[PIO] Announcement by the Cyprus Fiscal Council regarding the Cypriot economy and compliance issues

The impression that has been created about the Cypriot economy and its performance on compliance issues is a major macroeconomic problem. The Cyprus Fiscal Council notes that. In the absence of foreign investment, the only way forward is an increase in debt, both private and public, with implications that are as long-lasting as they are negative. [/LIST]

1. The negative image created by Cyprus has far-reaching implications as it is a disincentive and a cost for all foreign investors potentially interested in doing business in our country.

1. Following on from the above, an adverse selection and increased moral hazard is created as Cyprus' poor reputation acts as a disincentive to investment intentions by reputable investors, while acting as an attraction to investors who do not have a satisfactory reputation or even intentions.

1. The adverse selection on compliance issues has also turned into a long-term risk which threatens growth. It is now a matter of economic viability for the country, beyond meeting the international investment needs of our economy.

1. Possible laxity in compliance issues also works against fair competition as businesses and organizations that choose full compliance are at a competitive disadvantage against those that bypass the requirements or adopt them laxly.

Therefore, the Fiscal Council calls on the legislative and executive branches of government, as well as supervisory bodies, to take a tough stance against such phenomena and to adopt a "compliance-plus" policy, as some private organizations have done, in order to aggressively restore not only unfair competition but also the ability of Cyprus to attract the high-quality investors it desperately needs.

It must be recognised that the process of enhancing compliance performance will not be financially painless and is expected to have a negative impact on the economy. It is, however, necessary.

Reversing moral hazard and adverse selection in foreign investment is in itself a significant investment in the future of the economy.

(MB/SX)

Contents of this article including associated images are owned by PIO
Views & opinions expressed are those of the author and/or PIO
Source