of Lawyers: 11Number of Partners: 4Head of the Firm: Alecos Markides & Hermione Markides (Managing Partners)

Markides House, 1-1A Heroes Street, Nicosia (P.O. Box 24325, Nicosia 1703)Nicosia (P.O. Box 24325, Nicosia 1703)Nicosia (P.O. Box 24325, NicosiaOffices: Nicosia

22779900Fax: 22778787

www.markides.com.cy

mArKos P. sPAnos & CoNumber of Lawyers: 4Number of Partners: 2Head of the Firm: Paris Spanos and Maria Spanou-Anastasiou (Partners)

Corner Evagorou & 1 Menandrou Street, Frosia House, 3rd Floor, Nicosia 1066Offices: Nicosia

22863000Fax: 22863001

www.mpspanos.com

n miChAeL KyPriAnou & Co. LLCNumber of Lawyers: 30Number of Partners: 7Head of the Firm: Menelaos Kyprianou (Managing partner)

Corner Stasinos Avenue & 2, Ayias Elenis Street, Stasinos Building, 6th & 7th floor, Nicosia 1060floor, Nicosia 1060floor, NicosiaOffices: Nicosia, Limassol, Paphos, Athens

25363685 25363685Fax: 22767880

www.kyprianou.com.cy

miChAeLides & miChAeLidesNumber of Lawyers: 4Number of Partners: 2Head of the Firm: Andreas Michaelides (Managing Partner)

Omega Court, 4th Floor, Office 41, 4, Riga Fereos Street, LimassolOffices: Limassol

25352602 25352602Fax: 25 353603

www.michaelideslaw.com.cy

montAnios & montAniosNumber of Lawyers: 14Number of Partners: 5Head of the Firm: Acis, Eric & Adam Montanios, (Managing Partners)

Libra House, 21, P Catelaris Street, Nicosia (P.O. Box 5001, Nicosia)Nicosia (P.O. Box 5001, Nicosia)NicosiaOffices: Nicosia, Limassol

22660766 22660766Fax: 22678777

mouAimis & mouAimisNumber of Lawyers: 6Head of the Firm: Panayotis Mouaimis (Founding Partner)

16-18, Zena Gunther Street, Limassol3035Offices: Limassol, Paralimni

25362233 25362233Fax: 25373075

www.mouaimis.com

cover story

• tHe MosCow offiCe of HeRBeRt sMitH advised ing on the recently completed $400m syndicated loan for tnk, Russia’s third largest oil company. it is the largest syndicated loan in Russia this year. an essential part of the deal included advice on the laws of Cyprus. Michael kyprianou & Co. llC advised with respect to the Cyprus legal issues involved.• tHe fiRM was involved in an inteRnational fRaud Case, which was one of the first cases where a Cyprus Court was persuaded to issue a disclosure order against a local bank, not a party to the pending proceedings. with the disclosure the client was able to trace assets he had been defrauded of. • tHe fiRM undeRtook tHe Case ManageMent in three related lCia arbitrations concerning a dispute arising out

of a share sale agreement concerning the kazakhstan port authorities for a consideration in the region of $ 300 million. in these arbitrations we joined forces with a leading set of chambers in london.• founding PaRtneR MiCHael kYPRianou represented the Republic of Cyprus and the autocephalous greek orthodox Church of Cyprus in the us Courts for the return of the kanakaria Mosaics, stolen from the kanakaria Church and consisting of a handful of the rarest holy Byzantine artefacts to survive into the twentieth century.• tHe fiRM Has defended the New York times and the international herald tribune in a libel case filed against them by a prominent Cypriot politician.

notAbLe CAses: miChAeL KyPriAnou & Co. LLCnotAotAot bLn

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the international investment, business & finance magazine of cyprus 47

n PAmboridis LLCNumber of Lawyers: 17Number of Partners: 4Head of the Firm: Dr George Pamboridis (Managing Partner)

45, Dighenis Akritas Avenue, Pamboridis House, Nicosia 1070Pamboridis House, Nicosia 1070Pamboridis House, NicosiaOffices: Nicosia, Limassol, Athens, London

22752525Fax: 22752800

www.pamboridis.com

PAPAChArALAmbous & AnGeLides LLCNumber of Lawyers: 17Head of the Firm: Andreas Papacharalambous & Pavlos Angelides (Managing Partners)

10, Themistocles Dervis Street, 1st floor, Nicosia 10661st floor, Nicosia 10661st floor, NicosiaOffices: Nicosia

22670189Fax: 22676976

www.palaw.com.cy

PAPAdoPouLos, LyCourGos & Co LLCNumber of Lawyers: 11Number of Partners: 2Head of the Firm: Dimitris Papadopoulos & Doros Lycourgos (Managing Partners)

2-4, Archbishop Makarios III Avenue, Capital Center, 7th Floor, Nicosia 1065Offices: Nicosia

22676126 22676126Fax: 22674201

www.paplyclaw.com

n PAtriKios PAVLou & AssoCiAtes LLCNumber of Lawyers: 19Number of Partners: 8Head of the Firm: Stavros Pavlou (Managing Partner)

Patrician Chambers, 332, Agiou Andreou Street, Limassol 3035Offices: Limassol, Nicosia, Athens

25871599 25871599 25871599Fax: 25344548

www.pavlaw.com

PeLAGhiAs ChristodouLou, VrAChAs & CoNumber of Lawyers: 4Number of Partners: 3Head of the Firm: George & Pelaghias, Alexandra Pelaghias-Christodoulou, & Petros Vrachas (Managing Partners)

41, Themistolcles Dervis Street, Hawaii Nicosia Tower, Suites 806-807, Nicosia 1066 (P.O. Box 21684, Nicosia 1512)1066 (P.O. Box 21684, Nicosia 1512)1066 (P.O. Box 21684, NicosiaOffices: Nicosia

22764216 22764216Fax: 22768277

www.pelaghiaslaw.com

PhC tsAnGArides LLCNumber of Lawyers: 6Number of Partners: 2Head of the Firm: Photos & Constantinos Tsangarides (Managing Partners)

Corner of Omirou & Arachovas Street, Alasia House, Limassol 3096Offices: Limassol

25814054 25814054Fax: 25814170

www.tsangarideslaw.com.cy

• advised one of tHe leading Russian Banks on the possible acquisition of a controlling stake in a Cyprus bank listed on the Cyprus stock exchange. the firm acted as lead counsel with a mandate of negotiating the terms of the transaction, drafting all required documentation/agreements, advising on all regulatory/compliance matters and liaising with the Cyprus Central bank, the Cyprus stock exchange and the Cyprus securities and exchange Commission• aCted as CYPRus Counsel to tHe BoRRoweR, a joint stock company registered in the Russian federation, in the securitization of a $650 million loan facility from a leading Russian bank, through the Cypriot companies of the group. the party advised was jsC “the seventh Continent” and the

deal was valued at $650 million• aCted as CYPRus Counsel in Relation to tHe seCuRitization of a Bond issue and a restructuring of the issuer’s group. the firm’s mandate included reviewing the Bond agreement and ancillary documents from a Cyprus law perspective, drafting of all the Cyprus law governed security documents, advising on all the corporate authorizations required for the securitization purposes, liaising with the local counsel of the bond trustee and attending to all registration formalities. deal value: nok 125 million.• aCted as CYPRus Counsel foR standaRd CHaRteRed Bank in relation to an intercreditor agreement between the Bank as senior creditor, a Cypriot company as subordinated creditor, the subordinated borrower and the original obligors.

notAbLe CAses: PAmboridis LLC

• advised one of tHe leading Russian Banks

notAotAot bLn

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50 the international investment, business & finance magazine of cyprus

PiriLides & AssoCiAtes LLCNumber of Lawyers: 10Number of Partners: 1Head of the Firm: Neofytos Pirilides (Chairman)

5, Amathountos St, Pirilides Building, Limassol 3105 Offices: Limassol

25830830Fax: 25830759

www.pirilides.com

PoLAKis sArris & CoNumber of Lawyers: 9Number of Partners: 1Head of the Firm: Polakis Sarris (Founding Partner)

8th Floor, Nicosia Tower Centre, 36, Byron Avenue, Nicosia (P.O. Box 21341, Nicosia 1506)Nicosia 1506)NicosiaOffices: Nicosia

22456000Fax: 22670040

www.sarris.com.cy

sCordis, PAPAPetrou & Co LLCNumber of Lawyers: 27Number of Partners: 13Head of the Firm: Andis Scordis and Michalis Papapetrou (Managing Partners)

The Business Forum, 30, Karpenisi Street, Nicosia (P.O.Box 20533, Nicosia 1660)Nicosia (P.O.Box 20533, Nicosia 1660)Nicosia (P.O.Box 20533, NicosiaOffices: Nicosia, Limassol, Athens, Moscow

22843000 22843000Fax: 22843444

www.scordispapapetrou.com

n soteris PittAs & Co L.L.CNumber of Lawyers: 7Number of Partners: 2Head of the Firm: Soteris Pittas (Managing Director)

223, Archbishop Makarios III Avenue, Avenue Court, 2nd Floor, Limassol 3105Offices: Limassol

25028460 25028460Fax: 25028461

www.pittaslegal.com

tAssos PAPAdoPouLos & AssoCiAtesNumber of Lawyers: 16Number of Partners: 6Head of the Firm: Nicos Papaefstathiou (Managing Partner)

2, Sophoulis Street, Chanteclair Building, 2nd Floor, Nicosia 1096 Floor, Nicosia 1096 Floor, NicosiaOffices: Nicosia

22889999 22889999Fax: 22889988

www.tplaw.com.cy

• Handled on BeHalf of foReign defendants the defence of an action brought for a claim of more than $2.5 billion for fraud, coercion relating to the Moskva Hotel in Moscow, and succeeding to discharge a freezing injunction blocking assets of more than $6.5 billion.• Handled a ClaiM filed BY a CYPRus CoMPanY against Cypriot and foreign persons for losses sustained due fraud committed against them in relation to a large group of ukrainian Companies (Claim $150 million).• Handled a PeRsonal and deRivative aCtion filed by a foreign company against a Cyprus Holding Company, its foreign subsidiaries and other Cypriot and foreign persons for claim of more than $50 million.

• Handled an lCia aRBitRation conducted in london on behalf of a Cyprus company for a claim of $75 million for breach of a share Purchase agreement relating to a large project in sochi Russia.• Handled a fRaud Case committed against a Cypriot company through the use of a fraudulent arbitration award and successfully achieving the recovery of the value of the assets stolen (Claim $10.5 million).• Handled a ClaiM filed BY a Russian CoMPanY against a Cypriot company for the recovery of a loan and succeeding to freeze the assets of the Cyprus debtor company situated in Cyprus and in france (Claim $35 million).

notAbLe CAses: soteris PittAs & Co L.L.CnotAotAot bLn

cover story

Nicosia LimassolAthens London

info@prudensgroup.com www.prudensgroup.com

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36 the international investment, business & finance magazine of cyprus

Gold: Why did you decide to pursue a career in law?Pambos Ioannides: When I was very young, during my years at elementary school, I was impressed by the necessity to administer fairness when facing issues which had to be dealt with, such as punishing for improper behavioUr, resolving quarrels etc. At an early stage, I remember saying, “I want to become a judge”. At secondary school, I started reading law books and I liked attending court trials. At some stage I thought that the legal profession would be more fascinating if practised as a lawyer. I have not regretted it.

Gold: Which area of law do you personally find the most interesting and why?P.I.: In the last few years, I have been dealing mainly with matters relating to the capital and finance market and PPP projects, which I find very interesting, particularly in the sense that new concepts in these fields play an important role in developing the economy. However, I consider an attempt to classify a particular area of law as being more interesting than another to be rather futile. It depends on how circumstances may impact the career of a law professional. I think I have dealt with all or most of the main practices in

law. I would give no priority or preference to a particular area. For example, I still love criminal law, which I practiced extensively when I was a young lawyer but now I very rarely do so. When handling criminal law matters, you feel that a human being, the client, is almost literally tied to you, entrusting you with his entire well-being of a very personal nature, with his personal freedom and integrity.

Gold: What are the advantages and disadvantages of becoming a lawyer?P.I.: The destiny of a lawyer is to be a life student, sentenced to uninterrupted stress and the necessity to be courageous at all times, and ready and willing to work hard work and for long hours. I will avoid measuring advantages against disadvantages. I would only add that the legal profession is demanding and fascinating at the same time. If someone is a clock-watcher in his working hours, he had better choose to do something else.

Gold: Is the profession one that you would recommend to your children and why?P.I.: Children must have options and should be encouraged to choose the career that appeals to them, that speaks to their soul. They need guidance but not mandatory recommendations.

When my elder daughter was in her third year at secondary school, I asked her: “How about becoming a lawyer?” and she replied “Don’t say that again!” I never did. She is now an artist and she is happy. My younger daughter, after an academic career in maths and statistics, turned to law of her own choice. She is now a very busy lawyer.

Gold: A surprisingly large number of politicians in Cyprus have a professional background in law. Do you think that the legal profession provides a good grounding for pursuing a parallel career in politics?P.I.: Yes, I think it does and not only in Cyprus. A legal background is not a necessary prerequisite for a career in politics but it is an advantage. Politics is intrinsically linked to legal affairs.

Gold: Do you believe that the public perception of legal professionals is a fair one?P.I.: Why not? Public perception of the legal profession may be tough and not always very flattering; this helps in strengthening the responsibility that legal professionals should demonstrate.

Gold: How in your opinion does the Cyprus legal system compare to that in the other EU member states?P.I.: Cyprus’ legal system is in the upper levels amongst the 27 EU member states. That said, there is a lot of room for improvement in many areas and this must be a constant process.the destiny of A LAwyer is to be A Life

student, sentenCed to uninterruPted stress And the neCessity to be CourAGeous At ALL times

cover story

Pambos

ioAnnidesioAnnides demetriou LLC

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the international investment, business & finance magazine of cyprus 37

Gold: What is the most memorable legal case that that you have been involved in over the course of your career?P.I.: When I was a young lawyer I was asked to defend a student who had a tendency to steal, breaking into shops and the like, to get a little money or minor things like cigarettes, T-shirts etc. I was entrusted with defending him in one case and ended up defending him in no fewer than 60 cases, in a number of district courts, over a period of about a year. I was very stressed by the idea of almost unavoidable imprisonment for my young client, and I was also conscious of my own inexperience at the time. I asked his father to appoint a more experienced lawyer for his son but he insisted that I should defend the young man. I made passionate and well-prepared pleas before the courts. The young man ended up under the supervision of the welfare services. I think this result was partly due to the fact that, as his lawyer, I persuaded the judges that I was very confident that imprisonment would not do justice in this case. This gave me job satisfaction at an early stage of my career.

Gold: What is your vision for your firm over the next ten years?P.I.: Expansion in various fields which are appropriate in the Cyprus environment, constantly aiming at high level of services.

Gold: If there was a single law that you could enact in Cyprus tomorrow, what would it be?P.I.: I would introduce an effective law against corruption and control over politicians’ sources of income. In my view, such a control is the premium that each politician must be ready to pay.

Gold: If there was a single law that you could repeal in Cyprus, what would it be?P.I.: I would repeal certain financial privileges to Members of Parliament and others who serve in political posts. I favour a decent remuneration for those servicing in political posts. For example in the case of members of Parliament, who in addition to receiving a fairly good remuneration, are free to carry out any profession in the private sector. I consider special privileges in terms of duty free cars, high pensions, etc., as being a method of hiding their actual remuneration package and I see no justification for this. It should be repealed. This would help in upgrading the image of our politicians which, admittedly, has fallen to a very low level.

Pambos

ioAnnides

gold_32-51_inn.indd 37 8/31/11 12:02:48 PM

KyPros

CHRYSOSTOMIDES

cover story

Gold: Why did you decide to pursue a career in law?

Kypros Chrysostomides: My father and grandfather were teachers, so no relation to law. My preferences at the time were more for language, literature, history, ancient and modern Greek etc. rather than mathematics, physics or chemistry. Since I had the choice of a scholarship either for law or medicine, I spent a sleepless night weighing the pros and cons of each alternative. It appeared to me then (and I have since realised that it was a correct assessment) that law offered greater prospects of being able to pursue a choice of careers, hence in the morning my decision was taken in favour of law.

Gold: Which area of law do you personally find the most interesting and why?

K.C.: There are many areas of law that I find fascinating but in particular Court work. Representing clients during hearings before Judges and advancing arguments in support of their case and, at the same time, examining and cross-examining witnesses, is a very exciting and complex part of a lawyer’s activity. Likewise dealing with clients’ projects or problems in the office may also be very satisfying, depending on the complexity of the issues involved. It is very challenging to devise appropriate plans for the needs of imaginative and progressive clients in order to accomplish their business vision. Generally, practising law is a gratifying occupation that offers job satisfaction and, of course, financial reward in most cases.

