ECONOMY

Fair effort to bolster Cyprus?s economy

NICOSIA – Evolve or die, they say, and the 37th Cyprus International Fair, which opened on May 18 and runs through Sunday in Nicosia, is striving to defy the subdued climate of the country?s economy in the context of the eurozone crisis with a message of optimism for the future.

With specialized exhibitions taking an ever greater share of commercial interest at the expense of general fairs, as has also been the case for the Thessaloniki International Fair, the impact of the Cyprus exhibition has declined in the last few years. To stem this interest outflow, the organizers have included more specialized events such as a naval and fishing exhibition, a car show, a beer festival and a prefabricated home exhibition in the context of the general fair.

But that?s not all. The evolve-or-die mentality stretches far beyond the 20,000-square meter Cyprus Expo center in Nicosia, which serves a symbolic purpose in the effort to bolster the island?s economy through its evolution into a regional trade center with an emphasis on energy.

With talks about the island?s reunification going nowhere at the moment, the Republic of Cyprus has contracted the recession virus from Greece and the rest of the eurozone (its gross domestic product contracted by 1.5 percent in the first quarter of 2012 year-on-year) and cannot rule out recourse to the dreaded European support mechanism. All this has the vast majority of Cypriots considerably worried as to whether the island is going down the same road as Greece, given also the strong economic links between the two states and the increasing exports from Cyprus to Greece (up 33 percent on a yearly basis in 2011).

Consumption has dropped, public sector salaries have been cropped 6 percent — modest by Greek standards — and the impact of the tragic explosion at the Mari naval base last summer, which cost 13 lives, continues to take its toll on consumers as electricity rates have soared within just a few months and value-added tax on most commodities has gone from 15 to 17 percent.

Nevertheless, the 2012 Cyprus International Fair illustrates that the Cypriots also have significant reasons to feel some optimism for what lies ahead. The mere fact that it has opened for a 37th consecutive year and has gone to great lengths to maintain the same quality and variety it has delivered in the past is of major symbolic importance, akin to that of its first edition back in 1976, less than two years after the Turkish invasion of July 1974.

?The changes in the international financial environment have brought about a shake-up in our commerce framework,? Cyprus President Dimitris Christofias said during the inauguration of the exhibition on Friday, thereby accepting the evolve-or-die challenge.

?We intend to turn Cyprus into an international center of service supply, and already more than 75 percent of our economy is in the service sector,? added Neoklis Sylikiotis, the minister of commerce, industry and tourism.

Their optimism is not groundless: After 2011, a year that saw a 10.1 percent increase in tourism arrivals and — crucially — a 12 percent rise in tourism revenues, according to Sylikiotis, Cyprus is hoping to stay on the growth track in this sector while watching its trade go from strength to strength.

Exports climbed a remarkable 24 percent last year to 1.4 billion euros, from 1.1 billion in 2010. Exports to Greece, in particular, soared by 33 percent last year. And it?s not just halloumi cheese or potatoes. Cyprus exports pharmaceutical products, plastics, photovoltaics, chemicals and many other commodities. In 2011 alone, its industrial exports amounted to no less than 369 million euros, according to Costas Shekkeris, head of the Commerce Ministry?s Industrial Products Export Department — a significant figure for a such a small country.

After the recent turbulence experienced by the island?s banking sector due to its extremely high exposure to the Greek market, things are starting to look up, as the government in Nicosia decided last week to guarantee the recapitalization of its credit system, most importantly of troubled Cyprus Popular Bank.

Various development projects are in the pipeline, including a plan by a Chinese investor to create a giant wholesale trade center at Larnaca?s old airport and a power link via underwater cable intended to join the grids of Cyprus, Greece and Israel, the ?Euro-Asia Interconnect? project that a Cyprus-based subsidiary of Greece?s Public Power Corporation (PPC) will run.

But most crucially, Nicosia is looking forward to the utilization of the recently discovered hydrocarbon reserves to the south of Cyprus, which have not only boosted the country?s energy prospects but have also seen a strengthening of ties. Cyprus, Israel and Greece will soon sign an agreement regarding the delivery of natural gas to European and Asian markets and a natural gas terminal will be built on the island?s south coast.

That has brought Tel Aviv considerably closer to Nicosia, with all the political benefits Cyprus can secure from such a friendship — although that will become clearer in the future. What one can notice now is that Israel has already grown into the fifth-biggest export market for Cyprus, according to 2011 figures.

All this serves to show that Cyprus is making significant efforts to stem the impact of the eurozone crisis in more ways than one, teaching Greece a lesson that the latter had better learn as soon as possible: that it must evolve, or risk dying.