Can we begin with a brief discussion on recent economic developments in Cyprus?

The general developments are, of course, the crisis in 2014 and the bailout. The recovery of the economy has been remarkable, in the sense that we recovered much faster than expected. We endured a large crisis and we still had a huge recession in 2013; it was 5.2 percent, but we did better in 2014. This year, we will have a positive growth rate. This is a year which is quite difficult in a sense, because we have the problems with Greece that may affect us. Also, we have problems with tourists, because the second-largest group is from Russia, and we had the crisis there. This has affected the arrivals from Russia. In the beginning, we estimated a drop of as much as 40 percent. Now, the drop is going to be around 20 to 25 percent. That is not that bad.

Are you getting a benefit because Egypt and Tunisia are not that stable? Do they come here?

This is a fact. We are the most stable country in the region. In a sense, people feel safer coming here. In the past, we have had problems with tourism. Now, we are working on tourism, which is not my area, but Cyprus is perceived as a quite expensive area. One of the good things that came out of the crisis is that the cost of traveling to Cyprus has dropped. The reality is until 2008, there was this prosperity in the area, an abundance of money, and of course, the prices were going up a lot. We became an expensive destination to do business and tourism. It was for even financial services. The cost of living was rising and so were the salaries of civil servants. As I said, we had a remarkable recovery. If I relate this to my ministry, of course we cover three main areas: transport, communication, and works. If I start with works, it has to do with public works. As a government, this year, we have announced a number of projects that will be implemented in the next three years. The main reason we did this is to give a key to the economy. The economy has stabilized but we still need growth. The Ministry of Transport, Communication, and Works has a significant role to play in implementing its projects. We believe in the private sector. We are trying to promote a number of projects with the private sector, apart from the projects I mentioned, because real economic development comes from that sector. If I take the other areas of the ministry, even in the area of telecommunications, we have there the postal services, which are going through a project to make them more autonomous and efficient. We regulate the telecommunications area and the infrastructure. We see that we need to invest more in this area. Telecommunications and broadband are needed in an economy that provides services. We are currently studying to implement a large project provided to the home. This project will be done by the private sector, but we have secured some funding from the European Union. We will also do the study to see what is the best way to proceed with this project. It is our intention to have the fastest possible internet with the lowest possible price. This is a reality that we have fallen behind. The problem is, when you have a small country, because of the infrastructure, it is expensive to spread it. As a government, as a ministry, we are taking a number of steps to encourage providers to have common infrastructure, whenever possible, because otherwise you have different sets of needs and that makes it more expensive. Of course, it is the private sector. As an organization, through the privatization, the prices of broadband will fall. If you have a company that operates like a government, at a high cost, there will be more expensive activity. Regarding transport, this is the most important area of the ministry because we cover shipping, which is 7 percent of our economy. It is the third-largest contingent of our economy, after financial services and tourism. If I break the sector into two parts, it is registry and the companies based here. Most of the companies that are based here are involved in ship management. If I take the registry, we have the tenth-largest fleet in the world and the European Union. Twenty percent of the world’s fleet is managed out of Cyprus. As a Ministry, we realize the importance of this sector and have implemented a number of things to promote this sector.

The first thing is, we did a study about a new strategy of the shipping sector. This was done by a professional firm. It was tendered. The terms of reference for the study were agreed upon by the private and public sectors. We brought everyone together. There was a working group supporting the people doing this study. The study gave us some useful conclusions and we have already established some working teams to see how to implement these ideas, and have already started implementing some of them. I push for fast results because speed is the name of the game. Shipping services will grow here. We are not targeting a particular country or company. We welcome everybody who comes based on the merits of our country. We believe Cyprus has the potential to become the most important shipping sector in the area.

There are other countries with large fleets, but the difference is we have a large fleet and area residency as well. We have more than 4,500 people employed in the shipping sector in Cyprus. We have more than 55,000 ships registered. By the end of the year, there will be a large number of additional companies.

I hope you grow to 10 percent of the GDP [gross domestic product], so who knows.