Gold: What are the advantages and disadvantages of becoming a lawyer?

K.C.: As I have already said, the main advantage of a career in law is that it offers ample opportunity not only to practise as an attorney but also to pursue a career in the civil service, in the diplomatic service, to become a judge, an internal legal

dr. K. Chrysostomides & Co LLC

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the international investment, business & finance magazine of cyprus 41

counsel in a bank or other enterprise, or even work abroad in an international organisation. One may also choose an academic career teaching in the Law Faculties of Universities. Advocacy in general has in store many moments of professional satisfaction but this profession has its moments of frustration and disappointment too, when losing a case in Court or when dealing with difficult clients. All in all, however, there are more advantages than disadvantages to a legal career.

Gold: Is the profession one that you would recommend to your children and why?

K.C.: For all the above reasons, yes, indeed I would recommend the legal profession to my children. Particularly since my wife is also a lawyer and a partner in our firm. Now, of course, I know that not everyone would be happy with this. Of my two daughters who both studied law, only one is practising, though she would prefer an academic career at a university. The other has completely changed vocation. The main thing is for them to see whether a legal career in one or the other form suits them after all.

Gold: A surprisingly large number of politicians in Cyprus have a professional background in law. Do you think that the legal profession provides a good grounding for pursuing a parallel career in politics?

K.C.: Naturally it does provide a sound ‘springboard’, I would say, for politics. For example, both the Parliament and the Government are dealing on a daily basis with legislation, preparing, enacting and implementing laws. Also, citizens’ rights and the proper evaluation of such rights by politicians are, to a great extent, a legal process, hence a worldwide tendency to see lawyers very

often becoming politicians. What I do not like, however, is a lawyer becoming a politician by profession. Politics must be understood as a ‘mission’, a means for offering services to one’s fellow citizens and to society at large and not as ‘earning a living’ or as an occupation.

Gold: Do you believe that the public perception of legal professionals is a fair one?

K.C.: Not always but, as in every profession, there are members that do not do justice to their peers and distort the picture of the profession in general. We should always do our best to project the correct image of a lawyer to society and offer impeccable behaviour and respect for the rules of etiquette of the profession. Only in this way can we gain the appreciation and respect of our fellow citizens. We have a duty to do this.

Gold: How in your opinion does the Cyprus legal system compare to that in the other EU member states?

K.C.: I believe very well. Firstly, because of its history and background as part, mainly, of Anglo-Saxon law; this is a very advanced system that was gradually

introduced in Cyprus during the British administration. Then, during the pre-accession negotiations with the EU many harmonising laws were enacted, probably more than 300. Nowadays, EU regulations are directly applicable in our country and we now have a perfectly European legal system in all respects. We are not always quick in transposing EU Directives into Cyprus law but generally we comply with what is required of us as members of the EU.

Gold: What is the most memorable legal case that that you have been involved in over the course of your career?

K.C.: It is difficult to say which one, as every case has its particular characteristics. A very interesting case was one involving the arrest of a helicopter in Cyprus and the related proceedings that ended up setting novel points of our case law. I remember an arrest of a ship in admiralty proceedings at the early stages of my career with a very experienced colleague on the other side, which involved long hours of preparation overnight and hearings before the Supreme Court. As for cases of interest not involving court proceedings, we have had a great number at our office. One worth mentioning because of the huge amounts involved concerned the acquisition of a very large foreign company by a group of our clients and the purchase price amounted to US$2.2 billion.

Gold: What is your vision for your firm over the next ten years?

K.C.: It always remains the same in principle: rendering quality and timely services to our clients and securely growing for the benefit of future generations of lawyers at our office. We all were particularly happy this year when our firm received the Export of Services Award from the Ministry of Commerce and the Chamber of Commerce, presented by the President of the Republic to my partners Eleni Chrysostomides and Chryso Dekatris. We shall always strive to be better every year and always be a constructive part of our society.

Gold: If there was a single law that you could enact in Cyprus tomorrow, what would it be?

K.C.: A very strict law banning violence at sports grounds. This is a plague that is contrary to what I perceive as the basis of our culture.

Gold: If there was a single law that you could repeal in Cyprus, what would it be?

K.C.: This is a tricky question, because there many laws with which I do not agree. I can answer generally though; I would repeal any law that affects the standard of living of needy people that live below the poverty threshold.

we shouLd ALwAys do our best to ProjeCt the CorreCt imAGe of A LAwyer to soCiety And offer imPeCCAbLe behAViour

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44 the international investment, business & finance magazine of cyprus

Gold: Why did you decide to pursue a career in law?

Christos Kinanis: I had no knowledge of the legal profession when I had to take the decision about what I was going to study at university. My father was the driving force in my decision to pursue a career in law. He advised me to do it and he said that I would not regret it. I trusted him and I followed his advice. He was right that I did not regret it!

Gold: Which area of law do you personally find the most interesting and why?

C. K.: What really impresses me after 28 years of practicing law is corporate taxation. It is a subject which most lawyers do not practise but in fact I enjoy it because it has a mathematical implementation. However, despite the fact that I extensively practice corporate taxation, my ‘secret love’ is litigation.

Gold: What are the advantages and disadvantages of becoming a lawyer?

C. K.: A career in law broadens your way of thinking and horizons. It makes you energetic, independent and active. On the other hand, it is a demanding profession. It needs dedication, continuous studying and a great deal of hard work;

Gold: Is the profession one that you would recommend to your children and why?

C. K.: Definitely! I would recommend it not only to my children but to anyone’s children who have the right characteristics/abilities to pursue such a demanding

profession. It is a versatile career that offers a lot of opportunities.

Gold: A surprisingly large number of politicians in Cyprus have a professional background in law. Do you think that the legal profession provides a good grounding for pursuing a parallel career in politics?

C. K.: It certainly helps as you would understand legal concepts and legislation more easily but I would not say that it is an absolute requirement.

Gold: Do you believe that the public perception of legal professionals is a fair one?

C. K.: No, I don’t think so. Lawyers are not respected to the degree that they should be. Of course, to some extent this may be due to bad personal experiences that people have had as clients of lawyers.

Gold: How in your opinion does the Cyprus legal system compare to that in the other EU member states?

C. K.: I believe that there is room for improvement to our legal system. For example, we need to modernize the court structure and court procedures in order to make them easier and faster.

Gold: What is the most memorable legal case that that you have been involved in over the course of your career?

C. K.: I would say that it was the first ever case I tried before the courts, approximately 28 years ago. I still remember it clearly.

It related to a dispute over the sum of £105 which, even though it was a small dispute between a restaurant owner and a customer, needed a lot of time for preparation. For me it was exciting though very stressful too! I will never forget it.

Gold: What is your vision for your firm over the next ten years?

C. K.: To continue to grow as a multi-disciplinary firm engaging in a variety of services, to offer legal, tax, accounting, financial and investment services covering a large spectrum of the service sector. For this to be achieved, though, certain structural changes must be made to Cyprus’s legislation and, in particular, to the legislation governing and regulating the legal profession.

Gold: If there was a single law that you could enact in Cyprus tomorrow, what would it be?

C. K.: To bring specific legislation into force liberalizing the entry of non-lawyers as shareholders in law firms. The other areas of law that I am expecting to see a change concern the present international trusts law and tax laws and I also think that the bill relating to fiduciaries needs to to be brought into force.

Gold: If there was a single law that you could repeal in Cyprus, what would it be?

C. K.: I wouldn’t necessarily repeal a specific law but I would amend existing legislation to suit our current, modern era and the ever-changing attitudes of society.

Christos

desPite the fACt thAt i extensiVeLy PrACtiCe CorPorAte tAxAtion, my ‘seCret LoVe’ is LitiGAtion

cover story

KINANISKinAnis LLC

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the international investment, business & finance magazine of cyprus 45

desPite the fACt thAt i extensiVeLy PrACtiCe CorPorAte tAxAtion, my ‘seCret LoVe’ is LitiGAtion

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48 the international investment, business & finance magazine of cyprus

cover story

GeorGe

PAMBORIDIS

the whoLe system needs to be uProoted And be rePLACed by A modern, fAst And effeCtiVe one

PAmboridis LLC

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the international investment, business & finance magazine of cyprus 49

Gold: Why did you decide to pursue a career in law?George Pamboridis: From the time when I was a kid I always enjoyed debating. I loved the process of arguing in support of one’s beliefs and after a while I suppose it became a second nature to me. Gold: Which area of law do you personally find the most interesting and why?G.P.: My academic background exposed me to public international law and, therefore, academically I find this field of law very interesting. However, the most exciting field that I enjoy engaging in on a daily basis is corporate law. Adding value to a fast-moving business client in his effort to take over another business or to secure his interests in a deal gives me a kick. Gold: What are the advantages and disadvantages of becoming a lawyer?G.P.: The best element in my opinion is that you never get bored practising law. Every case is totally different from the other and each time you learn something new. The worst element is the pressure: you usually need to act fast and the advice you give sometimes can make or break the client. This can be quite stressful.

Gold: Is the profession one that you would recommend to your children and why?G.P.: I honestly believe that apart from a good education and practical experience, every profession requires a natural talent or inclination. I would definitely recommend law to my children but that’s only because in my eyes law is exciting. If this is not how it appears to them, I would discourage them from becoming lawyers.

Gold: A surprisingly large number of politicians in Cyprus have a professional background in law. Do you think that the legal profession provides a good grounding for pursuing a parallel career in politics?G.P.: Most politicians are Members of Parliament, which is the legislative body. It is only natural that lawyers who are familiar with laws and procedures would turn also to politics. That, of course, does not mean that lawyers by default make good politicians! Gold: Do you believe that the public perception of legal professionals is a fair one?G.P.: No. But the reason for this is not the public at large but the bad image spread by a very small number of lawyers who are led only by greed and vanity and move away from the principles of justice and fairness. Gold: How in your opinion does the Cyprus legal system compare to that in the other EU member states?G.P.: Unfortunately Cyprus has an archaic judicial system with long delays. “Justice delayed is justice denied”. Furthermore, the ability of the state to introduce new

legislation and eliminate obsolete laws is extremely limited. I feel, therefore, that we rank very poorly with our EU partners.

Gold: What is the most memorable legal case that that you have been involved in over the course of your career?G.P.: I would say the collision and subsequent sinking of m/v Poseidon Express which involved a number of jurisdictions with issues ranging from admiralty to marine insurance, third party claims, salvage, pollution, breach of port regulations, personal injuries, criminal charges and many other elements. I was a young lawyer working

for a London maritime law firm at the time and dealing with this case taught me how a lawyer’s work may affect the daily routine and survival of individuals as well as multinational corporations. It made me realize that a lawyer must at all times have a full understanding of and show respect for the facts of each case. He needs to get away from his desk and obtain a first-hand feeling of each case. Gold: What is your vision for your firm over the next ten years?G.P.:Pamboridis LLC started its operations in 2003 and today in addition to its Head office in Nicosia, maintains an office in Limassol, one in Athens and in a few days we shall have another one in London. We aim to establish a regional law firm, which will stand the test of generations and will truly belong to its people i.e. the lawyers. I guess that if in 10 years we are established in the minds of our clients as the best law firm in the region, we shall be able to consider ourselves successful. Gold: If there was a single law that you could enact in Cyprus tomorrow, what would it be?G.P.: It would definitely be a law reforming the judicial system. The whole system needs to be uprooted and be replaced by a modern, fast and effective one. The judiciary itself should take the initiative and then work closely with the legislature to resolve this issue which has tremendous impact – social, economic and political – on the country and its future. Gold: If there was a single law that you could repeal in Cyprus, what would it be?G.P.: The Statutory Tenancy principle, which was introduced as a means of social policy and ended up in the absolute abolition of the right to ownership. Only tenants with real social support should enjoy protection, and always not to the detriment of just one third party who happens to be the owner of the property but through the active support of the government or the local authority.

the whoLe system needs to be uProoted And be rePLACed by A modern, fAst And effeCtiVe one

the whoLe system needs to be uProoted And be rePLACed by A modern, fAst And effeCtiVe one

gold_32-51_inn.indd 49 8/31/11 12:03:43 PM

Prudens Limited and its team of trained and specialised professionals are ready to provide you with customised corporate, fiduciary and accounting services. Our team can offer you advice on tax issues and restructuring your corporate structures or even personal wealth. Solutions are offered in various jurisdictions selecting the one that will most suit your needs.

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gold_32-51_inn.indd 51 8/31/11 12:04:06 PM

54 the international investment, business & finance magazine of cyprus

A second well known risk goes by the name 'resource curse' which may be defined as the paradox that countries with an abundance of non-renewable natural resources like oil and natural gas tend to have lower levels of development than countries with fewer natural resources due to a variety of reasons: • A decline in the competitiveness of other sectors (caused by appreciation of the real exchange rate as resource revenues enter an economy)• Volatility of revenues from the natural resource sector due to exposure to global commodity market swings• Government mismanagement of resources, or weak, ineffectual, unstable or corrupt institutions (possibly due to the easily-diverted actual or anticipated revenue stream from extractive activities).

From 1965-1998, GDP in the OPEC countries fell on average by 1.3% per annum, while in the rest of the developing world, per capita growth was on average 2.2%.

The 'resource curse' goes also by the name of 'Dutch disease', a term coined in 1977 by The Economist to describe the decline of the manufacturing sector in the Netherlands after the discovery of a large natural gas field in 1959. The Dutch experience was repeated time and again by Mexico, Venezuela, Saudi Arabia and most other oil and natural gas exporters.

The most pernicious and lasting effect of the ‘resource curse’ is the retardation of the country’s human and institutional development. The flow of easy revenues from resource extraction lessens the pressure to develop a knowledge-based economy, an entrepreneurial and innovation culture and robust institutions of public finance and macroeconomic management. Furthermore, the newly-found wealth creates demands for more jobs and salary increases in the public sector, subsidies to failing enterprises, and to organised interest groups.

Only a few resource exporters such as Malaysia, Norway, Kuwait, Canada, Australia and New Zealand have managed to contain the ‘resource curse’ by taking deliberate measures to neutralize the effects of natural resource discoveries on their economic, political

and institutional development. They save part of the revenues in special funds and bring them into the economy slowly to reduce the spending effect and to stabilize the revenue stream which otherwise varies widely as a result of commodity market swings.

By saving the boom revenues, these countries are sharing their exhaustible resource with future generations. Invariably, these prudent and provident countries have created sovereign wealth funds such as the Alberta Heritage Savings Trust Fund, the Kuwait’s Future Generations Fund and the Norway Government Pension Fund, which save and invest the resource revenues in education, research and development, and environmental restoration.

Thus, instead of allowing the revenues from natural gas and oil discoveries to derail and retard the country’s institutional and economic development, we can sterilize them and use them creatively to accelerate the process of reform to regain international competitiveness. Cyprus could use its Natural Gas revenues to:• reform the public sector to reduce its size and improve its productivity and efficiency• reform and capitalize the pension fund to make it solvent• invest in educational reform and human resource development and knowledge creation• invest in research and development and promote entrepreneurship and innovation • invest in renewable energy technology development to exploit the country's abundant solar energy and to export solar technology• establish an insurance fund for future adversities, natural disasters, and economic crises• establish a Future Generations Fund for long term investments in sustainable development

In this way we would be converting non-renewable fossil fuel resources into renewable knowledge resources, education, research and innovation which will continue to generate wealth when the newly discovered resources are long gone.

froM 1965-1998, Gdp in the opec countries fell on averaGe by 1.3% per annuM, while in the rest of the developinG world, per

capita Growth was on averaGe 2.2%

the flow of easy revenues froM resource extraction lessens the pressure to develop a knowledGe-based econoMy

theodore panayotou is Director of the Cyprus International Institute of Management (CIIM) and Professor of Environmental Economics, Business Eth-ics and Corporate Social Responsibility. He has an extensive research and publication record in the areas of Environmental Economics, Climate Change and Sustainable Development. He can be contacted at: theodore.panayotou@ciim.ac.cy

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58 the international investment, business & finance magazine of cyprus

First the good news. In the ten years between 1999 and 2009 the share of renewable energy sources in total energy consumption within the European Union went up by 67%. At the beginning of that ten-year

period, in 1999, the share of various renewable forms of energy in total EU consumption stood at just 5.4%. Ten years later that figured had jumped to 9%. Next the not so good news. While there is no denying the fact that the share of renewables in the EU energy consumption bill has widened, for more than half the Union member states their performance on the energy-conservation front still leaves a lot to be desired.

