Cyprus Mail: News Articles in English, 00-05-18

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From: The Cyprus Mail at <http://www.cyprus-mail.com/>

Thursday, May 18, 2000

CONTENTS

[01] Offshore tax breaks to go, after OECD pressure

[02] Third straight fall for jittery market

[03] Laiki slaps down the speculators

[04] Clerides ignores doctors to pop into the Palace

[05] Clerides appeals for end to Papapetrou-Kyprianou spat

[06] ‘I was ousted by Anastassiades’ former youth chief claims

[07] Third man held over missing co-operative millions

[08] Drug trial cash ‘disappeared’, testing centre claims

[09] Kyprianou promises House co-operation for desalination bill

[10] 1,500 companies to take part in annual trade fair

[11] Leventis Museum marks reopening with Louvre exhibit

[12] New talks set for July 5 in Geneva

[01] Offshore tax breaks to go, after OECD pressure

CYPRUS is to scrap tax advantages for offshore businesses by the end of 2005, the Finance Minister said yesterday.

The decision comes after intense pressure from the OECD (Organisation for Economic Co-operation and Development) for countries all over the world to harmonise tax rates between foreign and local companies.

But both the government and independent experts played down fears that many of the island’s 1,082 offshore companies will flee Cyprus.

The OECD imposed a May 15 deadline for the decision. Had it not been taken, Cyprus would have been temporarily blacklisted as a tax haven by July and faced damaging economic sanctions.

International Business Companies’ (IBCs) contribution to the buoyant Cyprus economy is considerable, generating $300 million a year -- equal to more than 25 per cent of total manufacturing output. Offshore companies tot up about four per cent of GDP on only two per cent of the country’s labour force.

The OECD launched an investigation to clamp down on nearly 50 tax havens worldwide in 1996.

In 1998, the G7 organisation submitted a report to the Cyprus government, outlining measures the island needed to adopt to eliminate harmful tax competition.

All OECD member states will be forced to eliminate tax advantages from their legislation by April 2003. Countries that refuse to co-operate will be boycotted by the OECD.

Because Cyprus is not a member state, the government has been granted more time to conform to the changes.

"Before November 15, 2000, we will have drawn up a timetable to eliminate all harmful tax competition by December 2005," Finance Minister Takis Klerides told the Cyprus Mail yesterday.

Some analysts warn that if tax havens around the world are not shut down, then Cyprus-based IBCs could quickly transfer elsewhere, such as to the Caribbean or Channel Islands.

But David Rumsey, a board member of the Cyprus International Financial Services Authority, thinks a major exodus of offshore companies is unlikely.

"The brass plates will go, firms that use services supplied by the real IBCs, but those with fixed offices on the island will stay. The decision to move or stay will be one of operating costs and Cyprus is a cheap place to operate, particularly given the Cyprus pound’s low against sterling or the US dollar at the moment," he said.

Offshore companies have even welcomed the government’s decision, which has been on the cards for some time.

"I think it’s good for Cyprus. It could turn the island into a superb regional service sector. The infrastructure needs some attention, but the prospects are definitely there," said Rumsey, also managing director of a global financial services firm.

Offshore companies attaching more importance to the still undecided harmonised tax rate for local and foreign companies.

"The decision we are still waiting for is the tax rate for international businesses – it will be that rate that is very important," said Khalil Nasr, manager at the Jordan National Bank in Limassol.

Current tax rates for offshore companies are pitted at 4.25 per cent. Rates for domestic companies are fixed at between 20 and 25 per cent, depending on annual turnover.

Economists predict that a rate of 10 to 12 per cent would sustain foreign incentives to stay in Cyprus, and boost the island’s reputation as an international business centre.

In that case, corporation tax on local companies, currently 20 per cent, would have to be halved – a significant loss in state revenues.

But if the government does not lower rates so much, then experts fear many of the companies will indeed move overseas, along with a considerable chunk of Cypriot GDP.

Expected VAT hikes could recoup some of the lost revenue. The government is currently seeking House approval for an initial rise from eight to 10 or 11 per cent, as a first step towards the EU norm of 15 per cent.

"We hope that the government will decide the new rate as soon as possible," said Rumsey.

