Shipping is critical to the country’s recovery, says Kazakos
CYPRUS-based shipping has emerged from the country’s economic crisis without lasting damage and will be a crucial factor in the drive for normalisation, according to the head of its main shipping industry organisation.
Cyprus Shipping Chamber director-general Thomas Kazakos led an industry delegation in a meeting with the Troika, the nickname given to the European Union, European Central Bank and International Monetary Fund representatives who police the bailout package that saved the country’s banking system from collapse in March and April.
Several political and commercial issues were tabled, including the need to lift what remains of the capital controls imposed at the time and the ongoing row over Turkey’s ban on Cypriot-flag vessels entering its ports, Mr Kazakos told Lloyd’s List.
Although a complete collapse appears to have been averted, the situation remains delicate. One recent opinion poll found that 97% of residents regard the economic outlook as bad or very bad and that two-thirds expect things to get worse in the year ahead.
Nevertheless, the government has been disciplined in implementing the tough terms attached to the Troika deal, which demands an 11% reduction in spending in the next 12 months.
Despite this, most economists foresee substantial further loss of output in 2013.
Shipping accounts for some 7% of Cyprus’ GDP, coming second or third to tourism, depending on the estimate used, which makes the industry critical to the country’s eventual recovery.
“It was a very open, frank meeting. I would even dare use the word friendly,” Mr Kazakos said. “They wanted to know how the banking situation has affected the shipping industry.
“They wanted to know the prospects of our industry after the April agreement and if we have any suggestions, demands or requests on how to assist the shipping industry.”
He said only some 10 of the 60 or so major shipping companies on the island, which include Greek, German and Russian offshore concerns, banked with Laiki or Bank of Cyprus, the two banks that took a controversial haircut on depositors’ money.
Although the names are not in the public domain, Lloyd’s List earlier reported that Unicom, the shipmanagement arm of Russian state-owned tanker giant Sovcomflot, was among those who got caned for tens of millions of dollars.
However, the remaining 30 banks escaped penalties and, crucially for shipping, there were both legal means of getting necessary payments through, and no limitations on bringing money into Cyprus rather than taking it out.
“I’m not going to say it was hunky dory, everything was fine. No. But practically speaking, it made things a bit more difficult, rather than impossible,” Mr Kazakos said.
“Don’t forget that shipping is a globalised industry. Most of our companies have offices abroad, so they were able to divert money payments.
“Even during times when the banks were effectively closed, we discussed the matter with the administration and the agencies and found a legitimate way, with a properly scrutinised manner, in which we were able to effect payments to seafarers and associates abroad.
“If we managed to do that for the vast majority of cases while the banks were closed, how can anyone expect that the problem would be bigger after the banks were open?”
The priority now, as then, is to ensure that Cyprus remains a viable base for shipping and shipmanagement and can offer its services without interruption.
Temporary restrictions are still in place, although they have been substantially reduced. One of the most important reasons for the removal of capital controls, which appears to be imminent, is simply the country’s image, Mr Kazakos said.
“We told the Troika that, the sooner [capital controls] go, the sooner the credibility of the banking system and of Cyprus is restored.
“Our industry wants to stay in Cyprus and … if you want more prosperity and the ability for Cyprus to be a very good payer of the loan you are giving us, please use your powers to assist us to remain and expand. It is as simple as that.”