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Cyprus: A Mediterranean beachhead June 24, 2006

Posted by grhomeboy in Business & Economy.

Cyprus: A Mediterranean beachhead for India

TAKE A test: Which capital, other than Delhi, has three major boulevards named after three political leaders of India. No guesses?

Little known Nicosia, capital of Cyprus, has thoroughfares named after Mahatma Gandhi, Jawaharlal Nehru and Indira Gandhi. That measures the warmth of feeling this country in the Mediterranean has for India.

Even decades after India lent critical support to Archbishop Makarios during its hours of crisis and struggle, Cyprus has not forgotten the good turn. The reservoir of goodwill for India is amazing.

And today, when Cyprus is a member of the European Union and well on its way to entering the Euro zone, that is, when the euro becomes its currency, signifying complete integration in the largest and wealthiest regional grouping, it is once again extending an open arm to India to participate in its economy.

To a visiting team of high officials this month, Cyprus listed a whole gamut of activities where the country is looking forward to working with India. The negotiations of the high-level delegation took little time to home in on areas where effective and fruitful collaboration was possible.

India-Cyprus economic relations can bring in substantial dividends to both the countries. Three specific areas could be cited for closer co-operation. First is enhancing financial flows for mutual investment. Small it may be, but Cyprus is financially muscular and has funds for investing overseas. It is investing in properties and financial instruments in the West.

At the same time, the well-heeled of Europe are looking for the sun and sands of Cyrpus and picking up beachside properties around its coastline. Picturesque villages are coming in areas where there was nothing but clusters of traditional dwellings. Indian hotels could just well as look at Cyprus if they are in a mood to expand abroad.

At any rate, all the funds flowing into the country are adding to its prosperity and pushing up the exchange rate. Else, how can one Cyprus pound be worth around $2.3?

Of course, such an exchange rate is good for an economy which depends on tourism for its sustenance, because for every incoming tourist you get more.

However, the Cypriots have realised the vulnerability of an economy based exclusively on tourism. The bitter realisation was all the more acute in the aftermath of 9/11. The economic planners of the country, headed by a man who had spent his impressionable youth in India on a Commonwealth Scholarship, is evolving an alternative model, in which India can play a very critical role.In a country of this kind, investments from Indian companies in certain sectors can yield good dividends.

However, one has to be very careful about choosing the investment options. Cyprus is not suited for large-scale investment in manufacturing industries. It is a good place for investment in critical segments.

Obviously, given its positioning, Cyprus offers access to the entire Mediterranean world. It has good and functional links with countries from the northern fringe of Africa to the southern coastline of Europe. If Indian companies set up some measure of operation in this island-country, they will have the advantage of penetrating the regional markets. Cyprus allows 100 per cent foreign equity stake. Indian companies just might as well consider the country as a hub for servicing their markets in the wide region, from North Africa at one end to Europe on the other.

Second, Indian financial sector can establish its toehold in Cyprus for eventually entering the European Union. Speaking to some of the senior officials of the Bank of Cyprus, the country’s central bank, one got the impression that it should be possible for Indian financial intermediaries to establish operations in Cyprus to serve the small and affluent local financial market as well as for capturing a slice of the European business.

Here, in this Med island, the Indian companies will be able to get the same treatment as Cypriot companies.

Third, Cyprus has at its disposal large funds for research and development under the “EU programmes for R and D in member countries”. By establishing joint ventures with Cypriot companies, research institutes and government agencies, a good part of these funds earmarked for Research and Development activities could be tapped.

Indeed, the Government of Cyprus is formulating its master-plan for Science and Technology and it is time that some of our organisations began the exercise for establishing synergies to participate in these projects.

And the Cypriots are willing to look at Indian institutions and scientists for undertaking such jobs. Cyprus has identified bio-technology as one of the prime areas for such R and D activities. The only other country which is keenly involved in these areas in Cyprus is France.

Under its master-plan, the Cypriots are looking at involving the private sector for incubator activities. This will call for private sector participation and Indian firms could look at these opportunities. Since biotech is one of the chosen areas, Indian firms in this segment, and there are a few world-class units, could get involved in these programmes.

These are in fact the thrust areas which could be pursued by India in developing its economic relations with this Mediterranean country. We need not pursue the same strategy for all countries in formulating and developing our external economic relations.

Trade might be important factor in our relations with the US or China. However, with a population of just about 800,000, Cyprus cannot be a target for developing trade. Already, India runs a huge surplus with Cyprus in its trade account.

We cannot hope to further raise our exports and yet take little from that country. Where we should concentrate is in developing qualitative and strategic links.

Cyprus is situated at the eastern fringe of the Mediterranean Sea, off the coast of Turkey but culturally an extension of Greece and Greek civilisation. If today Cyprus is a sleepy little island, dotted with tourist spots, the government is taking its first critical steps to turn it into a technology hot-spot. It is consciously moulding its industrial, development and tourism policies not to upset in any way its critical ecology.

Hence, large-scale operations, such as even setting up cement plants for exploiting the abundant limestone deposits, are carefully avoided. Instead, the authorities are talking of developing cutting-edge research and development centers, IT hubs and technology collaboration.

Some beginning has been made in this direction. An Israeli technology company has begun operations, employing, of all people, some 1,000 Indian software engineers.

A few of these irrepressible young engineers had surfaced at a reception at the residence of India’s High Commissioner in Nicosia and could hardly be stopped in their conversation about the possibilities for Indian technology companies in their host country.

In choosing this new strategy, the Cypriot Government is consciously avoiding the easier option. It can do so because the country’s economy is sound. Unemployment is virtually unknown.

It has one of the highest per capita income in the world. It has a steady flow of income from rich European tourists who are ever flocking to its shores.

It is an incredibly beautiful country, where the air itself is laced with the sweet smell of orange flowers, vineyards. Poppies abound here, though not its cultivation. It is a country that gave birth to the Greek goddess of love, Aphrodite, and is seeped in Greek myths and legends.

When the whole world is establishing bilateral trade and economic co-operation agreements, it may well be a good idea to have strategic links. In that case, Cyprus could be the one country for India.

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