The government of Cyprus, in association with the private sector, has been implementing a multi-spectrum, investment-led development policy based on attracting foreign capital inflows. Whether this relates to incoming tourists, hydrocarbon exploration, citizenship by investment, or investments funds registering in Cyprus, the strategy depends on foreign capital. But that strategy faces significant challenges in a world where capital access and ultimate beneficial ownership is closely monitored and controlled. The strategy of investment attraction has not been met by equivalent investments in quality of life, governance or workforce. As a result, investors in Cyprus need to make very specific plans for how this jurisdiction fits into their wider strategy. Investors also need reliable partners in Cyprus and internationally. This presentation was prepared by Philip Ammerman of Navigator Consulting and delivered at a conference organised by KENDRIS in Larnaka, Cyprus on 18 October 2019. All information presented is based on information in the public domain. Sources have been provided where relevant. No part of this presentation should be construed as a recommendation to invest in Cyprus or in any of the companies or sectors mentioned. The opinions presented herein are the personal opinions of the author. © Philip Ammerman, 2019

1. The Cyprus Investment Story
Competing in the New World
Philip Ammerman | Navigator Consulting Group
KENDRIS Conference | 18 October 2019

2. CONTACT DETAILS
This presentation was prepared by Philip Ammerman of Navigator Consulting and delivered at a conference organised by KENDRIS in
Larnaka, Cyprus on 18 October 2019. All information presented is based on information in the public domain. Sources have been
provided where relevant. No part of this presentation should be construed as a recommendation to invest in Cyprus or in any of the
companies or sectors mentioned. The opinions presented herein are the personal opinions of the author.
© Philip Ammerman, 2019
pga@navigator-consulting.com
LinkedIn: philipammerman
Navigator Consulting Group
www.navigator-consulting.com
Philip is an investment advisor and serial entrepreneur who has advised investment banks, funds and asset owners on
investment-led growth since 1994. He is founder of Navigator Consulting, Numenor Capital and the Centre for Innovation
& Entrepreneurship.
Philip supported the first wave of "real economy" investments, primarily in industry and manufacturing, that took place in
Greece, Central & Eastern Europe, Russia and Ukraine. He has advised on over 120 investment transactions with a total
investment value exceeding € 6 billion. He has multi-sectoral experience in due diligence, business planning and financial
modelling, in sectors including digital/tech start-ups and scale-ups, agri-food, manufacturing and hospitality.
In 2010, he founded the Navigator Entrepreneurship Charter, an initiative to support growth in Europe by investing in 10
new start-ups and spin-offs between 2010 and 2020.
Philip acts as regional portfolio manager for Brookstreet Equity Partners, a London-based private equity firm active in
tech and innovation investments. Brookstreet recently announced its first investment in Greece, in the nanotechnology
firm Nanophos. He is a non-executive director of Redfin Capital, an asset management firm, and is an evaluator for the
European Union's Horizon 2020 SME Instrument.
Philip studied at Princeton University and Cornell University's School of Industrial and Labour Relations. He is also a
graduate of YCombinator's Startup School and the Oxford Fintech Programme. Originally from Athens, Greece, Philip is
a resident in Cyprus since 2016, and travels over 250 days per year. He has implemented project work in over 40
countries, and has lived and worked in Greece, Cyprus, Germany, France and the United States.

3. INTRODUCTION
The government of Cyprus, in association with the private sector, has been implementing a
multi-spectrum, investment-led development policy based on attracting foreign capital inflows.
Whether this relates to incoming tourists, hydrocarbon exploration, citizenship by investment, or
investments funds registering in Cyprus, the strategy depends on foreign capital.
But that strategy faces significant challenges in a world where capital access and ultimate
beneficial ownership is closely monitored and controlled.
The strategy of investment attraction has not been met by equivalent investments in quality of
life, governance or workforce.
As a result, investors in Cyprus need to make very specific plans for how this jurisdiction fits into
their wider strategy. Investors also need reliable partners in Cyprus and internationally.