No fewer than 15 member states had a renewables share in their gross inland energy consumption smaller than the EU average. In some cases, such as with Cyprus, the UK, Luxembourg and Malta, the share of renewable forms of energy in total consumption ranked among the lowest in the EU (for Cyprus it stood at 3.5% after rising from just 2% in 1999, while for the other three members of this group of underachievers share levels ranged from zero, in the case of Malta, to 3% for Britain). It is also worth noting this group of poor-renewable performers include’s the EU’s two largest economies, Germany and France. France’s share was just 7.5%, up by just one percentage point from 1999, while Germany’s level of 8.5% not only comes close to the EU average but corresponds to an impressive 6% increase over the 1999 figure.

Twelve European states had attained renewable share levels in excess of the EU 9% average by the decade’s end. These levels ranged from 9.3% (in the case of Spain) to 36.2% (Latvia, the Union’s renewables champion). Also exhibiting a strong presence of the renewables sector in their total energy consumption levels are Sweden (34.4% of the total), Austria (27.3%), Finland (23.2%), Portugal (19%) and Denmark (16.7%).

In the case of Cyprus, what really stands out, is the extraordinary dependence of the economy on oil and petroleum products. With nearly 96% of its total energy consumption involving the use of oil and petroleum products (the figure eased off slightly between 1999 and 2009, from 97.1%

to 95.7%), Cyprus exhibits the second worst oil-reliance indicator in the EU. Only Malta, with a figure of 100%, has a greater degree of dependence on oil and petroleum products. It is worth pointing out that the Cyprus figure is some 60% above the EU average, despite that fact that some progress has been recorded towards increasing the share of renewables in the island’s total energy consumption.

In the EU, on average, less than 37% of its total energy consumption originates with oil and petroleum products (the figure stood at 39.2% in 1999). Also departing from the trend exhibited by the vast majority of EU members, Cyprus has zero use for gas as a source of energy. Among the 26 of its fellow EU member states, only Malta finds itself in a similar position. If anything, judging by the EU average trend over the 1999-2009 period, Cyprus’ peers have opted to increase their use of gas in generating energy, thereby lifting the Union’s share in gross energy consumption to 24.5%.

Intertemporal comparisons of the trends in the use of renewables by member states over the 10-year period show that some countries have, indeed, made considerable progress. Denmark, whose share of renewables in total energy consumption jumped from 8.1% in 1999 to 16.7%, boasts the largest increase. Sweden, with an increase of nearly 8% to 34.4%, comes in right behind while ranked third in terms of registering the most impressive improvement is Germany, whose renewables share rocketed from 2.4% to 8.5%. Portugal’s increase from 13.4% to 19% and Slovakia’s, from 2.6% to 7.2%, also deserve special commentary as they correspond to some of the most notable examples of member state improvement towards the use of alternative forms of energy.

those elusive renewables targets

cyprus has the second worst oil-reliance in the eu

departinG froM the trend exhibited by the vast MaJority of eu MeMbers, cyprus has zero use for Gas as a source of enerGy

EU Average 9% 20%

Austria 27.3% 34%

Belgium 3.8% 13%

Bulgaria 6.2% 16%

Cyprus 3.5% 13%

Czech Rep. 5.7% 13%

Denmark 16.7% 30%

Estonia 13.5% 25%

Finland 23.2% 38%

France 7.5% 23%

Germany 8.5% 18%

Greece 6.1% 18%

Hungary 7.3% 13%

Ireland 4.3% 16%

Italy 9.5% 17%

Latvia 36.2% 40%

Lithuania 10.5% 23%

Luxembourg 2.8% 11%

Malta 0.0% 10%

Netherlands 3.9% 14%

Poland 6.6% 15%

Portugal 19% 31%

Romania 14.9% 24%

Slovakia 7.2% 14%

Slovenia 12.7% 25%

Spain 9.3% 20%

Sweden 34.4% 49%

UK 3.0% 15%

GettinG to 2020The table shows each member state’s current figure for theshare of renewables in its total energy consumption next to its agreed 2020 target. That target for the EU as a whole stands at 20% while the Union’s renewables share at the end of 2009 amounted to 9%.

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62 the international investment, business & finance magazine of cyprus

Where is Facebook’s

secret sauce?

The simple recipe for susTained corporaTe

success should make long-Term invesTors

Think Twice before invesTing in newer

‘phenomenon’ sTocks like facebook

By Dr. Savvas Savouri

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the international investment, business & finance magazine of cyprus 63

in a world where product innovation is leaving some of us extremely confused, I cannot help thinking how seemingly changeless some of the world’s most popular products have actually proven. Take Coca-Cola, Heinz, Hershey, Budweiser and KFC. Or Fairy Liquid, Head & Shoulders, Wrigley’s and Levi’s 501’s. What is my point?

When they come upon something they like, customers tend to demand consistency. For their part, when corporates hit upon a winning ‘recipe’ they should be grateful for their stroke of luck and avoid tinkering. Urban myth has it that only two men know the formula for Coca-Cola while the recipe for KFC is just as closely guarded a secret.

Sometimes, of course you need to evolve, particularly in the fast moving world of technology, which brings me to Bloomberg. Whatever evolution is clearly going on within the bowels of the highlyinnovative Bloomberg system, the front-end today still looks very much today as it did many years ago, and quite frankly that’s howusers like it. This contrasts with Reuters who have forced their users to regularly retool and, in so doing, have loosened the brand loyalty which any business should cherish.

The same consistency at work with Bloomberg applies to Google. Whatever magical algorithms it has added to accelerate its alreadyimpressive search capability, the iconic ‘letter-box’ approach gives a reassuring sense of consistency. Reuters has not been alone in ignoringthe ‘If it ain’t broke don’t fix it’ maxim. Let us return to Coke.

When Coca-Cola replaced its original formula in 1985 with New Coke, the result was customer disapproval, sales reversal, management upheaval and the eventual reinstatement of an original which should never have been tinkered with in the first place. After all, when Coke first launched back in 1886 it had been up against many dozens of other sodas. Through luck or just good judgement, the original Coke taste

gave it that special something, leaving its competitors to flounder and their names to be forgotten. The same thing, one imagines, occurred in most other markets in which mega-brands now dominate. The reality is that many, many competitors lie buried

under the ground over which they tower.In the world of pharmaceuticals, matters are somewhat different

from branded staples. Achieving a first-mover advantage with a drug which is then patent- protected - for a finite time, of course - produces an enviable stream of income. Those wise enough then invest these super-normal profits in research and development to search for the next winning drug. Here we have barriers to entry (the patent), product constancy and innovation all working together without being inconsistent.

this brings me to what I believe is the survival paradox of e-space in general and social networking sites in particular.

If operators in these sectors stand still with product that is essentially unprotected by a patent or ‘secret sauce’, they will be quickly matched by competitors. However, if they innovate too fast, they risk losing their loyalists as well as being overtaken by even faster innovators.

Corporate success can be reduced to a few basic principles: You need to be a first-mover or to put yourself in a prime location. You should ideally have barriers to keep out competitors. These may come from the protection afforded by ‘secret sauces’, figuratively in the case of drugs, literally in the case of food and drink. They may be provided by entry costs that are so high they make your market practically impenetrable. High front-end entry costs may be the result of your competitors having to sink considerable spending into infrastructure or brand advertising. The infrastructure spending could be thought of as the cost of laying entirely new railway lines alongside existing ones. In the case of intensive advertising you force competitors to promote their product to the same ubiquitous extent as your own. It is an expense that you hope will deter new entrants.

When we shop for detergent and we see two dozen brands each using aggressive advertising to win our attention, we assume that choice is there for our benefit. The fact is, it isn’t. Those two dozen brands of detergent are almost certainly produced by no more than three corporate giants. Their aim is to make the entry cost for a fourth participant so high that he chooses not to. Existing participants create artificial barriers by proliferating what

Those Two dozen brands of deTergenT are almosT cerTainly produced by no

more Than Three corporaTe gianTs

There is no such Thing as a prime locaTion in e-space

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66 the international investment, business & finance magazine of cyprus

We are going through another exciting time in the Telecommunications Industry, providing more and more opportunities to business and consumers. For years we have been talking about all the possibilities our

technology is offering. It seems like only yesterday that the phone moved from our ear to our face.

I am very pleased to have joined MTN Cyprus at this crucial time. At MTN we have been doing a lot of work on data products, starting from the basic infrastructure up to the end user device, with one aim: to unleash the full potential of the available technologies for our customers’ benefit.

Today we are selling more and more smartphones while Internet usage is growing by the day. The devices we provide are continuously evolving, allowing access to vital – and less vital – information everywhere you go.

We recently launched a series of prepaid data bundles in Cyprus which now allow the user to connect and access information whenever and as long as he/she wants and with absolutely no commitment. This is the first of a series of innovative and empowering services that MTN Cyprus will be launching in the near future, utilizing its new, upgraded network.

We continue to roll out fibre, providing high quality data links to business all around Cyprus. For corporations we offer advanced solutions that cover their ever-increasing needs for mobility and flexibility. We provide connectivity solutions for a broad range of applications, ranging from mobile point-of-sale devices for the banking and retail sectors to fleet management and metering services for utility companies. In some of our other

MTN operations, full ATM networks for Banks are run on mobile infrastructure if the fixed infrastructure is insufficient.

The gap between fixed and mobile communications is closing more and more and the focus is now fixed firmly on the customer’s need rather than on technology. This is most clearly demonstrated in a product we are piloting in one of our biggest operations, which ensures that a call will always reach you whether that call is on your fixed line, your mobile phone or any other device.

All these sophisticated services require more and more personal guidance. This is why we feel proud of our direct sales team’s expertise which, on a daily basis, supports our customers by showing them how to improve their margins through the technology provided. We are fortunate to have more than 25 stores in which we not only sell all the relevant handsets, laptops and modems but, more importantly, in which we have people who are bringing all these changes to the forefront and are more than competent enough to pass on their knowledge to our customers.

At MTN we intend to launch more and more services and applications, capitalizing on our investment to have the best human available resources in the telecoms sector.

info: Pieter Verkade is the Chief Executive Officer of MTN Cyprus

{opinion}By Pieter Verkade

ConneCting Worlds

the gaP betWeen fixed and mobile CommuniCations is Closing

more and more

gold_66-67_inn.indd 66 8/31/11 12:09:15 PM

natural gas: a blessing or a curse?

cyprus needs to invest wisely

By Theodore Panayotou

gold_52-59_inn.indd 52 8/31/11 12:05:45 PM

the international investment, business & finance magazine of cyprus 53

For the world, any major oil or natural gas discovery buys time, postponing the date of reckoning when alternative sources of energy have to be found. For a country, the discovery is an injection of funds that may or may not be put

to good use. What is certain is that hundreds of millions of tons of carbon emissions will be added to the atmosphere, exacerbating the climate change already underway. Moreover, as an increasing share of new fossil fuel discoveries lies offshore and at greater and greater depths, the risks of BP-type catastrophes and of countless smaller ones which go unnoticed, will multiply, despite new safer development and extraction technologies.

More surreptitiously and ominously, new fossil fuel discoveries constitute a “tax” on mankind’s efforts to research and develop alternative sources of energy that are cleaner and renewable. New fossil fuel discoveries (through their effect on energy prices) lessen the pressure and with it the economic incentive and the political will to invest in renewable energy technologies. New fossil fuel discoveries encourage the installation of conventional high-carbon infrastructures such as power stations and transport systems that lock in our dependence on fossil fuels for decades.

Of course, lower energy prices are good for the world economy, especially as it tries to recover from the economic crisis. However, the need for a new ‘energy architecture’ to accompany the new ‘financial architecture’ cannot be put off again for a more opportune time. The Japan catastrophe on the heels of the Mexico Gulf disaster has blown open the energy investment debate that seemed, until then, to have been silently won by the nuclear

option as the safe and economically viable form of emissions free energy.

But surely, fossil fuel discoveries can not possibly be bad for the country that successfully claims them as its own. Especially when they are located well offshore there is hardly any opportunity cost for the area and any environmental costs are easily externalized and dissipated. Suddenly, out of nowhere, a huge amount of cash is injected into the economy from royalties and revenue sharing arrangements; this would certainly help a country facing a high budget deficit and rising foreign debt like Cyprus.

Yet, the risks are equally compelling, though conveniently ignored, if perceived at all.First, the funds may be squandered to: • maintain and expand an over-bloated, over-paid and profligate public sector• give out subsidies to interest groups and raise social spending to unsustainable levels,• undertake high-cost, low-return public projects with high environmental impact such as the planned Paphos-Polis four-lane highway• put off the restructuring of the economy and the public sector badly needed to regain international competitiveness.

the Japan catastrophe on the heels of the Mexico Gulf disaster has blown open the

enerGy investMent debate

Cyprus and Israel, two resource-poor countries, have always imported virtually all their energy. Now they have discovered their own fossil fuels offshore and expect soon to become energy exporters. This is a cause for celebration but the experience of veteran resource exporters, such as OPEC and Mexico, suggests that caution and apprehension should be the watchwords. If Cyprus saves the revenues in a sovereign Future Generations Fund (like Norway) and invests it in research and innovation to upgrade human capital and tap “contemporary sunlight streaming in every window”, the new discovery will be a blessing. If, instead, it squanders the resource in inefficient energy use and the revenues in maintaining a profligate public sector and subsidies to special interest groups, Natural Gas will turn out to be a curse.

gold_52-59_inn.indd 53 8/31/11 12:05:48 PM

56 the international investment, business & finance magazine of cyprus

the european coMMission is concerned about poor MeMber-state

proGress towards the attainMent of the 2020 enerGy Goals

amid growing concern that the 2020 energy-conservation target was not likely to be met by EU member states, the European Commission announced in June this year a new package of measures designed to accelerate progress towards its paramount energy-efficiency goal. On the

basis of progress registered so far by the 27 member states, the Commission had come to the conclusion that by the time the 2020 deadline was reached only half of its energy-savings target would have been achieved. Such a failure, as the Commission has publicly acknowledged, would not merely put its official commitment of striving to curb its greenhouse gas emissions in jeopardy; it would also undermine the EU’s competitiveness and make the security of its energy supply even more precarious.In the light of these risks, the Commission decided it was time to push through a new set of measures designed to bring about greater energy efficiency progress. Brussels is hoping that this latest initiative will help put member states back on track for attaining their renewable-energy targets as initially set for the year 2020. The 2020 renewable energy target essentially centres around the

EU’s collective capacity to use alternative sources of energy for at least 20% of its overall energy mix. The 20% target, therefore, represents primarily an EU average, leaving room for individual member states to attain individual targets in the use of renewable energy in their overall energy consumption. In one particular sector, however, namely transport, all 27 member states have to reach the same target of 10%, which represents the share of renewable energy in that sector’s power consumption.

The EU directive is designed to push all energy stakeholders, whether governments, household and corporate consumers or producers, to take measures that will generate significant energy savings. In total, five broad areas of action are proposed:

2020 energy targets could be Missed

By Haris Christoforou

all MeMber states will be leGally obliGed to put enerGy-savinG

scheMes in place

gold_52-59_inn.indd 56 8/31/11 12:06:02 PM

the international investment, business & finance magazine of cyprus 57

• All member states will be legally obliged to put energy-saving schemes in place. Energy distributors or retail energy sales companies will be required to conserve 1.5% of their energy sales, in volume terms annually. This quantified target should be attained through the implementation of energy efficiency measures, including efficiency improvements to the heating system, the installation of double-glazed windows or the insulation of roofs among energy customers (households, supermarkets, hospitals etc). The Commission expects that if the proposal is adhered to by all member states, the Union's energy consumption will be cut by 6.4% by 2020.

• The public sector in member states is expected to lead by example: public entities should contribute to an increased demand for energy efficient products and services through a legal obligation to acquire energy efficient buildings, products and services. In addition they will have to steadily limit energy consumption on their own premises through required annual renovation works which extend to at least 3% of their total floor area.• At consumer level there will be easy and charge-free access to data on real-time and historical energy consumption through more accurate individual metering. This should help empower consumers to better manage their energy consumption. Billing must also be based on actual consumption, in line with metering data.• Industry will also be expected to step in and make its own contribution to the new EU-wide energy-conservation effort. There is a call for incentives to be extended to small- and medium-size companies, so that they undergo energy audits and disseminate best energy practices. For larger corporate entities there will be an obligation to make an audit of their energy patterns so as to identify the potential for energy conservation.• Producers themselves should also do their bit so that efficiency gains can be made with respect to energy generation. This would require monitoring of efficiency levels of new energy generation capacities, establishing national heating and cooling plans as a basis for a sound planning of efficient heating and cooling infrastructures, and the recovering of wasted heat.

