30 months after the crisis wreaked havoc, Cypriot finances have stabilised along with the financial sector. The country has returned to growth, employment levels rising. Confidence is finally returning to this Mediterranean jewel.

Cyprus has long been at a crossroads of continents and trade routes. It is also now at a vital juncture in an ambitious programme of reforms brought about by the unprecedented financial crisis that unfolded in March 2013. That year, the country’s GDP contracted by a painful 5.4%, compounded by a further 2.3% shrinkage in 2014. This rapid contraction sent shockwaves through the economy, bringing into sharp relief the volume of non-performing loans on the books of Cypriot banks. It also compounded the woes of an overheated real estate sector and prompted a spike in unemployment.

The country was also the recipient of the EU’s first ever ‘bail-in’ as part of the wider European debt crisis, an event which saw 47.5% of all unsecured deposits over €100,000 taken as collateral in a bid to recapitalise the banking system, all of which pointed to a country mired in a downward spiral.

However, the stalwart sectors of the Cyprus economy kept on firing throughout the crisis, performing strongly even at its height. The main imperative for the government has been to ensure the stability of the economy whilst promoting economic reform, as Harris Georgiades, Minister of Finance explains. “Through the implementation of the bail out programme, major imbalances and problem areas are being tackled, whilst at the same time preserving everything that is healthy and strong in our economy. The resilience of tourism, professional services and shipping allowed us to withstand the shock, and today these sectors are driving the economic recovery.”

How the President of the Republic of Cyprus, Nicos Anastasiades, and his government achieved such rapid change from a country that one of the initial troika summaries painted as full of lax enforcement and repeated breakdowns in anti-money laundering procedures is a testament to the underlying strength of the jurisdiction.

In a wide-ranging interview with InFocus, President Anastasiades explained that many of the structural problems that his country faced have already been, or are in the process of being resolved. He is firm that the whole government and the people of Cyprus are leaving the crisis behind stronger than when the country entered it. “Cyprus has more than 50 double tax treaties in force, an enviable quality of life, and is a perfect environment to raise a family thanks to the safety standards, good weather, and international schools, not to mention the Cypriot hospitality and friendliness.

“In addition, new vistas for business are opening up: the recent discovery of natural gas reserves within Cyprus’ Exclusive Economic Zone creates interesting prospects for investments and cooperation in the energy sector and auxiliary services, presenting new opportunities for growth in the well-established legal, financial services and even construction sectors,” the President concluded. As John Hourican, outgoing CEO of Bank of Cyprus said to InFocus, “Austerity is a platform from which you build prosperity, it is not an answer in itself,” advice Cyprus seems to be following to the letter.

Tourism, shipping and professional services have all benefitted from the island nations enviable location, its well-educated workforce, and the provision of business friendly legislation, which has been tightened and improved to further increase competitiveness. Although tourism contributes some 20% to GDP, there remains significant scope for the sector’s further growth and realisation of its potential.

Arrival numbers have stagnated over the past decade, hovering around 2 million, with a large proportion coming from the United Kingdom. The country momentarily reeled from the closure of flag carrier Cyprus Airways at the beginning of 2015, with the assumption that a reduction in much needed capacity would follow – in fact there was an uptick in capacity of around 300,000 seats within 12 days, highlighting the resilience of a robust private sector, as well as the attractiveness of the country to travellers.

With a comprehensive macroeconomic study mapping the way forward for the sector, which is expected to bring about a streamlining of the industry from a legislative and structural perspective, expect major changes in the visibility of the offer worldwide as the Cyprus Tourism Organisation (CTO) looks to further partnerships its partnerships internationally. A much vaunted integrated casino “super” resort has been approved by parliament and the tender process underway, with the government expecting the winning bidder to break ground in early 2016. Meanwhile, a new marina development in Ayia Napa is underway, and the tender for the Larnaca port and marina expected early in 2016, giving both investors and visitors plenty to salivate over. Finally, with Pafos set to be a European Capital of Culture for 2017, the outlook is positive.

The shipping industry has long been one of the strongest sectors in Cypriot economic mix. Most expect this to be explained by its position at the crossroads of Europe, Africa and the Middle East, however the true drivers of the sector are the industry friendly regulatory environment companies find on the island, together with the world-class human capital and accumulated expertise. As one of only two ‘open’ registries in the EU, the fleet managed from Cyprus accounts for over one quarter of ships registered in the EU – making it the tenth-largest in the world – and when combined with the services Cyprus offers, such as marine insurance, chartering, ship surveying and ship-broking, the sector as a whole contributes 7% to GDP.

The new tonnage tax system was implemented by the Merchant Shipping (Fees and Taxing Provisions) Law was enacted in May 2010 and applied from the 2010 fiscal year. The tonnage tax is calculated on the net tonnage of the ship according to a broad range of bands and rates prescribed in legislation, with the rates applicable to ship managers are 25% of those applied for ship owners and charterers.

