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India- Cyprus Relationships
Bilateral Agreements and Memoranda of Understanding
Relations between India and Cyprus have traditionally very close and friendly, and have become stronger over the years. Both countries are proud of ancient civilizations. Modern history has brought India - Cyprus closer together. The foundation stone of post-Independence friendship was laid by the architects of modern India and Cyprus, Mahatma Gandhi, Jawaharlal Nehru and His Beatitude Archbishop Makarios, who shared a personal friendship with them and with whom he worked closely together in various international forums – the UN, Commonwealth and Nonaligned Movement. Cyprus has been one of India’s closest and most dependable friends.
India supports the sovereignty, unity and territorial integrity of Cyprus. India has consistently supported a peaceful resolution of the Cyprus problem.
The Cypriot Government and the House of Representatives have expressed gratitude for India’s role on the Cyprus question since the Turkish invasion in 1974. There have been several gestures marking their special regard for and gratitude to India. A bust of Mahatma Gandhi was installed near the Parliament House in July 1972 on the occasion of the visit of President V.V.Giri. The avenue on which the House of Representatives is located was named after Jawaharlal Nehru during the visit of Prime Minister Indira Gandhi in 1983. The road on which the High Commission premises are located is also named after Indira Gandhi. A street in Limassol is named after Mahatma Gandhi, while General Thimmayya who was in Cyprus as commander of the UN Peacekeeping forces also has a road after him in Larnaca.
Exchange of visits: Over the years, Indo-Cypriot political relations have been maintained and strengthened through a series of high level visits. All the Presidents of the Republic of Cyprus, viz., Archbishop Makarios (Nov. 1962), Spyros Kyprianou (1982,1983,1984) George Vassiliou (April 1989) and Glafcos Clerides (February 1997), paid State visits to India. In April 2006 President Tassos Papadopoulos visited India for six days and held extensive talks with the Indian leadership. From India, President V.V.Giri (July 1972) and President R. Venkataraman (September 1988) visited Cyprus. Prime Minister Indira Gandhi’s visit in September 1983 is recalled as a significant milestone in India’s relations with Cyprus. Prime Minister A.B. Vajpayee visited Cyprus in October 2002. In addition, there have been Ministerial Level visits such as Shri R. Prabhu, Minister of State of Agriculture (1987) Shri P.V. Narasimha Rao, External Affairs Minister (1982, 1988 and 1989). Shri Madhav Singh Solanki, External Affairs Minister visited Cyprus in February 1992, while Dr. Balram Jakhar, Minister of Agriculture paid an official visit in July 1993. In October 1993 Dr Manmohan Singh, Finance Minister, was part of the Indian Delegation to Cyprus for a CHOGM meeting, while Shri Omar Abdullah, Minister of State for External Affairs visited Cyprus in April 2002. From 24-26 May 2007, Shri Pranab Mukherjee paid an official visit as External Affairs Minister.
There has also been a regular exchange of visits between Parliamentarians. Parliamentary Delegations were led by Shri Balram Jakhar as Lok Sabha Speaker in July 1981 and again in May 1985 for the Executive meeting ECM of the Commonwealth Parliamentary Association, and Shrimathi Najma Heptullah, Deputy Chairman of the Rajya Sabha for the Executive Committee Meeting in April 1985. Shrimathi Heptullah came again in April 1990 to participate in the Inter-Parliamentary Union from 1st to 8th April 1990. Shri Shiv Raj Patil as Speaker of the Lok Sabha led a Parliamentary Delegation to Cyprus from 14 – 18 September 1992. Again from 3-9 September 1993 he led the Indian delegation to the 39th CPA meeting. Shrimathi Najma Heptullah came again between 4-9 January 1996 while Shri Somnath Chatterjee, Lok Sabha Speaker, attended the CPA Mid-year Executive Committee meeting from 16 to 21 April 2007.
The President of the Republic of Cyprus, His Excellency Mr. Tassos Papadopoulos, paid a State Visit to India from April 11-16, 2006. The President’s delegation included the Minister of Foreign Affairs, Mr. George Iacovou, Minister of Commerce, Industry and Tourism Yiorgos Lillikas, and senior officials.