Particular emphasis is placed under this directive on public building renovation which make up close to 12% of the EU's

built-up area. From the beginning of 2014, at least 3% of public buildings in each member state must be renovated annually, in an attempt designed to bring energy-saving benefits. Such renovation schemes should normally provide for wall insulation, double glazing windows, roof repairs, the replacement of heating boilers with more efficient ones (especially in places such as schools). The Commission has estimated that cost-optimal renovation schemes can help generate up to 60% energy savings in public buildings across the EU.

Also stipulated in the directive is a provision for an interim report, to be released in 2014. In that report the Commission should essentially notify member states about progress made towards the 2020 EU energy efficiency target. If by then doubts still remain about the attainability of the energy target, the Commission is expected to draft a more stringent legislative proposal, setting mandatory national energy efficiency targets. During the course of the period leading up to 2014, therefore, member states will be expected to demonstrate their resolve to carry through long-overdue measures that will help reshape their energy balance. If they fail, the Commission will be left with little choice but to intervene to set iron-clad targets for individual member states, in particular those demonstrably unable (or simply unwilling) to live up to their undertakings.

four tarGets for 2020

As initially set in the European Council energy strategy of March 2007, the European Union should strive to attain by 2020 four separate but interrelated targets:• Reduce greenhouse gas emissions by at least 20% as compared to 1990 levels• Improve energy efficiency across the EU by 20%• Raise the share of renewable energy in total energy use to 20%• Increase the level of biofuels usage in transport fuel to 10%.The term “renewable sources of energy” is employed by Brussels to describe a wide range of alternatives to fossil fuels, namely wind power (both onshore and offshore), solar energy (thermal, photovoltaic and concentrated), hydroelectric power, tidal power, geothermal energy and biomass (including biofuels and bioliquids). Through these alternatives to fossil fuels, the EU is seeking to reduce its pollution levels and greenhouse gas emissions. At the same time there is a calculated attempt to diversify the Union’s energy supply and to significantly limit its dependence of hydrocarbon fuels.

froM the beGinninG of 2014, at least 3% of public buildinGs in each MeMber state Must be renovated annually

haris christoforou is a communications consultant and business writer.

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60 the international investment, business & finance magazine of cyprus

In what is probably my least favourite childhood story, the main characters of Alice in Wonderland always felt Alice in Wonderland always felt Alice in Wonderlandtoo unrealistic and over the top. Let’s face it, who runs around crying “Off with his head” and behaving like a tyrant besides the Queen of Hearts? Who would be as rude and provocative to a young girl as the Mad

Hatter was to Alice? Who would constantly grin, disappear and reappear whenever he liked except the Cheshire Cat? And who would always be nervous and in a hurry, appearing late for his job but confident enough about himself to contradict the Queen of Hearts? Having worked in the business world of Cyprus for more than a decade, I have finally understood what Lewis Carroll was saying: almost everyone in business acts exactly like one of his strange characters.

An inappropriate Mad Hatter once asked me during an interview to stand up and turn around so that he could see all of me, something which I pretended not to hear. An invasive one asked me if I had a boyfriend and what I would do if I was engaged to someone who wouldn’t let me go on a business trip. An unrewarding Mad Hatter asked me to work for the whole summer without pay in order for him to even consider me as a candidate and an unprofessional Mad Hatter overlooked my application entirely since he was on holiday for the whole summer and forgot to deal with the subject of recruiting. The unforgettable Mad Hatter summoned me for a five-minute interview after I aced all the necessary exams, only to say that he just wanted to see what I looked like and had nothing further to ask me. He informed me that I would only be offered a post in a different town because he wanted pretty girls to work close to him.

Over the years, what seemed to matter most for professional survival was to satisfy the unrealistic demands of the Queens of Hearts who appeared to be obsessed with demonstrating power, humiliating subordinates and squeezing every bit of worth out of their employees. The most unfounded requests were met with no questioning, for fear of being singled out as the non-conforming one. The quality of work, professional integrity and effort put into the job seemed to be irrelevant.

Cheshire Cats were not willing to pass on any kind of professional education to the new generation of accountants and auditors. Senior colleagues felt too insecure to share their knowledge with their eventual successors and frequently took pleasure in grinning and offering double-sided advice before disappearing just like Carroll’s famously enigmatic character.

White Rabbits would give unrealistic deadlines simply to encourage work over the weekend and a 60-hour week from the workforce and they would then be too busy to address any queries. The end product would remain on their desk for weeks; deadlines were just a choking game. As for the meaning of this surrealistic mentality and absurd world, I could not figure it out. I longed for simplicity and fairness but I felt like as if I was stepping deeper and deeper into a labyrinth.

Lewis Carroll’s story ends with Alice waking up in the park, realizing that her adventure has been nothing more than a bad

dream and she happily returns home for tea. Her adventure is really the quest to discover her own identity and to gain some understanding of authority, the rules and the games that people play which, ultimately, are all directly linked with how one grows and progresses through life. Carroll later wrote a sequel entitled Through the Looking Glass starring a grown-up Alice. Like her, I Through the Looking Glass starring a grown-up Alice. Like her, I Through the Looking Glasshave also matured in what felt like a parallel universe and I have often wondered what the business world would have been like if I had looked at it from the other side of the mirror. Just as life imitates art, I too have crossed over…and I have never looked back! Off with his head!

info: ElEni VickErs is a graduate of the of the of University of Warwick of Warwick of with a BSc in Accounting and Finance and a Chartered Accountant with the Institute ofChartered Accountants in England and Wales. She is the Financial Controller of Controller of Controller Trident of Trident of Fiduciaries (Middle East) Ltd.

{opinion}{opinion}By Eleni Vickers

MalicE in WondErland

i longEd for siMplicity and fairnEss but i fElt likE as if i Was stEpping

dEEpEr and dEEpEr into a labyrinth

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is essentially the same product. Think of it this way: Imagine regularly seeing a photograph which contains four faces. If one day that photo is replaced with another with the same faces plus a fifth, the chances are that you will notice the addition. Now suppose the original photo was of twelve people. If this were replaced with one containing an additional face, the chances are that you would miss noticing the new face. This is the principle on which consumer goods makers base their strategy of product proliferation. Any new face will have to be very noticeable, something that will require expensive advertising, something which becomes a barrier to entry into a market for otherwise broadly similar products.

In many instances, successful corporates have enjoyed more than one of the advantages outlined above. A first-mover in the world of malls and main streets will have the choice of the prime location. The ‘secret sauce’ in the pharmaceutical world may be the patent for the first drug to treat ulcers, whilst the secret ingredient in the world of Fast Moving Consumer Goods (FMCG’s) is the taste that draws so many of us back for more and more, viz. KFC and Coca-Cola. In fact, the ‘fast’ in FMCG refers to the speed of consumption not innovation. This brings us to the chances of long-term success in e-space.

i would argue there is no such thing as a prime location in e-space, or certainly nothing like the one we find in the world of physical

stores. In the world of malls and high streets, having a central store near the car park gives it an advantage that matters at the till. Furthermore, in the world of e-space names do not matter as they once did. In the old world of alphabetised phone books where your name was positioned mattered a great deal. Most of us can remember Acme Inc. from old cartoons but the reality is that this was not entirely fictional, with a number of companies adopting Acme or names that would appear either very early in, or towards the very end of, directories.

In short, there are few barriers to entry in e-space. Google’s search speed is the exception, not the rule, and it is as much based on a ‘secret-sauce’ as Coke. As for Amazon, the remarkable success of the online retailer is not really remarkable at all but based on time-honoured principles. Amazon’s strength is founded on the barriers to entry afforded by the considerable infrastructure that would need to be put down by others to compete with what is now a logistics giant.

Let me now turn to what might be described as the paradox of change. Where customers want improvements - they do not in all cases of course, viz. Coke - they demand that it should happen in a near-changeless way. This may sound trite but, as noted earlier, achieving this difficult feat has been at the core of Bloomberg’s success. I am not saying Facebook cannot imitate Bloomberg’s success, but I doubt it. In trying to keep itself ahead of rivals - existing and new entrants - Facebook will be unable to resist the

64 the international investment, business & finance magazine of cyprus

some imporTanT ingredienTs for corporaTe success

Prime Location

Patent Protection

High entry costs for competitors

First Move Advantage

Consistency

Evolution

facebook will be unable To resisT The TempTaTion of major innovaTion

which imporTanT ingredienTs for corporaTe success does facebook have?

Prime LocationIn regards to the cyber-world, there is no prime location.

Entry costs to competitors

These are not insurmountable.

First Move AdvantageFacebook was not the first of its kind.

ConsistencyFacebook is ever-changing in both appearance and in function.

EvolutionInconsistency will lead to user frustration and an inevitable loss of popularity.

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the international investment, business & finance magazine of cyprus 65

temptation of major innovation. My belief is that, rather than strengthen its hold over its users, this will actually loosen it.

i f I had to choose survivors into the second half of this century between Coca- Cola, Heinz and Gillette or Twitter, LinkedIn and

Facebook, there is no doubt in my mind which three should be backed. There will always be exceptions, of course. Consider Eastman Kodak. This one-time market titan was brought down by a combination of factors: it was not only up against the growth of digital, but the onslaught from cameras available in mobile phones. Few people would have imagined that the sun would ever set on Kodak and few today see Facebook becoming a corporate relic. But I am one of these few.

To my mind, social networking sites do not have any of the ingredients for long-term durability and few, if any, have that special ‘secret sauce’ that leads to addiction.

Over the years, many new products have appeared and been described as phenomena. Like fireworks they soared, amazed us all, and then came crashing down to earth. Few of the ‘phenomena’ of the last thirty years survive today and

those that do now limp along where they once raced. In which drawer have you thrown your once-indispensable Palm Pilot or Psion? When did you contact a schoolfriend on Friends Reunited? When did you last use Lastminute.com?

The challenge to the vast majority of ‘phenomenal’ child actors is the fact that their

best years are their early ones. Eventually most of these once-sought- after stars are reduced to playing roles in end-of-pier pantomimes. The same thing almost invariably applies in the world of commerce. With pantomime in mind, one day the

only reasonable reply to the question “Where is Facebook’s future?” will be “It’s behind you!”

firsT move advanTage: The production ofCitric Acid in the 1880’s ignited its growth.barrier To enTry: Using patentprotection and R&D, it has cementeditself asitself asitself a global drug giant.evoluTion: Although it may seemcontrary to consistency, Pfizer wasable to fund a stream of new of new of drugsdevelopment using earnings providedby the patent-protected super-normalearnings from earlier drugs.consisTency: Even where patents haveexpired, products continue largelyunaltered.

firsT move advanTage: Coke was thefirst cola beverage of its of its of kind,established in 1886.secreT sauce: Coke has a secret recipethought to be known by only two people.paTenT proTecTion: The traditional Coketaste is protected by patent, making itimpossible to replicate.consisTency: Aside from an attemptedformula change in 1985, the traditionalCoca-Cola taste has remained constant.

paTenT proTecTion: Google has fulllegal rights to the PageRank Patent, analgorithm that is the fastest on the web.consisTency: The standard homepageof Googleof Googleof has changed very minimallythroughout its existence. All changes areto the back end, focusing on speedand functionality.

firsT move advanTage: The AppleMacintosh, produced in 1984, becamethe first affordable personal computer.consisTency: Apple is renowned forits dependable and simple manner of manner of mannerfunction, despite the constant upgradesin technology.evoluTion: The rate of product of product ofdevelopment in this group is a thingof legend.of legend.of

my space: a cauTionary Tale

In 2005, nEws CoRP. boUGHT My sPACE FoR wHAT wAs THEn A MAssIvE $580 MILLIon FRoM ITs oRIGInAL ownERs. HowEvER, As oTHER sITEs sUCH As FACEbook ERoDED ITs UsER bAsE, TRAFFIC PLUMMETED. My sPACE wAs RECEnTLy soLD To THE ADvERTIsInG nETwoRk sPECIFIC MEDIA FoR $35 MILLIon, REPREsEnTInG A MonUMEnTAL 94% CRAsH In vALUE ovER A 6-yEAR PERIoD.

temptation of major innovation. My belief

info: dr. savvas savouri is a Partner and Partner and Partner Chief Economist Chief Economist Chief of Toscafund. of Toscafund. of

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the international investment, business & finance magazine of cyprus 67

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70 the international investment, business & finance magazine of cyprus

wealth management

{money}Barclays wealthA WeAlth of experience, A WeAlth of expertise

savvas constantinou

maria iacovidou

gold_70-73_inn.indd 70 8/31/11 12:11:33 PM

the international investment, business & finance magazine of cyprus 71

Barclays Wealth in Cyprus offers a full range of international corporate banking and wealth

management services. With our head office in London and a presence in 25 countries, including a number of well known offshore jurisdictions such as Switzerland, Jersey, Guernsey, the Isle of Man, Gibraltar and Dubai, we have built up considerable experience over many years in tailoring our corporate banking offering to intermediaries (accountancy firms, law firms and fiduciary service providers) in order to support them in servicing the global needs of their clients.In addition, as part of a leading global wealth manager, we have the capability to complement our

corporate banking offering with a suite of wealth management services. We cater to the needs of a wide range of clients, from companies requiring quick and efficient day-to-day banking such as Internet banking, deposits, loans and foreign exchange transactions, to wealthy individuals looking to preserve and grow their wealth, and companies and institutions looking to invest in a wide range of asset classes.

In Cyprus we employ around 50 people in various functions ranging from sales to operations and risk management and have offices in Nicosia and Limassol. Over the past 18 months, we have made some strategic appointments and have recruited key individuals to support our growth strategy in Cyprus. In particular I would like to introduce Savvas Constantinou and Maria Iacovidou.

By Evan Gavas, Country Head of Barclays Wealth

With a presence in cyprus for over 70 years, Barclays has a tremendous heritage on the island. having successfully survived the challenges of the gloBal financial crisis, Barclays Wealth in cyprus is Well-positioned to meet the increasingly sophisticated and demanding needs of its international corporate and high net Worth clients.

evan gavas

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78 the international investment, business & finance magazine of cyprus

beyond just gearing the next generation to attend UK and Greek universities in order to enable Cyprus to understand and orientate itself to the Eastern economic powers. There is a traditional level of xenophobia in Cyprus towards the newly emerging powers of the world and this needs to be overcome if the Cypriots are to get acquainted with servicing those markets.

Gold: Given your experience in working with governments, you must have seen many instances of corruption, ineffective policies, or officials being out of touch with the realities of the economy, etc. What are the tell-tale signs reveal whether a government is capable of addressing and rectifying such issues or not?P.H.: The obvious signs are whether they are meeting the needs of their society. Inevitably corruption and cronyism result in people being assigned to roles that they are incapable of fulfilling. Nelson Mandela once said to me that a politician

thinks of the next election whereas a statesman thinks of the next generation

Gold: You have been quoted as saying, “You’ll know you’re making progress when the things that keep you awake

at night this week are different from the things that kept you awake at night last week”. What’s keeping you awake at night these days?P.H.: On the whole this is two-dimensional.

Firstly I’m concerned about the eurozone. How will the sovereign debt crisis progress and what’s the threat posed by contagion? Ernst & Young needs to have a response regarding the threats and opportunities posed by different outcomes. Secondly, I think about the people within Ernst & Young. People make or break our organisation and what we sell in intellectual property is tied to personalities. If we get this right, we attract the right clients. The business environment is very tough these days and you have to serve the best with the best. I call it the ‘virtuous cycle’.

tHe reAl mAd meN:tHe remArkAbletrue story ofory oforymAdisoN AveNue’sGoldeN AGeby Ay Ay Ndrew Crdrew Crdrew ACkNell(QuerCus publishing, 2011)

rrP: £14.99 (£7.94 from amazon.Co.uk)

In New York City in the late 50s and the 60s – the era and location of Mad Men, one of the most successful television series in

recent years – advertising went through a revolution. In a booming market, a new generation of writers and art directors (“renegades”, as the book calls them) gorged themselves on a vibrant and artistic social scene. They were confident, driven and ambitious but they were clever and creative too, outclassing and out-thinking the old advertising establishment and implementing a new way of thinking and behaving which spread across the newspapers, magazines and TV screens of America and beyond. The story of modern advertising starts here, with the men – and women – of Madison Avenue who created the most radical and influential advertising ever. Their legacy still resounds in the industry today. Andrew Cracknell has accurately captured what many people call the Golden Age of Advertising and he tells the remarkable, inspiring story of creativity, ingenuity and the larger-than-life personalities who made it. Essential reading for today’s advertisers but highly enjoyable for everyone else.

book reVieWbookre

tHere isre isre A trAditioNAllevel oflevel oflevel xe of xe of NoPHobiAiN CyPrus towArds tHe Newly emerGiNG Powers of tHe world

CONFIDENCE is on the agenda.

