Is digital economy the key to the future in Cyprus?

For all of us dealing with and working in, one way or another, the digital aspect of the Cypriot economy, the recent period has brought some good news and appears to be opening up promising prospects.

If you are an entrepreneur with a strong interest in the online aspect of doing business in Cyprus, read on this interesting analysis below, which contains some interesting facts from the EU’s DESI report on Cyprus, as well as other developments in the country itself that is good to be aware about.

The European Union has recently published its Digital Economy and Society Index (DESI) for the year 2018, which tracks the progress made by EU Member States in terms of their digitisation. The report is structured around five chapters, namely connectivity (fixed broadband, mobile broadband and prices), human capital (internet use, basic and advanced digital skills), use of internet services (citizens’ use of content, communication and online transactions), integration of digital technology (business digitization and e-commerce) and digital public services (eGovernment and eHealth).

ccording to the report’s findings, Cyprus ranks 21st out of the 28 EU Member States. Overall, Cyprus is progressing slowly but steadily, as it has recorded improvement in all aspects of DESI, and even though it is ranked 21st, it is relatively close to the EU average. According to the report, for Cyprus “improvement in digital skills is crucial, since, although internet users engage in a wide variety of online activities, low levels of digital skills could hold back its digital economy and society.” Moreover, the report points out that despite some progress in the past few years, Cyprus still lags behind the EU average in supply and demand for eGovernment services, while it overall belongs to the low performing cluster of countries, along with Romania, Greece, Bulgaria, Italy, Poland, Hungary, Croatia and Slovakia.

However, Cyprus is commended for its new “holistic and integrated national industrial strategy 2017-2030,” which was announced in 2017 by the Ministry of Energy, Commerce, Industry and Tourism and focuses on increasing the local industry’s innovation and productivity through digitisation and the development of digital skills.

As regards the first pillar evaluated in the report, Cyprus ranks 19th for connectivity, compared to 20th in 2017. It performs well in fixed, fast and ultrafast broadband coverage and in fixed and mobile broadband take-up. In all these categories, Cyprus is above the EU average and its scores are improving, with the exception of fixed broadband coverage, which is close to 100% and leaves no room for improvement.

On the other hand, Cyprus lags significantly behind in 4G coverage, fast and ultrafast broadband uptake and the broadband price index, since in all these categories it ranks among the lowest on a pan-European level. More specifically, Cyprus ranks 25th for 4G coverage and 27th for the other three indicators.

On the up side, the report indicates that improvements in 4G coverage are visible and promising (77% in 2017, from 64% in 2016, and an improvement of two positions in the comparative rankings). The report also anticipates that taking into account investment by mobile network operators, Cyprus is likely to further bridge the gap in the next few years. It is also noted that fast broadband take-up is also improving, reaching 9% in 2017 compared to 3% in 2016. On the other hand, ultrafast broadband uptake remains negligible (0.2% in 2017), despite very widespread coverage of networks with such capacity. EU reporters point out that is situation is unlikely to change as long as the current retail offerings remain unattractive.

A further comment made is that, although the current Cyprus Broadband Plan sets targets in line with the Digital Agenda for Europe, it is not yet adjusted to the targets of the European Gigabit Society or the 5G Action Plan. According to the DESI report, the said Plan does not provide for supply side measures, taking into account the market players’ stated intention to expand their broadband networks. However, it is acknowledged and accepted that the deployment of fast and ultrafast broadband networks in remote, rural areas is not commercially viable, which partly explains why most actions, ongoing and planned, in this regard focus on stimulating demand.

Although the report mentions that the Digital Strategy Action Plan implemented in Cyprus for the period 2015-2017 included awareness campaigns, training programmes, and measures to build confidence in the security of online transactions, reduce broadband prices –which is considered very crucial -, digitalise government and provide (limited) free wi-fi access in public buildings and all villages, it is also noted that the Action Plan’s implementation of the plan is behind schedule.

