Focus on NEX-LABS Best Practices in Cyprus highlight the establishment of sustainability oriented strategies

Image courtesy Ricardo Gomez Angel su Unsplash

During the past months, NEX-LABS project partner countries have worked with an incredible commitment to defining a list of their country-specific best practices, which are helpful to build a resilient, sustainable, and inclusive Mediterranean ecosystem for water, energy and food security.

Best practices are a fundamental ingredient to building a catalogue which can be useful for policy building and for improved local entrepreneurship and community resilience.

The survey conducted in Cyprus, together with research papers, helped define four features of the country’s sustainable development in the nexus of water, energy and food:

Strategic Economic Reforms,
Entrepreneurial Orientation,
Business Environment Improvements, as well as
Digital Infrastructure and Sustainability Strategies.

STRATEGIC ECONOMIC REFORMS

On 25 June 2012, a three year Economic Adjustment Programme was agreed between the Cypriot authorities and the European Commission (EC), the European Central Bank (ECB) and the International Monetary Fund (IMF) on 2 April 2013; Cyprus exited its economic adjustment programme in March 2016. The programme included an ambitious reform agenda and measures designed to address the financial, fiscal and structural challenges facing the Cypriot economy in a decisive manner so as to return to a sustainable growth path. It provided financial assistance up to EUR 10 billion, with the European Stability Mechanism providing up to EUR 9 billion, and the IMF contributing around EUR 1 billion. Eventually Cyprus used EUR 7.3 bn, EUR 6.3 billion from the ESM and EUR 1 billion from the IMF. Cyprus fully repaid its IMF loan in February 2020. The repayment of the ESM loan principal by the Cypriot Government (EUR 6.3 billion) will start in December 2025 and be fully completed by 2031. Under the repayment schedule, the first repayment amounts to EUR 0.35 bn and it is due for 2025. In the following years until its full repayment in 2031, repayments will reach EUR 0.9-1.05 bn for each year. Cyprus is subject to post-programme surveillance (PPS) and the objective of PPS is to measure Cyprus's capacity to repay its outstanding loans to the European Stability Mechanism (ESM).

The economic adjustment programme addressed short- and medium-term financial, fiscal and structural challenges faced by Cyprus. The key objectives were to

restore the soundness of the Cypriot banking sector and rebuild depositors' and market confidence by thoroughly restructuring financial institutions, strengthening supervision and addressing expected capital shortfalls, in line with the political agreement of the Eurogroup of 25 March 2013
continue the fiscal consolidation process to correct the excessive government deficit through measures to reduce current primary expenditure, and maintain fiscal consolidation in the medium-term, in particular through measures to
- increase the efficiency of public spending within a medium-term budgetary framework
- enhance revenue collection
- improve the functioning of the public sector
implement structural reforms to support competitiveness and sustainable and balanced growth, allowing for the ending of macroeconomic imbalances, in particular by reforming the wage indexation system and removing obstacles to the smooth functioning of services markets.

Since 2016, the Cypriot economy is recording positive growth, over the last 8 years GDP annual growth shifted from 3.5% in 2015 to 6.6% in 2021. In 2022, growth expectations were surpassed, mainly on the back of a strong domestic demand. Real GDP increased by 6.3% in the first half of 2022 compared with the same period in 2021. The vigorous increase of private consumption was mainly supported by an increase in employment and the use of savings accumulated during the pandemic period. Investment increased (except in construction) boosted by the inflow of foreign companies, especially in the information, communication and technology (ICT) sector. It is also profiting from the implementation of the Recovery and Resilience Plan. In contrast, investment in construction took a hit due to the supply disruptions and exceptionally high prices for construction material, and more recently by the tightened financial conditions. Growth was also supported by external demand for tourism and other services, notably transport, information and communication and financial (source Post Programme Surveillance report).