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gold_76-79_inn.indd 78 8/31/11 12:12:56 PM

the international investment, business & finance magazine of cyprus 79

book reVieW

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gold_76-79_inn.indd 79 8/31/11 12:12:56 PM

82 the international investment, business & finance magazine of cyprus

The 2010 Condé nast traveller, GreeCe awards were presented at a prestiGious Ceremony in athens in July. the Cn traveller awards

were introduCed in 1988 by the ameriCan Cn traveller and are internationally reCoGnized as an exCellenCe landmark in the travel and tourism industry. this is the seCond year that GreeCe has orGanized its own Cn readers’ awards, whiCh are on a par with those made in the usa, the uk and spain.Several Cyprus hotels won multiple awards. The Amathus Beach Hotel in Limassol was voted Most Popular Beach Hotel in Cyprus and Most Popular Family Hotel in Cyprus. Commenting on the two awards, Achilleas Dorotheou, CEO of the Amathus Hotels, said: “We are truly honoured to have been recognized in two categories by the readers of Condé Nast Traveller in Greece. The Amathus Beach Hotel Limassol has often been hailed as the epitome of a luxurious hotel experience and we are proud to see that our on-going effort to provide unparalleled service to our guests continues to be recognized.”

Limassol’s Four Seasons Hotel prevailed in no fewer than four categories of the Condé Nast Traveller, Greece awards. It came first in the Cyprus Family Hotels category, first in the Cyprus Hotel Restaurant category for the Vivaldi Restaurant which also won the Most Popular Restaurant award, and was voted Most Popular Destination in the Cyprus Spa Hotels category.

A spokesperson for the hotel said that, “Success at the Conde Nast Traveller 2010

awards confirms the high quality of services provided by the Four Seasons Hotel and acknowledges than the hotel’s services are exceptional. The hotel’s restaurants stand out as its chefs use selected products to create special dishes and provide unique gastronomic journeys. The high standard of services in all sectors, combined with the hotel areas and the unique lifestyle that is enjoyed by all its clients, are the factors that have led to these latest distinctions.”

A third Limassol hotel, Le Meridien, won three awards in Athens as Best Spa Hotel in Cyprus, Best Beach Hotel in Cyprus and Most Popular Daily Spa in Cyprus, while the Apokryfo Hotel in the village of Lofou was voted Best Traditional Hotel in Cyprus by the readers of Condé Nast Traveller, Greece.

Meanwhile in the Condé Nast Traveller, UK awards, the Thalassa Spa at the Anassa Hotel came second in the 2011 Readers’

Spa Awards 2011 in the Europe, Asia Minor and the Russian Federation section while the only Cyprus hotel to be included on the Condé Nast Traveller Gold List 2011 is the InterContinental Aphrodite Hills Resort Hotel which was also voted Most Popular Resort in Cyprus by the readers of Condé Nast Traveller, Greece.

Cyprus hotels sweep Condé nast traveller awards

tourism

{business}

amathus beaCh hotel

four seasons hotel

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the international international investment, business & finance magazine of of cyprus cyprus 69

{september 2011}

76 {business}76 Eastern PromisePhilip Hourquebie says that Cyprus needs to reposition itself towards the new global economic powers80 DMS Myths and MagicWhat Document Management Software can do for your business82 Cyprus hotels sweep Condé NastTraveller AwardsTraveller AwardsTravellerWho won what in Athens

70{money}70 A Wealth A Wealth A of Experience, of Experience, of a Wealthof Expertiseof ExpertiseofBarclays Wealth in Cyprus

84{economy}84 Real84 Real84 Estate and Housing Loans Housing Loans HousingWhy the mismatch?87 Cities: Does attractivenessmatch investment?Investors’ perception of cities and the reality of where they investreality of where they invest

8888{tax&legal}88 Taxation and BusinessJust how favourable is Cyprus’ favourable tax regime?

iSSuE

06

92{lifestyle}92 From Boardroom to Screening Room Screening Room Screening10 of the best movies set in the world 10 of the best movies set in the world 10 of the best movies set in the world of business and financeof business and finance

money: Warren buffett invests like agirl: and Why you should, tooby louann lofton 73

business: the real mad men: theremarkable true story of madisonavenue’s golden ageby andrew cracknell 78

economy: Why the West rules - fornow: the patterns of history and whatthey reveal about the futureby ian morris 86

lifestyle: the sense of an of an of endingby Julian barnes 97

+ BOOk REviEWS

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82 CyprusTravellerWho won what in Athens

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72 the international investment, business & finance magazine of cyprus

savvas constantinou is responsible for our Limassol office and plays a crucial role in the development of our wealth management services to corporate and high net worth clients.

Savvas, what are your priorities for the business?Our strategy is to develop our business in Cyprus and my particular focus is on the Limassol office which is located in

an important financial centre where the majority of the international business takes place. Our vision is to be the premier international bank and wealth manager in Cyprus, delivering service excellence and expertise through innovation and teamwork.

What concerns are your clients talking to you about at present?Clients are understandably concerned about the current market situation in

both Greece and Cyprus and uncertainties in the global economy mean that they are worried about the security of their deposits and investments. With our local presence, we are able to address these concerns and offer solutions to help both our corporate and private clients to manage their investments in terms of diversifying their risk. As part of the Barclays Group, we have emerged strongly from the financial crisis and are able to offer the safety, stability and reassurance of a much coveted AA- credit rating.

How is Barclays Wealth positioned to tackle the challenges facing the wealth management industry in Cyprus?The wealth management industry in Cyprus is in the early stages of its development. It has emerged as a result of tremendous growth in the international business sector in Cyprus in recent years and the consequent wealth creation.

A major challenge has arisen for domestic players looking to establish themselves as wealth management providers, primarily due to the sovereign debt crisis in Greece and also to the fact that creating a sophisticated wealth management platform requires a large amount of investment which is difficult at a time of scarce resources.

Barclays Wealth has a unique advantage since it is already an established global wealth management provider and one of the few global players that continues to invest significant funds in the business.

Another significant challenge concerns how the industry adapts to meet the needs of investors who are becoming increasingly sophisticated and demanding. As the real value of money becomes a greater consideration, many local investors are diversifying their risk away from traditional forms of saving, for example deposits, towards alternative forms of investments.”

the wealth management industry in cyprus is in the early stages of its development

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the international investment, business & finance magazine of cyprus 73

maria iacovidou is Head of Business Development for Barclays Wealth in Cyprus and is focused on providing superior service to our clients and bringing the international expertise of Barclays to the local market. Maria was appointed to help grow the Cyprus operation and our growth plans are benefiting from her investment banking and corporate experience as well as her extensive relationships in the financial and business community.

Maria, how does Barclays Wealth differ from its competitors?As part of Barclays we can leverage capabilities within the Group in order to provide our clients with a wide range of solutions - investment banking through Barclays Capital and corporate banking through Barclays Corporate. An example of this is when we worked closely with

the Government of Cyprus and our colleagues at Barclays Capital to assist the Government in successfully tapping into the international markets as part of their bond issuance programme. We are well positioned to provide alternative investment and savings propositions to high net worth individuals and institutional investors - those who are local as well as international. Such propositions may be derived from the breadth of investment products and services of Barclays as well as from its ability to develop bespoke solutions to suit the individual investor’s risk-return profile.

In addition, we’re particularly proud of our position as a leader in the Cyprus market in terms of our economic and product research capability. This globally recognised research is often provided free of charge to our clients, to enable them to make the best investment decisions.

What do you see as the main challenges to the wealth management industry in Cyprus?The wealth management industry in Cyprus needs solid foundations and professionals who understand the specific requirements of this market. As part of the Barclays Group, Barclays Wealth offers a long history and proven experience in this segment. Barclays Wealth in Cyprus provides benefits derived from global synergies and its extensive international network as well as from the professionalism and wealth management expertise of its employees to reassure clients during a time of particular uncertainty and economic volatility.

As we move forward in these

As we move forward in these

Aongoing challenging times, Aongoing challenging times, Awe remain fully committed Awe remain fully committed Ato and focused on our Ato and focused on our Aclients, on providing the Aclients, on providing the Ainnovative solutions, service Ainnovative solutions, service Ainnovative solutions, service Ainnovative solutions, service Ainnovative solutions, service Ainnovative solutions, service Aand security they require and on successfully executing the growth strategy we have developed for our business in Cyprus. As we continue to evolve, expand and improve our operations, our strategic appointments to the business are key to our growth and success.

warrenwarrenw Buffettinvests like agirl: and why youshould, tooBy louann lofton(harperBusiness, 2011)

rrP: £16.99 (£14.44 from amazon.co.uk)

Male readers may not want to believe it but Warren Buffett and all of the

women of the world have one thing in common: they are better investors than the average man, a fact proven by psychologists, scientists, and the value of their portfolios. This well-researched, eye-opening and witty book shows that women, with their capability for patience and good decision-making, epitomize the investment practices of Warren Buffett, the most successful investor in history. In the author’s view, an investor’s temperament is probably as important as his/her research skills, area of competence, etc. Ofton’s book is consequently more about the personality/behavioural traits that result in more successful investing. Her central thesis, that Buffet’s success is due to his more feminine temperament, is fascinating and well backed up by her research. She does a good job of synthesizing the data on the advantages that women bring to the trading floor and analyses Buffet’s investing philosophy well. Warren Buffet himself says, “You’ll have to read her book to see the criteria she used, but I’d say I probably plead guilty.”

Book revieWBookrevie

As we move forward in these

As we move forward in these

A

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76 the international investment, business & finance magazine of cyprus

EastErn Promise

ComPANies

{business}

Why Cyprus needs to reposition itself toWards the neW global eConomiC poWers

Interview by K. Ioannides

Gold: What are the overriding trends affecting the global economy that are likely to impact the services sector in our region?Philip Hourquebie: The most important trend is the shifting of economic and subsequently political power, primarily to the East. As that shift takes place and we look at the demographics of the world, we see the empowerment of much younger populations. As this happens it will have major implications for the aging populations the power is shifting from and the younger populations that it heading towards. To highlight this point: there is an increasing shortfall in pension funding in Europe whereas in China and India this is not a problem at all. This movement in the balance of power will soon be reflected in the composition of international bodies like the United Nations and the Security Council. Even though Christine Lagarde was appointed Head of the IMF, there must have been many compromises behind the scenes promising that more attention and resources will be focused on newly emerged markets.

Gold: So China and India are moving to a position of greater power, both economic and political?P.H.: Effectively what we are witnessing is the establishment of China as the production centre and India the service centre of the West. Even though many Chinese products are still associated with being cheap and nasty, we only have to look at the experience of Japan where they went from producing ‘junk’ 30 years ago to being manufacturers of best in class items now. As the Chinese move up the quality chain, it will also impact the cost structures of the world. Just as an increasing middle class has an increasing impact on the cost structures of

PhiliP hourquebie is ernst & Young’s head of Central and south-east euroPe. PreviouslY the Managing Partner for afriCa, he has aMassed vast exPerienCe in working with the world’s largest CoMPanies and governMents sinCe the 1980s and he has his finger firMlY on the Pulse of how soCio-eConoMiC drivers are fundaMentallY Changing the global balanCe of Power. As Europe and America rapidly lose ground to the world’s booming developing markets, Hourquebie tells Gold why Cyprus has a golden opportunity to position itself as the transit hub of choice between the increasingly prosperous East and the declining West.

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commodities and food, this quickly impacts other parts of the supply chain. Given that these fundamental changes are taking place, the task for the services sector is to anticipate the changes and position itself accordingly.

Gold: How can Cyprus take advantage of this?P.H.: Cyprus has an immense opportunity thanks to its geographical and geo-political location. As an EU gateway to commerce in the East along with its proximity to North Africa, Cyprus has an opportunity to service these rapidly rising markets. However at the moment Cyprus is only really orientated towards the Russian and CIS markets and is allowing the opportunity presented by those who will be the dominant players in the region to pass it by. This is a shame because the education system here is highly geared to providing a very thorough knowledge of the language of international business [English] and this is key to being able to effectively unlock the potential offered by the emerging economic powerhouses in the region.

Gold: What are your views on the direction of the flow of global investment capital in the future? P.H.: There’s no question where this is heading. Even major European car manufacturers like Audi have recently set up a key R&D centre in China [Changchun, Jilin province]. In terms of infrastructure, China is urbanising 20-30 million people a year; entire new cities housing millions are in the process of being built so, inevitably, where there is demand, investment will follow. Aside from China, if we look at the other key market for commodities we see that Africa is experiencing phenomenal changes and, to a great extent, the continent is only at the very beginning of exploiting its natural resources.

Gold: But is there enough political stability there to allow Africa to fully achieve its potential?P.H.: If you look at the number of African countries that have stabilised politically over the last 10 years, it is clear that there are massively under- exploited markets with phenomenal potential. Take countries like Nigeria with a population of over 150 million or the Democratic Republic of the Congo where there are 70 million: they may not be the best models of democracy but then again where can you find pure democracies? The important factor which will allow these markets to flourish is political stability and in this sense Africa is on the cusp of becoming a major global

market with over a billion people. The biggest investor in Africa is actually China and this is largely done on a country-to-country basis.

Gold: What are the key challenges that your clients in Central and South East Europe will be facing over the next 5 years? P.H.: The problem with the region here is that there are neither significant natural resources nor populations. As such, there are no obvious drivers for growth and there is a danger that the region will increasingly rely on riding on the back of German productivity.

Gold: How do you see the global enforcement landscape changing and how will this affect European service sector centres?P.H.: Currently there is a great shift towards compliance. Technology has allowed countries and jurisdictions worldwide to begin sharing data and intelligence on individuals, and as such there are increasingly fewer places to hide wealth. As such, individuals and companies realise that proper reporting is unavoidable and, of course, with this comes the requirement to source the necessary expertise to carry it out.

Gold: What can Cyprus do to better position itself as a destination of choice for organisations looking for an overseas financial hub for their operations?P.H.: Cyprus needs to be very clear about its Unique Selling Points and its value proposition and it must make sure that its entire education and economic system is aligned towards fulfilling it. In my opinion, it is crucial that Cyprus’ education system looks

ComPANies

NelsoN mANdelA oNCe sAid to me tHAt A PolitiCiAN tHiNks of tHe Next eleCtioN wHereAs A stAtesmAN tHiNks of tHe Next GeNerAtioN

CyPrus is AllowiNG tHe oPPortuNity PreseNted by tHose wHo will be tHe domiNANt PlAyers iN tHe reGioN to PAss it by

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80 the international investment, business & finance magazine of cyprus

A few years ago, ‘electronic archiving’ was born. Then it evolved into Document Management Software (DMS), and more recently is being referred to as Electronic Content Management (ECM). But what is it exactly and do we really need it? Stéphane Horta, CEO of Allgeier DMS

Solutions, explains the what, how and why of data management in today’s business world.

Gold: Is ‘Document Management Software’ (DMS) just an overblown term for scanning paper documents and storing them digitally to get rid of all those box files? Stéphane Horta: Absolutely not! The storage issue is a welcome by-product but not the essence of DMS. To solve that problem, all you need is some software and hardware, a scanner and a computer. You don’t need an external consultant. The question is this: after you’ve scanned and stored your documents digitally, then what? When you need to refer to a document, are you supposed to start searching through your digital files just as you did with your paper files? Unfortunately, that’s what a lot of people do… and they come to the false conclusion that the system is ‘useless’. People often buy software and hardware, and believe that’s the solution. It’s not.

Gold: So what is the solution?S.H.: At Allgeier we see the equation as this: Software + Hardware + Consultancy = DMS Solution. Yes, we do provide software and scanners but these are only tools. That’s not our core business. We undertake to deliver the best solution for your company’s needs. Our core business for the past 25 years, and where we excel, is our Consultancy. It’s about how we apply these tools. Look at it this way: Let’s say you want to buy a car, a DMS ‘car’. You go to a car dealer who sells all kinds but you don’t know which car works best for you. How can the dealer offer you the right car if he doesn’t know your needs? This is where Allgeier comes into play. Like a good dealer, we will ask you questions to try to determine not just what you want but what you need. But even that is not enough. Even if I offer you the best car that perfectly matches your needs, it’s still no use if you don’t know how to drive!

