THE EBRD IN Results snapshot 2014-20

Overview In numbers (2014-20)

The EBRD began investing in Cyprus, a founding member of the EBRD, on a €591.1 million temporary basis in May 2014. The was invited by the authorities to support the Net cumulative investment* country’s recovery from a deep economic crisis triggered by the 2008 global financial crisis and subsequent , as well as to help Cyprus address key 84.4% structural and transition challenges, including poor governance standards in the Private-sector share of cumulative sector. The EBRD invested close to €600 million from May 2014 until December 2020, when the Bank’s mandate in the country expired. 24.8% During this period, the EBRD’s strategic focus was on: Equity share of portfolio ► a greener energy mix and better resource management ► the competitiveness and growth of small and medium-sized enterprises (SMEs) €90 million ► financial sector resilience. Green economy financing commitments

In response to the Covid-19 crisis, the Bank also increased financial support for trade *Stock of all EBRD commitments less their sale or cancellations. facilitation, providing guarantees covering the political and commercial payment risk through four partner financial institutions. Our policy engagement

► Facilitating investments in energy efficiency and renewables ► Promoting renewables in the Greener energy mix domestic electricity market Highlights of Five EBRD solar power investments added 11.9 MW of installed solar power capacity to ► Stronger legal framework for our results Cyprus’s installed solar power capacity– a 14 insolvency and restructuring per cent increase from 2016 levels; and ► Digitalisation and development Enhanced trade integration EBRD projects contributed to an estimated cumulative reduction of 15,470 tonnes/year of a national plan for broadband More than €340 million in trade finance, connectivity accompanied with training for five of CO2 emissions, as of 2020. Significant , which helped them to provide greenhouse gas emissions are projected to be more than 600 guarantees to facilitate the reduced through the floating storage international trade of Cypriot firms. regasification unit project, which will enable the fuel switch in the Vasilikos power plant.

More productive SMEs Resilient financial markets Eighty-three per cent of EBRD- Our equity investments in the two largest advised SMEs grew their turnover, 58 Cypriot banks helped strengthen them, per cent of EBRD-supported SMEs restore confidence in the banking sector and increased productivity, and 54 cent reduce non-performing loans (NPLs) from increased jobs. 55 per cent to close to 20 per cent. Cyprus in context We seek to help countries Cyprus was hit by a significant crisis in 2008 and in 2012, revealing flaws in its economic transition towards democratic and structure and governance, particularly in the banking sector. The economy contracted sustainable market economies. We sharply during the crisis and, subsequently, reform measures were brought in, including the finance projects that strengthen the bail-in of uninsured deposits in the two largest local banks that had collapsed as a result of private sector in economies serious mismanagement and poor governance. undergoing transition to a well- functioning market system. Our The Cypriot economy started recovering in 2014 and recorded robust economic growth in investment decisions are guided by subsequent years, primarily driven by rising investment and private consumption. six “transition qualities”, which Unemployment continued on a downward trend, reaching 6.6 per cent in September 2019, focus on making economies its lowest level in eight years. On the demand side, private consumption has remained competitive, well-governed, green, robust, while investment (especially residential aimed at foreign investors) has grown inclusive, resilient and integrated. strongly. Unfortunately, the rapid global spread of Covid-19 in 2020 has led to the deterioration of the For more detail on our economic outlook for Cyprus with negative consequences across all sectors, especially in the transition qualities visit tourism industry, a major contributor to growth (around 14 per cent of GDP in recent www.ebrd.com/qualities years). EBRD score,1 2020 The EBRD’s assessment of challenges across its six transition qualities identifies “resilience” (1-worst, 10-best) as the only aspect in which Cyprus lags behind; this is caused by gaps in financial resilience Competitive and energy security. Although Cyprus scores better than regional comparators, further progress is needed to achieve environmentally sustainable growth. Green Inclusive The Cyprus Doing Business ranking (54th out of 190 countries in 2020) could be improved as well, with the lowest ratings in enforcing contracts, dealing with construction permits, Integrated and getting credit. Resilient Cyprus Cyprus OECD Key economic indicators (2014) (2020) comparators2 Well-governed (2020) 0 2 4 6 8 10 GDP per capita, PPP (current international dollars) 30,042.8 41,254.4 52,815.4 Cyprus Bank non-performing loans to total gross loans (%) 45.0 17.1 1.3 OECD comparators Electricity production from renewable sources, 7.3 14.2 11.0 excluding hydroelectric (% of total) Unemployment, total (% of total labour 16.1 7.3 4.8 EBRD investment 2014-20 force) (modelled ILO estimate) € million Number Unemployment, youth total (% of total labour 34.4 15.7 11.0 8 force aged 15-24) (modelled ILO estimate) 600 7

