Between 14^th to 17^th September 2020, just a day before yet another lockdown, I had the pleasure of joining ‘Mission: Innovation’, a bootcamp tailored to the needs of Trade & Innovation Counsellors serving in EU Diplomatic Missions in Israel.

The bootcamp programme was jointly designed and delivered by the European Institute of Innovation & Technology (EIT) Hub in Israel and Innovation Without Borders (IWB), an organization serving as a platform for diplomatic staff leading innovation activities in Israel to network with local ecosystem stakeholders.

Considering that the Cyprus Trade Center (CTC) in Tel Aviv has been operating for 3 years already and that during this time has initiated, supported, and took part in several activities in the Research & Innovation domain, our team’s knowledge and understanding of the local ecosystem would be classified as fair.

Nevertheless, we abide by the motto ‘I know that I know nothing’ (ἓν οἶδα ὅτι οὐδὲν οἶδα). Thus, with an interest of enriching my knowledge, extending our office’s network and challenging my understanding of the opportunities and challenges in advancing cooperation between Cyprus and Israel, I joined a team of counterparts from 9 different EU diplomatic missions in this 4-day educational journey.

In summary, the bootcamp’s intense programme could be divided into 3 meta-categories.

1. Α plethora of back to back meetings with key ecosystem actors, covering the full stakeholder spectrum; academia, public sector, private sector as well as civil society.
2. A specialist workshop guiding participants to clearly lay out their innovation agenda objectives, formulate a concrete action plan and pinpoint deliverables and performance metrics.
3. Peer-to-peer learning, through daily interaction with counterparts sharing very similar job descriptions but practically delivering value for their respective business communities and countries in varied ways

Personal Key Getaways & Thoughts

• High-level objectives for EU innovation counsellors in Israel may look alike, but the actual opportunities and projects to be explored may vary significantly between countries when taking into account parameters such as -and not limited to- the specific country’s economic profile, its innovation strategy, availability of resources, national ecosystem size and maturity level, presence of MNCs, culture, intensity of collaboration between stakeholder groups etc.
• Projects & Activities Planning – Concerning delegation visits and other relevant events; sector-specific, more compact initiatives may deliver significantly greater value and tangible results compared to those of general -and often customary- nature.
• There is a very wide network of potential partners to team up with when executing projects and collaborators to consult when collecting information and when handling requests from organizations back home. There is a great deal of overlap, which can at times lead to unnecessary duplication of effort but may also bring about complementarity. It is important to be clear on requirements before approaching stakeholders, in order to (a) be efficient in identifying the most appropriate and relevant collaborator and (b) be effective in achieving targets.
• From an Innovation Counsellor’s perspective, defining Key Performance Indicators (KPIs) or performance metrics in general is a very challenging task. Quantifying targets is particularly complex as many elements in the equation are outside a Counsellor’s control.  Nevertheless, it is a valuable exercise worth pursuing while tweaking the outcome as you go (Plan-Do-Check-Act). This is not necessarily done as part of an appraisal process. Instead, it should serve as a compass for a given team to navigate accurately towards its objectives.
• COVID-19 era considerations – In the absence of physical meetings and events, the world resorted to the increased utilization of VC tools and the planning of webinars and digital conferences. It is a common observation that we have by now reached ‘Zoom-fatigue’. Thus, -to the extent possible- it is important to identify innovative, fresh ideas for webinars and digital events, to attract and engage audiences, and offer them value adding experiences.
• Continuously improving website and social media content, by keeping up to date with digital tools and communication trends is key to effective audience education and engagement.
• Boosting interest in available opportunities is equally important as bursting bubbles and misconceptions. E.g. Motivate EU companies searching for solutions and new technologies to look into the Israeli market, whilst at the same time informing that investment organizations in Israel are inward looking, meaning they predominantly and purposely invest in Israeli startups and are not -in principle- looking into investments in foreign startups.
• Stay knowledge-thirsty, ask questions, say ‘yes’ to networking opportunities, keep a positive attitude, embrace local culture and traits, be open and collaborative. Do not see hutzpah as an enemy, make sure you turn it into your friend.