2. During the visit, President Papadopoulos held talks with President Dr. A.P.J. Abdul Kalam, Vice President, Shri Bhairon Singh Shekhawat, Prime Minister, Dr. Manmohan Singh. The President of Cyprus met Chairperson of UPA, Smt. Sonia Gandhi and former Prime Minister Shri Atal Behari Vajpayee. He also received Shri Anand Sharma, Minister of State for External Affairs.
3. The President of the Republic of Cyprus was accompanied by a high-level business delegation. In New Delhi, he addressed a luncheon meeting of representatives of apex Indian Chambers of Commerce & Industry – CII, FICCI and ASSOCHAM. The President delivered a lecture at the Indian Council of World Affairs on “Cyprus as a Bridge between India and the European Union”.
4. Leaders of the two countries reaffirmed the traditionally close and time-tested friendship between India and Cyprus. Both sides reviewed with satisfaction the development of bilateral relations and agreed that the long tradition of political interaction, commercial and cultural exchanges provide a valuable base to take bilateral relations forward in all spheres and underlined their commitment to further strengthening and diversifying this relationship.5. The Republic of Cyprus’ membership of the European Union and the framework of India-EU relations provided another area of meaningful interaction between the two countries.
6. India reiterated its consistent support for the independence, sovereignty, territorial integrity and unity of the Republic of Cyprus. India welcomed the joint press statement issued on 28 February 2006, following the meeting in Paris between the President of the Republic of Cyprus and the UN Secretary-General. India supports efforts for the preparation of the ground for the timely full resumption of the negotiating process under the UN auspices that will lead to a comprehensive, fair and mutually agreed settlement of the Cyprus question in accordance with the relevant UN Resolutions.
7. The two sides exchanged views on developments in their respective regions and international issues of common concern. The discussions revealed mutual understanding and a similarity or identity of outlook on the on-going international efforts for strengthening institutions and traditions of democracy in the world, for a rule-based system of international trade, and for a more determined global effort to meet the daunting environmental challenges.
8. The two sides share a deep concern on the need to counter international terrorism and welcome the strong condemnation of terrorism in all its forms and manifestations, as contained in the Outcome Document of the World Summit held in September 2005. They were of the view that all member-states of the UN should make concerted efforts for an early conclusion of the comprehensive convention on international terrorism.9. The two leaders discussed the issue of UN reform. In this context, H.E. President Papadopoulos reiterating their position that as the world’s largest democracy with an active global role, India has all the credentials to be a permanent member of the UN Security Council, reaffirmed the Republic of Cyprus’ support to India’s candidature for a permanent membership in an expanded Security Council.
10. Cyprus welcomed the India-US Agreement on Civilian Nuclear Cooperation. Both sides agreed that such cooperation would help in addressing concerns related to global energy security and environmental protection. Cyprus conveyed its support for India’s efforts for the promotion of full civilian nuclear energy cooperation for the benefit of her economic development and prosperity of its people.
11. The two sides took stock of progress in the implementation of existing agreements and emphasized the importance of optimal utilization of existing inter-governmental and other bilateral mechanisms. While expressing satisfaction that bilateral economic cooperation has shown growth over recent years, they agreed to pay particular attention to expand and diversify their trade and economic relations. Recognizing the new possibilities and needs of the growing economies of the two countries, the two sides decided to set up a Joint Committee which will prepare, within a year, recommendations to the two governments for ways to expand and enhance mutually beneficial cooperation in all areas of common interest.12. As Cyprus plans to develop hi-tech sector as the third pillar of its economy, Information Technology, ITES, Biotechnology, including collaboration in R&D projects, have emerged as the areas for future cooperation between the two countries. In light of India’s well-established capabilities in this field, Cyprus welcomed participation by Indian companies in the development of knowledge-based industries and in the high-technology park project.
13. The two sides noted other potential areas for bilateral economic cooperation arising from Cyprus’ expertise in financial services and cooperation in knowledge-based industry relating to accountancy, legal and investment banking research.
14. Both sides consider the energy sector as a high priority area and India expressed its willingness to share its expertise with Cyprus in this regard. The two sides discussed the possibilities of forging long-term joint collaboration in promoting innovative energy renewable applications and rational use of energy and the deployment of energy thematic park in Cyprus.