6

Our approach and operational delivery 400 5

During its engagement between 2014 and 2020, the EBRD supported the development of 4 the private sector in Cyprus through a combination of investment, policy dialogue and 3 technical assistance. We provided a wide range of financial instruments, both as direct 200 2 investments and through partner financial institutions. We provided business advisory services and technical assistance to help improve the institutional capacity of our clients. 1 0 0 In our policy engagement, we worked on reform with the government, businesses and 2014 2015 2016 2017 2018 2019 2020 regional officials, helping to shape initiatives that create favourable economic conditions Net cumulative investment Number of projects and promote sustainable economic growth. The Bank was active across the whole island, with both finance and business advisory Portfolio by sector services for private-sector restructuring and the expansion of markets. Initial focus was on support for recapitalisations and workouts of NPLs in the financial sector, followed by Financial institutions, 66% restructuring advice for non-financial enterprises and trade finance guarantees to help them recover links to key external markets. The EBRD also provided significant support for projects to help Cyprus transition to a green economy, including through advice on energy efficiency for enterprises and energy policy reform, investments in renewable power generation, and financing for a switch from heavy oil to cleaner fuels.

EBRD activities mobilised over €5 million in donor finance for technical cooperation projects, including from the European Union (EU), bilateral donors and the EBRD’s own funds. In 2017 Cyprus became the first economy where the EBRD invests in which the authorities agreed with the Bank to support economic development using EU Structural Sustainable Funds for small business advisory services. The partnership with our donors is key to infrastructure, 34% supporting advisory and training services offered by the EBRD.

1 For details see https://www.ebrd.com/economic-research-and-data/transition-qualities-asses.html 2 OECD comparators are a simple average of eight OECD countries: Canada, the United States of America, Data relate to EBRD activities in Cyprus between 2014 and 2020. the United Kingdom, Sweden, France, Germany, Japan, and the Czech Republic. Green solar panels in Cyprus THE EBRD IN CYPRUS

Related SDGs A greener energy mix and better resource management 2014-20

Cyprus has an isolated energy system with no interconnections to EBRD score neighbouring countries. High energy costs undermine the competitiveness of local (1-worst, 10-best) businesses and significant investments in sustainability improvements are Electricity produced by needed. Cyprus relies on imported heavy fuel oil for power generation, with oil- renewables fired power generation accounting for as much as 90 per cent of total generation. Quality of Although Cyprus has made considerable progress in diversifying electricity supply electricity generation towards more sustainable sources, only about 7 per Sector restructuring and cent of total generation came from renewables when the EBRD started investing unbundling in the country in 2014. Cyprus has the highest solar energy potential in the Tariff EU, but further investment and regulatory improvements are needed to reap reform the benefits. The authorities are committed to encouraging private sector 0 2 4 6 8 10 investment in the electricity and gas markets, but progress to date has been Cyprus slow. Commercialisation of the state-owned power company is crucial for further OECD comparators development of the energy sector and economy.

How we work In numbers Quick links > Green Economy Transition The EBRD provided significant support €90 million > Energy efficiency initiative for projects to help Cyprus transition Green economy financing towards a greener economy through direct commitments investment in renewable power generation. It also provided financing for €80 million the restructuring of the dominant power- Net cumulative investment in cleaner energy production generating company to facilitate a switch GET is the EBRD approach for from heavy oil to cleaner fuels, and policy helping economies in our advice on energy efficiency for the regions to build green, corporate sector and energy policy reform. low-carbon and We have acted as an anchor investor to climate-resilient promote the potential of renewable energy economies. production. These investments were channelled through the EBRD’s Green Economy Transition (GET) approach and energy efficiency initiatives.

