The Cypriot flag — which portrays the shape of the island and two olive branches on a white background symbolising peace — flies high and wide in the eastern Mediterranean. The small island nation is the world’s third largest ship management centre, accounting for one fifth of the global third-party managed fleet. Cypriot ships are the 11th biggest fleet globally. And the shipping industry directly accounts for approximately seven percent of the Cypriot economy, a figure that does not contemplate the ancillary impact the sector generates on the economy – which as the new Deputy Minister of Shipping Natasa Pilides has made clear, is going from strength to strength.
But this has not always been the case. Cyprus has worked hard for the past six decades, following independence in 1960, to grow the country’s maritime sector. It also helps that the country is situated in an ideal location at the crossroads of Europe, Asia and Africa. Already by the early 1980s, Cyprus ranked 32nd on the list of leading maritime nations. Now, “more than 200 companies” are directly involved in the sector, stated Pilides proudly, “and we also have about 24 million gross tonnage in terms of our Cyprus flagged vessels”, thanks to which Cyprus has pushed up the ranks to become the third largest fleet in the EU.
However, the country’s attraction goes beyond its location. Cyprus’ competitiveness, within the maritime sector, has been substantially bolstered by the implementation of an EU tool called the tonnage tax system – which basically entails calculating taxes based on a vessels tonnage, rather than on its corporate earnings. “The Cyprus Tonnage Tax was the first one to be approved by the EU,” explained Pilides, “and it does encompass ship ownership, ship management and chartering, which is very important because it offers the full spectrum of options to companies seeking to operate in Cyprus.” While Pilides is quick to admit that this tool has been fundamental in Cyprus’ attraction of companies, her sights go well beyond her country, as she defends the importance of the tonnage tax in assuring the competitiveness of the EU shipping jurisdiction as a whole.
The Cypriot government has taken notice of the sector’s potential, and in March this year, it set in motion the new Deputy Ministry of Shipping, reporting directly to the President of the Republic — which absorbed the former Department of Merchant Shipping — as a means to continue the sector’s strong growth and allow innovation in the industry to flourish. “It’s a very exciting new development for us”, enthused Pilides – who spent several years in the private sector working in management positions in tax law and consulting before moving to the Cyprus Investment Promotion Agency, where she was Director General for two years prior to her current position – “it’s something that the industry has been waiting for, for a long time”, she added.
“We’re very happy with the progress, very happy with the cooperation that we have with the private sector, which is key to creating a successful cluster,” explained the Deputy Minister of Shipping. While public-private partnerships have been a major component to Cypriot shipping’s recent successes — the privatisation of the Limassol Port being the most notable example — these partnerships are likely to extend beyond shipping to touch many other aspects of the economy.
In addition to ship management and ship ownership – which are the key drivers within the sector – “we also have brokerage, shipping finance [and] almost all the banks in Cyprus [are] now offering shipping finance,” noted Pilides. “We have insurance companies and marine insurers coming to Cyprus and adding to the already existing companies.” Pilides added that the logistics sector is getting a big boon as well, with Limassol’s privatisation and the upcoming privatisation of the Larnaca Port.
Indeed, Pilides is thinking big in terms of what shipping can do for the Cypriot economy. The end goal is a technical hub for marine and shipping research and innovation. The creation of a Cyprus Marine and Maritime Institute is in the works. The School of Marine Science and Technology will open in September 2019 in Larnaca. Three new maritime academies have already opened — and the Deputy Ministry offers scholarships and other financial support for students. With the first group of students having graduated this summer, Pilides is confident that their commitment to the sector will “encourage more and more students to get involved in blue careers”.
Those students turned experts will, in the future, be working on things like smart shipping, autonomous ships, cybersecurity in shipping, and how to make Cypriot shipping environmentally sustainable (while still ensuring it harnesses all of the shipping potential coming from the energy reserves found in Cyprus’ exclusive economic zone).
“We encourage companies which are involved in the energy sector value chain, to actually look at Cyprus and to consider possibilities of basing here, and we already have a few companies which have based in Cyprus and are operating from here, and hopefully we will see more of that happening in the next few years,” commented Pilides. American energy giant ExxonMobil commenced exploratory drilling on the first of two test wells last week, in a landmark move for the nascent upstream sector. “We think (…) there is also going to be new opportunities arising for shipping companies based in Cyprus to actually take part in all the projects that are going to involve exploration and then drilling” added Pilides.
At the same time, member states of the International Maritime Organisation — including Cyprus — in April agreed to reducing 50 percent of greenhouse gas emissions from the shipping sector by 2050 (compared to 2008) and making an energy efficiency improvement of at least 40 percent by 2030, aiming for 70 percent by 2050. Cyprus, for its part, has welcomed that challenge. “It’s very important to ensure that shipping continues to reduce its carbon footprint and we are very committed to that”, explained Pilides, highlighting the need for viable solutions that guarantee that when the measures do come into effect, “the shipping industry is able to adopt the correct tools and the correct systems”, providing sustainability “both in terms of the environment but also in terms of profitability”, she concluded.
One example of efforts to this end is the EU’s Maritime Single Window, which seeks to integrate the digital logistics chain to improve efficiency and, thus, environmental sustainability.
“We want to contribute to that; we’re great supporters of it, and we would love to see it taken on at IMO level as well to ensure that all countries operating in shipping are applying best practices,” Pilides said about the single window program.
Collaboration — with the EU, with the private sector, with other economic actors in Cyprus, and in the greater region — seems to be one of Cyprus’ leading competitive advantages. In May, Pilides met with her Greek and Maltese counterparts in the countries’ 6th trilateral meeting on shipping, where they discussed competitiveness, labour relations, training, and ways to reduce pollution. The three countries together comprise the EU’s largest fleet.
“The aim is to make sure that the EU shipping sector remains as strong as it is today and is even more enhanced in the future,” said Pilides.
The only real thorn in the upward climb of the Cypriot maritime sector relates to Turkey’s restrictions on Cyprus-flagged vessels and vessels serving the Cyprus trade – an embargo that was first imposed in 1987, and a consequence of the decades-long territorial dispute over the island-nation between the two countries.
Still, Pilides has confidence this will not substantially hamper the Deputy Ministry of Shipping’s ambitious plans.
“The Cyprus flag is a flag of quality. It’s a white flag. It’s got a very good reputation to begin with. Our safety and security standards are excellent. Our piracy regulation is absolutely excellent. … We definitely have plans to continue supporting Cyprus flagged vessels in every way that we can.”