However, for the most part the abovementioned geographic position that Cyprus enjoys has yet to be leveraged and translated into tangible benefits. Privatisation, modernisation and investment of the ports are desperately needed if the country is to realise its potential as a transhipment hub. While the ports currently serve the domestic economy as an entry point for goods and an outlet for exports, the scale of Cyprus’ economy and embedded inefficiencies have kept thwarted the logical development of a transhipment industry.

With Malta, an even smaller island located further from the Suez Canal, currently handling 3 million TEU per year after privatisation, versus the approximate 300,000 TEU handled by Cyprus’ ports, the ground is ripe for Cyprus to increase numbers dramatically. The tender process for the privatisation of the Limassol port is underway and with over 70 expressions of interest having being lodged, the outlook looks promising. Meanwhile, the Cyprus Ports Authority prepares to transform into the sector’s regulatory body, a move which keeps experience and knowledge in-house while smoothing over the privatisation process.

The financial services sector is one that has been hit hard both by the crisis itself, the process of consolidation and the changes to a more Eurocentric regulatory environment. With Cyprus’ second biggest bank, Laiki, ceasing trading and being absorbed by Bank of Cyprus (BoC), and the Cooperative Central Bank also needing emergency assistance, the travails of the sector are well documented.

The return of confidence came quickly though, with BoC finding €1 billion of investment from international markets and players such as Wilbur Ross, a true show of belief that there is growth in the short and medium term in Cyprus. With Hellenic Bank raising capital from a mix of domestic and international investors without the need for liquidity funding from the European mechanisms, the show of strength in adversity is impressive.

In his interview with InFocus, John Hourican, explained the importance of following the new regulations laid down, but also that there needs to be a step change in attitude in Cyprus. “In my time in Cyprus I have found that generally everyone knows what to do,” he explained, “but the silence collectively can be deafening. Cyprus needs to continue being brave, to push hard in terms of the reform agenda, in short, not wasting the crisis. More modernisation should be on the agenda, stronger legislation and a bravery to build wealth through opening up the ways people can compete, as opposed to protecting the past.

“We remain at war with economic circumstance, we remain at war with historic practices that need to be changed, and we remain at war with the rest of world for investment dollars from foreign investment. We need to understand that Cyprus is still has work to do, and not allowing parochial politics to effectively get in the way of a good discussion about the future of the nation.”

The professional services sector in Cyprus has also performed well throughout the crisis, driven by a workforce boasting one of the highest levels of tertiary education in the EU that is well versed in international law, finance and accountancy, finding its skills much in demand. With some of the lowest operating costs in Europe and numerous double taxation agreements and provisions in place, Cyprus is an attractive destination for international capital. Furthermore, these advantages leave it well placed to deal with the effects of the Russian de-offshoring regulations and advent of FATCA, the American information sharing arrangement, of which Cyprus is fully compliant, and point to a well regulated environment.

Exciting developments are present in industries and sectors not historically associated with Cyprus, such as oil and gas. With the discovery of the Aphrodite field, which at 126 billion cubic meters (bcm) dwarfs the combined domestic energy needs of Cyprus for generations to come, exports to its neighbouring countries, and possibly the EU are on the cards. Egypt recently struck its own massive discovery of natural gas with the Zhor field, which weighs in at 850 bcm, and is only 6.5km from the two countries’ maritime border. This surpasses Israel’s Leviathan field discovery of 621 bcm. It remains to be seen how regional energy plays will shake out, however the scale of discoveries within the Eastern Mediterranean basin bodes well for subsequent future discoveries within Cyprus’ EEZ.

Yiorgos Lakkotrypis, Minister of Energy, Commerce, Industry and Tourism explained that Cyprus is looking to take full advantage of all available synergies in the sector, searching for international partners to work with. “In the mid-term, what we look forward to is to take advantage of the revenues from the selling of the natural gas and hydrocarbons but also, for domestic usage in order to achieve the goal of lowering the cost of electricity.

“In the longer-term, where we want to be once the hydrocarbons are extracted, sold, and gone, what we want to be left with – we want to be able to create a knowledge-based economy centred on the oil and gas industry. So leveraging on the unbelievable human capital that we have, all of those consulting services, technical, financial, legal, accounting, commercial, we want to be in a position to export ourselves.”

Two and a half years after the crisis fully hit, Cyprus is a different place. The regulations that needed to be updated are going through parliament with the backing of the business community, the financial sector is going through its painful restructuring yet still managing to find partners willing to invest, and the tourism and real estate sectors are finding new ways to increase revenue and exploit new markets.

With the addition of oil and gas into the mix, not to mention the ever-present debate over the country’s reunification – which appears to have found leaders on both sides that see the economic and social benefits for the whole island – seemingly on the table for discussion, the future for Cyprus is bright. However, Cyprus and its people must continue along the road of change, taking the painful medicine in the knowledge that it will pay off in the form of growth and an end to the crisis.