The country is committed to implementing structural and institutional reforms and policies to tackle its challenges. In 2015, a Smart Specialisation Strategy for Cyprus was approved. The preparation and adoption of Smart Specialisation Strategy is an ex-ante conditionality set by the European Commission to the Member States, during the programming period 2014-2020, for the exploitation of resources from the European Structural and Investment Funds for enhancing Research and Innovation (R & I) in areas where each country has a competitive advantage. The priority areas identified through Smart Specialization Strategy are: Energy, Tourism, the Structured Environment/Construction Industry, Transport/Marine, Agriculture/Food Industry and the sector of Health. Furthermore, a number of horizontal priorities have also been identified (such as Information Technology, Environment and Human Resources). According to the Smart Specialization (S3) Platform on the EC website, below are the the identified priorities:

As shown on Smart Specialisation Platform, Cyprus is gaining momentum on its digital innovation hubs. By clicking on each petal, it appears that the country is progressing in Education, Collaborative Networks, Internet of Things and most progress is made in Energy, as well as Agriculture.

ENTREPRENEURIAL ORIENTATION

The above mentioned initiatives showcase how Cyprus is focusing on building an entrepreneurial culture and innovation. This has been facilitated by international financing, but also with its governmental commitment to facilitating access to finance and markets for business innovation, promotion of young scientists and startups communities.

According to EACEA National Policies Platform, in May 2021 the Cipriot Ministry of Energy, Commerce and Industry (Industry and Technology Service) announced the establishment of a Youth Board responsible to promote the Scheme for the development of New Business activity (Σχέδιο Ενίσχυσης Νέας Επιχειρηματικής Δραστηριότητας). More specifically, the Youth Board of Cyprus is responsible for:

The promotion of the program and the distribution of relevant information to young people,
The organization of seminars to present the program,
The provision of technical assistance and other consultation to interested people,
The enhancement of the cooperation among young entrepreneurs participating to the program.

The Scheme aims to provide access to capital and the grant based schemes for young entrepreneurs specific for start-up creation are the following:

The "Students in Action" Program (Φοιτητές σε Δράση) is a grant program, implemented by the Youth Board of Cyprus in cooperation with the Ministry of Education, Culture, Sport and Youth. The purpose of the Program is to support and empower students. The program aims to: enhance research and documentation on youth issues, enhance the employability of young people through strengthening their skills and abilities, strengthen the participation of students and enhance student entrepreneurship.
The "Students in Action" Program supports and is linked to the implementation of the National Youth Strategy 2017-2022(NYS), is the first youth policy document in Cyprus and was established in 2017 by the Youth Board of Cyprus. The document highlights the need to invest in young people and commits the government to identify and address young peoples’ needs. The second plan was outlined in 2021, its creation and monitoring is based on the engagement of multiple stakeholders. The NYS was based on the European Youth Strategy, therefore it has the following main policy fields of action: Employment and Entrepreneurship, Social inclusion, Participation, Education and Training, Health and Well-being, Volunteerism, Youth and the World, Creativity and Culture
The Scheme for the development of New Business activity ("Σχέδιο ενίσχυσης νέας επιχειρηματικής δραστηριότητας") under the umbrella of the Ministry of Energy, Commerce and Industry. The program aims to develop, support and promote entrepreneurship, by focusing on specific target groups, such as young people and women who wish to do business in any economic activity, utilizing their knowledge, experience and talents. Beneficiaries are unemployed or employed, (a) young people aged 18-29, (b) men aged 30-50 and (c) women aged 30-55. Young people aged 18-29 are entitled up to 70% of funding.
The Cyprus Entrepreneurship Fund (CYPEF). As mentioned in the National Reform Programme 2020, the Cyprus Entrepreneurship Fund supports both working capital and investment loans to Small-Medium Enterprises.
Tax incentives. As mentioned in the National Reform Programme 2020, the amended Income Tax Law N135(I)/2016, established a framework of incentives effective from January 2017 until the end of 2020 through tax relief to individuals who invest in innovative Small-Medium Enterprises, including start-ups, either directly or through an investment fund. The incentives provide for the following:

exemption of the investment from the investor's taxable income (up to a maximum amount of 50% of the taxable income);
deduction of up to €150,000 per year as well as the right of allocation and distribution of the
discount in a 5 (five) year period, and investment in shares, loans, or granting guarantees to innovative companies.