15. Recognizing the tremendous scope for enhancing the two-way tourism, it was agreed that both countries would focus on bilateral tourism promotion initiatives, including considering the feasibility of direct air links between the two countries.16. The two sides emphasized the need for a comprehensive expansion of mutually beneficial contacts between business communities of the two countries and noted with satisfaction the setting up of Cyprus-India Business Association as a step in this direction.
20. The two sides also jointly issued postage stamps of each side in the two countries, under the existing bilateral agreement in the field of Posts and Electronic Communications.
17. Aiming at further developing bilateral trade and mutually beneficial economic cooperation, the two sides discussed measures for simplification of visa procedures for business representatives, scientists, professionals and tourists. Within this context, issuance of long-term multiple entry business visas and facilitation for scientists and professionals who find employment in Cyprus, to be considered within the overall policy of employment of third-country nationals, was announced by the Cypriot side during the visit.
18. The two sides acknowledging the positive role that the traditional cultural affinity between the two countries and peoples has played in fostering bilateral ties, decided to organize special cultural events during 2006-07.
19. A bilateral agreement on combating terrorism, illicit drug trafficking and organized crime was finalized during the visit.
21. The two leaders agreed that regular exchanges of high-level visits will help to sustain the momentum of bilateral relations. In this context, President Papadopoulos extended invitations to President, Mr. A.P.J. Abdul Kalam and Prime Minister, Dr. Manmohan Singh, to pay an official visit to Cyprus at a mutually convenient time, which were warmly accepted.
New Delhi
April 16, 2006
Agreements in Place:
-Agreement on Economic, Trade, Scientific, Technical and Industrial Cooperation signed in October 2002
Memorandum of Understanding on Science and Technology
MOU on Information Technology and Services signed in October 2002
-Agreement on Cooperation in the field of Posts and Telecommunications signed in October 2002
-Agreement in the fields of Public Health and Medical Sciences signed on 8.10.2002during P.M's visit to Cyprus.
-Agreement for the Mutual Promotion and Protection of Investments signed on 9.4.2002 in Nicosia
-Cultural exchange programme last signed on 8.10.2002 in Nicosia from 2002-2005. The new CEP signed on 30th May 2007.
-Agreement on Cooperation in the Field of Tourism.
- Double Taxation Avoidance Agreement
-Agreement on Abolition of Visa Requirement for Diplomatic and Official Passports (May 2007)
-Agreement on Combating International Terrorism, Organised Crime and Illicit Drug Trafficking (May 2007)
-
Agreements under review:
-Agreement on Merchant Shipping
-Air services agreement.
Agreements between Apex Trade Bodies:
A Joint Business Council was set up between the Federation of Indian Chambers of Commerce and Industry (FICCI) and the Cyprus Chamber of Commerce and Industry (KEVE) in 1989.
Cyprus-India Business Association (CIBA) set up in 2005:
In September 2005, Cyprus-India Business Association (CIBA), under the auspices of the Cyprus Chamber of Commerce, has been established.
The Association was inaugurated by Mr. George Lillikas, the then Minister of Commerce, Industry and Tourism, Republic of Cyprus, in December 2005.
This comprised top companies in IT, pharma, automobile, construction, tourism, tax planning, and leading banks in Cyprus. FICCI would like to establish a long-term institutional arrangement with CIBA. Besides inviting a business delegation from Cyprus to India, FICCI is also considering a proposal to mount a pharmaceutical delegation to Cyprus. CII has expressed a keen interest to send a sector-specific delegation to Cyprus . A high level business delegation from Cyprus accompanied the President during his visit to India in April 2006.
Visits of Business Delegation:
During the last year, a number of business promotion events and seminars have been organized in Nicosia and Limassol. The Gem & Jewellery Export Promotion Council of India mounted an 8-member delegation to Cyprus from 8 to 10 February, 2006 and again from 23-25 April 2007
Economic and Commercial relations with Cyprus have grown in the recent years. However, the total two-way trade is still very small despite a manifold increase from US$7.68 million in 1991 to US$ 40.65 million in 2005. Indian companies, notably BHEL, PEC, Tata Projects Ltd., Bharati Ship Yard (P) Ltd. and Tata Exports Ltd., have been participating successfully in various Cypriot projects from time to time, and a few of them were able to secure major contracts in the past, in the power sector, petroleum refinery, desalination project and supply of tug boats and ammunition. Altogether, trade and investment flows and the scale of the economic interaction are not commensurate with the excellent political relations and the vast potential of the two economies.