Overall, the bootcamp experience was highly beneficial and I would heartily recommend it to fellow Counsellors who might consider signing up for it in the future. It was a great opportunity to take a step back, re-assess our operational environment also considering the extraordinary circumstances we are faced with due to the COVID-19 pandemic, re-evaluate our objectives and revise action plans.

Sofronis Papageorgiou

Head – Cyprus Embassy Trade Center (CTC) Tel Aviv

The Case of Cyprus – Energy, Port Infrastructure, Maritime Transportation & Logistics

A US investment fund is currently assessing the prospect of strengthening its investment portfolio in the areas of energy (primarily oil & gas operations but also renewables), port infrastructure and shipping logistics in the Eastern Mediterranean region. The company has been considering Cyprus, both as a location for establishing its regional base as well as a promising investment destination. Political instability, coupled with uncertainty and heavy pessimism on the viability of the development of energy projects in the region, as well as the Cypriot economic crisis of 2012-13, are considerations that the Board of Directors is currently evaluating.

On 15 January 2020, the Wall Street Journal published an article titled ‘Israeli-U.S. Consortium Begins Pumping Natural Gas to Egypt’[i]. The commencement of natural gas exports from Israel to Egypt-formally announced on 15 January 2020- was praised by the Israeli government and media, as a historic milestone for Israel-Egypt relations, second in scope and magnitude to the Peace Treaty of 1979.

The commercial agreement was concluded back in February 2018, between the consortia licensed to develop the Israeli natural gas reservoirs Tamar and Leviathan, and Dolphinus Holdings Ltd. a private natural gas trading company in Egypt. Since then, an extension to the original contract scope (i.e. additional quantities to be exported) was agreed, a prompt solution to the necessary transportation infrastructure was identified and put forward (i.e. reinstate and use in reverse flow mode the EMG pipeline connecting Ashkelon and Arish) and regulatory licenses were granted. [ii] [iii]

Politically speaking, the post-WWII period for the Eastern Mediterranean region was and remains one of withstanding but also newly sparked crises and conflicts, be it intra-national or international. Indicatively mentioning; Israeli-Palestinian conflict, the Arab Spring, the Syrian War, Turkey’s foreign policy shift towards Neo-Ottomanism etc. From an investor’s standpoint, the ever-changing political conditions compose an environment characterized by high volatility, unpredictability and ultimately high-risk.

Nevertheless, within the last decade, we have observed that whilst political -and in certain cases military- conflict is on-going, certain sectors are identified for which countries may put their overall differences aside and focus on as part of a positive agenda delivering benefits to all parties involved. Prominent examples include security of energy supply and responding to climate change[iv].

As of 2014, a joint initiative for encouraging regional dialogue and cooperation was rolled out by the Republic of Cyprus and the Hellenic Republic.  This resulted to the establishment of an array of Trilateral format dialogue platforms with like-minded neighbours including Egypt, Israel, Jordan, Lebanon and the Palestinian Authority. In the case of Israel, the Trilateral cooperation has matured significantly, igniting an increased interest by the US to participate and to jointly coordinate activities in areas of mutual interest. This led to an extended 3+1 format marked by the participation of Secretary of State Pompeo to the Israel-Cyprus-Greece Trilateral Summit held in Jerusalem (March 2019)[v]. This signified a shift in US policy, aiming for a stronger focus and involvement in the Eastern Mediterranean region, supporting initiatives that promote peace, economic and social prosperity.

Specifically, in the area of energy and the development of regional natural gas resources, on 16 January 2020 we have witnessed the establishment of the East Med Gas Forum (EMGF) for which the foundation charter was signed by the Ministers of Energy of Egypt, Cyprus, Greece, Israel, Italy, Jordan and the Palestinian Authority.[vi] At the same time, France formally requested to join the EMGF as a permanent member, whilst the US has requested to gain permanent observer status.[vii] Among others, the objectives of the Forum include the attraction of Foreign Direct Investment (FDI), cost optimization for infrastructure works as well as the joint identification and development of gas export corridors to gain access to markets.

