The collapse of the Cypriot banking system in March and the introduction of tough fiscal measures to steady the country’s economy, took the shipping industry massively by surprise. But while the Limassol-based shipping industry backed up by the Nicosia government has been quick to proffer a message of business as usual, it has opened the door to the debate on Cyprus’ future and the potential for a possible successor to the Mediterranean island as a major shipmanagement cluster.

According to a report by Ernst & Young, the island’s business credentials will remain largely unaffected by the crisis.  “Despite the planned change in taxation, the favorable environment of Cyprus for the international businesses companies remains significantly unaffected”, it said.

But while the country continues to promote its position as an attractive international centre, there are concerns, internally, that the situation was allowed to happen in the first place. And there are wider concerns about the overall viability of the Eurozone itself.

Since the day the bank sector collapsed with Laiki Bank going bankrupt and Bank of Cyprus being restructured, the large shipping companies which operate and have bank accounts in other jurisdictions did not face that much problem in terms of cash flow. But the smaller players, who are Cyprus based, were in trouble. As far as the shipping industry was concerned there was panic, but this has been overcome and now people are concerned about the validity of the European Union.

The European Union is not helping the shipping industry and it is very slow, and shipping has been drifting away from Europe because has not been reliable and acted badly and are moving towards Hong Kong and Singapore which are more user friendly.

Mr Andreas Hadjipetrou, Deputy Managing Director of Columbia Shipmanagement, while being asked whether companies will start to move money out of Cyprus he quoted:

“There is surely a risk that some of the companies conducting their banking here in Cyprus, but who were not doing it with the two main banks, would move money out of Cyprus.  So, the banking sector would obviously shrink and would be affected by this change but the fact that local companies do have offices here and do employ qualified people out of Cyprus does not mean that they will close their businesses or will move out of Cyprus”.

Mr Hadjipetrou is not concerned that Cyprus will shrink as a maritime centre although he believes it will be tough for the island to bounce back. He also believes that it will take some time to reach the same level as before. We should not forget that Cyprus is still an attractive location to do business and the country’s tax regime has not been significantly affected, since the 12.5% rate is still quite good, whereas the personal taxation remains better than most European countries.

Cyprus is a country with a very nice climate and people do like to live here and taking into concern its small size and economy, it is easy to bring things back to where they were.

According to Mr Thomas Kazakos, Director General of the Cyprus Shipping Chamber, despite the imposition of the banking restriction after the banks reopened on 28thMarch shipping has been unaffected.

Mr Philippos Philis, Chairman and CEO of Lemissoler Navigation, shared the same views by saying: “It is still the case that Cyprus is an attractive centre for shipping – there has been no impact at all. Because there is no impact even on money that was initially blocked, they have been released apart from those that we need to prove are client accounts but practically speaking all new money coming in is fully released. We are operating 100% uninterrupted.”

The government has announced a number of undersecretary positions – one for shipping and one for tourism. Tourism is improving, Shipping is something they pay a lot of attention to and one of the primary tasks of the new undersecretary is to market the tonnage tax and attract more companies to relocate to Cyprus, according to Mr Philis.

The government and fiscal authorities have sought to help shipping to operate without significant interruption and to preserve outside confidence in the industry. These restrictions are being reduced by the day. It is, however, now most imperative that all restrictions are lifted the soonest, and the shipping industry’s aim is to reduce to the least possible extent the exposure of shipping companies to the affected banks.