NEWS

27 January, 2009 INVESTMENTS, CRISIS & BUSINESS WITH CYPRUS COMPANIES

In 2008, Cyprus managed to emerge unscathed from the consequences of the international financial crisis. It is due not only to economic factors but also to the country’s foreign policy designated to develop strong relationships with many countries, including Russian Federation. Moreover, Cypriot banks and other businesses did not invest in the “toxic products” marketed in the United States.

Now, at the beginning of 2009 experts express their concern about the international financial crisis that has involved Russia & a number of neighbor East-European countries.

Mr. Arkadiy Dvorkovich, Russian President’s assistant for economic issues considers that “the crisis will last for 9,5 months” accompanied by 20% decline in industrial production relative to its last July peak, 25% fall of national currency exchange rate, drastic decrease of inflation- from 20% to 8%, less money being in circulation & high level of free bank liquidity by the end of the year.

Nevertheless these factors are not symptoms of a collapse or uncontrollable decline but characteristics of a classic recurring crisis that Russian economy had to enter inevitably & will get out of it with the same inevitability in the course of the current year. “Revitalization of the economy may start already these May or June”, - Mr. Dvorkovich says. This Russian expert’s opinion supports Mr. Zeljko Bogetic, chief economist of the World Bank in Russia who thinks that the influence of such factors as low oil prices, flight of capital & balance of payments decline will not last for long. An “air bag” of 475 billion dollars of international reserves is more than sufficient to maintain a stable ruble exchange rate.

Therefore, many factors indicate that the crisis can pass in the nearest future while business development & economic investment issues will remain topical. Mutual investments were discussed at the conference held in the Cyprus capital – Nicosia on 22-23 January 2009 with Moscow government & business circles representatives & members of Cyprus – Russian Association for Business Cooperation as its participants.

It is well-known that foreign investors are attracted by considerable advantages provided by Cyprus for international business activity such as: tax benefits, low companies’ incorporation & maintenance costs, free foreign currencies transactions, double taxation treaties with more than 34 countries (CIS, USA, Great Britain, Germany, Norway, Sweden, Greece among them), modern & efficient legal & finance consulting services.

Mr. Dimitris Christophias, Cyprus President, Mr. Charilaos Stavrakis, Cyprus Finance Minister, Mr. Valdimir Platonov, head of Moscow State Duma & some bank, audit & business specialists spoke at the conference. In his speech Mr. Dimitris Christophias, Cyprus President stressed out that from the point of view of the Economy, the Russian Federation remains an absolute priority for Cyprus. The Republic of Cyprus, business & financial center, is one of the three major foreign investment sources for Russia. That is why it is no wonder that Cyprus holds the leading place for the amount of foreign investments in Moscow. Its total investment sum count for 33 billion dollars, while Great Britain’s, second major investor, share is of 30 billion dollars.

The Cypriot President pointed out that both Cyprus & Russia both derive through their partnership important economic benefit. Meanwhile the authorities of both countries keep widening their cooperation.

A Midland Consult (Cyprus) Ltd representative who attended the conference concluded that Cyprus is an important partner to the Russian economy.

The speakers emphasized that the Republic of Cyprus is a leading investor in Russia, ahead of the Netherlands, Great Britain & the Virgin Islands. Certainly, it is not Cyprus citizens themselves who make investments in Russian economy. They are made mostly by Russians & those foreign companies that choose better investment schemes. These considerable sums of Cyprus investments in Russia demonstrate the efficiency of performing Russian business activity through Cyprus international companies. These companies are most successfully when used in the Russian real estate market & construction management. Shipping, financial, holding & management Cyprus companies are of a great demand as well.

The representatives of Russian government financial institutions spoke about the flight of capital from Russia. Thus in 2008, the foreign assets of Russian companies & private persons reached the historical maximum of 147, 3 billion dollars. According to the Central Bank of the Russian Federation in 2008 nett flight of capital from Russia was of about 130 billion dollars. However the Central Bank forecasts that nett capital inflow in Russia in 2011 may be of $ 95-105 million. Meanwhile according to the data stated above Cyprus is a leader in investments in Russia. It is explained not only by its proved financial system safety, but also by highly efficient work of registration & tax authorities, cultural ties with Russia, orthodox religion & old traditionally friendly relations between both countries.

One of the world’s most powerful fleets goes under the Cyprus flag & many large shipping companies reside on the island. “All these facts guarantee that relationships with Russia will be growing stronger in all spheres of cooperation”,- Mr. Philias Pilides, President of Cyprus-Russian Business Association said at the conference. Mr. Charilaos Stavrakis, Finance Minister of the Republic of Cyprus shares that view. Speaking about the appeal of the island’s economy & bank system for Russian investors, he pointed out that nowadays Cyprus possesses one of the most perfect financial systems in Europe that allows taking its advantage in international business activity. Besides, Cyprus & EU legislation will defend all the interests of Russian investors, - he said.

The Nicosia conference proved again the advantages of Cyprus companies. Midland Consult (Cyprus) is pleased to inform our old & new partners about the stability of the Cyprus office, its success and would like to enumerate once more the benefits of acquiring Cyprus companies from Midland Consult Ltd which are as follows:

• low registration cost
• low annual maintenance fee
• usage of double taxation treaties with many countries, including Russian Federation
• confidentiality
• tax burden minimization
• respectable European company
• government support of international business
• documents are kept in Midland Consult offices in Panama & Cyprus.