4. Foreign direct investment
into key sectors
THE NATIONAL INVESTMENT STRATEGY
Shipping
Property
Finance
Energy
Tech
Domestic investment &
policy-led reforms
Education
Energy & Transport
Healthcare
ICT / Productivity
Casino & Tourism
INCENTIVES Expatriate/HNWI Incentives | Investor Citizenship Programme | Investor Residency
Solving bad debt / NPL and
public sector regulation
Cooperative Bank
NPL Restructuring
Public Debt Mgmt
Improving AML / KYC
Compliance
CySEC | CIPA | CIFA | Cyprus Shipping Council | CCCI | OEV | Others
OECD CRS | EU 5th AML | MiFID / AIFM / UCITS | AML / KYC / CFT | US Treasury
3 KEY PILLARS
INSTITUTIONS
REGULATIONS

5. SHIPPING
SHIPPING & FINANCE
Shipping
Property
Finance
Tech
Energy
Incentives & Regulation
Tax on net tonnage
Ship management and flag
Full compliance with EU & IMO regulations
Active international promotion
Strong public-private sector cooperation
(CSC-Department of Shipping)
Results
Over 1,500 ships registered; Cyprus is the
third largest EU flag (CSC)
Employs 5,000 people ashore; 55,000 people
afloat (CSC)
Ship mgmt revenue rose to € 528 mln in 2018:
key markets include Germany, Greece, Malta,
Norway, Russia, Switzerland (CBC)
FINANCE
Shipping
Property
Finance
Tech
Energy
Incentives & Regulation
Alternative Investment Funds Law in July 2014 / July 2018
and Registered Alternative Investment Fund
Compliance with UCITS, AIFM and MiFID
Access to wide tax and foreign investment incentives
Active international promotion
Strong public-private sector cooperation (CIFA-CySEC)
Results
Cyprus has doubled assets under management, from €2.1
billion in 2012 to €4.8 billion in March 2018 (CIFA)
410 regulated entities + 35 under approval; 80 listed
companies
Bilateral MoU with 19 Regulatory Authorities & 47
Supervisory Authorities for enhanced supervision and
exchange of information

6. 8598
7018
6269
3767
4527
4952
7063
8734
0
1000
2000
3000
4000
5000
6000
7000
8000
9000
10000
2010 2011 2012 2013 2014 2015 2016 2017
PROPERTY
Registered Property Transactions
Tech
The Cyprus skyline is changing with
the additional of residential highrise
towers and commercial property
investments.
Several main drivers:
• The Investor Citizenship Programme
and the Investor Residency
Programme
• Bank exchanges of debt-for-
property are also a factor
• Demand for student housing
• Seasonal labour housing
• Buy-to-rent / tourism market rentals.
Many investors have also been
investing as property returns are higher
than bank deposits and offer a
relatively safe haven. Source: PriceWaterhouseCoopers, quoting Department of Lands and Surveys
https://www.pwc.com.cy/en/industries/assets/real-estate-march2018.pdf

7. LONGER-TERM SECTORS: ENERGY
ENERGY MARKET
HEALTHCARE MARKET
ICT INITIATIVES
CASINO
Cyprus has made a determined, strategic effort to
develop hydrocarbon potential. Future development
will depend on geopolitical and economic constraints,
and regional threats.
2007: First licensing round for eleven offshore blocks.
2011: Aphrodite Field discovered by Noble Energy in
Block 12; contingent reserves estimated at 5-8 tcf
2012: Second licensing round consisting of 12
offshore blocks.
2016: Third licensing round consisting of 3 offshore
blocks.
2018: Exploration well by ENI Block 6 discovers the
Calypso field
2019: Exxon Mobile discovers 5 - 8 tcf potential in the
Glaucus-1 field in Block 10
Turkey currently exploring in CY offshore blocks

8. LONGER-TERM SECTORS: EDUCATION
ENERGY MARKET
HEALTHCARE MARKET
ICT INITIATIVES
CASINO
Upon EU Accession, Cyprus adapted the
spirit and letter of EU policy. Quality has
improved, while the number of foreign
students studying in Cyprus has increased.
• In 2016/2017: 49 public and private
higher education institutions, total
enrolment of 45,263 students (up from
40.347 in 2015/2016) (MOE)
• Cypriot students enrolled in Cyprus were
22,507 in 2016/2017
• Foreign students enrolled in Cyprus
were 22,756 in 2016/2017 (including
distance learning)
• Innovative curriculum development, e.g.
University of Nicosia, Blockchain
programme
https://www.timeshighereducation.com/news/best-universities-new-europe-ranking-2018#survey-answer