"It is too early to fix the rate now," said Klerides. "It is a matter for parliament to decide."

During the five-year timetable a full range of issues will need to be tackled, including the status of duty-free cars.

The Finance Minister underlined that Cyprus would maintain its standing as an international business centre – a reputation it has upheld since legislation in 1976 first made the island a tax incentive location.

Double taxation treaties with 27 countries, which allow international businesses registered in Cyprus to reduce their corporate tax liabilities at home, will remain untouched. Indeed, higher Cyprus taxes would mean greater tax reductions for companies in their home countries.

After criticising the government for inattention over economic preparations for EU membership, Marios Clerides, research manger at the Hellenic Bank, yesterday welcomed the government’s decision.

Brussels stipulates company tax rates for local and foreign companies must be the same for all member states.

"It will help with our EU accession plans, and if the government negotiates a good new tax rate for all companies, then no one should lose out too much, " he said.

© Copyright Cyprus Mail 2000

Thursday, May 18, 2000

[02] Third straight fall for jittery market

THE CYPRUS Stock Exchange ended with a loss for the third straight session yesterday as prices were pummelled from jittery nerves over banking stocks.

Weak momentum and limp buying interest pulled the all-share index down 2.07 per cent to a close of 530.56 as the market was unable to push past an intraday high of 538.87.

Traded values reached £30.12 million on 17.2 million shares traded.

"Nervousness on the market and various rumours centred on different blue chip stocks had an impact, wiping out the gains of last week," one trader said.

In the case of Laikiin particular, the share was hit by rumours that the bank would not be announcing the goodies that shareholders were expecting at a general meeting yesterday afternoon.

The stock fell 29 cents to a last trade of £13.32 as 219,970 shares worth a total threemillion pounds changed hands.

Even though rumours had been doing the rounds on the market for weeks keeping the stock swinging violently, Laiki was careful not to fuel the speculation by confirming or denying anything.

Laiki's drubbing dented the bank sub-index by 1.19 per cent, a retreat that underperformed losses on other sectors with lower capitalisation. The banking sector absorbed 17 per cent of the session's turnover total.

Bank of Cyprus was unscathed by the sell-off in Laiki. It declined three cents to £8.42 on a turnover of 157,125 shares.

Elsewhere on the market, Louis suffered a 5.3 per cent loss to its share price as it declined to £1.79. It was among the most active traded of the day with more than 2.5 million shares changing hands.

Traders said the market had gone cool on the stock, as it did on Globalsoft.com, for no particular reason.

Globalsoft.com fell 17 cents to a last trade of £5.78 -- more than a pound below its high to date of £6.89 on May 3, two days after its debut.

The sell off in Louis and Globalsoft sent the ‘other’ companies sector 3.34 per cent south as it absorbed some 36 per cent of the day's total traded value.

The market was generally subdued. Of 108 issues traded, 89 fell, 15 rose and four were unchanged. There were 7,588 deals.

© Copyright Cyprus Mail

Thursday, May 18, 2000

[03] Laiki slaps down the speculators

LAIKI defied optimists looking for giveaways at an annual general meeting yesterday but gave speculators a resounding put-down, saying that if the Bank had anything to announce, it wouldn't be rumoured for weeks first.

"When the bank has something to announce it will be a surprise and will come at a time nobody expects," chairman Kikis Lazarides told an audience of around 800 people at a luxury Nicosia hotel.

Stock of the bank, which has the lowest price to earnings ratio on the market of around 16 times, has been oscillating strongly for weeks on expectations the bank would announce early gifts marking its centenary next year.

However, that speculation fizzled out on the bourse early yesterday, when Laiki subsided 29 cents to a last trade of £13.32 and on a turnover of 219, 970 shares.

As expected, the bank received shareholder's approval to increase its share capital by 15 million shares, though it was not immediately clear how the bank would use the additional capital.

"This will be used for the expansion of activities either in Cyprus, in Greece or anywhere else where opportunities arise," Lazarides said.

Expansion was also in the works for the Australian and Canadian markets, he added.

Lazarides denied suggestions by some shareholders that the bank would use the equity to give stock to privileged groups at a discount.

"The board must have approval so when any opportunity arises it can make a move in the best interests of the group," he said.