Gold: Do you undertake to teach your customers?S.H.: Yes, Allgeier will make sure you know how to drive in a way that will ensure that you enjoy your car - without crashing it. There’s more: If I ask you all the right questions, but the car is actually for your wife, the ‘solution’ I offer will not be satisfactory. In the case of DMS, I will negotiate the contract details with the decision maker - the director or CEO of a company - but then I

will talk to the actual users - the ‘drivers’ - in the company to find out exactly how they work and what they need to make their work more efficient.

Gold: Can DMS really make a company’s operation more efficient?S.H.: The market is extremely competitive. Customers these days are used to instant information. If they have to wait for anything, they go to the next supplier. Whether you are an accountant, an insurance clerk or a doctor, making your client wait while you find the answer to his question can put you out of the race. Allgeier’s strength lies in tailoring the DMS solution so it can give a company a competitive edge by making information instantly accessible, anytime, anywhere and by any authorized user. People need to be aware of the ‘trap’ of corporate DMS solutions. Even within the same company, different departments have different needs. Corporate solutions could spell disaster - usually a very expensive one. But with our expertise, we can always ‘fix’ the situation. There is no ‘wrong’ system. You just need the right consultant. You don’t have to throw away the car you bought. We can change the seat covers, add a sound system, re-spray it in the right colour and it will be just fine.

Gold: When is it time for a company to start considering DMS?S.H.: You could say it’s always too late or it’s never too late. But the earlier you start (fewer documents and less of a mess), the more cost-effective it is. Also, it doesn’t have to be an ‘all or nothing’ decision right from the start. I always recommend ‘baby steps’. Start with the department that stands to benefit the most. Test - and enjoy - the results. The rest will follow naturally.

Allgeier DMS SolutionsA member of the Allgeier AG Group (Belgium / Netherlands / Luxembourg / Germany / France / Cyprus)www.allgeier-dms.net

DMS MytHS anD MaGic

cOMPaniES

{business}

What Document management SoftWare can Do for your buSineSS

DiffErEnt DEPartMEntS HavE DiffErEnt nEEDS. cOrPOratE SOlutiOnS cOulD SPEll DiSaStEr, uSually a vEry ExPEnSivE OnE

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MakinG yOur cliEnt wait wHilE yOu finD tHE anSwEr tO HiS quEStiOn can Put yOu Out Of tHE racE

StéphANe hortA

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{advertorial}

The Karaolis Group is synonymous with high-standard property development in the Limassol district. Powering the town’s continuous growth since

1960, the company has innumerable residential and commercial projects to its name, which have all played a part in Limassol’s development into the international business centre and cosmopolitan resort it is today. Prospective buyers seeking either a home in the sun or a promising investment will find just the right property in the company’s wide-ranging portfolio of apartment buildings, townhouses, bungalows and luxury villas. Each property is an expression of quality construction and appealing design, the mark of the Karaolis Group since its establishment. As the demand for high-standard homes in Limassol continues to grow,

the Karaolis Group has earned the confidence of some 5,000 Cypriot and foreign buyers who testify not only to the merits of each project, but also to the company’s comprehensive pre-sale and after sales service. This includes the sound guidance provided by experienced staff with a full understanding of the market in combination with buyer expectations and concerns. We will guide you from We will guide you from Winitial site viewings to professional financing and legal advice, and you will find yourself in a position to make an informed and confident decision regarding the acquisition of property in Cyprus.Whether you have visions of a comfortable apartment in town, a luxurious beachfront bungalow, a charming village cottage or a magnificent mansion in a prestigious location, you can trust the Karaolis Group to direct you to a property that reflects your personal preferences and lifestyle.

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86 the international investment, business & finance magazine of cyprus

A fourth reason, which has always been my main assumption, is that it could be a reflection of borrowers getting into trouble. If I owe €100,000 but am €10,000 in arrears, the bank might offer to repackage that loan into a €110,000 loan with an extended maturity. This would help keep a lid on the bank’s non-performing loan (NPL) ratio and as long as the loan to value ratio does not breach 80%, then everyone is happy. This also assumes of course that the banks are regularly reassessing the value of the property for which, they have handed out mortgages, so that loan-to-value ratios reflect real market values.

Indeed, one remarkable feature of this downturn is that NPLs have not risen faster. According to Marfin Popular Bank’s presentation of first-quarter results, the

NPL for Cyprus loans rose to 5.7% in the first quarter of 2011, from 5.1% in the first quarter of 2010. Anecdotal evidence suggests that Bank of Cyprus figures are not that different.

A contrary theory comes from Yiannis Tirkides of Marfin Popular Bank, who says that the fairly steady NPL for Cypriot loans is not a matter of repackaging but of a strong housing loan market. He says that housing is “a segment of the market that is not giving us difficulty”. The vast majority of us, it seems, are paying our mortgages on time.

He also points out that if you compare housing loans in June 2011 with housing

loans in December 2010, rather than June 2010, when the banks were still chasing new customers, you see that the growth is only 2.4%. This is because banks have become much more risk averse this year in the face of downgrades and unwelcome international attention over their exposure to Greece.

Demand for housing loans is also weakening, according to the latest Bank

Lending Survey. Perhaps by the end of this year, therefore, we might see housing loans finally catching up with all the other depressing figures for the property market.

% change over same period of previous year unless otherwise indicated

2006 2007 2008 2009 20102011 ytd (a)

latest2011

Floating interest rate interest rate interest onnew housingnew housingnew loans (end-period; %)

5.84 5.65 6.57 5.01 4.88 5.16 Jul

Property transactions(sales) 2.2 25.3 -31.0 -44.3 5.2 -19.7 Jan-Jul

Gross construction output 4.1 6.8 2.3 -10.6 -8.0 -18.9 Jan-Mar

Local sales of cement of cement of 2.4 10.0 8.4 -25.8 -7.2 -5.8 Jan-June

Dwelling units authorised 0.8 8.3 -2.0 -16.9 -14.2 -41.8 Jan-May

Stock of housing of housing of loans(end-period) 31.2 27.9 22.6 22.2 14.8 9.0 June

banks have become muchmore risk averse this year

info: Fiona mullen is director ofirector ofirector sapienta economics ltd, which analyses and explains economictrends to local and international clients.

pRopeRty maRket indicatoRs

WHy tHe WestRules - FoR noW:tHe patteRnsoF HistoRy andy andyWHat tHey Revealabout tHe FutuReby ian moRRis(profile books, 2011)

RRp: £12.99 (£7.01 from amazon.co.uk)

In the middle of the eighteenth century, the world changed forever when British entrepreneurs unleashed the astounding energies of steam and coal.

Factories, railways and gunboats then propelled the West’s rise to power, and computers and nuclear weapons secured its global supremacy in the twentieth century. Today, however, many worry that the emergence of China and India spell the end of the West as a superpower. Historian and archaeologist Ian Morris draws on 15,000 years of history to offer fresh insights into what the future will bring. Well-researched and brilliantly argued, this is a gripping and original history of the world, based on the latest research across disciplines from ancient history to neuroscience. Beginning with a terrific fantasy of how things might have been if the Chinese had triumphed over England in Victorian times rather than the reverse, this book is part history, part archaeology, part geography, part biology and part sociology. The work of a real polymath, it’s incredibly readable, challenging, stimulating and entertaining work that has received universally enthusiastic reviews.

book revieWbookrevie

(a) Period pertains to the column on the right.Sources: Central Bank of Cyprus; Lands and Surveys Department; Statistical Service; Sapienta Economics calculations.

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book revieW

investment

{economy}cities:does attRactivenessmatcH investment?

According to Ernst &

According to Ernst &

AYoung’s 2011 European AYoung’s 2011 European Aattractiveness survey, Aattractiveness survey, Aone of the ways that Aone of the ways that AEurope will come to AEurope will come to Aterms with the concerns Aterms with the concerns Aof its formidable investment base is to reconcile its economic weight (one-quarter of the world’s GDP) with the diversity of its location options. Countries excel in different sectors: the UK attracts financial services, Germany draws industrial investment and France does well in energy and utilities.

These advantages may stem from historical trading positions, education systems that encourage engineering or government investment in quality infrastructure. The recognition of these strengths has fostered a multi-polar Europe, where investors see the attractions of different countries, regions and cities and can rate them according to where they are most likely to invest.

A vivid illustration is provided by the way investors perceive Europe’s cities. According to investors, London is the

most attractive city in Europe to establish operations, standing nine percentage points ahead of its closest continental rival. Despite high costs and a transport system of variable quality compared with some continental competitors, London’s dynamism attracts businesses and talents, especially in services, finance and business support, from diverse origins. Britain’s economic culture also appeals because it is clearly pro-business, global and accessible.

Other companies see distinct benefits in Paris (a solid second in the E&Y ranking), and in several cities in Germany, where Berlin leads the three in the Top 10 and ranks third Europe-wide.

Historic hubs such as Amsterdam and Brussels, and emerging capitals such as Warsaw (7) and Prague (14) enable Europe to offer a rich choice of high-quality urban environments. All provide access to business partners, skills and technologies and can draw international talent, while providing gateways into global, not just national, markets.

Interestingly, when investors’ perception of cities is compared to the reality of where they invest, there are some differences. London and Paris continue to lead the pack. Lyon beats the urban German regions for third place, and Berlin does not even place among the top German urban regions, being ousted by Dusseldorf, Darmstadt and Munich. The Eastern European urban regions

change as well. While investors perceive Warsaw and Prague as the top investment destinations, they put their money in Moscow. This indicates that although investors like the idea of stable, EU member states for their investments, they

prefer the high returns that they can earn outside the European Union.

The dichotomy between investor perception of cities and the reality of where they place their investments begs the question; can Europe develop a third “global city”? Currently London and Paris lead Europe in both investor perception and in the number of FDI projects. Investors then perceive the German capital Berlin as the third most attractive investment destination.

However, Berlin is more an administrative capital than an economic capital and does not rank in the top 15 cities for FDI projects in Europe. To become a global city, do cities need both the perception of power (government) and economic power (investors)? If that is the case, Madrid or Amsterdam appear more likely to accede to this position of leadership than the German capital. For more on Ernst & Young’s 2011 European attractiveness survey, visit: www.ey.com/GL/en/Issues/Business-environment/2011-European-attractiveness-survey

When investors’ perception of cities is compared to the reality of Where they invest, there are some differences

WHile investoRs peRceiveWaRsaWaWa and pRagueas tHe top investment destinations, tHey put tHeiR money in moscoW

WHat is tHe most attRactive euRopean city to establisH opeRations?

3%

30%london

paris

berlin

frankfurt

amsterdam

barcelonaWarsaWmunichmadrid

milanbrussels

hamburggenevaprague

zurich

21%

13%

8%7%

5%

4%

most attractive city in Europe to establish operations, standing nine percentage points ahead of its closest continental rival. Despite high costs and a transport system of variable quality compared with some continental competitors, London’s dynamism attracts businesses and talents, especially in services, finance and business support, from diverse origins. Britain’s economic culture also appeals because it is clearly pro-business, global and accessible.

Other companies see distinct benefits in Paris (a solid second in the E&Y ranking), and in several cities in Germany, where Berlin leads the three in the Top 10 and ranks third Europe-wide.

Historic hubs such as Amsterdam and Brussels, and emerging capitals such as Warsaw (7) and Prague (14) enable Europe to offer a rich choice of high-quality urban environments. All provide access to business partners, skills and technologies and can draw international talent, while providing gateways into global, not just national, markets.

When investors’ perception of cities is compared to the

prefer the high returns that they can earn outside the European Union.

The dichotomy between investor perception of cities and the reality of where they place their investments begs the question; can Europe develop a third “global city”? Currently London and Paris lead Europe in both investor perception and in the number of FDI projects. Investors then perceive the German capital Berlin as the third most attractive investment destination.

However, Berlin is more an administrative capital than an economic capital and does not rank in the top 15 cities for FDI projects in Europe. To become a global city, do cities need both the perception of power (government) and economic power (investors)? If that is the case, Madrid or Amsterdam appear more likely to accede to this position of leadership than the German capital. For more on Ernst & Young’s 2011 European attractiveness survey, visit: www.ey.com/GL/en/Issues/Business-environment/2011-European-attractiveness-survey

change as well. While investors perceive Warsaw and Prague as the top investment destinations, they put their money in Moscow. This indicates that although investors like the idea of stable, EU member states for their investments, they

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90 the international investment, business & finance magazine of cyprus

TAXATION

{tax&legal}

the terms of the existing double tax treaty with the US. The treaty was concluded in 1984 and we believe that it needs to be renegotiated with a view to being updated. A rational review of the treaty will encourage American businesses to establish their European domicile in Cyprus and, more importantly, it will allow American investors to take advantage of the Cypriot network of double tax treaties to invest, via Cyprus, in other contracting countries, such as Russia, Ukraine, India, etc.

cOrPOrATe TAX dOmIcIleFor a company to enjoy the advantages

of a favourable tax regime, its management and control must be exercised in Cyprus. The company must be actually established in Cyprus, with local permanent infrastructure (buildings, staff and equipment) from where to carry out real and substantial activities. A brass plate or a post office box or a fronting company with a board comprised of nominee directors, are no longer adequate. An office which merely provides corporate services risks being considered a “fictitious establishment not carrying out any

genuine economic activity”, to use the expression of the European Court of Justice. In order for Cyprus not to be viewed simply as a booking centre and become a recognized international financial centre, the policy of attracting companies of foreign interests must be adapted to the needs of those interested in having their genuine permanent establishment in Cyprus, acquiring their own office and equipment, employing their own staff and carrying out real activity that adds value to their business.

PersONAl INcOme TAXA low corporate tax rate alone is not a strong incentive for a company to come to Cyprus and have its genuine and permanent establishment here. There are problems with regard to the progressive rate for personal income tax which applies to income - whether from sources within or outside Cyprus - acquired by employees considered to be Cypriot residents, i.e. who reside in Cyprus for more than 183 days in a tax year. The high rate of 30% (which, in 2011, applies to income exceeding the amount of €36,301) deters

companies of foreign interests from employing staff in Cyprus.

The international business centres which manage to attract companies of foreign interests offer, amongst other facilities, low personal income tax rate, aimed at promoting the employment of both local staff and expatriates. The amount of personal income tax is an important criterion taken into

consideration by both major shareholders and expatriates (mostly management executives and specialized high-salaried staff) interested in establishing their permanent residence and living in another country.

VAlue Added TAXCyprus has the lowest standard VAT rate in Europe, an advantage enjoyed by all consumers, both residents and visitors. However, the inclusion of VAT in calculating the Cost of Living Allowance (COLA) falsifies the nature of VAT as the par excellence European consumption tax. VAT was designed as a consumption tax, i.e. a tax aiming at taking out purchasing power from consumers and giving it to the State. The inclusion of VAT in the COLA passes the tax burden from the consumer onto his/her employer and consequently converts the tax from a consumption tax to an employment tax. We call upon the competent authorities to disassociate VAT from the COLA the soonest possible, prior to discussing any suggestions for increasing the rate.

ImmOVABle PrOPerTy TAXThe modernization of the immovable property tax must be based on two axes: the updating of values and the readjustment

a rational review of the double tax treaty with the us will encourage american businesses to establish their european domicile in cyprus

cyprus is in urgent need of a strategy to attract investment

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of rates. The determination of immovable property values at current levels and the method of future reviews can be carried out in cooperation with professionals from the private sector, aiming at the fairest possible valuation and the avoidance of objections. As far as the fixing of new tax rates is concerned, this must be based on a balance between the amount of revenue that the State needs to draw from this source and the tax burden which immovable property owners can handle. It goes without saying that excessive tax burdening of immovable property will deter much-desired new investments.

Special reference needs to be made to the taxation of inert wealth. This is a nice-sounding slogan but not in line with current economic realities. It has been alleged that inert wealth is an obstacle to growth. In these times of economic crisis characterized by a negative economic climate, a fall in the real estate business, difficulties in raising finance, higher interest rates, etc., it is highly improbable that the taxation of inert urban plots will act as an incentive for their development. On the contrary, it will probably lead to them being sold off at knock-down prices, to the advantage of buyers able to offer cash.

TAX rulINgsEven though the principle of tax certainty requires that the law defines, in an explicit manner, the main elements of the tax (the subject, the object, the rate, the mode and time of payment), legislators inevitably use general and vague concepts. This is why we expect the tax authorities to publish manuals and interpretation circulars, explaining how they interpret and apply tax laws. And if there are two possible interpretations, the one most favourable to the taxpayer should be adopted (in dubio pro fiscus). We also expect the tax authorities to reply in time to the questions of tax advisors with regard to specific cases in order to provide interested companies with the opportunity to carry out their tax planning without any unpleasant surprises.

