Could we begin our conversation by giving a brief description of the current political situation in Cyprus?

There are many ways to look at the current political situation. However, determination is certainly one of the key aspects that differentiate this government from previous ones. In March 2013, there came a point when various outside forces started dictating their terms to the national government. This is not the case anymore. A lot of the structural changes that we are currently undergoing in many different areas should have been streamlined much earlier. There might be disagreements among various political parties as to how exactly these changes should be implemented, but the general consensus is that they are necessary. We have to change the legislation under which the government has been operating from the 1960s until now. It is a challenging task. However, we are not here to accomplish easy and minuscule tasks. We are here to do the hard work of bringing about positive changes to Cyprus. That is what our citizens expect. Tourism is obviously an essential part of what this Ministry deals with.

If I am not mistaken, tourism brings in about 12.5 percent of the country’s entire GDP.

Yes, that is correct. The Ministry of Energy and Tourism deals with several specific branches of the professional services sector. For example, the Registrar of Companies is under our direct supervision. It recently underwent structural reforms that expedited the process of setting up a commercial or an industrial company. You can now do it in one to three days rather than having to wait for three weeks.

Do you provide support for entrepreneurs?

Yes, of course. We have launched various EU-funded structural programs worth a total of € 65 million. They were all developed at a very rapid pace since we wanted to address our economic issues as quickly as possible. Lack of liquidity and unemployment were chief among them. We launched sixty-five programs for supporting entrepreneurship among women and the nation’s youth, two energy-efficiency related programs for homes and offices, and various other programs dealing with innovation in manufacturing. As a result, the market was quickly injected with € 65 million of structural funds. This shows that we do, in fact, deal with entrepreneurship initiatives. Two other branches of our core operations are consumer protection and commerce. Cyprus has been doing fairly well in terms of both trade and exports. During the first four months, exports have increased by almost 8 percent.

What are the country’s primary exports?

Pharmaceuticals, dairy products, and various goods produced from citrus fruits.

Is wine also a large part of your exports?

Actually, almost all of the wine produced in Cyprus is consumed domestically. Nevertheless, one of the reasons we made such huge improvements is because of the support for the nation’s wine industry. The fact still remains that most wine produced in Cyprus is also bought in Cyprus. It is a shame that such great wine does not reach other great countries.

Cypriot wine is then considered boutique.

Yes, it can be said so. Despite the Russian embargo on European products, which took a significant toll on our economy, we still managed to increase our exports by almost 8 percent during the first four months of this year.

Could you tell us more about the ministry’s plans for the tourism sector? How do you intend to exceed the current rate of bringing in 12.5 percent of the country’s GDP?

It is an excellent question that I am happy to answer. If you look at the level of tourism in Cyprus during the past fifteen years, you can see that we have lost our competitive edge. With the growth of the middle class and the development of Asian countries, the number of travelers worldwide has increased tremendously. Despite the global growth of tourism, Cyprus has actually experienced a decline in that same sector. This is especially evident when the country’s economic growth is taken into account. Over the past ten to twelve years, we have been stuck with a steady number of around 2.5 million tourists per year. It is a significant number, compared to Cyprus’s total population of eight hundred thousand, but it is nowhere near our full potential. We have lost our competitive edge primarily because we failed to diversify our range of offerings. We developed the “sun and sea” concept back in the 1960s, but we have not moved away from it up until now. Over the years, various competing destinations, such as Turkey, Greece, Tunisia, and Italy have emerged with similar “sun and sea” business models and our resorts began to lose some of their attractiveness. In order to regain our competitive advantage, we are working to refine our tourism sector in several ways. First of all, we will try to increase the number of arrivals and booking capacity both in the southern and middle regions of Cyprus. The events concerning the actions of the Eurogroup made 2013 a particularly difficult year. It took great effort to overcome the economic difficulties. The behavior of the Cypriot people was, of course, tremendously helpful. Instead of choosing to go out into the streets and start riots, they decided to send the world a message that Cyprus is still a beautiful place and a great holiday destination. In 2014, the country experienced only a small amount of growth because of Russia’s economic decline.

Russian tourists have always made up a large part of our client base. However, things are finally making a turn for the better. We are expecting 2015 to be a great year despite the challenges. The total number of arrivals has already grown by 6 percent during the first six months. Unfortunately, the growth in total revenue is significantly smaller due to a global decrease in people’s incomes. Visitors are spending less money upon arrival. Our primary market this year is the United Kingdom. For the first time during the past decade, the number of tourists from the UK has increased significantly. It grew by 14 percent during the six-month period. German arrivals have increased by 25 percent while Russian arrivals declined by about 19 percent. These numbers will still, hopefully, improve. According to the latest statistical data, we are currently operating at around 95 percent of our total capacity. Cyprus has definitely seen an expansion in the tourism industry during September and October. We are working together with various tour organizers and airlines in an attempt to improve flight arrangements and attract more Northern European customers. To them, Cyprus is an attractive holiday destination because sunshine and warm weather are valuable commodities. At the same time, we are developing a progressive long-term strategy. As of today, we are in the final stages of hiring a group of consultants to help us work out the most economically viable options for the future. This strategy is intended to be drafted on the basis of multilateral consensus and exceed the time-frame limitations of just one government. Foresight of the upcoming years is of utmost importance. We want to make sure that we make proper investments in special interest tourism. Another important aspect of our work is the deregulation of the tourism industry. We launched an initiative to deregulate at least 25 percent of the sector. The third and, perhaps, most important area we are working on is improving customer experience. We launched three strategic projects aimed at this goal in particular. The traditional “sun and sea” business model can be significantly expanded upon. Special interest and nautical tourism are also included in our updated business. We have already set up one marina that you might have heard of.