9. CyStat: GDP Growth Rate at Constant Prices
https://www.mof.gov.cy/mof/cystat/statistics.nsf/All/EB2B4ACD559F9047C2257D480027D4CC/$file/Growth_Rates_CP-Q418-EN-080319.xls?OpenElement
REAL QUARTERLY (YOY) GDP GROWTH
-7.0 -6.7
-5.1
-4.4
-2.7
-0.6 -1.0 -0.9
0.4
2.0 2.0
3.3
4.0
4.4
4.8
6.0
4.8 4.8 4.7
3.7
4.0 4.0 3.8 3.8
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
2013 2014 2015 2016 2017 2018

10. Eurostat: Annual Government Finance Statistics https://ec.europa.eu/eurostat/data/database
GENERAL GOVNT REVENUE & EXPENDITURE
General Govnt 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Revenue 6,848 7,203 7,233 7,085 6,664 7,014 6,976 7,086 7,688 8,278
Expenditure 7,862 8,115 8,355 8,167 7,595 8,592 7,213 7,027 7,344 9,268
Result -1,015 -912 -1,122 -1,082 -931 -1,577 -236 59 344 -990
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
9,000
10,000
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Revenue Expenditure€ mln

11. CyStat: Employment in the Broad Public Sector
https://www.mof.gov.cy/mof/cystat/statistics.nsf/All/877CC2978876B4C2C22577AC0040F37C/$file/LAB-PUBLIC_SECTOR-Q109_0418-EN-140319.xls?OpenElement
PUBLIC SECTOR EMPLOYMENT
Headcount in the public sector has been growing significantly since 2015.
Year
General
Government
Government
NPOs
Local
Authorities
Other Local
Authorities
Semi-
Governmental
Orgnisations Total
2009 51,253 5,162 3,332 1,280 9,156 70,183
2010 51,941 5,666 3,397 1,280 9,246 71,530
2011 52,198 5,831 3,516 1,280 8,728 71,552
2012 51,153 5,830 3,714 1,140 8,432 70,269
2013 49,475 5,765 3,502 1,140 8,008 67,890
2014 48,308 5,650 3,219 1,140 7,278 65,595
2015 48,014 5,612 3,127 1,140 6,047 63,940
2016 48,630 5,662 3,144 1,120 5,993 64,549
2017 50,740 5,631 3,112 1,120 5,911 66,513
2018 51,747 5,806 3,090 1,120 5,915 67,678

12. Central Bank of Cyprus: Aggregate Banking Sector Data
https://www.centralbank.cy/en/licensing-
supervision/banks/aggregate-cyprus-banking-sector-
data
CREDIT & NPLs
NPLs have theoretically fallen from
48% total credit in 2014 to 30% total
credit in 2018.
A large share of the decrease is also
due to debt restructuring and asset-
for-debt swaps.
While the NPL share has declined,
access to credit remains difficult given
bank balance sheets.
31/12/2014
Total facilities
(Gross)
€'000
Non-performing
exposures
€'000 NPL Share
Loans and advances Total 57,224,070 27,328,292 48%
General governments 1,170,149 62,304 5%
Other financial corporations 8,602,699 1,019,230 12%
Non-financial corporations 23,570,597 13,667,339 58%
Of which: SMEs 13,827,845 8,809,200 64%
Households 23,880,625 12,579,419 53%
31/12/2018
Total facilities
(Gross)
€'000
Non-performing
exposures
€'000 NPL Share
Loans and advances Total 33,892,413 10,278,431 30%
General governments 196,255 349 0%
Other financial corporations 5,617,632 329,172 6%
Non-financial corporations 14,354,286 4,777,154 33%
Of which: SMEs 10,469,355 4,084,291 39%
Households 13,724,240 5,171,756 38%

13. World Economic Forum Ranking: Improvement to 44th place in 2018, up from 64 in 2015
IMPACT: WEF RANKING
World Economic Forum http://www3.weforum.org/docs/GCR2017-2018/03CountryProfiles/Standalone2-pagerprofiles/WEF_GCI_2017_2018_Profile_Cyprus.pdf

14. World Bank Ease of Doing Business Survey: fall from 41 out of 190 economies in 2015 to 57 in 2018.
IMPACT: WB BUSINESS RANKING
Trading Economics using World Bank Data https://tradingeconomics.com/cyprus/ease-of-doing-business

15. IMPACT: FDI INTELLIGENCE RANKING
FDI Intelligence https://www.fdiintelligence.com/Locations/Singapore-tops-fDi-s-Smart-Locations-of-the-Future-2019-20-ranking