Laiki posted a pre-tax profit of £154.23 million in 1999, up a staggering 294 per cent on the back of a surge in demand for financial services caused by a booming stock market.

Net gains rose to £132.303 million, against a 1998 profit of £26.5 million. "Our results exceeded every optimistic forecast," said Lazarides.

The bank plans to increase its Greek presence from 15 branches now to an estimated 50 by 2004, while it has recently acquired a majority stake in a Greek stockbroking firm.

Lazarides made particular mention of the state of the economy, and said that there were signs that macroeconomic indicators were deteriorating.

"The fiscal deficit as a proportion of GDP is expected to ease slightly but it is still at a high level, possibly over four per cent. That will lead to a worsening of the public debt," he said.

He also singled out inflation as a source of concern.

Core inflation was running at 4.8 per cent year-on-year in April, burgeoned by the higher price of imports from a weaker pound, and particularly high fuel costs.

"Stability of the economy must be reinforced mainly through reducing the fiscal deficit," he said.

The need to curtail the shortfall was even more imperative taking into account the deregulation of interest rates in January 2001and the anticipated moves to lift currency control restrictions, he said.

© Copyright Cyprus Mail

Thursday, May 18, 2000

[04] Clerides ignores doctors to pop into the Palace

PRESIDENT Glafcos Clerides yesterday morning ignored doctor's orders and left his home to go to work at the Presidential Palace for two-and-a-half hours.

He told reporters outside the palace that he had popped out for a haircut and then decided he "might as well" go to his office to see to some "outstanding" business.

Clerides, 81, is meant to be recuperating at home after a May 5 operation at the Evangelistria private clinic in Nicosia to remove a benign polyp growth from his large intestine.

His doctors have been very pleased with the rate of the octogenarian's recovery following the bowel surgery, but, when releasing him from the clinic on Tuesday, had instructed him not to go back to work till Monday.

"Yes, the doctors said Monday, but I had certain outstanding matters I had to see to and since I'd gone out to get a haircut I thought I might as well come up here and finish off these outstanding matters," a cheerful if tired- looking Clerides said as he went into the palace just before 11am.

He returned home about two-and-a-half hours later.

The third round of proximity settlement talks has been put back a month to allow the President time to recuperate and there have been suggestions that Clerides' political opponents wanted to ‘pension him off’ as no longer fit enough to rule. The government has been quick to quash suggestions of presidential frailty, and yesterday's unexpected appearance at the Presidential Palace will have done its case no harm.

On Monday, the President chaired a meeting of the Council of Ministers from the Evangelistria clinic where he had the operation.

Despite the fact that Clerides was ignoring doctor's orders, medical experts yesterday said the President was not putting his recovery at risk by going to his office.

"It's not like he's a labourer: two hours of office work will not harm him, " one private surgeon, who wished to remain anonymous, told the Cyprus Mail.

© Copyright Cyprus Mail

Thursday, May 18, 2000

[05] Clerides appeals for end to Papapetrou-Kyprianou spat

PRESIDENT Glafcos Clerides yesterday appealed for an end to the increasingly bitter feud between Government Spokesman Michalis Papapetrou and House President Spyros Kyprianou.

The latest fracas began on Monday when Michalis Papapetrou was quoted by Politis as saying some people were attempting to undermine Clerides.

And he said it was not members of ruling Disy who were responsible.

The paper added that circles close to the government had said that rumours about Clerides' possible resignation always came from the same source, Kyprianou.

Kyprianou said on Monday that no one had been trying to undermine the president and that all he had said was that doctors should treat Clerides on medical grounds only, and not feel pressure to declare him well if he was not.

Yesterday Papapetrou said: "The president told me that he would not wish for the spat to continue in light of Mr. Kyprianou's meeting with him where they would discuss the issue face to face."

The spokesman said he did not want to add anything more and that he was not authorised by the government to do so.

He did, however, say that he would decide when and if he would say more.

Papapetrou also told reporters that the President had called for the issue not to be pursued further since he was meeting Kyprianou.

Asked by reporters if he had backed his Monday statements to the President, Papapetrou replied: "certainly."

"He was not surprised because he already knew most of what I told him," he added.