Yes, as a matter of fact, we have.

A project aimed at developing the upper marina is set to start soon. Despite the difficulties related to Cyprus’s lack of liquidity, the project has a safety guarantee of € 25 million from the consortium.

Is that project done with Naguib Sawiris or are some other market players involved?

Yes, it is done with them. Our ministry launched a tendering process for the Paralimni Marina, set up several golf courses, and approved legislation for an integrated casino resort. I want to put some emphasis here because the casino would be the first of its kind in Europe. It would operate under a single license, issued for thirty years with exclusivity guaranteed for the first fifteen years. We hope to be able to attract ample investments with these particular parameters. The casino we plan to build will be different from the many smaller casinos that can be found in the rest of Europe. It is going to be significantly larger and feature major attractions. Gambling will be but a small part of the entire range of offerings.

Has this project attracted any interest from investors so far?

The “expression of interest” segment will be launched in September. Now that all the relevant legislation has been passed, the project is expected to run smoothly.

Are casino businesses under your ministry’s supervision?

Yes, they are. This casino is considered a strategic tourism infrastructure project. Getting it through parliament was not easy, though. Cyprus has a long history of debates related to the legalization of gambling. However, the model we introduced was specifically aimed at improving tourism rather than at introducing gambling into our society. After the expression of interest in September, we expect to single out three successful candidates and start the RFP [request for proposal] process. Hopefully, this will be achieved by early 2016. In the second quarter of that year, we hope to grant the investors a full operating license.

Are you looking at the big casino market players from Las Vegas?

Yes, we are looking at companies from Las Vegas and Asia as potential investors. Macau from Singapore is also considered. Many of the dominant market players have expressed interest in Cyprus’s casino project. We hope they will follow up and participate in the official expression of interest part of the project. Since it is highly related to tourism and the development of strategic infrastructure, the Ministry of Energy and Tourism’s best interest is to be in close contact with potential investors. Promoting special-interest tourism like cycling, athletics, and sports is another one of our concerns.

Your country has a lot to offer.

Cyprus has a special identity. For example, Paphos is a great place to visit if you are looking to experience culture or simply have a pleasant time. Podaras has the most impressive beaches in the country and is a great destination for family vacations. Limassol, in turn, is the most cosmopolitan city not only in Cyprus but the entire Mediterranean region. We have something to offer to all manners of flavor. However, we need to put more emphasis on promoting this fact. Rebranding and repositioning ourselves in the market are integral parts of our new business strategy.

Are you considering any promotional initiatives?

Yes, we are. We need to change the way foreign tourists see us. Differentiating ourselves from Greece is essential. Some tourists still consider Cyprus to be a Greek island. This point of view is particularly prevalent among German visitors. This can be advantageous in some cases, but our goal is to develop our own national identity.

Which you do have, from what I have seen.

That is true. We simply need to promote it more adamantly.

You mentioned extending the tourism season with sports, cycling, and special interest tourism. Are there any plans to support conference and exhibition tourism in Cyprus?

As a matter of fact, there are. We recently talked to the Meeting Center Association and we hope to build a state-of-the-art conference center in the upcoming casino. It should attract huge numbers of conference attendants from all around the world. Developing the business-meeting subsector is definitely one of our midterm priorities. In order to extend the tourism season, we recently began offering week long-type vacations. This is done during the less popular months of the season. The fundamental problem we face is the closing of hotels, bars, and restaurants by late October. Visitors are then exposed to a significantly reduced variety of entertainment. We are hoping to persuade the hotels to remain open during that time. It is equally important to have all of the other facilities operating. However, that is a much more difficult task. Ensuring a proper availability of flights to Cyprus particularly comes to mind. We hope to extend the tourism season by first increasing the attractiveness of the early March and late October periods. Slowly, we hope to shift our attention on to November and February. It is a gradual process since it is nearly impossible to achieve a twelve-month holiday season.

You can, instead, gradually increase the tourism season by two weeks. I know that some tourists choose to go on vacation even in January or the end of the year.

For some, it is very convenient to travel during the December–March period. Cyprus welcomes a large amount of Northern European visitors in January due to the cold weather there. Tourists from Germany, Poland, and the Baltic countries are also looking for a short, warm break from the cold.

They are willing to travel and spend money.

Yes, exactly. That is a part of our tourism model.

Could you tell us more about the potential of Cyprus’s energy sector?