Data relate to EBRD activities in Cyprus between 2014 and 2020. Achievements and results: Our case study: Supporting green Promoting a greener energy mix and better resource economy transition in management Cyprus

The Bank supported an increase in renewable energy in the fuel mix and Greener energy mix the power-sector fuel switch from Cyprus’s solar energy capacity doubled heavy fuel oil to lower carbon fuels, between 2014 and 2020, with support through: from the Bank's investment in five solar photovoltaic plants adding a capacity of ► investing in renewable energy generation through financing the 11.9 MW. development, construction and operation of five solar power plants, including the largest commercial solar Cleaner air power plant on the island in 2017 The EBRD supported a switch from oil to gas generation at the existing units at ► promoting an improved regulatory the Vasilikos power station, framework to facilitate increased uptake contributing to estimated savings of See how EBRD-financed solar of renewables in electricity generation, 6,000 tonnes of sulphur dioxide and plants came on-stream in through policy advice to the Energy 175 tonnes of particulate matter (PM) Cyprus. Regulatory Authority and the electricity every year. market operator.

The Bank helped to promote better Energy saved resource management and greater energy Greater energy efficiency practices have security through: been put in place as a result of the ► advising on the much-needed reform of Bank’s launch of the energy efficiency the energy market; and working closely initiative, in order to support energy efficiency advisory projects and energy with the electricity market operator to management training for local assess the new electricity arrangements consultants. and market rules being proposed to See how the EBRD supported promote investment in renewables Less pollution the decarbonisation of the energy sector in Cyprus. ► launching the Energy Efficiency Around 900,000 tonnes of CO2 per year Initiative to support energy efficiency have been avoided due to the switch advisory projects and training in energy from oil to gas generation at the existing units at the Vasilikos power management (ISO50001) for consultants station. This is equivalent to taking 200,000 cars off the road for one year. ► financing Cyprus’s first floating storage regasification unit (FSRU), a liquefied natural gas (LNG) import terminal aimed at substituting expensive and polluting heavy oil fuel with gas in local power generation.

Data relate to EBRD activities in Cyprus between 2014 and 2020. SMEs in Cyprus THE EBRD IN CYPRUS

Related SDGs

Competitiveness and growth of SMEs 2014-20

EBRD score Cyprus has an open and liberalised economy with a relatively enabling (1-worst, 10-best) business environment. However, in the aftermath of the 2008 financial crisis, the corporate sector was in urgent need of restructuring, partly as a result EBRD Knowledge of previous indiscriminate lending practices. SMEs have been hit particularly Economy index hard by the subsequent significant reduction in lending from the financial sector. This concerns both access to long-term funding and working capital. Logistics performance Moreover, due to the relative isolation of the island and its reliance for the bulk index of its international trade on Limassol Port, the competitiveness of Cypriot EBRD SMEs remains limited. The lack of international competition and over-reliance SME index on the banking and real estate sectors have contributed to relatively low levels of productivity. Cypriot SMEs remain in need of improved skills, 0 2 4 6 8 10 Cyprus such as HR management, financial reporting, export promotion or innovation. OECD comparators

Quick links How we work support programme. The Bank also offered direct financing and policy advice > Advice for Small Businesses The Bank selectively engages in the for the development of key transport and financial and operational restructuring of > EBRD Knowledge digital infrastructure. larger enterprises, including improving Economy Initiative corporate governance standards and working closely with commercial banks with the purpose of demonstrating In numbers successful restructuring more widely. SME €10.4 million Within the Small Business Initiative, in support includes the EBRD’s Advice for Total direct EBRD financing for SMEs Small Businesses (ASB) programme, addition to finance, we provide business advice to help SMEs grow, focused on improvements in corporate 263 succeed, then grow again, governance, sustainability standards and SMEs supported through the EBRD ASB programme becoming genuine operating practices. In Cyprus, the EBRD catalysts for their local deployed its advisory services to provide economies and regions. business advice and skills training to small businesses across the island, and supported development and adaptation of new technologies through its ICT business