I.Cyprus Economy
The Cypriot economy has been a success story. With a population of 780,000, its per capita income is over US$20,000, higher than many countries within the European Union, such as Greece, Spain and Portugal. The rapid growth of GDP in the past five years has been 3.4% in conditions of almost full employment and low inflation. This has been accompanied by economic stability and restructuring of the economy. Cypriot economy has been dominated by the services sector, mainly tourism and financial services. Government has now decided to develop hi-tech and knowledge-based industries as the third pillar of the economy. The synergy with India in this field is self-evident.
Although the size of the Cypriot economy and its internal market is small, Cyprus is strategically located at the crossroads of three continents that makes it a gateway to enter the wider EU market, Middle East and North Africa. The successful use of modern technology and the development of infrastructure in the sectors of transport and telecommunications have turned Cyprus into a centre for transit trade, international shipping and banking services. Nearly 1200 international business companies operate from Cyprus. Foreign investment is welcome in almost all sectors of the economy with equity participation up to 100% by both EU and non-EU entities, who are treated at par with local businesses. Tourism is one of the mainstays of the Cyprus economy. In 2005, 2.5 million tourists came to Cyprus.
The European Union is Cyprus’ main trading partner, absorbing more than 65% of its imports and 55% of exports in 2004. Since joining the EU, Cyprus has become the EU’s key trading post in the eastern Mediterranean, providing a point of exchange between Europe, Africa and Asia.
II. India-Cyprus Trade:
The two-way trade between India and Cyprus is very small, and the balance of trade has always been heavily in favor of India. The two-way trade and Balance of Trade figures given below bring out this trend.
India-Cyprus Trade: 1991-2005
(Figures in US $ millions)
Year
Indian Exports to Cyprus
Indian Imports from Cyprus
Total Two-Way Trade
Balance of Trade
1991
7.42
0.26
7.68
+ 7.16
1992
27.72
0.34
28.06
+ 25.38
1993
12.70
0.84
13.54
+ 11.86
1994
17.46
1.02
18.48
+ 16.44
1995
28.39
0.26
28.65
+ 28.13
1996
28.12
1.29
29.41
+ 26.83
1997
26.34
1.13
27.47
+ 25.21
1998
26.39
0.66
27.05
+ 25.73
1999
29.34
0.85
30.19
+ 28.49
2000
31.52
1.49
33.01
+ 30.03
2001
33.20
2.40
35.60
+ 30.80
2002
32.71
1.88
34.59
+ 30.83
2003
34.84
2.60
37.44
+ 32.24
2004
37.55
5.2
42.57
+ 32.53
2005
36.91
3.75
40.66
+ 33.16
2006
47.24
6.04
53.28
+41.2
Main items of Import and Export:
Major imports from India during the year 2006 were vegetable products, including rice, nuts and oilseeds; organic chemicals, including pharmaceutical products; mineral fuels, oils and products of their distillation; leather travel goods; textiles and garments including woven fabrics of man-made and synthetic staple fibres; footwear; carpets and other textile coverings; iron and steel and its products; machinery and mechanical appliances; electrical machinery, sound recorders, television image and reproducers; vehicles, parts and accessories; furniture; and precious and semi-precious stones.
Major exports from Cyprus to India during the year were Meslin flour, waste and scrap of paper or paperboard, copper and its articles; pharmaceutical products; and raw hides and skins, machinery, mechanical appliances, aluminium & articles thereof.
Indian exports of seafood, antibiotics and cotton yarn have increased during recent. However, our share of the market for these items is still small. Other Indian items having good prospects are textiles, handicrafts, hand/machine tools, and software. Efforts are being made to introduce Indian tea and alcoholic beverages to the Cypriot market.
New Areas of Economic Cooperation:
Areas of interest for India
A constraint in expanding economic and commercial relations has been the small size of the Cypriot market given an effective population of less than 800,000. For Indian exporters, this limits the demand and practically eliminates economies of scale, especially with respect to transport costs. One way out might be for our companies to not merely target the internal Cypriot market, but to exploit the very good logistical, storage and other services available on the island, and use Cyprus as a base for distributing and marketing their products to Europe, Mediterranean, Middle Eastern and North African countries.