Papapetrou also replied to Akel General Secretary Demetris Christofias, who had commented that the spokesman should present the evidence of what he was claiming, or he would be offending the island's political figures.

"I do not accept lessons on political ethics from anyone, and all those interested in ethics, let them find it in those who perniciously try to undermine the institutions," Papapetrou said.

Commenting on Papapetrou's statements, Kyprianou yesterday said that if he believed Clerides should have been replaced, he would have told the President so himself.

He suggested that the spokesman "drop the mysterious innuendos", and added that if he had any information about any politician he should come clean with it.

"Anyone can ponder on the future of political life, but to get to the point where there are allegations that the president was undermined while ill is truly inconceivable," Kyprianou said.

He added that he would talk to the president at the appropriate time because "the issue concerns him now."

© Copyright Cyprus Mail

Thursday, May 18, 2000

[06] ‘I was ousted by Anastassiades’ former youth chief claims

OUTGOING Youth Organisation Chairman Andreas Taliadoros yesterday blasted Disy leader Nicos Anastassiades for allegedly undermining his chances of being reappointed to the post.

Taliadoros also accused Disy Youth (Nedisy) Chairman Yiannis Ioannou for collaborating with Anastassiades to get rid of him.

The accusations came in a news conference called yesterday after he failed to be reappointed to the head of the State Youth Organisation.

Taliadoros claimed "flatterers" had persuaded Anastassiades that he was boosting Justice Minister Nicos Koshis, whom the Disy chief is said to dislike because of his brother Bambos’ brushes with the law.

Bambos Anastassiades is on trial for allegedly forging residence permits for foreign workers.

"My co-operation with Koshis was considered a flagrant action to hurt Anastassiades, within the framework of a larger group that Anastassiades believes is working against him," Taliadoros said.

He added Anastassiades believed Koshis and Interior Minister Christodoulos Christodoulou were masterminding attempts with Disy to undermine him.

Taliadoros added that he had been branded a heretic because he co-operated with Akel municipal authorities and scientists, and that he was not considered Anastassiades' man.

"The creation of a camping site in Dherynia, whose mayor Flora Ioannou is not affiliated to Disy, was considered a hostile act," he said.

He said he was not reappointed because Disy was trying to take control of the organisation.

Taliadoros revealed that four people affiliated with Disy had been appointed to the new board, chaired by Nicos Takides.

The outgoing chairman also disclosed that in the two years he had served as chairman, the Nedisy leadership had requested favours on several occasions.

His refusal to cave in annoyed them, he said.

"I was not their man."

"The brains behind all this were the Nedisy leadership, and other people in Anastassiades' office who had been appointed by him," Taliadoros said.

He also claimed that he had received dozens of phone calls before the news conference telling him not to speak because he would only hurt himself.

"Young people should get away from party politics and from the frame of mind that whoever does not belong to a party is bad and has to be fought," added Taliadoros.

But the outgoing chairman had praise for President Glafcos Clerides, who had supported him during his tenure.

Anastassiades later issued a terse statement in reply to the accusations.

"Mr. Taliadoros' statements only cause grief and do not deserve to be answered," the announcement said.

© Copyright Cyprus Mail

Thursday, May 18, 2000

[07] Third man held over missing co-operative millions

The branch's general cashier and its accounts and computer chief have already been sent for trial before the Criminal court in connection with the alleged scam, uncovered late last year. Police say £4,405,000 of bank funds were diverted by the embezzlers over nine years, between 1991 and 1999.

Yesterday, a 49-year-old former branch secretary, who resigned shortly after the scam came to light, was brought up before the Limassol District Court. He was remanded for eight days on suspicion of involvement in the case.

Two other branch employees, arrested by police along with the branch secretary on Tuesday night, were yesterday released by police. Limassol police chief Andreas Kariolemos said the two men would be charged at a later date.

The court heard that the 49-year-old branch secretary had stolen £156,320 from a bank customer, had forged two checks for £20,000, had made various false entries into accounts and had forged a number of documents. He is also suspected of entering stolen cash into an account belonging to a customer who died in 1991. The offences, the court heard, occurred between 1991 and 1999.

The suspect is denying involvement in any embezzling.

The scam, one of the biggest ever uncovered on the island, was discovered after an internal audit at the Polemidia branch in November last year.