There is profound potential in the national energy sector to make the country’s economy more competitive. Indigenous resources can be used domestically to lower the cost of energy. This would strengthen our economy. The tourism industry would also benefit from reduced energy prices. Various opportunities for the development of other economic sectors would open up. One of the main challenges that Cyprus has had to deal with for a long time is the fact that we are a small, isolated system. There are no interconnections available for electricity and gas. Another issue we would like to resolve is not using enough natural gas in our energy infrastructure. On the brighter side, there is a high penetration of renewable energy. It makes up around 9 percent of the total energy production. For the remaining 91 percent, we mostly depend on heavy liquid fuels. This has to change not only for environmental reasons, but also in order to improve our competitiveness.

Both gas and electricity are expensive resources.

Yes, that is true. However, we have managed to decrease the price of electricity by almost 30 percent over the years. The global drop in oil prices was a large contributor to this success. Nevertheless, 10 to 12 percent of the decrease is due to structural reforms we implemented with the Electricity Authority of Cyprus.

I believe there was an unfortunate accident in 2011.

That is true. However, it is now behind us. We are currently enjoying a secure and stable supply of energy. Our state-owned companies have become more efficient and effective. Their operating costs were lowered and this, in turn, resulted in lower electricity costs. If you look at statistics from Eurostat, you see that Cyprus experienced the most significant drop in electricity prices among the European countries. This stands in contrast to the fact that the global drop in liquid fuel prices affected everyone.

Is it because of the initial high price of electricity in Cyprus?

That is one of the reasons. We are probably still ranked quite high in that regard and there is a lot more to be done.

Did the privatization rate in the electricity sector drop as well?

Yes, but our ministry is currently looking to resolve this issue. Cyprus is different from the rest of Europe in terms of privatization. We are a small, isolated system that is almost completely dependent on electricity for our energy needs. Just a few days ago, we hired a group of consultants to help us put together a plan of addressing our electricity dependence issue. Another reason why the scenario in Cyprus is atypical is due to the existence of natural monopolies within the market. Talking about offshore projects, I would like to mention a significant milestone that was reached several months ago. In June 2015, the “Aphrodite” oil fields were declared commercial. Companies that operate Block 12 submitted a development and production plan. It has great significance because when an oil field is declared commercial, it signifies that there are sufficient and recoverable resources, coupled with a way to exploit them and potential customers. Benjamin Netanyahu’s recent visit to Cyprus is an indicator that we are looking for more integration within the region in terms of both geopolitics and techno-economics. The ability to develop and exploit the natural resources of Cyprus and the Eastern Mediterranean region is one of our primary goals. In the upcoming years, we anticipate the discovery of more exploitable resources. We will soon be submitting our field development plans to other interested parties and hopefully come to an agreement on how to proceed with their implementation. In order to have a full outlook on the energy sector, one must also take into account global developments. The widening of the Suez Canal is worth mentioning. Cyprus is the first landmass that is come across after crossing the canal when headed for Europe. If the Middle East is the intended destination, Cyprus then becomes the last landmass encountered. This means that the country is at a strategically significant location. The recently completed widening of the Suez Canal is therefore a significant development. Investments are beginning to flow into Cyprus from various oil companies that want to trade here. For example, the VTTV Terminal in Vasiliko is a 250 million euro investment by the Dutch company Vitol. Now that the Suez Canal is capable of supporting a bidirectional flow of transportation, we expect to see a lot more investments.

The international market is highly competitive and each country is striving to attract new investors. What do you think is the most attractive feature of Cyprus for foreign investors? What are your competitive advantages?

I think it is a combination of many factors. First, we have an ample amount of human capital. The national tax regime is another prominent attraction. Our political system is relatively stable, compared to other Eastern Mediterranean countries. Cyprus also boasts an attractive investment environment with new improvements added regularly. The oil and gas industry is currently experiencing a surge of interest in Eastern Mediterranean offshore activity. Prominent companies are looking to set up a service base in the region. If you look at the geopolitical environment of the Eastern Mediterranean, Cyprus would seem like the obvious choice. It has stable relations with all the neighboring countries—Lebanon, Egypt, Israel, Palestine, Jordan, and others. A lot of the investments we have received can be attributed to the fact that oil companies can service the entire region out of Cyprus. That is our primary competitive advantage. It has become even more significant now that the Suez Canal has been widened. At the same time, stable political and economic conditions help us attract new investors. Over the past two and a half years, entrepreneurs have been telling us that we can either be lax or strict with our regulations, but we have to be predictable. That is precisely what we have achieved. Our motto is: “What you see is what you get.”

Any other subject you would like to touch upon?

If you allow me, I would also like to touch on the subject of science and technology. We are currently in the final stages of an open tender, aimed specifically at finding strategic investors for the Cypriot science sector. We have singled out a particularly attractive location and the investors are expected to attract high-value industries there. Technology, innovation, and research are examples of such high-level industries. In turn, the investors would receive a highly attractive package of financial incentives.

It seems to be a very important development.

Yes, it is. We put together a simple tendering process since we only want the government to allocate the land. Once we find the investor, we hope to attract attention from high-profile companies like Microsoft, Google, Apple, IBM, and Cisco.

Thank you Minister Lakkotrypis for meeting with us.