The impact of Covid-19 Pandemic on Cyprus Economy and Shipping industry.
Ever since the global pandemic of the Covid-19 appeared on the face of the earth, it brought along unprecedented detriments to the economy, business and social life of people all over the world. Cyprus is no exception. The economy of Cyprus is suffering significant financial losses from the isolation period, and the life flow has been tampered with to a great extent. Some commentators even compare this situation with the 2013 economic crisis and note that there are similar effects between the two periods.
Nevertheless, even through a state of pain, discomfort and despair, one can find a way to flourish. Despite the countless negative consequences of the pandemic outbreak, Cyprus strives for ways to balance the harm done and make use of the circumstances in the best possible way.
Cyprus Response during the Covid-19 outbreak
Cyprus government has adopted many of the standard protection measures enforced across Europe. Some of them include the tax payment holidays and national insurance suspension for individuals, aiming at keeping households above water and consumer confidence from completely collapsing.
Furthermore, the Central Bank of Cyprus urged other banks to focus on the provision of short-term liquidity facilities for up to twelve months at preferential interest rates. This move intended to help viable businesses facing financial difficulties because of the pandemic. Retailers are mostly satisfied with the government’s prompt response, although they express discomfort on delays in loan restructuring and rent guidance.
The Shipping Deputy Ministry (SDM) has decided to extend the date of payment of the Cyprus Registry Maintenance Annual Fee and the tonnage tax of Cyprus ships, in an effort to support shipping companies and owners in these difficult times of the Covid-19 outbreak. The Ministry had notified the interested parties through an announcement in the Official Gazette of the Republic on March the 27th, 2020 that the deadline of such payments would be extended from 31st of March 2020 to 31st of May 2020.
The Shipping Industry
The restrictions imposed upon movement of goods caused severe disturbances on the shipping industry. The authorities involved in the process have taken necessary measures in an attempt to balance the situation
Right after the outbreak of the pandemic, the Deputy Minister of Shipping (DMS) in Cyprus offered support and guidance to shipping companies and owners of Cyprus-flagged vessels. The Ministry stated that its website remains in full operation and it “continues to provide its high-quality services without any disruption so that all ships registered under the Cyprus flag will continue to operate as usual.”
One of the most significant steps of the DMS was to renew its tax scheme for another 10 years.
The Minister of Transport, Communications and Works, in exercising the powers vested in him by Article 14(1) of the Cyprus Ports Authority Legislation of 1973 to 2016, stated that: “It is imperative that Cyprus’ ports and ports installations, which constitute essential infrastructure and services, continue to operate in order to support the economy, the health system, as well as the viability of social cohesion on the island.”
The Minister announced several restrictive measures for both the Cyprus Ports Authority and Contractors, Operators, and licensed agents for port services and port installations to implement. These relate to the disembarkation of passengers and crew, the crew of commercial vessels performing international voyages – who must return to Cyprus and strictly comply with the instructions of the Medical and Health Services – and the movement of members of the UNIFIL Command based onshore.
Furthermore, the Deputy Minister of Shipping has issued Circular 05/2020 to inform the registered owners, charterers, ship managers and representatives of Cyprus-flagged vessels of the circular letters issued by the International Maritime Organisations (IMO):
- IMO Circular Letter 4204/Add 2 of 21 February 2020 containing the joint statement of the IMO and the World Health Organisation (WHO) on the response of the Covid-19 outbreak.
The statement in question highlights the need to minimize the unnecessary interference with maritime traffic to prevent the introduction of the disease. It further highlights the significance of avoiding unnecessary restrictions or delays on port entry to ships, persons and property on board
- IMO Circular Letter 4204/Add 3 of 2 March 2020 which contains operational considerations for managing the virus cases onboard ships developed by the WHO. Amongst other things, it contains guidance on:
- Pre-boarding and pre-disembarkation information
- Pre-boarding screening
- Crew education
- Managing a suspect case
- Development and activation of a written outbreak plan for passenger ships as well as obligations of shipowners to inform the authorities of the next port of call of any suspected cases
- IMO Circular Letter 4204/Add 4 of 5 March 2020 containing guidance for ship operators to protect the health of the seafarers, prepared by the International Chamber of Shipping in response to the COVID-19 outbreak.