As reported in the aforementioned National Reform Plan, the measure was promoted in the context of the Policy Statement on the Enhancement of the Entrepreneurial Ecosystem with the goal to support business innovation and also support the efforts of young scientists and the startup community. Lastly, it has to be underlined the fact that a new law regarding the establishment of Social Enterprises has been voted by the Parliament (December 2020) (ο περί Κοινωνικών Επιχειρήσεων Νόμος του 2010 (Ν.207(Ι)/2020), which creates a positive environment for the creation of new business endeavor for young people.

BUSINESS ENVIRONMENT IMPROVEMENTS, DIGITAL INFRASTRUCTURE AND SUSTAINABILITY

Cyprus is working towards the removal of administrative burdens and to delivering better governmental services through adopting e-Government. As outlined in the European Commission Digital Public Administration factsheet 2022 Cyprus, Cyprus has established digital strategies for:

Digital Public Administration Political Communications

The “Digital Skills – National Action Plan 2021-2025” is a comprehensive and dynamic plan, stipulating a decisive step in the country’s digital transformation. The Action Plan has been crafted taking into consideration the latest developments in the field, considerably, among others, the goals of Europe’s Digital Decade specifically in the area of digital skills and in full alignment and in support of the “Path to the Digital Decade” Policy Programme. The total budget for the Plan, which is included in the National Recovery and Resilience Plan (RRP) amounts to over €24 million for the period 2021- 2026. In November 2021, the Department of Electronic Communications, Deputy Ministry of Research, Innovation and Digital Policy published the National Broadband Plan 2021 – 2025 which point out a roadmap for developing broadband infrastructure in the country, but also for the uptake of high-speed and ultra-high speed broadband services by citizens and businesses. The Broadband Plan includes a set of legislative, regulatory and support actions for the development of state-of-the-art broadband infrastructure.

Digital Public Administration Legislation

The Republic of Cyprus effectively transposed the European Directive 2018/1973/EU on establishing the European Electronic Communication Law into the national legislation in March 2022. The new legislation contributes to connectivity through VHC networks, faster time-to-market for spectrum resources and timely 5G deployment, alongside the take-up of ‘Internet of Things’ applications and innovative services. It ensures that connectivity for citizens and businesses is at affordable prices, through sustainable competition and universal service when needed. It also provides better protection for end-users, addressing new and emerging rights issues based on market developments.

Digital Public Administration Governance

The Digital Security Authority (DSA) acts as the Single Point of Contact and the National Competent Authority (NCA) for implementing the NIS (Network and Information Security) Directive (EU) 2016/1148 in Cyprus, whilst also incorporating the National CSIRT (CSIRT-CY). It covers all of the sectors mentioned in the NIS Directive (energy, transport, banking, financial market infrastructures, drinking water, health, digital infrastructures), as well as many governmental services and the electronic communications sector.

Digital Public Administration Infrastructure

Cyprus is developing a government e-Consultation Portal which aims to serve as a single space where all public consultations will be published. The platform will enable citizens to submit comments/suggestions to all open public consultations, follow certain consultations in real time, receive notifications and also access all comments submitted by citizens/organisations as well as the public bodies’ responses to them. The portal is expected to be serviceable for the public during the second quarter of 2022.

All of the above is also included in the Digital Strategy Plan 2020-2025.

Through technology and innovation the country is creating a fertile business, youth and citizenship environment and addressing sustainability challenges, whether economical, social or environmental.

Awareness campaigns must be run in an effective and efficient way enabling enterprises and citizens to participate in the transformation process.