Data relate to EBRD activities in Cyprus between 2014 and 2020. Achievements and results: Our case study: Advice for women-led Enhancing the competitiveness and growth of SMEs businesses in Cyprus The EBRD supported local and international competitiveness of SME growth SMEs through: Fifty-two per cent of SMEs advised by the EBRD hired more people. In total, 1,188 ► providing business skills advice to new jobs were created.* 263 SME clients, including on export promotion, strategic planning, supply chain management, exports, planning More exports and budgeting; and organising Nineteen per cent of SMEs advised by the sector-specific workshops in the areas EBRD grew their exports. In total, the of agribusiness and consumer goods Bank's advisory services contributed to to share know-how with SMEs €29 million of new exports.*

► offering tailored advice for start-ups, including as part of the EBRD Higher productivity Business Clinics programme that Read why the EBRD received an award coached 45 small businesses Sixty-three per cent of SMEs advised by the EBRD became more productive.* from the government for “contributions to the ”, notably for ► improving the efficiency and its support of a private concession for productivity of the largest port in Limassol Port, which was Cyprus through financing a local Higher turnover one of the greatest investor for the private concession of Seventy-eight per cent of SMEs advised by successes of the the port. the EBRD increased their turnover. In total, the Bank's advisory services government’s reform contributed to €153 million of additional programme. turnover.* The Bank has promoted the digital economy by: More efficient international trade ► supporting SMEs to reap the benefits EBRD investment in Limassol Port of e-commerce and e-government contributed to significant improvements with improved digital skills, in operational performance and the broadband access and awareness faster turnaround of ships. through the ICT business support programme Better skills ► improving access to the internet by The EBRD promoted a scheme to improve leading a comprehensive assessment digital skills across Cyprus. of the telecommunications sector to help create a viable national implementation plan for broadband Better digital governance with the state telecoms agency, in The EBRD advised the government on boosting demand for broadband order to support its planned services through a connection voucher privatisation scheme.

► advising the government on broadband connectivity, including boosting demand for broadband See how the EBRD helped a services, improving digital skills and local business improve its encouraging the adoption of ICT connectivity. broadband services among SMEs.

*within a year after the advisory project ended. Data relate to EBRD activities in Cyprus between 2014 and 2020. in Cyprus THE EBRD IN CYPRUS Related SDGs

Financial sector resilience 2014-20

EBRD score When the EBRD started investing in Cyprus in 2014, NPL levels were very high at (1-worst, 10-best) 45 per cent (due to the European debt crisis) and among the highest in Europe, burdening the financial system and restricting access to finance for local firms. In Non-performing recent years, since the deep recession, the government has made significant efforts loans to strengthen the resilience of the banking sector, with increased capital buffers and restored profitability. At the same time, the size of the banking sector Credit to the private sector remains large, at 280 per cent of GDP, and enterprise debt is on average twice as high as in the rest of the EU. The economic impact of the Covid-19 pandemic is Stock market resulting in a further deterioration of the asset quality and a drop in the already capitalisation low profitability of local banks, while the continues efforts to reduce non-performing assets in the banking sector. Due to the 0 2 4 6 8 10 continued distressed situation, banks have reduced tenors and country limits for Cyprus OECD comparators Cyprus, significantly affecting the banks’ abilities to provide trade finance.

How we work In numbers Quick links > Trade Finance e-Learning The EBRD helped to strengthen the €497 million resilience of the financial sector, including Net cumulative EBRD investment Programme through improved governance standards in the financial sector in the banking sector, enterprise restructuring and introducing new €365 million Combined volume of more than 600 sustainable economic activities. This transactions under the TFP support has been provided through direct and indirect financing, equity investments into systemic banks, and engaging in The EBRD Trade Facilitation Programme policy dialogue with the government and aims to promote foreign trade to, from market participants. To support trade, the and within the EBRD regions and offers a EBRD Trade Facilitation Programme range of products to facilitate (TFP) provided guarantees covering the this, including guarantees political and commercial payment risk. and trade-related cash The EBRD also provided trade finance advances. know-how to local banks through trade finance training courses, as well as the optimisation of banking procedures and Data relate to EBRD activities in Cyprus between the structuring of trade finance. 2014 and 2020. Achievements and results: Our case study: Restoring resilience to the financial sector Trade Facilitation Programme in Cyprus

