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Elias Neocleous: Restoring Cyprus’ name and good reputation a matter of urgency

The government, in close cooperation with the private sector and with the help of expert advisers, must embark on a coordinated campaign to restore Cyprus’ name and good reputation – as a matter of urgency – according to Elias Neocleous, Managing Partner at Elias Neocleous & Co LLC.

In an interview with InBusinessNews as part of its “IN Business Forecasting 2024” series, Neocleous mentions that one of the main challenges facing the Cyprus economy in 2024 is the potential impact from recent negative international media reports on the country’s reputation as a sound business centre.

Another big challenge, he said, is the possible adoption of regulatory, compliance and tax provisions, whether at a European or international level, that work against Cyprus’ appeal as a destination for international businesses and investments.

“It goes without saying that Cyprus has no other choice but to comply with such regulatory, compliance and tax provisions, but this must be done in a way that does not diminish its competitiveness and attractiveness as a regional business and financial centre, but also investment destination,” said Neocleous.

As for the professional services sector, including legal services, Neocleous anticipates even more changes in 2024, what with the impact of technology and various other developments affecting the industry.

"The proper management and utilisation of all the opportunities and challenges that technology has to offer will be key to the success and development of our industry's services," he points out.

How do you see the economic environment shaping up in 2024, in light of inflationary pressures, high interest rates and unpredictable ever-changing geopolitical developments?

As the latest macroeconomic forecasts for Cyprus showed, after the strong growth of 2022 which reached 5.6%, economic activity was expected to fluctuate in 2023 to 2.3%, while in 2024 it is expected to slow down to 2.7%, which is one of the highest indicators in the EU amid persistent inflationary pressures and rising interest rates.

After peaking in 2022 at 8.1% and despite upward pressures from partial wage indexation, inflation was expected to moderate as global energy prices and supply chain disruptions were expected to ease.

Nevertheless, given that these forecasts were drawn up before the outbreak of war in Israel, there is relative uncertainty as to the potential economic impact for the year 2024, which as expected will depend on the duration, extent but also the intensity of the war.

It is worth noting, however, as also stressed by the Governor of the Central Bank of Cyprus during the Standing Committee on Financial and Budgetary Affairs’ meeting on the 2024 annual state budget, that the Cyprus economy recorded significant annual growth in the range of 2.6% in the first half of 2023, compared with 7.1% in the same six-month period the previous year, despite the ongoing war in Ukraine and the subsequent international sanctions that were imposed on Russia, which shows how resilient the Cyprus economy is.

Furthermore, the country’s small size makes it more flexible to adjust to any adversities and difficulties.

Therefore, my forecast for the economic environment of 2024, taking into consideration the abovementioned challenges but also the war in Israel, remain optimistically positive, due to the fact that the Cyprus economy has already proven its resilience and flexibility.

What do you consider to be the biggest and most difficult challenges that the Cypriot economy will have to face?

Following the successive crises of the previous years, the economy of Cyprus is once again at a critical juncture.

The geopolitical unrest in the Middle East has now been added to the challenges that the Cyprus economy will have to manage, with the sole objective being to emerge unscathed and stronger.

The biggest and most difficult challenges I predict the Cypriot economy will face are a potential economic slowdown and higher inflation in the event of a prolonged war in Israel, and potential stagflation in the event that the war in Israel escalates into a regional conflict.

Additionally, another major challenge will be the possible adverse effects on the country's reputation as a sound business centre due to various recent negative publications in the international press.

Nevertheless, as I already mentioned above, our country has repeatedly proven its flexibility and ability to face even the most difficult conditions.

Would you say that, taking into account the latest upgrades, the economy of Cyprus is now well on its way to growth?

All the necessary conditions seem to be in place, and indeed to a greater extent than at any other moment in time.

The positive characteristics of the business world and the executive potential of the country, the flexibility and timely turning of business actions towards the most suitable sectors and towards cutting-edge objects, the institutional framework related to investments and establishment, the support of the state, all driven by both the establishment of appropriate business and investment incentives, as well as economic, cultural and educational diplomacy, allow for optimism that we are on a path of growth and that the next year can also close on a positive outlook.

Despite this, I am concerned about the large increase in fiscal expenditure and the state payroll, and I believe that Cyprus’ economic stability should act as the pillar and compass for reverent adherence to the rules of fiscal discipline which will support and be supported by the increase in productivity, as well as a continuous and fast rate of introducing reforms that will make our country more competitive in the international business environment.

How do you believe your industry will fare in 2024?

In addition to what I mentioned above about my forecasts for the economy in general, specifically for the services sector and, in particular, legal services, the geopolitical unrest and the uncertainty surrounding how it will progress, but also the need to properly manage the effects that the negative publications about Cyprus may have, are very important.