Above all, with Cyprus as an EU member since May 2004, it can be used as a base for the wider EU market. Cyprus’ export opportunities have broadened considerably as its products and services have gained access to the vast EU market. The possibilities for developing collaboration in projects have also increased due to the availability of financial assistance through EU structural funds as well as through wider participation in European programmes. Cyprus’ new hi-tech investment programme will additionally open opportunities for creation of new ventures in this sector, including collaborations in R&D projects.
Developing our links with Cyprus in the field of IT and R&D can also serve as a springboard for wider market in Europe as there is still relatively unrestricted mobility of professionals in these sectors. Cyprus has the most competitive tax regime with a 0% capital gains tax and across the board 10% corporate tax even after dismantling the offshore regime. Indian industry could consider whether it would like to use Cyprus’ ease of corporate establishment to set up EU companies, which could have same rights for market opportunities to participate in the tenders for various projects not only in Cyprus but also in other EU countries.
In short, Indian industry could set up shop in the Techno-Park, especially the IT industry and participate in Cyprus’s business incubators programme for collaboration in biotechnology projects. In pharmaceutical sector, besides generic and specialty drugs, export of medical equipment could also be explored.
Other new areas of future cooperation have emerged as construction, tourism and financial services.Search of hydrocarbons in E.E.Z. of Cyprus in Eastern Mediterranean may be yet another area of interest for the Indian companies.
Areas of interest for Cyprus
Since Cyprus’ economy is dominated by the services sector, mainly tourism and financial services, it is very keen to expand tourism from India and promote Cyprus for routing foreign direct investment into India. It is worth noting that Cyprus has 0% (zero per cent) capital gains tax. There is a growing awareness of the huge potential of tourism from India. Cyprus Tourism Organization (CTO) is keen to target the high-value tourists from India for pleasure as well as conference tourism.
Other specific sectors could include:
Knowledge-Based - Accounting, Legal, Investment Banking Research, Back Office Processes could be set up by Cypriot businesses in India. They are currently restricted by availability of human resources; expansion is possible, if they set up shop in India, as these can be re-routed to their own subsidiaries in India.
Medical Tourism - Currently Cypriots are travelling to Israel, Greece, and UK for treatment, not available in the Island.
Film Industry - Cyprus could explore the possibilities of Island to be used by Indian Film Industry. Switzerland, Australia, Mauritius, Malaysia have gained a large number of high-net-worth tourists due to indirect promotion by Indian Film Industry.
Investment in Retail and Infrastructure - Cyprus companies like J&P and Cybarco could bid for projects in India.
Special Economic Zones - Businesses could set up shops in SEZ or participate in SEZ. On joining EU, Cyprus has ceased offshore operations and introduced an across the board 10% corporate taxation, which is still lower than many EU countries
Alternate Fuels - Use of CNG for public transport. CNG is more economical fuel. Fuel prices are not likely to come down to the level of two years ago. Delhi is the first city in the world to have all its public transport running on CNG.
Power Generation - Cyprus is looking to expand its power generation capacity based upon Natural Gas. BHEL has the expertise in this area. Previously, BHEL has supplied equipment to Dhakelia power station.
Food Products - Mediterranean Cuisine is catching up in India. Export of food products like Olive, Olive Oil, Halloumi, Feta are a possibility. Export and Import of Wines is another possibility.
Hydrocarbon potential and opportunities in Cyprus
Cyprus is located at the northernmost tip of the African plate, which in the Middle East area contains 65% of world oil deposits, or 680 billion barrels. The oil reserves in the surrounding seas outside Cyprus’ EEZ are estimated at 6-8 billion barrels, worth US$.330-440 billion in current prices
The volume of oil and gas reserves in Cyprus’ EEZ is not known. There have been numerous explorations, satellite imagery, seismic and geological studies of Cyprus’ EEZ. The stable oil slicks detected by satellites, the various seismic studies, the confluence of the Nile Delta discharging into the sea some 55 billion tons of water and organic material each year, as well as an examination of the geology of the seabed surrounding Cyprus, have provided very positive clues.