Police do not know where the stolen money ended up.

© Copyright Cyprus Mail

Thursday, May 18, 2000

[08] Drug trial cash ‘disappeared’, testing centre claims

THE AUDITOR-general's office is investigating the disappearance of £180,000 donated by a foreign firm for drug trials in Cyprus.

In 1996, a foreign drug company offered the money for local field trials of a new medicine it had produced for multiple sclerosis patients. The three- year study, involving 40 MS patients, was overseen by a doctor at the Nicosia Institute of Neurology and Genetics.

But according to a CyBC report yesterday, the money was never used for the purpose it was donated for.

Before the trials began, the doctor overseeing the trials allegedly told both the government and patients the foreign firm was providing the drugs free of charge, but was not funding the study in any other way.

The allegation came from one of the directors of the Ayios Therisos medical testing centre, which carried out tests for the trials free of charge.

"In a meeting with all concerned, the doctor was asked if there was any financial aid beyond the medicine itself and he said: ‘no there is not’. And now we see that the company had funded the whole of the research - there is evidence to prove this," the Ayios Therisos man said.

The expenses for the trials were footed by the government and the patients themselves.

Both the Ayios Therisos director and Yianna Vafeades, of the Multiple Sclerosis Patients Association, claimed the doctor concerned had recently began quietly returning money to patients.

Auditor General Chrystalla Yiorkadji launched a probe into what happened to the £180,000 some three months ago. The Neurology Institute is also investigating the matter.

Constantinos Loizides, a member of the Neurology Institute's board, admitted yesterday that there were "gaps" in the whole affair.

He confirmed the Institute was investigating the matter. "What we are studying is whether it was clear from start that there was some source of funding for the study," Loizides said.

© Copyright Cyprus Mail

Thursday, May 18, 2000

[09] Kyprianou promises House co-operation for desalination bill

HOUSE President Spyros Kyprianou has promised to expedite an emergency bill through Parliament to fund a pipeline and pumping station to a desalination ship to be moored off Moni, Agriculture Minister Costas Themistocleous said yesterday.

The bill seeks upwards of £600,000 for the land-based legs of the emergency measure to provide extra drinking water to the island this year and next, according to Water Development Department (WDD) Chief Engineer Nicos Tsiourtis.

Themistocleous said yesterday after meeting with Kyprianou he expected the House to co-operate in passing the measure.

"They understand the situation is critical, so I have Kyprianou's promise that they will work to have their decision (on the bill) as soon as possible," he said. The bill will be introduced in the House on Tuesday.

Kyprianou said the bill would be put onto the agenda today for a later meeting; he added the Agriculture Committee would discuss the issue "very soon" to find a temporary solution to the island's worsening water shortage.

Themistocleous said the proposed de-salting ship should be ready to pump its first drinking water four months after the government signed a contract with one of several companies tendering for the project.

The water crisis worsened on Monday when 18,000 million litres of reservoir water poured into the sea off Limassol from a break in the Southern Conveyor pipeline, which carries water from Kouris Dam to towns en route to Nicosia.

A break in a parallel pipe carrying treated sewage water to farms in the Akrotiri area washed away soil from under a section of the Southern Conveyor, causing it to collapse at a joint, WDD sources said. They said the break was expected to be fixed by today.

Ironically, as the Kouris Dam water flowed into the sea, the Council of Ministers was meeting and agreeing to seek tenders for the Moni desalting ship to supply Cyprus with water until the Larnaca desalination plant is completed in December, and a Paralimni facility is built two years hence.

Themistocleous said yesterday he had outlined to Kyprianou the full gravity of the island's water problems and his plans to solve them.

He said this involved building desalination plants in Paphos and Limassol, besides the unit planned for Paralimni and the Larnaca plant in progress. The island's sole desalination plant is located in Dhekelia.

Meanwhile, WDD Director Christos Marcoullis and Nicosia Water Board Technical Director Panayiotis Theodoulides were yesterday at a loss to explain the opposition that Moni residents have expressed to mooring any desalination ship off their village.

"Everywhere there is opposition. It's the fashion," Marcoullis said. "If you cave in to the demands of one community, no matter how unreasonable or reasonable they are, nobody else wants it," Theodoulides added.