16. The Investor Citizenship Programme has
attracted significant criticism from some EU
countries as well as the OECD.
A total of 3,255 passports have been granted
between 2009-2017 (Philenews, 2018).
Total revenue from the programme is estimated at
€ 4.8 billion from 2014 to 2017. (Lakkotrypis,
2019).
New direct ICP grants (not counting family
members) are capped at 700 per year.
Citizenship remains an exclusive issue of national
sovereignty within the European Union.
INVESTOR CITIZENSHIP PROGRAMME
2008 – 2010 55 investors only
2013 112 investors & family members
2014 400 investors & family members
2015 679 investors & family members
2016 904 investors & family members
2017 1013 investors & family members
Foreign demand for 600-700 passports per year is likely to
remain strong given global GDP growth, population growth
and the number of millionaires being created world-wide

17. 1. The Cyprus economy remains dependent on foreign capital inflows as well as
expertise in key sectors.
2. Successive Cypriot governments have a strong track record of (a) designing legal
incentives and regulatory systems, and (b) attracting significant and tangible foreign
investment. When done correctly, this brings strong results.
3. The reform of the wider public sector remains a critical issue. Quality and
transparency of governance, strategic planning and move to an internet-based e-
government remains a challenge.
CONCLUSIONS TO PART 1

18. 1. In many respects, Cyprus runs a “looser” regulatory regime that other jurisdictions.
OBSERVATIONS
HNWI Incentive: 60 days
residence vs. 180+ days in
most other jurisdictions
OECD Issue
Cyprus company registration: Nearly no
requirements
Jersey company registration: must be a resident
and get a business license
2. Responsibility for compliance is shifting from government to the banking system as well as
accounting firms with fiduciary responsibilities. This distorts normal economic activity.
3. There is little confidence that superficial policy amendments will solve any root cause problems.
For example, contributing EUR 75,000 to the Public Housing Fund as a condition for citizenship
is probably not going to result in affordable housing. Neither will government subsidies for
“innovative companies” result in real innovation.

19. 4. The Investor Citizenship Programme may be the latest example of “Dutch Disease”. High
capital inflows for citizenship investments are making real business activity in Limassol, Nicosia
and other areas increasingly unprofitable. The quality of services is also falling as a result.
5. There are significant doubts whether real solutions to NPLs and real regulation of the financial
sector is taking place. In many cases, bureaucratization has replaced regulation. Many
institutions are also not aware of regulatory reach or limits.
6. New EU regulations continue. 2020 will bring even higher compliance costs and issues for
financial and non-financial firms alike.
OBSERVATIONS (2)

20. KEY EXOGENOUS RISKS
RISK DESCRIPTION LIKELY IMPACT CHANCE
Geopolitical
Risk
Turkey: Relations deteriorate leading to limited
armed conflict or clashes offshore (see ENI).
Israel: A regional war between Israel and its
neighbours or non-state actors
Russia: Further embargos or issues lead to
limiting the business relationship
Confidence in Cyprus diminishes
Capital & labour flight
Disruption of flights, tourists and
financial flows to Cyprus
In some scenarios: business
opportunities
SIGNIFI-
CANT
Regulatory
Overshoot
International regulatory requirements continue to
increase, making costs of compliance difficult.
This is clearly seen today, driven by EU and
OECD initiatives.
Higher compliance costs
Confidence in Cyprus diminishes
Capital & labour flight
HIGH
US Treasury
operations
Under the guise of AML and anti-terror
financing, the US Treasury is placing severe
pressure on Russian owners of bank accounts.
A significant number have been closed.
Deposit flight
Investor flight
Asset base and income of
Cypriot banks falls still further
Confidence in Cyprus diminishes
HIGH
International
financial crash
An emerging debt crisis or a real US-China
trade war, and/or a further European debt crisis
Lower overall capital and trade
flows; synchronized recession
HIGH