Also, another big challenge for Cyprus will be the possible adoption of regulatory, compliance and tax provisions either at the European or global level, which are likely to operate in a way that will reduce Cyprus’ appeal as a destination for international businesses and investments.

It goes without saying that Cyprus has no choice but to comply with such regulatory, compliance and tax provisions, but this should be done in a way that does not reduce its competitiveness and attractiveness as a regional business and financial centre, as well as an investment destination.

The situation so far, however, shows that any fears of a dramatic impact on our sector will prove to be excessive, while the country seems to be making satisfactory use of the alternatives, such as opportunities arising from its participation in the EU.

In terms of the general economic activity that the legal services sector depends on and goes hand in hand with, it is realistic to estimate that Cyprus will remain and continue to grow as an attractive business and investment destination, with a clear positive impact on all sectors; under the obvious condition that the feeling of security will be strengthened and that our country will continue to be an even bigger pillar of stability in the wider region.

What are the biggest industry trends/changes you anticipate in 2024?

As is already well evident, technology has entered and interactively affects the field of professional services, including legal services, and therefore it is expected that even within 2024 there will be even more changes due to the impact of technology and the various developments it brings about in the field of professional services.

The proper management and utilisation of all the opportunities and challenges that technology has to offer will be key to the success and development of our industry's services.

What are the most significant problems currently affecting your sector, the resolution of which you believe should be set as a priority in the new year?

One of the chronic problems that have been plaguing our sector and consequently the administration of justice in Cyprus, is the delays in court proceedings and the time-consuming bureaucratic procedures followed in the courts.

The government in close cooperation with the Supreme Court of Cyprus and others, in recent years and with the use of technology, is in the process of reforming the courts and strengthening the justice delivery system.

Among other things, they have already implemented electronic justice through, initially, the i-justice system which has been operating since July 2021, and in a second phase through e-justice which is now in the process of being activated.

Furthermore, the new Rules of Civil Procedure came into effect in September 2023, which among other ensure the timely scheduling of the case from the get go and the fair distribution of judicial time, through strict timeframes that are predefined.

The benefits and progress from these reforms and procedures are expected to become evident in the next few years, offering hope that this significant problem marring the sector will be resolved.

If you could ask the government for specific measures or the formulation of policies to support/reinforce your sector, what would these be?

The government, with the help of experts from abroad, must seriously consider restoring the good name and reputation of the country, in view of the defamatory reports circulating the international media.

Being in the business of providing professional services, we are well aware of how important a country’s reputation is in achieving beneficial international collaborations and attracting foreign investments and clients.

The recent international media reports tarnish Cyprus’ good name in a way that does not reflect reality, as they refer to isolated bad practices of the past without acknowledging the huge progress that has been made in recent years in Cyprus in the fields of supervisory and regulatory compliance.

The government, in close cooperation with the private sector and with the help of expert advisers, must embark on a coordinated campaign to restore the name and good reputation of our country. This is a matter of priority.

What is your organisation’s plan/strategy for 2024?

Regarding our expectations for the year 2024, as a company, we believe that these are supported and verified by the foresight we demonstrate and careful planning in pursuit of our realistic future goals, elements that have always characterised our corporate mentality.

What has consistently established us over many years as leaders in our field of activity will continue to be pursued with unwavering consistency.

The level of our executives and the continuous effort to utilise their skills and ensure their professional improvement and development, the non-negotiable high quality of our services, our sincere interest in achieving the business goals of our clients, the emphasis on the ability to cover every knowledge object of legal interest and specialisation, are just some of our daily goals.

Furthermore, our dedication to innovation and taking advantage of the latest technological advancements, fields in which we clearly lead the way, is evident through our investment in creating the digital legal platform Neolaw.ai, which we aspire and are making positive steps towards developing and upgrading even further.

What role will technology, such as artificial intelligence, play in your sector and what changes do you expect it to bring?

Technology, and artificial intelligence in particular, has already brought and is expected to bring even bigger changes to the legal profession.

Undoubtedly, certain sectors are affected more than others from the technological advancement, with its impact extending from managing legal procedures to automating work routines.

Technological advancement, as it became abundantly clear over the past year, directly affects the legal sector, given that artificial intelligence programmes can now be used, with the necessary safety clauses, to automate legal operations, such as executing legal research, preparing various documents faster and more effectively, and direct contact and communication with clients.

Here I would like to mention a very important award our office received at the 15th IN Business Awards, and specifically in the newly-introduced category “Business Innovation”, among a number of very well established other businesses.

Our recognition in this category was a great honour for our office. By creating the revolutionary digital legal service Neolaw.ai, we showed that we are not only concerned about developing new services and ideas, but also willing to carve out the way for the technological advancement and innovation of the legal business world.

The pioneering digital legal service Neolaw.ai marks the beginning of a path that is set to lead to the very promising technological advancement of the legal profession.

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