Recent events; the establishment of the EMGF, gas exports commencing from Israel to Egypt and Jordan respectively[viii], gas reserves discovered in the Exclusive Economic Zone (EEZ) of Cyprus[ix], the signing of an intergovernmental agreement (IGA) for the construction of a subsea pipeline between Cyprus and Egypt[x], additional licenses granted and planned/on-going exploratory activities in the EEZs of Cyprus, Greece, Israel, Lebanon and Egypt[xi], as well as the recent signing of an IGA between Cyprus-Israel-Greece on laying the EastMed pipeline[xii] compose an environment of mutual understanding and respect in what concerns natural resources exploitation and economic development for the region, which serves as conducive for attracting and boosting foreign investment.

Additional considerations relevant to Cyprus’ investment outlook for the energy, maritime transport and logistics sectors may be considered. The government, amongst other initiatives:

1. has awarded a €290 million contract for the construction of an LNG import terminal (13 December 2019)[xiii]
2. is expected to award a €1.2 billion contract for the privatization of the Larnaca Port, entailing infrastructure expansion and operations growth[xiv], whilst a similar endeavour has taken place for the Limassol Port in 2017[xv]
3. is developing an industrial port and an energy service centre (expected to be operational in 2023)[xvi]
4. is championing -via a Cypriot private project promoter- the EuroAsia and EuroAfrica Interconnector projects[xvii]
5. is supporting investments in Renewable Energy Sources (RES) following the Cyprus Renewable Energy Roadmap 2030, striving for a 25-40% of electricity needs generated via RES[xviii].

Logistics and administrative support, as well as maintenance activities for international oil & gas companies operating in the region are performed by companies established in Cyprus. Requirements for increased capacity are present, thus, if infrastructure development proceeds at a fast pace, oil and gas operations as well as the maritime transport & logistics sector are bound to grow, provided that growth is coupled with relevant controls on ensuring suitability and availability of workforce.

Following the economic crisis of 2012-13, Cyprus had entered a 3-year Economic Adjustment Programme, resulting in the restructuring and downsizing of the banking sector, the strengthening of its anti-money laundering framework, as well as the reduction of government deficit and the implementation of structural reforms enabling competitiveness and sustainable growth[xix]. 

Reaching an impressive 4.1% in 2018, the real GDP growth rate is forecasted to steadily decline, reaching a 2.3% by 2021. This is mainly attributed to external factors, whilst domestic demand appears to remain concrete. Fiscal performance is expected to stay strong, considering an improving labour market and comparatively stable GDP growth. The debt-to-GDP ratio is also anticipated to drop from (est.) 93.8% in 2019 to 81.8% in 2021. Unemployment is expected to drop to 5.7% by 2021, whilst inflation remains relatively low (0.6% in 2019). Consumption, both private and public has increased and is expected to remain strong. [xx]

Considering the Global Competitiveness Index (2019), Cyprus is ranked at 44 out of 141 economies[xxi], whilst it is ranked at 54 out of 190 countries in the Ease of Doing Business (2020)[xxii], outperforming other southern EU countries such as Malta, Italy and Greece. Trade, considering both exports and imports, is experiencing a new growth path as of 2015[xxiii].

In addition to the increasing opportunities for investments in energy, maritime transport and logistics; it is also worth considering the ease of establishing operations in Cyprus as well as the growing investment funds management sector, which saw assets under management more than tripling between 2012 to H1 2019, reaching €6.8 billion[xxiv].

• Increased US-interest in the EastMed region and Cyprus in specific; see in addition, EastMed Act[xxv], increased US interest and engagement in supporting reforms enhancing the transparency and stability of the Cypriot financial regime, the on-going dialogue on updating the US-Cyprus Avoidance of Double Tax Treaty and the introduction of a Visa Waiver[xxvi]
• Positive macro-economic indicators for the post-crisis Cypriot economy, relevant stability assured by its EU/Eurozone membership
• Infrastructure development projects implemented in the areas of energy, shipping and logistics as elaborated above, coupled with investment incentives
• Increased stability in the specific areas of economic cooperation, supported by multilateral agreements of neighbouring countries, backed by the US, as well as the EU.

Based on the above, it is recommended to establish presence in the region, via the establishment of a regional office in Cyprus (prompt and low-cost procedure). This will allow for the development of a stakeholders network, locally and regionally, whilst at the same allowing time for monitoring and further assessing the stability and maturity of certain initiatives; enduring Israeli gas exports to Egypt and Jordan, Cyprus’ progress on infrastructure development, gas exploration activities continuing without major impediments and Cyprus maintaining and strengthening leadership as an international global shipping operations centre (EU’s largest ship-management centre, 11^th largest merchant fleet worldwide[xxvii]).