We supported a more resilient financial More resilient banking sector by: sector ► strengthening the capital base and The non-performing exposures ratio of rebuilding confidence in the banking domestic client banks Bank of Cyprus sector via equity investments in two and decreased during systemic banks: the Bank of Cyprus 2014-20, from 55 per cent to close to and Hellenic Bank (€128 million in 20 per cent. total) Better business standards ► supporting the successful restructuring The EBRD promoted major of and high standards of corporate improvements to the business governance in these two banks standards of the Bank of Cyprus and Hellenic Bank (for example, Read how the EBRD became ► assisting with the development and compliance with central bank a shareholder in Hellenic implementation of the new directives, internal risk management). Bank, a systemically restructuring and insolvency important bank, to framework to help reduce NPLs, by More efficient law contribute to Cyprus’s advising the government and financial economic recovery. institutions and by training implementation restructuring and insolvency With funding from the EU, the EBRD practitioners. Legal Transition team helped the government to implement the insolvency service more efficiently, assisting efforts to restructure firms and reduce NPLs.

We promoted international integration See how the EBRD helped of the financial sector through: More trade finance address the Covid-19 €340 million utilisation of TFP facilities crisis through increased ► providing training and advice to supporting trade activities of exporters, trade support in Cyprus partner banks and local businesses in importers and distributors of imported with a new limit for a large trade finance through the TFP and goods in Cyprus. local bank. providing guarantees for import, export and local distribution of imported Better skills goods, in order to strengthen trade links The TFP issued 278 certificates to trade between Cyprus and other economies finance professionals across the EBRD where the EBRD invests regions for their completion of the EBRD Trade Finance e-Learning Programme, ► helping clients to access new sources of thereby improving their skills in finance, including the international processing complex trade products. financial markets. Capital market development An EBRD client accessed international capital markets for the first time since the financial crisis through an initial public offering at the . Read how the EBRD’s client Eurobank Cyprus won the TFP Deal of the Year in 2016. The construction of the 90 km, three- lane road in Egypt was a great challenge that was met effectively by the joint efforts of the EBRD and Eurobank Cyprus.

Data relate to EBRD activities in Cyprus between 2014 and 2020. GREECE AND CYPRUS

Greece

Athens TFP partnerships Results snapshot of Cyprus

Nicosia

EBRD offices Resident Office

Partnerships

The EBRD supports the transition process by combining investment with close policy dialogue with local and central governments, regulators, financial institutions and representatives of civil society, as well as by providing technical assistance and advisory services using funds donated by governments and institutions. Donor funds play a vital role in ensuring the success of these activities and act as a catalyst or enabler for our investment.

Our partnerships in action

► Our SME development activities were ► With support from Austria, France, supported by donor funds from the EU and Ireland, Taipei and the United Cyprus, and coordinated carefully with Kingdom, we conducted trade finance other stakeholders to maximise impact and training for issuing client-bank staff. to complement, rather than duplicate, their efforts. The Bank has also partnered with ► Our training of Cypriot procurement several bilateral donors and the EU to officers was leveraged when they provided facilitate trade finance. training for procurement specialists from other economies where the EBRD invests. ► Funding from our Shareholder Special Fund supported Cyprus’s comprehensive assessment of the telecommunications sector and resulting recommendations on Donors: Cyprus, the European Union boosting demand for broadband service.

Work with us Contacts Country facts Andreea Moraru, Financing Goods and services EBRD Regional Head of 28 March 1991 -Loans -Procurement Greece and Cyprus -Equity -Careers Joined the EBRD -Guarantees (including to London, UK HQ local banks for Participate €30,010 One Exchange Square, trade finance) -Have your say on Capital subscription (€ 000) EBRD policies and London EC2A 2JN Advice strategies United Kingdom - Expand Tel: +44 020 7338 6000 - Improve processes and governance - Meet standards Constantinos - Navigate regulatory Petrides environment New business enquiries EBRD Governor - Train workers Business Development Department Leander Treppel Tel: +44 20 7338 7168 EBRD Board Director More information email: [email protected] > EBRD in Cyprus