Geography and population
Cyprus is strategically located in the Eastern Mediterranean lying at the hub of three continents and close to the busy trade routes linking Western Europe with the Arab World and the Far East. The total area of Cyprus is 9.251 square km.
The island enjoys the best type of Mediterranean climate with about 300 days of sunshine per year. The bulk of the rain falls during the period from November to March. The coldest month is January, with minimum and maximum mean temperatures of 6°C and 13°C respectively, while in August, the hottest month, the corresponding minimum and maximum mean temperatures are 21°C and 36°C.
The estimated population of Cyprus is 952.100 (December 2011) of which 71,5%belongs to the Greek Cypriot community and 9,5% to the Turkish Cypriot community while the remaining 19,0% are foreign residents and workers. Greek and Turkish are the official languages of the Republic and English is widely spoken and regularly used in commerce and government.
The capital of Cyprus is Lefkosia (Nicosia). It is situated roughly in the centre of the island and is the seat of government as well as the main business centre. It has a population of 245.900. The 1974 Turkish invasion and occupation of 36,2% of the sovereign territory of the Republic of Cyprus literally cut the capital in half. The second largest town is Lemesos (Limassol) with a population of 184.600. It is currently Cyprus’ main commercial port and an important tourist resort. Larnaka and Pafos, which are also popular holiday resorts, are the third and fourth largest towns with a population of 86.400 and 63.900 respectively.
Cyprus has a free market economy with services constituting its main engine power. Although the per capita income is one of the highest in the region, reaching EUR 21.264 in 2011 the global economic crisis has affected the labor market in Cyprus with unemployment in 2011 reaching 7,7% compared to 7,0% in 2010. Moreover, the inflation rate (CPI) for 2011 was 3,3%, while the average annual rate of growth in the past five years (2007-2011)was 0,82%, average inflation rate stood at 2,6% and average unemployment rate at 5,3%. Additionally, within the framework of the harmonization of Cyprus with EU laws, wide-ranging structural reforms have been promoted covering the areas of competition, the financial sector and the enterprise sector. Full liberalization of the foreign direct investment regime in Cyprus has also been implemented, opening new promising business opportunities for foreign investors.
The basic characteristics of the Cyprus economy are the dominant role of the private sector in production the small size of the domestic market, the small size of most of the business units, as well as its open nature .The government’s role is mainly to support the private sector and regulate the markets so as to maintain conditions of macroeconomic stability and a favorable business climate.
The economy is driven by the strong tourism and services sectors and a stable export-oriented industry. Indicatively, the services sector contributes around 80,5% to the Gross Value Added (GVA). Apart from tourism, finance, insurance and business services are the main contributors followed by social and personal services. The trade sector contributes considerably to the economic growth of the island. The importance of the trade sector can act as a major consideration in the endeavor of Cyprus to develop further and strengthen its trade relations with third countries. Due to the small size of the domestic market, access to international markets is of utmost importance for Cyprus. With regard to the commodity structure of Cyprus exports, manufactured products account for 60%, agricultural products (raw) for 18% and processed agricultural products for 17%. The European Union is Cyprus´ most important trading partner. In 2011, imports from the EU accounted for 68,3% while in the same year domestic exports reached around 50,9%. Transit cargo enjoys special treatment at the Cyprus ports. Indicative of the position of Cyprus as a main transshipment centre is the substantial amount of products re-exported, which reached EUR 575,4 million in 2010.
The main products re-exported from Cyprus were tobacco, processed foodstuffs, beverages, textiles and textile articles, minerals and chemicals. Improvements in port infrastructure and equipment include advancements in operational methods and information systems used for the handling of vessels and cargo. Furthermore, Cyprus has a thriving ship management system.
On January 1st 2008, the Republic of Cyprus joined the euro system and in doing so the euro was introduced as its official currency, replacing the Cyprus pound as the unit of account. Thus, euro banknotes and coins are the country’s legal tender.
The euro is subdivided into 100 cent. There are currently in circulation seven denominations of euro banknotes (€500, €200, €100, €50, €20, €10 and €5) and eight denominations of coins (€2, €1, 50, 20, 10, 5, 2 and 1 cent). The euro banknotes are exactly the same in all euro area countries. The euro coins have a side which is common for all euro area countries and a national side which shows country-specific designs. As with banknotes, euro coins can circulate in all euro area countries irrespective of the issuing country. Cyprus has a well-developed and modern banking system, which offers a wide range of services catering for the needs of businesses and individuals. Cyprus’ banking system comprises the Central Bank of Cyprus and banking institutions, which operate as fully-fledged commercial banks. It also encompasses the co-operative credit institutions, the main activities of which are the collection of savings and the extension of loans to their members. The latter are supervised by the Co-operative Societies Supervision and Development Authority. The banking system in Cyprus is well organized and meets the highest international banking standards. As such it copes completely and efficiently with the diversified needs of the business community. The Central Bank of Cyprus supervises banks which are incorporated in Cyprus, including local subsidiaries of foreign banks, branches of foreign banks as well as representative offices of foreign banks. As at the end of 2011, 14 locally incorporated banks were operating in Cyprus, seven of which were subsidiaries of foreign banks. In addition, there were 26 branches of foreign banks and two representative offices of foreign banks.
Banking arrangements and practices follow the British model. Banks maintain strong correspondent networks around the world and most of them subscribe to SWIFT, Reuters, Telerate and other services, enabling them to have easy access to the world-banking network. They offer a wide range of services including insurance, leasing, hire purchase finance, factoring, mutual fund management, and investment and consulting as well as custody and asset management services.
Banks are sound and well capitalized. They have responded to the demands of the liberalized financial environment in which they have been operating in recent years by making efforts to expand their sources of income as well as to streamline their operations and cut costs. Moreover, they have made significant investments in the field of technology and computerized systems, which increase productivity as well as in skilled human resources. Special emphasis has also been given to the strengthening of internal governance and improvement of their risk management systems and policies.
Cypriots and foreigners residing on the island enjoy the benefits of a well developed insurance
Industry with all types of risk accepted mainly through agents and intermediaries. Currently (2012) there are 26 local insurance companies operating on the island, 6 international insurance undertakings, 5 European insurance undertakings operating in the Republic of Cyprus under the freedom of establishment, 394 insurance undertakings operating in the Republic of Cyprus under the regime of freedom to provide services and 2 foreign insurance undertakings. The Cyprus Stock Exchange commenced its operations in March 1996. It is a regulated exchange where all transactions concerning corporate and public securities are carried out. Such securities include stocks, bonds and warrants. The main participants in the market are the members of the stock exchange (stock brokerage firms), the listed issuers and the investors. Transactions are electronically displayed and the trading and settlement systems are computerized.
Source: Business Map 2012 Cyprus: Cyprus press and information Office