Cyprus: The Island of Business Opportunities in the Mediterranean

Francisco A. Laguna & Wojciech Kornacki

Cyprus is a rising regional transport hub in the Mediterranean.  The island’s economy has recently been rated one of the top 10 fastest improving economies with great potential in 2016, and thereafter. What is unique about Cyprus is that it is located near the Middle East but is also member of the European Union, and its official currency is Euro.

Cyprus (dark green) is a member of the European Union (EU members are in light green) that is located in the Southeastern Mediterranean. With its brand new multi-million private main port                    for trade, Cyprus it set to become a major transport and logistics hub in the Mediterranean.

Cyprus (dark green) is a member of the European Union (EU members are in light green) that is located in the Southeastern Mediterranean. With its brand new multi-million private main port for trade, Cyprus it set to become a major transport and logistics hub in the Mediterranean. Courtesy of http://en.wikipedia.org.

Cyprus: Business Intelligence Summary

Cyprus is the largest island in the eastern Mediterranean, and although it is divided between Turkey and Cyprus, the whole island is considered to be European Union territory.  It population is approximately 800,000.  In 2015, country’s GDP was 17,421 billion Euros (~ US$ 19 billion), and it is expected to grow rapidly in the future. After significant reforms in business regulations, Cyprus is showing significantly improved economic performance. In addition, Cyprus is pushing hard to re-unify the entire island which would most likely create many new investment opportunities on the Turkish side of the island.

Currently, transport, trade and accommodation are some of the most important sectors of Cypriot economy.

Regional Transportation Hub

Cyprus’s commercial fleet is third largest in the European Union. Recently, the European Union has invested millions of euros to make Cyprus one of its main sea transport and logistics hubs.  In the last 2 years, that investment has transformed Cyprus’s main port, Limassol, into one of the most efficient and modern ports in the southern Mediterranean. The estimated economic benefit to the island approaches 2 billion Euros. In 2015, the port was privatized, and since then, it has breathed new life into Cyprus. Additional construction projects for oil and gas offshore bases and terminals are in progress. The port is expected to be fully operational in early 2017. Since the European Union is seeking to make Limassol a critical logistics hub in the region, and many European and international companies have already invested in it, this offers a great opportunity for additional business prospects in Cyprus.

Cyprus’s tourism and accommodation sectors are very well developed and continue to attract new investors. In addition to many very favorable tax and investment incentives, Cyprus is engaged in re-unification discussions which will create additional business opportunities in the areas of gas exploration, banking, and tourism on both sides of the island.  Courtesy of http://en.wikipedia.org

Cyprus’s tourism and accommodation sectors are very well developed and continue to attract new investors. In addition to many very favorable tax and investment incentives, Cyprus is engaged in re-unification discussions which will create additional business opportunities in the areas of gas exploration, banking, and tourism on both sides of the island. Courtesy of http://en.wikipedia.org.

Opportunities in a Re-Unified Cyprus

While Cyprus has experienced significant economic growth, the Turkish Cyprus remains less developed, and its economy is much smaller. It is estimated that by 2035, a reunified Cyprus could generate 45 billion Euros or (~ US$ 50.5 billion) in economic output – more than double than what it is now. Re-unification would make it very easy for many companies to start developing the recently discovered gas fields on the Turkish Cyprus side. It would also lift the Turkish embargo on Cyprus-flagged ships which would dramatically increase shipping and transshipment of containers through Cyprus to Asia and the Middle East. Since the re-unification appears almost imminent, and both sides are aware that it makes economic sense, the time to consider Cyprus for investment and business opportunities is now.

Contact TransLegal with your questions concerning business opportunities in Cyprus.

Future Business Opportunities in Iran

Francisco A. Laguna & Wojciech Kornacki

Under normal conditions, a country with a well-educated population, a large middle-class, 9% of proven world oil reserves, 18% of proven global gas reserves and an abundance of strategic minerals would be an excellent place to invest.  Unless, the country is Iran, which is currently subject, rightly, to complex and multi-faceted international financial and other sanctions that have reduced its economy by about 15 to 20%.  This may change soon, however, as Iran attempts to end its economic isolation.

According to a 2007 Goldman Sachs report, Iran’s energy sector, technology, and human capital could make it particularly attractive for foreign direct investment.  Now that there is a possibility that sanctions may be lifted, many national and private investors want to position themselves to benefit from the new and very attractive market when (and if) it opens.  Countries such as China, Russia, Turkey and various European countries are already preparing for the sanctions to be lifted.