The aim of the letter is to support all types of ship and help shipping companies implement the advice provided by UN agencies, including IMO, WHO, the International Labour Organisation and the European Centre for Disease Prevention and Control.
One of the most significant steps of the DMS was to renew its tax scheme for another 10 years. This sounded very appealing to ship owners and ship-management companies and some decided to ‘park’ their vessels along Cyprus’ shores until the lockdown is over.
Visitors on the Shores
On the 6th of May, the Cyprus government announced that cruise ships are allowed to dock in its ports for refueling purposes, as well as having a ‘hot lay-up’ during this isolation period. (A hot lay-up refers to a vessel which is out of profitable service due to lack of charter or cargo. Nevertheless, the vessel can be mobilized into service at short notice, in contrast to ‘cold’ lay-up it is anchored at a safe place while awaiting new employment or charter.)
The Health Minister stated that docking of cruise ships is allowed for supplies and maintenance purposes. However, no disembarkation of passengers or crew is allowed, unless it is a crew replacement.
He stated that six cruise ships, four of which belong to the internationally known luxurious cruise line ‘Carnival’ Corporations, anchored off Moni, near Limassol. Each ship has around 100 members of the crew – and no passengers – and must be ready to leave the port once the shipping industry resumes. Additionally, owners of drilling rigs were considering Cyprus as a stopover while being inactive.
The six visitor vessels are expected to bring in much-needed revenue. Each of these is contributing €20,000 a month during their stay in Moni shores. EDT Offshore spokesman explained that the amount is not entirely for anchorage fees. All six vessels will be buying fuel and supplies for the ships and crew, use local facilities for maintenance, and the crew change will increase traffic in the two airports of Paphos and Larnaca. In any case, the income from the ships’ parking is a significant contribution to the Cyprus economy during a time of economic disaster.
Even though crew members of commercial ships are only permitted to disembark at an isolated space in the port, it may become possible for them to enter the country if this goes for too long. Crew members of military vessels and yachts can also enter the country, provided that they come from the safe designated countries (countries A and B) and have been tested for the virus.
Business during the pandemic outbreak
Business activities are facing a significant incline on a world-wide scale. The European Commission’s economic forecast noted that the expected revenues of tourism were reduced significantly to 25% from last year.
Particularly, it demonstrated that tourist arrivals and revenues decreased by 46.5% and 52% respectively in the first three months of 2020. In addition, there is a sharp increase in unemployment in services relating to tourism, with an increased risk of bankruptcies for the businesses. The European Commission (EC) Spring Economic Forecast understandably stated that the pandemic is pushing the economy into a severe recession in 2020.
The “Covid-19 Impact of the Pandemic on the Cyprus Economy” report by PWC Cyprus revealed that most CFOs are greatly concerned about the effects of the virus on their businesses. Nevertheless, the report showed that 52% of them believe their company could get back to ‘business as usual’ within 3 months if the virus ended today. On another positive note, most retailers have embraced flexibility and revised their business’ operations. They have increased online banking features while recognizing the importance of technology and data analysis for management decisions. This way, Cypriot consumers have started to enjoy alternative sales channels, following the practices of their European counterparts.
Find more about Setting Up a Shipping Company in Cyprus
We are experiencing very difficult times, equal to other great tragedies in human history. Covid-19 has impacted all the aspects of our everyday lives and we long for the day we can safely interact with each other and go on our regular business once again. Fortunately, the development of technology allows us to stay home and still interact with others both personally and professionally, despite the restrictions of movement. Even though the future is unsure, we should stay optimistic that, as with every other obstacle humanity has faced, we will surpass this and thrive.