The blue economy of Cyprus

The Article below was assigned to one of this year’s summer interns, Loukas Dionysiou, and was written with the help and close supervision of our Team. Loukas is about to enter his 4^th and final year as a BSc in Maritime Studies student at the Frederick University, Limassol. Ultimately, it has provided an opportunity for Loukas to unfold his academic knowledge on paper, as well as to express his ideas and interpretations on the importance of the Shipping industry for the Cypriot economy. On the other hand, our Company has gained insight from an informative piece of writing, dedicated to one of the most critical sectors in terms of contribution to the country’s GDP. This article is considered as one of our Company’s “short and sweet”, informative pieces of writing, that allows for a quick and pleasant read for everyone who is interested in gaining some basic and useful knowledge on the matter.

Did you know that:

• Today, the Cyprus Registry is ranked as the 11th largest merchant fleet globally and the 3rd largest fleet in the European Union only behind Greece and Germany.
• It includes more than 2,200 ocean-going vessels totalling 21 million gross tons. The Cyprus Registry tries to maintain high quality standards and implements regulations to eliminate any traces of substandard shipping.

Below is a graph of vessels registered under the flag of Cyprus per gross tonnage dating all the way back to 1963 up until 2019:

• Cyprus, and more particularly Limassol, is considered to be the largest third-party ship management centre in the European Union, and one of the largest in the world.
• A large number of ship owning, ship management, chartering and shipping related companies are stationed and manage day to day operations from Cyprus.
• The vast majority of these companies are located in Limassol and are Members of the Cyprus Shipping Chamber. Some of the largest ship management companies in the world have their headquarters in Limassol. It is estimated that approximately 4% of the world’s fleet is managed from Cyprus.
• Among the ship owning and ship management companies established and operating from Cyprus, 90% are controlled by EU, including Cypriot interests.
• Companies participate in chartering, crewing, ship surveying, shipbroking, salvaging and marine insurance and are able to offer first class services to their customers worldwide from their offices in Cyprus.
• In addition, competent and reputable shipping agents, efficient clearing and forwarding agents as well as top class ship chandlers, freight forwarders, travel agents and other shipping related companies are also located in Cyprus.

1. How did Cyprus’ manage to develop such a large and successful shipping sector?

Since ancient times, Cyprus was targeted and conquered by many civilizations such as Egyptians, Greeks, Romans, French, Venetians and the British, all of which have contributed to the development of sailing and trading. Merchant shipping began to be developed by countries in the aftermath of the Second World War. In turn, Cyprus established its shipping registry fairly early, back in the early 1960s, taking advantage of entering a market where it could thrive in the years to come.

2. What is Cyprus position in the international playing field?

Cyprus has the most growth when it comes down to chartering and ship management companies. As we see below to the chart the companies starting with the year 2009-2010 do not exceed 50 companies in total and the owners of foreign vessels are close to none. From the year 2016 onwards we can observe a significant increase to the owners of foreign vessels reaching a peak of more than 120 companies in 2019-2020. The charterers on the other hand have remained around the same amount and have not experienced any major increase or decrease from 2012-2020. The same can be observed for the ship managers as well with a stable amount of 45 companies reaching almost 50 companies throughout most of the years excluding the year of 2010 where a slight decrease is observed.

3. What are the pros and cons of the Cyprus shipping sector?

Pros: 

• Cyprus is an open registry meaning that both Cypriot nationals and non-nationals can register under the Cyprus flag.
• When it comes to taxation, Cyprus is in a highly favourable position, able to offer low taxation and therefore many foreign shipowners choose to register their vessels under the Cyprus flag to enjoy taxation incentives as well as credibility. The taxation system used in Cyprus is a tonnage tax system, this is calculated on the basis of the net tonnage of qualified ships possessed by a ship owner.

• Another advantage of the Cypriot shipping sector is the country’s strategic geographical position located at the crossroad between three continents Europe, Africa and Asia.
• Cyprus is whitelisted under the Paris MoU, meaning that vessels under its flag have low risk of detention under port state control.
• Cyprus has adopted and implemented the ISPS code that is related to maritime security.
• Cyprus is a natural transhipment centre for the European-Far east trade.
• Operating costs for Cyprus based companies are competitively low such as labour and office rents

Cons:

•  Turkish restrictive measures also known as the Turkish embargo, forbid Cyprus registered vessels from calling to Turkish ports. These restrictive measures cause a substantial increase in transportation costs.
• Registration under the Cypriot flag may prove to be costly, as well as maintenance costs when compared to other flags.

4. What is the shipping sector’s contribution to the Cyprus GDP?

As one of the pillars that hold the economy together, the maritime industry contributes an annual amount of more than 1 billion euros and comprises around 7% of the country’s GDP, while 5% of it consisting only of ship management and the rest 2% of other maritime activities. Shipping is often described as the blue economy of Cyprus. The blue growth strategy enhances and updates the shipping regulatory framework, focuses on digitalization, promotes blue careers and education in shipping and ensures that maritime innovation as well as environmental responsible policies are applied.

Conclusion:

It is evident that Cyprus’ presence in the shipping industry cannot be ignored. The country is an impactful and attractive business destination in 2023, internationally recognised. Whether one is looking for an ideal registry for their vessel, or a 3rd party ship management company to run the business, Cyprus has one covered!

References:
(https://splcy.com/cyprus-maritime-growth/)
(https://csc-cy.org/cyprus-a-leading-maritime-center/, n.d.)
(https://www.dms.gov.cy/dms/shipping.nsf/cyprusmaritime_en/cyprusmaritime_en?OpenDocument)
(https://www.bakertilly.com.cy/of-further-interest/shipping-in-cyprus/)

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