Currently, the United States and Iran are engaged in extensive negotiations over Iran’s nuclear program.  Depending on the outcome, certain sanctions could be lifted against Iran.  This would open its oil, gas, technology, human resources, natural resources, automotive, airline, hospitality and tourism, and many other industries to foreign direct investment, and it would create billions of dollars’ worth of business opportunities in Iran and the world.   Courtesy of http:// http://en.wikipedia.org

Currently, the United States and Iran are engaged in extensive negotiations over Iran’s nuclear program. Depending on the outcome, certain sanctions could be lifted against Iran. This would open its oil, gas, technology, human resources, natural resources, automotive, airline, hospitality and tourism, and many other industries to foreign direct investment, and it would create billions of dollars’ worth of business opportunities in Iran and the world. Courtesy of http:// http://en.wikipedia.org

The expectation is that once sanctions are removed, new opportunities will create billions of dollars’ worth of business for local and international companies.  Essentially, Iran could be the “next big thing” (once the sanctions are lifted) after the opening of the markets in Central and Eastern Europe.  Some of its regional trading partners expect that their economies will also grow once the sanctions are removed.

Investors are already holding discussing Iran’s oil industry and auto industry.  Indeed, many international energy companies are very interested in Iran, including Royal Dutch Shell Plc, British Petroleum and Total SA.

Not all sanctions will be lifted overnight, and some sanctions may continue for years to come.  In addition to keeping an eye on the international sanction regime, a prudent investor should also consider the following Iranian industries, once the sanctions are removed.

Banking: New businesses and residents will require both domestic and international banking services.  The international banking community has started looking at the country’s potential.  It will be interesting to see which banks move in first.  Will the Swiss join?

Iran’s domestically developed drone capable of traveling almost 2,500 miles.  Due to sanctions, Iran has been forced to develop its own technologies.  Collaboration between international and domestic businesses partners is estimated to create millions of dollars’ worth of business, once the sanctions are lifted.  Courtesy of http:// http://en.wikipedia.org

Iran’s domestically developed drone capable of traveling almost 2,500 miles. Due to sanctions, Iran has been forced to develop its own technologies. Collaboration between international and domestic businesses partners is estimated to create millions of dollars’ worth of business, once the sanctions are lifted. Courtesy of http:// http://en.wikipedia.org

Construction / Real Estate:  Many Middle Eastern businesses are interested in Iran’s real estate market.  The lifting of sanctions is likely to result in the return of some of the Iranian diaspora as well as representatives of multinationals and other companies that will invest in the country.  This will create the need for housing and, as the economy progresses, more luxury condominiums and residences with Western amenities.

Consulting Services: International businesses are likely to begin working to pre-position themselves in a post-sanctions Iran.  To be successful in the country, businesses will need reliable consultants to assist them navigate cultural nuances, language barriers and business practices, including the practice of gift-giving.

Natural Resources and Minerals: After years of sanctions, Iran desperately needs billions of dollars to make its oil industry profitable again.  In 1974, Iran pumped 6 million barrels per day; today, it only pumps 2.8 million.

Cube of Zoroaster.  Iran’s rich culture spans over thousands of years.   This tower-like construction was in the 5th Century BC.  Iran’s tourism and industry are likely to grow fast once the sanctions are removed.  Courtesy of http:// http://en.wikipedia.org

: Cube of Zoroaster. Iran’s rich culture spans over thousands of years.
This tower-like construction was in the 5th Century BC. Iran’s tourism and industry are likely to grow fast once the sanctions are removed. Courtesy of http:// http://en.wikipedia.org

Tourism and Hospitality: Before the Iranian Revolution, Tehran was touted as one of the most cosmopolitan cities in the region.  Years of isolation and religious extremism have crippled Iran’s tourism and hospitality sectors.  As Iran seeks to re-open itself to the world, it will have to modernize these sectors, and FDI is the perfect means of accomplishing this goal.  There is much work to be done, however, for these sectors to be viable contributors to the Iranian economy.  Currently, tourism in Iran accounts only for 2% of the entire GDP; in most countries, it is typically around 5%.

It will be interesting to see how the government will approach FDI in strategic sectors such as banking, minerals, natural gas and oil, as well as non-strategic sectors.  How will it allow such investments to be structured?  What ownership percentage will be permitted?  What about repatriation of capital / profits or termination of investments?  How will corruption manifest itself? Equally important, how will it treat different religious views and cultural morés?

If sanctions are lifted, Iran will be an emerging economy.  It will not have the bargaining power of economies such as China that can exact concessions from investors.  The manner in which the government treats international investors will largely determine the success of a post-sanctions Iran.  Given the political and religious turmoil plaguing the larger region and the very real threat of terrorism, corporations will be cautious of investing financial and human resources for a deal that is overly burdensome with uncertain financial returns.

If you are interested in learning more about future business opportunities in Iran and how to increase your chances of harnessing them, contact TransLegal or call 703-566-9427.