Moreover, when an administrative interpretation or an established policy concerns other businesses as well, we would suggest that it becomes secondary legislation in the form of a statutory instrument, in order to be binding on everyone, fostering a sense of certainty and, more generally, a climate of trust.

TAX eVAsIONFrequent public references to tax evasion promote an image of lack of control and inefficiency on the part of tax authorities. In fact, the undeclared economy in Cyprus seems to be one of the least significant in Europe and, therefore, tax evasion cannot possibly reflect the tragic levels at which it is portrayed.

Moreover, there is confusion in the terminology used and it would be desirable to distinguish between:

• tax evasion (i.e. the fact of illegally concealing taxable amounts in order to avoid paying taxes);• the non-payment of assessed taxes (which may be due to a refusal to pay or a delay because of the inability to pay or a dispute of the tax assessment before the Tax Tribunal or the Supreme Court); and• tax avoidance (i.e. tax planning aiming at reducing tax obligations using legitimate ways).

As a business association, we are unreservedly in favour of combating tax evasion, as it deprives the State of revenue which rightly belongs to it, violates the principle of tax equality and distorts competition rules at the expense of law abiding companies.

Recent amendments to tax laws are strong

weapons in the hands of the Inland Revenue Department and we would reasonably expect to see those guilty of the offence of tax evasion being prosecuted and punished, resulting in a corresponding increase in tax revenue, as well as legal action being taken against those who unjustifiably fail or are late in paying assessed taxes.

The favourable tax regime can be maintained only if the public economy is founded on sound indicators and is positively assessed by international rating agencies. We are also concerned with the continuous downgrading of Cyprus’ credit rating and the monitoring of the Cyprus economy by the European Union. The delay in the adoption of reform measures for public finances increases the financing cost not only for public borrowing but also for businesses and is an obstacle to growth and employment. This is why we call upon the Government to take immediate action in favour of more fiscal discipline, with measures for containing the State payroll, reviewing the pension system and making bodies governed by public law which carry out business activity independent of State aid. At the same time, in the context of managing public debt, the Government must plan the repayment of its debt to the Social Insurance Fund. The measures to be taken must address the structural problems of public finances in an efficient manner rather than offer short-term and easy solutions. In our view, any increase in public revenues must not rely on an increase in tax burdens but on economic growth, as a result of the strengthening of investment in innovative projects through joint ventures, alliances and public - private partnerships, and the improvement of the business climate. Unfortunately, according to the forecasts of the European Commission, overall investments in Cyprus for 2011 will be negative, at -3,9%, whilst for its major competitors, Luxembourg and Malta, they are expected to reach +12% and +11% respectively. These forecasts ring the alarm bells. Cyprus is in urgent need of a strategy to attract investment. If the fiscal deficit continues to expand and the State is, in the end, forced to resort to additional taxes, then companies of foreign interests will flee and the structure of the international financial centre will collapse like a house of cards.

tax officers see taxpayers as thieves and crooks, and taxpayers perceive tax officers as intruders and predators

info: mIlTIAdes mIlTIAdOu is Chairman of the american Chamber of Commerce Cyprus (amCham Cyprus)

fIscAl fAcTOrs

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3

capitaliSm: alove Story(2009)Michael Moore doesn’t make too many movies but he chooses his timing carefully so that, when

something monumental takes place, he is there to capture it on film. In his latest documentary, Moore’s signature humour gives good balance to a story filled with shocking data and tear-jerking scenes. Focusing on the recent financial crisis and the recovery stimulus, he explores the current US economic order while criticizing capitalism in general. Topics covered include what Moore calls Wall Street’s “casino mentality”, profit-making prisons, Goldman Sachs’ extraordinary influence on Washington, D.C., the poverty-level wages of blue-collar workers, the large wave of home foreclosures (‘tent cities’ exist in the middle of America), and corporate-owned life insurance (did you know that you may be worth more to your employers dead than alive?). Moore likes to take things to extremes, knowing how to appeal to all types: the film even features a religious component where Moore examines whether or not capitalism is a sin and if Jesus would be a capitalist… The film ends with Moore placing police lines

around numerous banks and lastly, Wall Street itself, holding out a bag for the big corporations to drop the millions they owe into it. As usual he manages to intrigue and captivate his audience with a tear, a shock, and a laugh.

4

the corporation(2003)This Canadian documentary, written by Joel written by Joel Bakan, and directed by Mark Achbar and Jennifer Abbott, is Jennifer Abbott, is

a critique of the modern-day corporation, considering it as a type of person and evaluating its behaviour towards society as a psychiatrist might evaluate an ordinary person. The film shows the development of the contemporary business corporation from a legal entity, that originated as a government-chartered institution meant to effect specific public functions, to the rise of the modern commercial institution entitled to most of the legal rights of a person. The documentary concentrates on North American corporations, especially those in the United States but, through a wide variety of interviews it examines corporate business practices and establishes parallels between the way corporations are systematically compelled to behave and the symptoms of a psychopath, such as

deceitfulness (continually lying to deceive for profit). Numerous topics are addressed including the 1933 Business Plot, in which General Butler exposed an alleged corporate plot against President Roosevelt, Eisenhower’s warning people to beware of the rising military-industrial complex, the alleged role of IBM in the Nazi holocaust, economic externalities, and themes of corporate social responsibility and the notion of limited liability. Nominated for numerous awards and winner of a couple, The Corporation received mostly good The Corporation received mostly good The Corporationreviews, although The Economist suggested The Economist suggested The Economistthat the concept of an organisation as a psychopathic entity actually originated with the German sociologist Max Weber who used it with regard to government bureaucracy.

5Boiler room(2000)From the very start, this movie makes it clear what it is about as the narrator tells us, “I didn’t want to be an

innovator. I just wanted to make a quick and easy buck. I just wanted in.” The slogan on the DVD cover says it all too: ‘Welcome to the American Dream. Where would you turn, how far would you go,

film

{lifestyle}

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the international investment, business & finance magazine of cyprus 95

how hard will you fall?’ Giovanni Ribisi plays Seth Davis, a college dropout who gets a job as a broker with a suburban investment firm, which puts him on the fast track to success… although the job is not as legitimate as it sounds. The film gives us an inside look at the world of wannabe brokers, a taste of how out of control things - and people - can get. It’s all about greed, and what these men are willing to do for money. Along the way, we learn some interesting ‘facts’: rumour has it that Microsoft employs more millionaire secretaries than any other company in the world, and that a really good broker makes over 700 calls a day! The film boasts some really good lines too: Ben Affleck, boss at the firm, briefs the newcomers: “Anybody who tells you money is the root of all evil, doesn’t f***ing have it!” and “You want vacation time, go teach 3rd grade public school!” There is even a tribute to Wall Street (see Wall Street (see Wall Streetbelow) in the movie, in the scene when Seth walks into an almost empty mansion to find the guys clustered around the TV watching Wall Street, repeating the script Wall Street, repeating the script Wall Streetaloud, word for word. Another film in this list, Glengarry Glen Ross (see below), Glengarry Glen Ross (see below), Glengarry Glen Rossis also directly mentioned in Boiler Room, when Seth is told by his senior broker that he should “Always Be Closing”. Although the film may be a work of fiction, there are many lessons to be learnt here about the reality of the trading world portrayed.

6

rogue trader(1999)Starring Ewan McGregor and Anna Friel as his Anna Friel as his onscreen wife, this film’s title says it all. Directed by James Dearden, it is all

about former derivatives broker Nick Leeson and the 1995 collapse of Barings Bank, and is based on Leeson’s 1996 book Rogue Trader: How I Brought Down Barings Bank and Shook the Financial World. Ambitious young Nick is the rogue World. Ambitious young Nick is the rogue Worldtrader, determined to rise in the world of finance, no matter what it takes. So when his employers offer him the opportunity to go to Jakarta, he seizes it. There he meets and marries Lisa, and together they move to Singapore, where the bank offers him

the job of setting up their future options trading operation. To save money, the bank allows him to operate both the floor trading and the back

office facilities and forces him to employ cheap, unskilled staff. Nick’s first year of trading is a big success as he “earns” the bank large profits even though he has illegally broken trading rules and secretly covered up losses (“...with scissors and paste, I created $78 million out of thin air…this was forgery, pure and simple…and there was no going back.”) Indeed, there is no going back when Nick’s illegal actions generate even bigger losses, with the increasing freedom and boom of profits backfiring. What he first explained to his group, “The truth of the matter is, we’re not buying or selling anything real. It’s just numbers,” doesn’t seem to make the damage any less when the losses mount up to well over £800 million. It is only when Nick and Lisa escape to Malaysia that he discovers the severity of his losses and that Barings has gone bankrupt. They decide to return to London, but Nick is arrested along the way and extradited to Singapore where he is sentenced to six and a half years in jail. This is yet another example of a film which compares the trading room to a casino but it stands out, thanks in part to a great - and ironically appropriate - soundtrack (“The best things in life are free” goes the first line of Berry Gordy’s classic song “Money”) and because it’s a true story, which serves to heighten the effect of its tragic ending and amplify the real-life consequences of such risky actions.

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98 the international investment, business & finance magazine

Any idea what this title means?Do you have a smartphone?An iPhone or an Android?Do you have a QR reader application installed?If you don’t, please download one from the App Store.

It’s free.Is your phone currently connected to the internet?Wifi or 3G ... either will do. Ready?Open up the QR reader application.Now point your phone’s camera at the strange pattern at the top left of this page.Are you ready?That strange pattern is a QR code.The QR (an abbreviation of Quick Response) code has been around since the early Nineties. It’s a bit like a bar code, except that it can be read at higher speeds. This made it useful for tracking parts on car assembly lines which is why it was originally developed.Now QR codes are becoming part of the ever-growing technology-driven marketing tool box. Some examples: I see a BMW ad and point at the QR code which takes me to a 60-second video. Or I see a restaurant ad and the QR code gives me the menu. Or I point at a fashion billboard and get the full designer catalogue. Or I point at a “PROPERTY FOR SALE” sign and get a full video tour of the property. Or I point to a poster for a new movie and get to watch the trailer. Or I point at that tropical beach and book my ticket online. Or I point at the back of your business card and all your contact details are instantly entered onto my phone. The possibilities are endless...

Technology is impacting our lives in more ways than we imagine.The speed at which technology is becoming available is creating new challenges for every marketing professional, every single day. Commercial television was invented back in the Fifties. We have had almost sixty years to perfect our use of this medium. And now it’s all being turned over and tossed out, day by day. And as you get used to one technology, along comes another.The most interesting thing about this particular technology is the way in which it levels the playing field. Smart marketing by even the smallest business can lead to dramatic, almost overnight success. Because theoretically, every web address has access to the same audience as every other web address.My advice is simple. Seek out new technology. Understand it well enough to dive into it. Then take the deep dive. You will be experimenting, I know. But the cost is low and the payoff is huge.I think I’ll print a QR code on my t-shirt ...

P.S. If you don’t have a smartphone or a QR reader, then the title to this article has probably still got you puzzled. It asks if you are ready. Get it? r u (red) E? ... :) We used it at TBWA\Worldwide, my former advertising agency, to launch Sony PlayStation in the United States in the mid-Nineties. Kids understood it. Perfectly.

info: Peter economides is a Brand Strategist and founder of Felix of Felix of BNI. He is a former Executive Vice President and Worldwide Director of Client of Client of Services at globaladvertising agencies McCann-Erickson Worldwide and TBWA\Worldwide. He has worked on some of the of the of world’s most iconic brands including Coca-Cola, Apple,Absolut, illy, Audi and Nike. In Cyprus, he has been involved in branding projects for Bank of Cyprus, of Cyprus, of Sigma Television and easy-forex. Peter is based in Athens.

{ the last wordlast wordlast }}

By Peter Economides

smart marketing by even the smallest business

can lead to dramatic, almost overnight success

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84 the international investment, business & finance magazine of cyprus

{economy}

Real estate and Housing loans: Why the mismatch?

By Fiona Mullen

While property sales rose by 25.3% in 2007 and fell by an average 37.6% in 2008-2009, housing loans have continued to soar, even in 2011. What is the reason for this anomaly?

pRopeRty

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the international investment, business & finance magazine of cyprus 85

If you are involved in the property sector in Cyprus, you do not need me to tell you how bad business has been in the past few years. Almost every indicator you look at

shows how bad the situation has been and continues to be.

The boom period of late 2006 and 2007 was followed by a total collapse. Sales recorded at the Lands and Surveys Department tumbled by 31% in 2008 and by another 44.3% in 2009. The apparent increase of 5.2% in 2010 was from a low base and sales have since fallen again, by 19.7% over the previous year in the first seven months of 2011. In volume terms, sales are around 7,000 per year, compared with the peak of 21,245 in 2007.

Prices for residential properties have gone southwards too, by 4.1% in 2009 and 2.5% in 2010 according to the Central Bank of Cyprus. The Central Bank uses the ‘hedonic’ methodology for measuring property prices, by assembling data on all valuations undertaken on behalf of banks and the cooperatives. This takes into account qualitative aspects of properties, such as views, the quality of construction and other similar factors. In other words, the prices are ‘quality constant’.

The RICS property price index, using a different methodology that asks

valuers to value the same property on a quarterly basis, recorded a price-drop of 12.6% between the first quarter of 2010 and the first quarter of 2011. This is probably more in line with the shift in actual prices, although the fall has been more pronounced in secondary areas and where there was a higher concentration of overseas buyers.

And if these figures are not depressing enough for the industry, the data indicates that the future is pretty bleak too. Building permits are a leading indicator of construction activity as well as a weather-vane for developers’ expectations. The figures suggest that the developers expect demand to remain slim for some time, especially for housing.

Total authorised building permits fell by 13% over the previous year in January-

May, having slipped by 2% in 2010. Permits for dwellings in particular dropped by a staggering 41.8% in the first five months of 2011, having declined by 14.2% in 2010.

Moreover, the decline in dwelling unit authorisations

is fairly even across all districts. Despite reports that the real estate market in Limassol and Nicosia is faring better than the rest, dwelling units authorised for Limassol dropped by 51.8% year on year in January-May and those for Nicosia by 35.9%.

Housing loans continue to climbAmid all the gloom, one figure has stood out as going against the grain and it concerns housing loans. While property sales rose by 25.3% in 2007 and fell by an average 37.6% in 2008-2009, housing loans continued to soar, rising by 31.2% in 2006, 22.6% in 2008 and 22.2% in 2009. They have continued to grow since, by 14.8% in 2010 and in double digits in every month so far this year except June.

What is the reason for this anomaly? A few possibilities spring to mind.

One suggestion is that housing loans have been taken out so that people can refurbish their homes, rather than buy new ones. But if that were the main reason for the trend, one would expect to see less of a decline in cement sales, construction output and perhaps building permits for bigger projects.

Another suggestion, put forward among others by Pavlos Loizou of Antonis Loizou and Associates, is that these are really loans for businesses, not loans for housing. He says that strictly speaking this is not allowed under Central Bank rules: if a loan collateralised with property is a business loan, it should be recorded as a business loan. But he points out that if no-one comes to check what you have done with the money, you might invest your housing loan in your business instead, especially since interest rates on housing loans are lower than for business loans.

A third reason is that the total stock of housing loans will always grow as long as people are not paying back their loans in full, therefore even in a down market you would expect to see some growth. But the remarkable correlation in the boom years between housing loans and unit sales seems to defy this theory.

if no-one comes to check what you have done with the money, you might invest your housing loan in your business instead

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88 the international investment, business & finance magazine of cyprus

TAXATION

{tax&legal} TAXATION ANd BusINessJust how favourable is Cyprus’ favourable tax regime?

C yprus is being promoted as an international financial centre, mainly thanks to its favourable tax regime.

it is a fact that cyprus enjoys two comparative advantages, namely the low corporate tax rate and a wide network of double tax treaties.

But is this enough for the tax regime to qualify as favourable? In this AmCham position paper, it is suggested that a whole series of measures is needed in order to make the tax system more friendly towards businesses which already operate here or are considering the prospect of establishing operations on the island.

PrOmOTION Of The TAX regIme TO The PuBlIcFirst of all we need to improve our communication policy, i.e. how the Cyprus tax regime is presented both to the competent authorities of other countries and interested foreign investors.

The exaggerated advertising of the advantages of the tax regime, which gives the impression that everything is possible - even in the absence of real economic activity - runs the risk of being perceived by other countries as a ‘beggar thy neighbour’ policy and/or as harmful tax competition. Critical voices within the EU have already referred to instances of tax dumping being exercised by Member States with low tax rates. What is needed

is a more prudent presentation of the advantages of Cyprus’ tax regime.