Cyprus recently signed an MOU with Egypt for joint exploration of oil and gas reserves across the delimitation line of the two countries’ Exclusive Economic zones on 20th July 2005. The MOU covers mainly technical cooperation, under which Egypt will help Cyprus to set up a multi million energy centre for receiving and deliquidifying natural gas. Egypt has also offered its expertise to Cyprus for joint exploration of oil and gas as part of this agreement. Initial joint exploration with Egypt will help them to confirm the oil and gas reserves in their waters. Once they have a surer idea of these reserves, Cyprus intends to open up collaborations with other partners. Cyprus will require special outside technological help, as the water in question is two-kilometres deep. Cyprus’ plans to explore its EEZ for petroleum and gas reserves are under consideration of the Council of Ministers for a policy decision. We have flagged our interest to develop long-term cooperation in this field.
On the Cypriot side, a 100% Cypriot-owned Company, L.K. Group, is functioning successfully at NOIDA, employing around 250 software programmers and exporting software to Europe, the Middle East and the Gulf.
Another Cypriot company, Cyber Group, which has been franchising its innovative, interactive computer educational programme, called ‘Cyber Kids’ for children, has launched its programme in Chandigarh in May 2000 and has since opened up several franchises throughout India. The huge Indian market is highly rated in Cyprus for its IT talent and capacities.
M/s Hyperion Systems have recently opened an office in Pune for research work in the chemical engineering.
AMDOCS (Cyprus), a multi-national company, has opened its development centre in Pune in January, 2004 and has employed approximately 500 young software programmers and engineers. AMDOCS (Cyprus) has more than 500 Indian software engineers as its employees. The company has expertise in telecommunications sector.
Card Tech Ltd., a multi-national company, has signed a contract with ICICI bank worth US$ 2 million to provide ATM cards recently.
Cultural exchanges in general have remained infrequent and cultural ties between the two countries need to be vitalized. Short term to mid term action plan is being developed to step up exchanges in this field. An Agreement on Cultural Co-operation was singed in October 1980. Due to problems concerning rates of allowances applicable to artistes/scholars, the Cultural Exchange Programme (CEP) was suspended in 1990. The new CEP for 2002-2005 was signed during the Prime Minister’s visit to Cyprus from October 7-9, 2002. An ICCR sponsored photographic exhibition on India was held in February 2001. A 10-member Margi Kathakali Dance Troupe visited Cyprus from November 26-30, 2002. A week of Indian Cinema, including Dil Chahta Hai, Sardari Begum, Hazaaron Khwaisein Aisi and Hum Dil De Chuke Sanam were screened in Pantheon Cinema in Nicosia in April 2007.
A joint issue of Postage Stamps of India and Cyprus were issued in April 2006 under the Agreement between India and Cyprus in the field of Posts & Electronic Communications, signed in October 2002. The stamp show cases spectacular facets of Indian and Cypriot cultures, its theme being the folk dancers of India and Cyprus.
Indian firms have won contracts for various projects in Cyprus. BHEL won a contract worth US $ 34 million for the supply of 2 x 60 MW Turbine Generators and ancillary equipment for the Dhekelia Power Station, which has been completed. Tata Exports Ltd., Bombay won a contract worth US $ 1.3 million from the Cyprus Petroleum Refinery for supply of roof tanks and associated pipe work. The same firm had implemented another contract worth US $ 275,000 for the Cyprus Petroleum Refinery, for de-tubing of a boiler. Bharati Ship Yard (P) Ltd., Bombay has supplied three tug boats worth US $ 15 million to the Cyprus Port Authority. PEC has supplied ammunition worth US $ 1 million to the Cypriot National Guard. Most recently, Tata Projects Ltd. teamed up with Austrian Energy as a sub-contractor for the erection of boilers at the 240 MW Vasilikos Power Station in Southern Cyprus and the job has been completed. Tata Projects Ltd. secured a part of the project work in the new 54,000 cbmpd, US$ 40 million desalination plant at Larnaca in 2000-2001.
Projects in which Indian firms participated but were unsuccessful:
Information Technology and High-Tech sectors, which are of late being given prominence by Cypriot authorities, are other areas which offer prospects for collaboration between India and Cyprus. In this connection, the Director General, Software Technology Parks (STPI), India, had visited Cyprus in 2004 and submitted a feasibility study, which is being examined in the overall framework of an Science and Technology Park, being developed in cooperation with France.
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