Business Opportunities in Iraqi Kurdistan

Francisco A. Laguna & Wojciech Kornacki

Iraqi Kurdistan offers the security and numerous investment opportunities that are currently hard to find in other parts of Iraq or Central Asia. Since the fall of Saddam Hussein in 2003, the region has experienced dramatic economic growth and political stability that continue today, despite the violence in other parts of Iraq. Iraqi Kurdistan has become a magnet for foreign investors and foreign direct investment.

Background on Iraqi Kurdistan

Currently, Iraq is a federated state, and Iraqi Kurdistan is one of the federally recognized regions of Iraq. Iraqi Kurdistan is located in a strategic location between Turkey, Iran and Syria. It has enjoyed local autonomy for the last 45 years. Since the fall of Saddam Hussein, it has had a democratically elected Parliament and vibrant government institutions which are openly pro-Western. The population of Iraqi Kurdistan exceeds 5.2 million and estimated GDP per capita was ~ US$ 4,500 as of 2011.

"Autonomous Region Kurdistan en" by Maximilian Dörrbecker (Chumwa),derviative work by ilyacadiz - Autonome Region Kurdistan (Karte).png. Licensed under CC BY-SA 3.0 via Wikimedia Commons

“Autonomous Region Kurdistan en” by Maximilian Dörrbecker (Chumwa),derviative work by ilyacadiz – Autonome Region Kurdistan (Karte).png. Licensed under CC BY-SA 3.0 via Wikimedia Commons

In the last several years, Iraqi Kurdistan has been undergoing rapid development. The region has experienced an estimated 12 percent growth, one of the highest in the world.  Major trade partners for Iraqi Kurdistan are Turkey, the United Arab Emirates, the United States, and the European Union.

The capital of the Kurdistan Regional Government is Erbil – perhaps one of the oldest cities in the world.  According to the Kurdistan Regional Government’s official website, the Kurdistan Parliament has passed progressive investment and oil and gas laws which have contributed to economic growth and stability. The region has 2 international airports and approximately 12 major international airlines offer direct flights there.

Investment Opportunities

Iraqi Kurdistan appears to be one of the best places to invest in the region because of its current need for foreign direct investment, security and flexible and transparent investment laws. The Kurdish Regional Government allows for full repatriation of profits, investment with or without local partners, a 10-year exemption from corporate taxes, and a 5-year exemption from customs duties. Needless to say, this makes Iraqi Kurdistan much more investment-friendly than the rest of Iraq or the region.

Canyon in Rawanduz in northern Iraqi Kurdistan, offers some of the most beautiful scenery in Asia.  While exports of natural resources are highly profitable for the Kurdish Regional Government, the tourism industry accounts for almost 20% of the region’s GDP.   It is likely that this industry will also experience substantial growth as the interest in Iraqi Kurdistan continues to accelerate, and 2 international airports with multiple international airlines offer easy access the region.  Courtesy of http:// http://en.wikipedia.org.

Canyon in Rawanduz in northern Iraqi Kurdistan, offers some of the most beautiful scenery in Asia. While exports of natural resources are highly profitable for the Kurdish Regional Government, the tourism industry accounts for almost 20% of the region’s GDP. It is likely that this industry will also experience substantial growth as the interest in Iraqi Kurdistan continues to accelerate, and 2 international airports with multiple international airlines offer easy access the region. Courtesy of http:// http://en.wikipedia.org.

The Kurdistan Board of Investment makes it easy to identify foreign direct investment opportunities in the Kurdistan region. It lists numerous business opportunities in the areas of real estate, communication, transport, agriculture, education, banking and many others.

Current investment priorities are agriculture, tourism, and various industries that have been largely underdeveloped over the last several decades. In addition, with oil reserves estimated at 45 billion barrels, many international companies have been already heavily investing in the oil and gas industry.

The turning point for Iraqi Kurdistan came when Exxon became interested in its natural resources.  Several years ago, Exxon, the largest international oil company, signed major exploration contracts with the Kurdish Regional Government, and many other international companies followed in recent years, including Total, Gazprom and Chevron.

Sofi Mall, Erbil, Kurdistan.  With its rapidly growing economy and international investment, Erbil and the rest of Iraqi Kurdistan are undergoing massive economic development.  In fact, currently, Iraqi Kurdistan needs approximately $32 billion in investments.  Courtesy of http:// http://en.wikipedia.org.

Sofi Mall, Erbil, Kurdistan. With its rapidly growing economy and international investment, Erbil and the rest of Iraqi Kurdistan are undergoing massive economic development. In fact, currently, Iraqi Kurdistan needs approximately $32 billion in investments. Courtesy of http:// http://en.wikipedia.org.

Currently, the Kurdish Regional Government continues to export oil to markets around the world, including the United States. Despite igniting a legal battle with the Iraqi Government, the highly profitable exports have not stopped.

If you would like to take the first step and learn about investment opportunities in Iraqi Kurdistan, contract TransLegal – your one source for comprehensive international commercial consulting services.