Other best practices include building smart factories and ensuring digital infrastructure through digital innovation hubs and technology transfer offices. Some are RIF Knowledge Transfer Office the country has been long working toward the establishment of a National Technology Transfer System.

In July 2021 Unite4Horizon informs us that Cyprus’ National board for Research and Innovation (CYRI) published on May 2019 a new strategic framework called ‘2019-2023 INNOCATE CYPRUS’ which aims to set Cyprus on a new roadmap towards growth by implementing strategies that are going to increase the research and development (R&D) spending in Cyprus.

“Achieving the objectives of a new national development Strategy would require a significant increase in national investment for R&D, which is a significant indicator for the maturity and effectiveness of national R&I ecosystems. Adopting an ambitious national target for R&D expenditure to reach 1,5% of GDP by 2023, which translates into approximately 280 additional Mil. Eur channelled annually into the national R&I ecosystem, will intensify R&D activity, and will help Cyprus move up from the 25th place to one of the first 12 places in EU in R&D investment intensity”.

The national framework revolves around 9 strategic pillars and is of strategic importance.

Those pillars are:

Governance
National R&I Strategy
Research excellence
Knowledge transfer and commercial exploitation
Innovative entrepreneurship
Cultural change
International dimension
Communication
Digital transformation

The fourth pillar ‘Knowledge transfer and commercial exploitation’ is focusing on enhancing knowledge transfer among the science community, the public sector, the business sector, and the society. The purpose of the framework is to facilitate commercial exploitation of new knowledge and technology, aiming at developing competitive and added-value products, services and processes and supporting social innovation. In Essence, the fourth pillar aims to further link the research community to the business sector and will direct research activity to areas that better address current and future needs of the industry and the Cyprus economy, contributing to the increase of R&D investments of the private sector.

CYRI has come up with a few policies to promote University-business collaboration (UBC).

Redefine the mission of public and private Universities and research institutes to include knowledge transfer along with education and research.
Effective protection of intellectual property rights.
Intellectual property right regimes, institutional policies, and incentive schemes for technology transfer, with a fair share of income for researchers (in royalties and spin-offs).
Legislative frameworks and regimes encourage the exploitation of research results and the creation of faculty spin-offs and start-ups, particularly in publicly funded universities and research institutions.
Having in place a dedicated knowledge transfer office, with critical scale, experience, and expertise. The development and operation of a central Knowledge Transfer Office (KTO) by the Research & Innovation Foundation, providing support to the main Universities and research organisations in Cyprus funded through public funds, will provide a cost-efficient solution for the support of academic technology transfer, built on the principles of acquiring a critical mass of research output and economies of scale. To this end, it will be necessary to formulate benchmarks to evaluate impact of the KTO and knowledge transfer activities on the economy based on defined precise outcomes and key performance indicators.
Identify public research infrastructures that can play a central role in the innovation ecosystem, serving as links among the major innovation actors (universities, enterprises, incubators, accelerators, etc) and as a basis to develop clusters and collaboration networks. Optimal use of public investments in research infrastructures could be materialized by facilitating access from the whole spectrum of potential users ranging from academia, the research community, the business, and the public sector. Existing public infrastructures will be mapped, adopting measures to simplify access and remove any obstacles of legal or technical nature.
Enterprises should be encouraged to invest in digital transformation, as well as in research and development (R&D) activities, either implemented in-house, or in collaboration with other companies, universities, or research institutions. Encouragement could take the form of incentive schemes (i.e. tax incentives) for implementing R&D activities, acquiring specialized testing equipment and laboratories and patenting, to support development of new products and services and entering the global market. Facilitating access to existing research infrastructures and laboratories available in public and private Universities and research institutions would also support indigenous innovation capacity of the business sector.
Improving the innovation capacity of the business sector, as well as the capacity for scaling-up entrepreneurial activity, is considered vital for generating and transforming new ideas into competitive products, services, and processes. Digitalization, continuous training, and capacity building of human resources will support responsiveness and adaptability of enterprises to the rapidly changing business and technological environment. Encouraging extensive user involvement in the process of product and service development can help minimize risk and optimize development loops, while ensuring that products respond to the real needs of the customers.
Simplify procedures and remove unnecessary “red tape” in programs, incentives and measures addressing the business sector, including R&I funding programs and procedures for new companies’ registration in Cyprus.