I am sure we will grow to more than 10 percent. We have the potential to grow more than 10 percent in the next three to five years. We are being affected by all the problems of the shipping industry, but we have the potential if we make the right moves to attract many more companies to come and reside here. The other part of the job is ports. I have a vision for the ports. Through this process of commercialization, we can develop the ports to be one of the main pillars of economic growth for our economy. We are already late in this process, so we cannot delay one single day. We began the process on June 18. The prequalification phase ends tomorrow and then we enter the second phase. The prequalification stage is all about the technical criteria. We need to ensure that we get companies that know the industry and can attract people. We do not want to just give the management of the ports to anybody. We are not looking for a financial investor; we are looking for a manager. We want someone who will take over the port. There are a number of large operators that are ideal. There is very encouraging interest. We will know more tomorrow. The second phase is all about giving access to people to the financial data, interviews, physical visits, etc. The third phase is negotiation and signing. We hope to finish by February 2016. It is a project to which, as a minister, I am completely committed. It is a project that will change the face of Cyprus and the transport sector. It is part of the whole effort to develop the shipping caster. In Cyprus, everything grows around ship management. If you develop the true potential of the port, it will be better. As a government, we believe in a private initiative. We are good planners, but we are not good businesspeople, which is why the port has not been developed yet. The rest of the transport sector…

Yes, what are the most important parts? You have the ports, which are important for the GDP and economy. What is important for the shipping, international investors, and growth of the economy?

We do have the road transport, which is cars, public transport, and taxis. It has to do with serving the people. We have the airports, which are managed by a private concession Hermes. The Cypriot shareholders control less than 30 percent and the foreign ones control more than 70 percent. The French control. We have Caribbean shareholders as well. When people think of airports, they think of Charles de Gaulle. We are going through a major reconstruction project in aviation to make the sector more autonomous. We are trying to create a separate organization for traffic services to make them more efficient. On the area of connectivity, we have an open-skies policy. At the same time, more than 80 percent of open-sky traffic is within the European Union; another portion is Russia, and the remaining is other nations. We have a number of rights. We are doing work to change our rights. We tend to give out as many rights as possible. There is potential to develop more connections with the Middle East and Eastern Europe.

We have the China route and a number of people interested. The initial stages will be charter flights, then shuttle flights, which are much more expensive. Actually, in a year when our national carrier postponed its operations—that was the end of January—if we take out the impact from the lack of Russian tours, the increase of passenger traffic is around 7 percent for the first six months of the year. By the end of the year, even with the drop of Russian tours, we will be at the same percentage as last year. It shows we took all the right steps. These things did not have a large impact and the government worked fast to close the gaps. We believe in increasing connectivity even more by promoting our changes as much as possible.

Let me say a couple of supplementary things. The government is trying to complete as many infrastructure projects as possible with public/private participation. We formed a unit to deal with this and we are also promoting a number of projects. The ministry is promoting a project at the marina. We have other projects related to government roads. The second thing is, we are looking for new areas of growth. For example, we are strengthening our relationship with the European Space Agency to help promote a number of Cyprus-based telecommunication companies. The third thing is antiquities. They fall under this ministry. We are doing a large restructuring of the ministry to be more efficient. Part of the digital strategy, which is important for e-business, was commissioned under the presidency. We need to reform and implement. I do believe in this, but it should be under the Ministry of Education, which may be part of the restructuring. We need to become more commercial in the way we think about antiquities.

People come for sand, sea, and history. We are investing a lot in refurbishing museums. We are spending fifty million euros for a new museum in Nicosia. We need to promote our culture.

Minister, what is your background?

My background is in finance and economics. I worked as a charter accountant for years. I worked in the private sector for twenty years. I started with BDO then worked for EY; in Cyprus, then e-banking. Now, I am in the government.

It is very efficient to hire someone with a finance background. You treat people as clients. It is very rare.

The president brought in people with a technical background. There is a very good mix now of politicians and technocrats, especially at our ministry, the economic ministries.

Minister Demetriades, thank you for meeting with us.