On the other hand, the one-sided declarations of the intentions of those in power to tax ‘flamboyant wealth’, ‘the haves and the possessors’, ‘large immovable property’ and so on, give rise to justified reactions that are detrimental to the image of the State. This kind of rhetoric fosters a lack of trust between tax authorities and citizens. As a result, tax officers see taxpayers as thieves and crooks, and taxpayers perceive tax officers as intruders and predators.

We all understand the principle of tax equality, i.e. that the contribution to public burdens must be proportionate to each individual’s tax-paying ability.

By Miltiades Miltiadou

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the international investment, business & finance magazine of cyprus 89

Political power should aim at the

acceptance of taxes by the broader public, reconciliation between taxpayers and tax authorities and an honest cooperation between them. In the context of promoting Cyprus as an international financial centre, it would be desirable to present to foreign investors a friendly tax environment, willing to address their needs and concerns and provide them with facilities. Making threats of an imminent tax raid on their investments and assets does not serve the interests of Cyprus.

TAX eXemPTIONsTax exemptions in favour of certain privileged individuals are unacceptable in a fair tax system. Such tax favouritism, attributed to pressure by groups which are in a position to impose their views, creates feelings of bitterness among taxpayers. Moreover, it violates the constitutionally established principles of tax equality and universality. This arbitrary and unfair tax discrimination, which has been rightly referred to as the ‘tuberculosis’ of public finances, is characteristic of underdeveloped states and has no place in the tax system of a country that wishes to present itself as a well-governed EU member state.

cOrPOrATe TAX rATeStability is essential for a tax system to be viewed as favourable. Frequent changes to tax rules and modifications of tax rates reveal a lack of serious consideration of the problems and a weakness to identify

the causes of the crisis. Cyprus’ corporate tax rate of 10% is the most important incentive and the key to success in attracting foreign investors. An increase would lead to insecurity among prospective investors, with grave consequences for the development of investment and economic growth. Reassuring investors that corporate tax will continue to be subject to the same fixed rate will create feelings of certainty, as it will allow them to calculate their tax obligations correctly and incorporate them into their budgets and future plans.The corporate tax rate is being advertised as the lowest in Europe, but 10% is only the nominal rate. The effective rate of corporate tax is at times much higher, eroding the competitiveness of the Cypriot tax system on the market of international investment centres.

In order to reduce the effective rate and make it at least equal to the nominal one, specific measures are needed such as the improvement of exemptions, deductions and depreciation (capital deductions) as well as the full deduction of expenses incurred for the purposes of the business.

cOmmON cONsOlIdATed cOrPOrATe TAX BAse (cccTB)Following ten years of

deliberations, the European Commission recently proposed the creation of a common base for the taxation of companies operating in more than one country of the European Union. The Commission’s proposal establishes a single set of tax rules without, however, affecting the member states’ sovereign right to determine their own corporate tax rate as deemed appropriate. According to the proposed directive, businesses will be able to choose whether to apply the CCCTB or their national system. The business opting for

the CCCTB will submit a consolidated tax return for all its profits and losses occurred in all EU countries in which it operates. In other words, it will be able to add profits, deduct losses and use the common rules to calculate its reliefs and exemptions, to come up with a single taxable amount. Each one of the countries involved will collect the tax which is proportionate to a part of the taxable amount based on its national rate. This part of the taxable amount will be calculated with the method fixed by the rules. The Commission’s proposals to greatly simplify compliance and tax administration across the EU will ease unnecessary burdens on cross-border business. Of crucial importance is the fact that the proposed rules will be optional for business. Cyprus must carefully examine the advantages offered by the adoption of the proposed directive and consider whether opting out of the CCCTB zone will help it maintain its interests and compete with member states adopting the CCCTB. According to one point of view, consolidation of the tax base will lead to simplification and transparency, which will strengthen tax competition in Europe, making it clearer to understand which member states offer the lowest tax rates.

dOuBle TAX TreATIesCyprus has a wide network of double tax treaties and pursues its efforts to conclude more new treaties of this kind. The existence of a wide network is a prerequisite for an international financial centre. As a Cyprus American business association we would be interested in the improvement of

the undeclared economy in cyprus seems to be one of the least significant in europe

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Whether it is about making money, losing a job or succeeding in the world

of finance, movies about business tend to reflect their times. For almost a century, the best of these films have depicted their economic era and their talented directors have succeeded in showing onscreen the struggle and drama lived out by those who are willing to do what it takes to get rich, often gambling away their sanity in return for financial security as they strive to reach the top… or avoid the bottom. In American Madness (1932), Frank Capra American Madness (1932), Frank Capra American Madnesstells the story of a New York banker

embroiled in scandal during the Depression. embroiled in scandal during the Depression. Thematically, the movie anticipates Capra’s 1946 classic It’s a Wonderful Life, in which It’s a Wonderful Life, in which It’s a Wonderful Lifehe repeats the “bank run” scene. How to Succeed in Business Without Really Trying, Succeed in Business Without Really Trying, Succeed in Business Without Really Tryingdirected by David Swift in 1967, has Robert Morse recreating his Tony-winning Broadway role in a musical comedy about a window-cleaner who shamelessly grabs every opportunity as he rapidly rises from working in the mailroom to become Vice-President in Charge of Advertising, making sure that each person above him gets either fired, moved or transferred within the company. Little Shop of Horrors (a remake of the Little Shop of Horrors (a remake of the Little Shop of Horrorsoriginal 1960s low-budget film) kicked off the 1980s with what appears at first glance to be nothing more than a fantastically zany

story, but is actually more nostalgic fantasy story, but is actually more nostalgic fantasy combined with that decade’s reaction against the cut-throat capitalism of Wall Street - an eerily prophetic indictment of the deprivations and inequities which result from the ruthless pursuit of the American Dream. Wall Street: Money Never Sleeps, Wall Street: Money Never Sleeps, Wall Street: Money Never Sleepsthe 2010 sequel to the original Wall Streetof the 1980s (which illustrated the risky world of the stock market exchange and the infamous Wall Street crash of 1987), revolves around the 2008 financial crisis, and, like the rest of the films mentioned, is not only a paradigm of the economic disasters that continue to ambush us, but also a fine opportunity for us to make sense of the realities captured on film and to learn something from past mistakes.

92 the international investment, business & finance magazine of cyprus

film

{lifestyle}from Boardroom Boardroomto Screening Screening room10 of the best movies set in the world of business & finance

By Nathalie Kyrou

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1

the companymen (2011)The film, which arrived in European cinemas this summer and opens in the States in December,

introduces us to Bobby Walker (Ben Affleck), who is living the American Dream: a great job, a big house, a loving family and a shiny Porsche. But when the effects of the global financial crisis leave him a victim of corporate downsizing, Bobby finds himself drowning in debt and ultimately forced to accept a very different kind of reality - unemployment and ultimately a job as a construction worker with his brother-in-law (Kevin Costner). Soon enough, his boss Gene (Tommy Lee Jones), and other colleague Phil (Chris Cooper) find themselves in similar situations, each left to deal with their fate in varying ways. This is the story of our times, told through three characters forced to redefine their lives as men, husbands

and fathers. With humour (Gene confronts his boss after the latter closes down his shipyard saying “Everybody’s stock is in the toilet”, to which his boss replies “Well, stockholders would like to see their share value maximized”, and he retorts, as he points to a painting on the wall, “Well, sell the f***ing Degas!”); with pathos (orientation encourages the unemployed to chant together, “I will win because I have faith, courage and enthusiasm!”); with optimism (when, towards the end of the film, Bobby asks his brother-in-law how he’s doing, he replies that sometimes he’s up, sometimes down, but it all works out in the end); and with some tongue in cheek (in the last scene Bobby finally takes control of a new company with his former co-workers and jokes by telling them “what’s the worst thing they can do? Fire us?”). Writer/director John Wells has succeeded in portraying the new reality of American life: that sometimes you have to lose it all to win back hope.

2inSide JoB (2010)For real facts and figures rather than fictional entertainment, watch director watch director Charles Ferguson’s excellent

documentary about what really happened in the events leading up to the 2008 financial meltdown and its aftermath. This year’s Oscar winner for Best Feature Documentary, Inside Job provides a Inside Job provides a Inside Jobcomprehensive analysis of the global financial crisis, which cost over $20 trillion, (the film’s clever tag line is “ad The film that cost $20,000,000,000,000 to make”), and caused millions of people to lose their jobs and homes in the worst recession since the Great Depression. Made on location in the United States, Iceland, England, France, Singapore, and China, the documentary manages, through exhaustive research and extensive interviews with key financial insiders, politicians, journalists and academics, to illustrate the rise of an industry which has corrupted politics, regulation, and even academia. Simply yet effective, the film also succeeds in offering clear explanations of various financial terms and practices - a real bonus for viewers who are not economists themselves (though not quite as big a bonus as what most of the CEOs of the banks involved received).

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film

{lifestyle}{lifestyle}

7JerryJerry maguire(1996)This film is proof that Hollywood can make movies about money while refreshingly avoiding

the cliché investment trading story. Told in a tale through the world of sports - which is, undeniably, a big money-making machine in itself - this Academy Award-winning romantic comedy by Cameron Crowe is mostly remembered for one of the most famous phrases in movie history: “Show me the money!” Tom Cruise stars as Jerry Maguire, a 35-year-old sports agent who suffers a nervous breakdown

after which he writes a mission statement about perceived dishonesty in the sports management business entitled “The Things We Think and Do Not Say: The Future of Our Business”. His co-workers are touched by his honesty and greet him with applause but the management sends Bob Sugar, Maguire’s protégé, to fire him. Jerry and Bob call all of Jerry’s clients to try to convince them not to hire the services of the other. The film is ultimately all about transformation and learning how to value something more important that money. Ironically, the film did “show [its makers] the money”: although it cost $50 million to make, it grossed more than $270 million worldwide.

8

glengarry glenroSS (1992)Delivering a killer pep talk to a group of real-estate salesmen, this film captures Alec Baldwin superbly

acting out David Mamet’s 1984 Pulitzer Prize-winning play about a business that eats its workers alive. The story’s title comes from the names of two of the real estate developments being peddled by the salesmen characters (Glengarry Highlands and Glen Ross Farms). Covering two days in the lives of four real estate salesmen and how they become desperate when the corporate office sends a representative to “motivate” them (by announcing that, in one week, all except the top two salesmen will be fired), James Foley’s film received

extremely positive reviews though it was not a commercial success. Featuring a cast of screen legends, including Al Pacino, a dynamo as the most aggressive of all salesmen, and Jack Lemmon, who plays an aging loser, as well as Kevin Spacey and Ed Harris. Property salesman might want to take the film’s advice, and remember their ABC (A-Always, B-Be, C-Closing) but it might be a good idea to try and not use as much profanity as this movie contains!

9

Wall Street(1987)The quintessential financial movie of all time tells the story of Bud Fox (Charlie Sheen), a young stockbroker

desperate to succeed, who becomes involved with his hero, Gordon Gekko (Michael Douglas), a wealthy, corrupt, corporate suit. Director Oliver Stone made

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the international investment, business & finance magazine of cyprus 97

the film as a tribute to his father, Lou Stone (a stockbroker during the Great Depression) and it was well-received by critics as the archetypal portrayal of 1980s excess, remaining the prototype for all subsequent films of the genre. The movie has even been influential in inspiring people to work on Wall Street. Sheen and Douglas have commented over the years how people still approach them and say that they became stockbrokers because of their respective onscreen characters, which is rather ironic since, as noted by Vanity Fair magazine, the film Vanity Fair magazine, the film Vanity Fairwas “Intended as a cautionary tale on the pitfalls of unchecked ambition and greed [but] instead had the effect of turning Douglas’ hugely charismatic (and Oscar-winning) villain into a household name and boardroom icon - an inspiration to the very power players and Wall Street wannabes for whom he set such a terrible example.” Times may have changed, but even over 20 years later, in the sequel, Douglas’ character still seems to believe that “greed, for lack of a better word, is good.” Defining itself through morality conflicts which put wealth and power against simplicity and honesty, the film is not actually a criticism of capitalism but rather of the cynical, quick-buck culture of our time.

10

the godfather,partS i and ii(1972, 1974)These classic films are undoubtedly more than just mob movies. The Mafia is presented as a family business in

Francis Ford Coppola’s Oscar-winning adaptation of the Mario Puzo best-seller. Don Corleone (Marlon Brando) grooms his son Michael (Al Pacino) to take over once he’s gone, while Michael’s disenchanted wife (Diane Keaton) helplessly witnesses the corrupting influence of “this Sicilian thing”. It may not be about figures and stocks, but it is still all about money - Italian style - where cash is not virtual, but real wads of banknotes. Greatly respected among international critics (and apparently by real-life gangsters too), the original film is routinely listed as one of the greatest films ever made and is now ranked as the second greatest film in American cinematic history - behind Citizen Kane - by the American - by the American Citizen Kane - by the American Citizen KaneFilm Institute. Many would argue that the Film Institute. Many would argue that the sequel is even better. sequel is even better.

the SenSe of anendingBy JulianBy JulianBy BarneS(Jonathan cape, 2011)

rrp: £12.99 (£6.09 from amazon.co.uk)

A new book by Julian Barnes, one of the world’s most distinguished writers, is always a cause for

celebration, even when it is a relatively short (150-page) novel such as this. The story of a man coming to terms with the mutable past, it tells how Tony Webster and his clique first met Adrian Finn at school. Sex-hungry and book-hungry, they navigated adolescence together, trading in affectations, in-jokes, rumour and wit. Maybe Adrian was a little more serious than the others, certainly more intelligent, but they swore to stay friends forever. Until Adrian’s life took a turn into tragedy, and all of them, especially Tony, moved on and did their best to forget. Years later, the unexpected bequest conveyed by a lawyer’s letter leads Tony on a dogged search through a past that is no longer as clear as it once appeared. The novel is a meditation on the unreliability and falsity of memory, rich in human resonance and with an ending that will probably make you want to go right back to the beginning again.

BooK reviewBooreview

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More than just a holiday destination with pristine white beaches and 300 days of sunshine, Cyprus can also cater to your business needs ranging from registering and setting up your company’s operations to managing your EU, North African and Middle Eastern clients at a considerably lower cost.

As well as being an EU country and a member of the European Monetary Union since 2008, Cyprus enjoys the lowest corporate tax rate in the EU of 10%. Cyprus belongs to those jurisdictions on the OECD White List which have substantially implemented the internationally agreed tax standard.

In addition to this, Cyprus provides efficient business services, has a transparent legal and regulatory system and is committed to sustainable growth.

Cyprus welcomes both visitors and investors to work here, so, if you are searching for a new business base, consider Cyprus. It’s more than just beaches and sun.

The Ministry of Commerce,Industry and TourismTel + 357 22 867100Fax + 357 22 375120www.mcit.gov.cy/tsperm.sec@mcit.gov.cy

Cyprus InvestmentPromotion AgencyTel + 357 22 441133Fax + 357 22 441134www.cipa.org.cyinfo@cipa.org.cy

“Columbia’s growth and expansion over the years is attributed to the uniqueness of Cyprus; being the island’s strategic position at the crossroads of three continents, its comprehensive legal framework, double tax treaties regime, communication system, banking system, infrastructure in general and last but not least its highly educated labor force.”

Captain Dirk Fry, Managing Director Columbia Ship Management Ltd

“The favorable business climate, the excellent telecommunications infrastructure, the well educated and skilled human resources, the favorable tax rates and the proximity to the Middle East and Africa markets, were some of the key factors that enabled NCR to decide to move its regional offices to Cyprus in the 80’s. Gradually, NCR managed to expand the office in Cyprus to cover also all the African Countries.”

Managing Director of NCR Cyprus,Mr. George Flouros

Barclays Wealth is the wealth management division of Barclays and operates through Barclays Bank PLC and its subsidiaries.Barclays Bank PLC is registered in England and is authorised and regulated by the Financial Services Authority. Registered No: 1026167. Registered Office: 1 Churchill Place, London E14 5HP. Barclays Bank PLC is authorised by the Central Bank of Cyprus to conduct banking and investment business.

A business pArtner with solid foundAtions.

When it seems that stability is a thing of the past, you need to be sure that your business partner will be around when you really need them.

Barclays was established over 300 years ago, and that experience has seen us safely through the recent financial turmoil to emerge stronger and more vigorous than ever. In Cyprus, Barclays Wealth offers a range of specialist services including corporate banking, personal banking and wealth management.

To find out how you could benefit from working with us, call either Nikolas Gerkotis on +357 2265 4454 (nikolas.gerkotis@barclayswealth.com) or Andreas Rouvis on +357 2535 6660 (andreas.rouvis@barclayswealth.com) or visit barclayswealth.com

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