Sofronis Papageorgiou

Head – Cyprus Embassy Trade Center (CTC) Tel Aviv

References

[i] https://www.wsj.com/articles/israeli-u-s-consortium-begins-pumping-natural-gas-to-egypt-11579097813

[ii] https://www.delekdrilling.com/sites/default/files/wysiwyg_uploads/Israeli-Leviathan-to-start-exporting-gas-to-Egypy.pdf

[iii] https://en.globes.co.il/en/article-israel-to-begin-gas-exports-to-egypt-next-month-1001311161

[iv] https://futureearth.org/2019/07/04/cyprus-leading-climate-change-actions-in-the-eastern-mediterranean-and-the-middle-east/

[v] https://mfa.gov.il/MFA/PressRoom/2019/Pages/PM-Netanyahu-holds-joint-meeting-20-March-2019.aspx

[vi] https://www.neweurope.eu/article/east-med-gas-forum-makes-cairo-hq/

[vii] https://www.middleeastmonitor.com/20200117-france-and-us-request-to-join-east-mediterranean-gas-forum/

[viii] https://www.reuters.com/article/jordan-israel-gas/jordan-gets-first-natural-gas-supplies-from-israel-idUSL8N2960Q9

[ix] https://www.cnbc.com/2019/02/28/exxonmobil-makes-big-natural-gas-discovery-off-the-coast-of-cyprus.html

[x] https://in-cyprus.com/cna-cyprus-and-egypt-sign-iga-on-natural-gas-subsea-pipeline-video/

[xi] https://www.cnbc.com/2019/03/13/gas-finds-in-the-mediterranean-spark-partnership-between-rival-nations.html

[xii] https://www.euronews.com/2020/01/02/israel-greece-and-cyprus-sign-deal-for-eastmed-gas-pipeline

[xiii] https://www.financialmirror.com/2019/12/13/cyprus-signs-landmark-deal-to-build-e290-mln-lng-terminal/

[xiv] https://www.financialmirror.com/2020/02/16/huge-e1-2-bln-development-for-larnaca/

[xv] https://worldmaritimenews.com/archives/189905/dp-world-po-maritime-ink-deals-to-operate-limassol-port/

[xvi] https://www.cyprusprofile.com/en/sectors/energy-and-environment/

[xvii] https://www.quantum-corporation.com/about/the-quantum-corporation-group,3

[xviii] https://www.southeusummit.com/europe/cyprus/innovation-to-the-fore-as-cyprus-bids-to-break-energy-dependency/

[xix] https://www.financialmirror.com/2016/04/05/cyprus-exit-from-bailout-to-repay-esm-in-2025-2031/

[xx] https://ec.europa.eu/economy_finance/forecasts/2019/autumn/ecfin_forecast_autumn_2019_cy_en.pdf

[xxi] http://www3.weforum.org/docs/WEF_TheGlobalCompetitivenessReport2019.pdf

[xxii] https://www.doingbusiness.org/en/rankings

[xxiii] https://oec.world/en/profile/country/cyp/#Trade_Balance

[xxiv] http://www.cifacyprus.org/assets/files/library/ar_cifa2019.pdf

[xxv] http://www.ekathimerini.com/247923/article/ekathimerini/news/american-chambers-of-greece-cyprus-israel-hail-trumps-signing-of-eastmed-act

[xxvi] https://www.financialmirror.com/2019/12/23/cyprus-heralds-the-lifting-of-us-arms-embargo/

[xxvii] https://www.cyprusprofile.com/en/sectors/maritime-and-shipping/

The largest increase recorded for a commodity category, was the doubling of exports in the ‘Miscellaneous Chemical Products’ category, shifting from 306.6 million USD (2017) to 596.3 million (2018). 

In the case of Israel’s imports from Cyprus, the commodity category which recorded the highest increase was ‘Cereals’, reaching 24.9 million USD (2018) compared to 12.2 million USD (2017).

Looking into bilateral trade between Cyprus and Israel and comparing the results of 2018 with those of 2017, increases were recorded in all areas of interest (commodities and business services). A relevant overview is presented in the table above.