For the full framework please visit: https://chiefscientist.gov.cy/wp-content/uploads/Innovate-Cyprus-CYRI-Strategy-Framework-2019-2023-NBRI-May-2019-2.pdf

Whilst the above investments in promoting innovation across public and private sectors, the country is also investigating alternative energy systems, as well as circular economy strategies pursuing other ways of its sustainable development.

According to a research published by IRENA, the International Renewable Energy Agency, Renewable Energy Roadmap for the Republic of Cyprus page 17 “ between 25% and 40% of Cyprus’ electricity supply can come from renewables in 2030, in the economically optimal mix. Solar PV is the predominant renewable energy technology in all scenarios, supplying between 15% and 27% of the electricity consumed in Cyprus in 2030. Wind is the second most important RET, contributing between 5% and 9%.”

In terms of improving its circular economy, as illustrated by CYPRUS CIRCULAR ECONOMY NETWORK, on 27 July 2021, the Ministers of Energy, Commerce and Industry and Agriculture, Rural Development and Environment and the Deputy Minister of Research, Innovation and Digital Policy presented the “Cyprus Action Plan for the transition to a circular economy 2021-2027” with budget of €90m, has been approved by the Council of Ministers. The “Cyprus Action Plan for the transition to a circular economy 2021-2027” is based on the following four pillars:

1st Pillar – Cultural change for a circular economy:

It includes informing the business community and consumers about the prospects and business opportunities of a circular economy, information campaign for the sustainable management plan “Pay as you throw” and providing training on circularity issues.

2nd Pillar – Providing incentives for investments in a circular economy:

It includes the development of a Consulting and Financial Guidance Plan of €1m (€15 thousand per company), the development of “Go Circular” Grants schemes of €1m. by the Research & Innovation Foundation for the development of new circular products and services and the utilization of HRDA plans for training on circular economy.

3rd Pillar – Development of circular economy infrastructures:

With a total cost of €2m, conduct a study to identify the appropriate waste streams to be declassified, create an online sharing platform that will enable companies to share equipment, services, facilities, waste, etc., and create an integrated system of supervision and monitoring of waste management projects.

4th Pillar – Municipal Waste Management:

Development of a “Pay as you Throw” scheme (€25m), for the separate waste collection in mountainous areas, development and operation of a network of Green Recycling Points to help remote communities (€3.5m), domestic composting of organic waste (€7m), development of Product Repair and Reuse Centres (€4m), reduction and separate collection of solid waste in Limassol – Paphos (€5m) and waste recovery plan collected separately (€15m).

The Ministry of Energy, Commerce and Industry has started preparing the Grant Schemes and an Incentive Scheme of €13m will be announced in 2022, which will give industries the opportunity to invest in projects and practices that lead to circularity.

The above comes to completion also thanks to the adoption, in July 2022 of the Partnership Agreement, the single operational programme and the Just Transition Plan for Cyprus, the EU will invest a total of more than €1 billion in the country between 2021 and 2027.

“The Partnership Agreement lays down Cyprus' investment strategy for its economic, social and territorial cohesion, the green and digital transition and the development of a competitive, socially inclusive and sustainable growth model. At the same time, the Just Transition Plan will alleviate the impact of the energy and climate transition on the local economy and society.

Along with the Partnership Agreement, Cyprus is the first country to have its Cohesion Policy operational programme approved for the European Regional and Development Fund (ERDF) the Cohesion Fund, the Just Transition Fund (JTF) and the European Social Fund Plus (ESF+).

A green and digital economy

Over €387 million from the ERDF will go to the green transition via investments in energy efficiency, renewables and the reduction of carbon emissions in line with the European Green Deal.