Opposition by residents of Zakaki and Ayios Theodoros killed off Themistocleous' plans to site two desalination plants in their villages.

[10] 1,500 companies to take part in annual trade fair

The event, which will last until June 4, serves as a platform for Cyprus to promote itself as an international business centre servicing Middle Eastern, and European markets.

Typically, the annual event receives about 150,000 visitors including both the general public and professional traders who come to see goods from over 1,500 companies and 35 countries.

Members of the public usually flock to the fair, lured by special ‘fair prices’ offered on goods purchased for the duration of the event.

The main overseas products exhibited are industrial equipment, domestic appliances, cars, computers, telecommunications equipment and systems, household furniture and foodstuffs. Local products typically exhibited include furniture, building materials, plastics, travel goods, foodstuffs and others.

In honour of its 25 years of operation, the fair will also offer a series of artistic and entertainment events, including recitals by famous Greek and Cypriot singers, shows by well-known dance groups, children's shows and other events.

The Fair will be open to the general public from the first day of operation on May 26 until the final day on June 4. There will be no ‘traders only’ days. Entrance fees will be as follows: £2 for adults and £1 for students, pensioners and holders of social cards. Entry for large families is free. Foreign businessmen and visitors with special invitations to the fair do not have to pay an entrance fee.

For further details contact: 02-352918, fax: 02-352316, e-mail: csfa@cytanet.com.cy or visit the official website at: http://www.csfa.org.cy

© Copyright Cyprus Mail

Thursday, May 18, 2000

[11] Leventis Museum marks reopening with Louvre exhibit

THE LEVENTIS Museum reopens tomorrow after an extensive makeover that has kept it closed over a year.

The Leventis Museum was first open to the public in April 1989 and won the European Museum of the Year award in 1991.

Louisa Leventis yesterday praised those assisting in the reopening: "Everybody has worked very hard on this project. Those who have assisted over the last two years have made me very happy."

Iain Lenglands of B.L.B. Architects from Clerkenwell, London, initiated the new interior designs, collaborating with Cypriot architects Pefkios Georgianes and his daughter Karin Georgianes.

"It has been an honour to work on this project, the people involved are extremely pleasant," Lenglands said.

To mark the reopening, the museum is exhibiting a large 14^th Century basin and joining platter made for the Lusignan mediaeval kings of Cyprus.

Sophie Makariou, curator of Eastern Antiquity for the Louvre Museum in Paris, which is lending the pieces to the Leventis, told the Cyprus Mail: "These pieces are of great relevance to Cyprus' history from this period. They are the only pieces known to have been made for Christians by Muslims."

She added that the pieces – on loan for two months - had "never before been displayed together," as the platter had only been recently acquired from a private collection with a grant by the Leventis Foundation

The curator of the Leventis Museum, Loukia Hadjigavriel, said: "the Leventis has made a living museum appropriate for all ages, the percentages of Cypriot and tourist visitors are equal. I am very proud to be a part of it all."

© Copyright Cyprus Mail

Thursday, May 18, 2000

[12] New talks set for July 5 in Geneva

A first round of talks was held in New York from December 3 to 14, and a second round in Geneva from January 31 to February 8. The third session had been set for May 23 in New York but was postponed because Clerides is still recovering from colon surgery earlier this month.

The two leaders will meet separately with Annan and other UN officials, including the secretary-general's special adviser for Cyprus, Alvaro de Soto.

"I am pleased to announce that the proximity talks on Cyprus between his excellency Mr Glafcos Clerides and his excellency Mr Rauf Denktash will resume in Geneva on July 5, and they will be opened by the secretary- general," UN spokesman Fred Eckhard said.

He used the neutral title ‘his excellency’ for both since their respective status goes to the heart of their differences.

Denktash does not recognise Clerides as president of the entire island while only Turkey recognises the Turkish Cypriot ‘state’ established in 1983 with Denktash as its head.

Clerides supports establishing a bi-zonal, bi-communal federation -- the prescription for a solution laid down in numerous Security Council resolutions.

But Denktash has been pressing since August 1998 for a confederation -- a much looser union between two independent states that would mean recognising the self-declared ‘Turkish Republic of Northern Cyprus’.

© Copyright Cyprus Mail

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