21. KEY ENDOGENOUS RISKS
RISK DESCRIPTION LIKELY IMPACT CHANCE
Regulatory
Error or
Capture
The key risk is whether Cypriot regulatory
authorities have the resources necessary to
implement their mission. For example: are Forex
companies properly regulated in Cyprus?
Further damage to the business
reputation of Cyprus
Financial damage to investors in
specific segments.
HIGH
Regulatory
Overshoot
Cyprus regulators overstep their bounds. Rather
than smart regulation, regulatory authorities rely
on high bureaucratic procedures.
Higher compliance costs
Lower regulatory quality.
HIGH
Revisions to
ICP or HNWI
Incentives
Further revisions are made to bring Cyprus
standards on substance, residency duration, or
citizenship grants in line with OECD practice.
Cyprus incentives lose their
attractiveness compared to other
onshore or offshore jurisdictions.
HIGH
Labour &
Input Price,
Quality and
Availability
Recruiting and retaining the qualified, highly
skilled managers and staff needed is becoming
more expensive and difficult. All costs are rising.
Labour imports or labour
offshoring; rising costs for
investors.
HIGH
Lower Banking
Effectiveness
High costs of banking for foreign investors; low
bank productivity; high bureaucracy and
compliance; low capital availability
Investors focus on jurisdictions
with a better financial or fintech
ecosystems.
HIGH

22. A further issue is the extent to which the Cypriot government can reform public sector operations
and create a level playing field.
• Domestic investor have significant systemic advantages over foreign investors (IBU fees; asset
valuation and access, capital access; Cooperative Bank liquidation);
• The court system takes far too long to hear and decide cases;
• Taxes and costs are increasing; quality and speed of operations is decreasing;
• Key institutions, such as the Cyprus Registrar of Companies, have not adapted to the internet
age; the process of registering and managing a company has become bureaucratic and costly
due to domestic protectionism;
• The government is expanding public sector recruitment; increasing public sector salaries; and
delaying liberalisation in key sectors;
• Key semi-governmental organisations have lapsed into heavy financial losses and are being
maintained due to their regulatory backing and public sector payroll;
• Other jurisdictions, such as Ireland, Malta, Estonia and Lithuania are reinforcing and enhancing
their competitiveness across the spectrum of operations.
OTHER KEY ISSUES

23. JURISDICTION
RISK MITIGATION: STRATEGIC
1. How does Cyprus fit into your wider business strategy given the increasing
specialisation of other jurisdictions? For example: if you are a tech startup, and
you seek a higher pre-money or post-money valuation, Dublin or Amsterdam
have a deeper ecosystem and offer better valuations and exits. Lithuania has the
best fintech regulatory licensing system. Ukraine has a deeper talent bench.
2. Compliance and regulation costs are going to increase in coming years in all EU
jurisdictions. GDPR and the coming ePrivacy Regulation are good examples.
What is your strategy for this?
BREAK-EVEN 1. Have you correctly calculated your break-even point? Are your Cyprus tax
savings high enough to justify the added costs needed to achieve them?

24. BANKING
RISK MITIGATION: DEFENSIVE / COSTS
Develop multiple banking relationships inside and outside the EU.
Ensure access to funds and watch for deposit insurance levels. Remember what
has happened with depositor insurance in “non-systemic banks”.
Have at least one fintech provider such as Revolut or N26.
PROPERTY
STAFF Have a reliable Cypriot partner
Ensure non-compete, retention and indemnity contracts with CY or fiduciary staff.
Consider talent offshoring or onshoring in EU.
Form alliances with universities or vocational training schools to access talent. Use
HRDA, Erasmus, internships, and other tools to develop talent.
Invest in training, productivity, IT.
Current valuations of older property in Limassol favour buying rather than renting. (This
refers to rental / purchase cost comparison, not future capital appreciation).
Larnaka and Paphos remain significantly undervalued compared to Limassol or Nicosia.

25. SHARED
ECONOMY
RISK MITIGATION: AGGRESSIVE / INNOVATIVE
Do you need to bear all costs on your own? Can you form alliances or
partnerships with other firms facing the same challenges?
INNOVATION &
DISRUPTION
DIGITAL /
PRODUCTIVITY
What investments are you making to raise productivity, raise client
relationships and raise market standing via digital transformation or wider
productivity initiatives?
Why is there no digital bank in Cyprus?
Strategic investments in key segments such as high speed telecoms, co-working
spaces, other Cyprus substance solutions, student housing, seasonal staff
housing, small-footprint offices, digital banking, digital credit offer good return
potential. Consolidating and upgrading traditional segments such as HORECA are
a major opportunity.
CONSOLIDATION Cyprus is oversupplied with small, less-productive service providers across
the value chain. A large part of this is also due to generational change. What is
being done to consolidate these and gain economies of scale?