Important investments will focus on the development of the circular and sustainable economy, the preservation of the local biodiversity and on the adaptation to climate change and related events like floods and wildfires.

Cyprus will also devote €147 million to enhance the competitiveness and develop the digitalisation of its small and medium-sized businesses and to connect national research and innovation systems with business. Through these investments, the country aims to create over 2485 new jobs, including 885 in research and 133,000 new users of public digital services.

Support for a just green transition

The JTF, with a dedicated budget of €101 million, will help Cyprus with its energy transition process towards the 2030 and 2050 targets. Investments from the JTF will strengthen the energy transmission and distribution systems to allow for storage technologies and transition towards renewable energy. The JTF will also support measures for small and medium-sized businesses to apply new technologies and increase the use of renewable energy sources.

Additionally, it will empower human capital through education and training actions, including the creation of a Green Technical School in Nicosia.

A Green Technical School will also provide upskilling and reskilling to train young people in green technologies and skills, filling a gap in the country's existing Secondary Technical Education.

Socially inclusive economic development

The ESF+ will invest €222 million in labour market policies and skills development and strengthen social cohesion in the country.

Investments will target far-reaching reforms and actions aimed at reinforcing youth support, improving the labour market relevance of education and training, restructuring social welfare services and combatting social exclusion with a significant budget allocation of €87 million for the latter. This will contribute to achieving Cyprus's 2030 targets under the European Pillar of Social Rights, namely, to increase participation in employment (from 74.9% to 80%) and in annual adult learning (from 44.8% to 61%) and to curb poverty (10 000 fewer people).

Key initiatives will support the youth employability, the modernisation of public employment services and the development of technical vocational education and training. For example, support to young people will be extended through the ALMA innovative initiative (Aim Learn Master Achieve) and the individual learning accounts for young NEETs with a budget allocation of €5 million.

These measures will target 3440 people looking for employment while 1000 people will complete training classes. In addition, almost 40 schools will benefit from education and integration actions. For the most vulnerable, food aid will be given to 144,000 children in need.

Sustainable fisheries

€38.3 million from the European Maritime Fisheries and Aquaculture Fund will promote sustainable fisheries and the restoration and conservation of aquatic biological resources, sustainable aquaculture, and the development of local coastal fisheries communities and the implementation of international ocean governance.

Members of the College said:

Commissioner for Cohesion and Reforms, Elisa Ferreira, said: “The Cohesion Policy investments will strengthen the economy of Cyprus and enhance competitiveness and diversification of the local business activities with a particular focus in addressing social and environmental challenges. Cohesion Policy funding will improve the quality of life of the citizens of Cyprus.”

Commissioner for Jobs and Social Rights, Nicolas Schmit, added: “It is encouraging that the European Social Fund Plus in Cyprus will provide educational support and training to young people and disadvantaged groups to help them enter the labour market. It will also invest funds into skills development of the people and tackling social exclusion and poverty. This funding makes a crucial contribution towards improving the living and working conditions of the people in line with the European Pillar of Social Rights.”

Commissioner for Environment, Oceans and Fisheries, Virginijus Sinkevičius, said: “For the Mediterranean Member States the sustainable development of the blue economy is a crucial issue in need of support. This Partnership Agreement will create favourable conditions for the sustainable development of fisheries, aquaculture, maritime and coastal activities in Cyprus, by supporting the green and digital transition of the fisheries and aquaculture sectors. It also offers alternative solutions for the blue economy in the Cypriot coastal communities and contributes to the international governance of the ocean in the East Mediterranean.”

In conclusion, also thanks to EU support, the country is going through important transformations of public and private sectors, and adopting a multistakeholder approach to accelerate its sustainable development, and all actions shall impact the nexus of water, energy and food.

Should you wish to review a summary of all of NEX-LABS European-Mediterranean Partner Countries Best practices in the Water, Energy and Food nexus, click on the link below