Cyprus seems to have technology at the bottom of its priority list after ranking 54 from 63 economies for digital competitiveness just one spot above the Philippines, while behind India, Turkey and Romania.
The United States held on to the number one spot in the IMD World Digital Competitiveness ranking (WDCR) in 2019, with all top five economies unchanged: USA, Singapore, Sweden, Denmark and Switzerland.
Now in its third year, the WDCR, produced by the IMD World Competitiveness Centre, measures the capacity and readiness of 63 economies to adopt and explore digital technologies as a key driver for economic transformation in business, government and wider society.
While Cyprus is ranked near the bottom of similar surveys, little has been done to advance the country’s digital transformation, with severe consequences on the cards, says Dr Theodore Panayotou, director of the Cyprus International Institute of Management.
Cyprus performed poorly on the DESI Index, ranked 22 out of the 28 EU states with just 0.2% of the population having installed a fast internet connection with speeds of 100mbps or higher.
“Technology not only affects how businesses perform but also how economies function and prepare for the future. Governments around the world are investing heavily in their digital economy to enhance value creation and prosperity and Cyprus is being left behind,” said Panayotou.
The CIIM director said it comes as no surprise that Cyprus is near the bottom of these reports as stakeholders have not taken measures to promote digital transformation of the economy and society.
“Saying that we have yet to grasp an understanding of the era we are living in would be an understatement,” said Panayotou.
“We have not understood that not catching up will mean the country will be faced with serious consequences in the near future as we will be losing out on serious investments.”
“One of the goals of Cyprus is to become a centre for services. Without digitalization we have no chance of being competitive as other more advanced countries will be offering services at much lower prices.”
He explained that Cyprus is already paying the price for not taking steps towards digitisation of the economy.
“We have not invested in digitalising the tourist industry, as businesses are not registering with online platforms, preferring to invest solely in bringing in tourists on a mass scale through a handful of agencies,” said Panayotou.
Easy Money
Panayotou said the Cyprus economy is based on a serendipity model, which has until recently worked with Cypriots betting on easy money from bringing in tourists en mass and relying on building towers, with money coming in from the Citizenship for Investment scheme.
“Cyprus’ success relies on a series of fortunate events. When neighbouring tourist destinations were taking off, they were hit by wars, incidents like the bombing of Sharm el-Sheikh and the shooting down of a Russian airplane by the Turkish army, sending Russian tourists to the island.”
He added that the country’s economy also relied on other short-term sources of income like the enlisting of shell companies and opening accounts for questionable clientele.
“We all saw where this was going. The EU came down hard on us, shell companies closed, a large number of accounts were closed with billions of euros leaving the country. Now there are voices from the EU urging us to increase our corporate tax, upon which we had built our strategy to attract foreign companies.”
Panayotou argued that Cyprus should be looking to invest in long-term sources of income, which would mean investing in human resources and technology.
“Our luck has not run out yet, apparently, as we have now found natural gas deposits in our EEZ. However, we need to leave the myopic and serendipity business model in the past and move forward with digitalising our economy and society.”
Panayotou said the public needs to be educated, with both the state and the private sector investing in education to convince people of the necessity of change.
“We need to understand that if we do not understand the need for change and digitilising our economy, we will be left behind.”
“Just take a look at where Singapore was 30 years ago and where they are now. Second in digital competitiveness, while they top the list last year, overtaking the USA.”
Even Malta has is attracting 20 times more direct investment than Cyprus because it lacks a strategy for innovation and digitalization.
Acknowledging that Cyprus is lagging in digitalising its economy and keeping up with the rest of the EU, George Komodromos, head of the department of electronic communications, said the government is stepping up efforts to reverse the situation.
“Apart from the creation of the Junior Ministry of Innovation, the government has approved that EUR 250 mln will be spent on government projects over the next 2-3 years,” said Komodromos.
“The problem we are facing is that estimates say that these projects will take some 6-7 years to be completed. However, the government is adamant on finding ways to speed up procedures,” he added.
Komodromos said the private sector will also have to do its bit, as currently, just big companies have digitalized their businesses.
“Some 90% of all companies, which consists of small to medium companies have yet to take any steps. Companies need to take the matter seriously and start investing in educating their staff and then moving on to buying the necessary technology.”
He said the Cyprus Chamber of Commerce and the Federation of Employers and Industrialists can help in this area.
Komodromos argued that telecommunication firms also have a big role to play in paving the way for digitalization, noting that current high-speed landline networks are insufficient to meet the task.
“Digitalising the economy and society implies high-speed connections. Currently, the network is not only insufficient but also, where available, high-speed connections are too expensive.
Households in other EU member states have a 500mbps connection for just €30 whereas we pay that much for a 20mbps connection.”