Interestingly the DESI report highlights that fixed network coverage is among the factors boosting Cyprus’ ability to benefit from the digital economy. However, the report identifies that it still remains highly challenging to encourage take-up of high-speed broadband, which is influenced by factors such as pricing, a lack of compelling content and low digital literacy.

In terms of human capital and though progress is being made, Cyprus’ performance is below the EU average. According to the findings of the report, in 2017, 79% of the Cypriot population used the internet regularly (versus 74% in 2016), but only 50% possessed at least basic digital skills. Given that in this day and age digital skills and competencies are needed for nearly all jobs where digital technology complements existing tasks, shortages in such skills can be an important barrier to a country’s economic development. To make matters worse, the report also reveals that Cyprus has a low share of Science, Technology, Engineering and Math (STEM) graduates (9.8), ranking lowest among all EU countries. The country also has a lower share of ICT specialists in the workforce (2.2%) than the EU average (3.7%).

The National Coalition for Digital Jobs is the main lever working to address the shortage of digital skills in Cyprus, giving students the chance to acquire digital certification at no cost. Additionally, it organizers various competitions in schools for coding, robotics, etc.

The Cypriot Ministry of Education and Culture places particular emphasis on helping younger people acquire necessary digital skills: computer science is taught as a subject in primary schools, for example, while the Ministry also helps stage the Cyprus Digital Championship competition. However, Cyprus has some important barriers to overcome in this effort, such as the fact that ICT professionals do not receive the necessary IT training, because the academic programmes do not meet the needs of the industry with regard to ICT qualifications. To solve this, the Ministry has set up a committee to analyse the performance of Cyprus’ students. Following a thorough discussion with academic stakeholders, an action plan has been drafted to improve educational outcomes, prioritising STEM graduates.

In terms of digital public services, Cyprus remains, overall, below the EU average. However, regarding pre-filled forms offered for public services, Cyprus has progressed compared to last year, scoring 58, while the EU average is 53. Online service completion and digital public services for businesses that are active across borders remained at the same level as in 2016. Open data, on the other hand, is steadily advancing, with Cyprus scoring 75%, almost 20 percentage points higher than last year’s scores. The number of users of eGovernment services remained at the same level compared to last year, while the EU average is 9 percentage points higher.

Cyprus considers eGovernment a priority, in tandem with Public Service Administration Reform. Thus, one of the pillars of the Growth Reform is eGovernment. The goal of the eGovernment strategy in Cyprus is threefold: offer even more e-services in a simple and user-centric way; satisfy citizens, businesses and public administration authorities by providing services through different channels (e.g. end-to-end public services, call centres, use of the Point of Single Contact for businesses); and increase the efficiency of public administration by reducing the administrative burden, simplifying the Regulatory Framework and improving administrative procedures.

The Cyprus government has already started an awareness campaign to inform citizens and businesses about the benefits of using ICT and the internet in order to increase take-up. In addition, training programmes have been introduced to improve the citizens’ digital skills, with additional emphasis on the use of digital services.

As regards the integration of digital technologies by businesses, Cyprus is also progressing slowly. Companies do engage in the use of social media and do trade online, but are still less inclined to take up new technologies such as Cloud and RFID. SMEs’ online selling services declined, to 11.4% from 12.4% the previous year. On the other hand, e-commerce turnover increased from 4.7% to 6.3%.

What the report notes, which is encouraging for us in the industry, is that e-commerce is considered one of the top priorities of the pertinent ministry. The report makes particular mention to the Action Plan for Growth, which includes e-commerce support actions with the aim of enhancing the competitiveness of the economy. The main goal is to establish a competitive and dynamic environment to develop basic infrastructure, by encouraging enterprises to take advantage of the new technological opportunities. The strategy will be co-financed by the Republic of Cyprus and the European Union, with a total budget of EUR 3.3 million (for the period up to year 2020).

Cypriot companies stand to also benefit from specific digitalisation plans for industry. A unified industry strategy is currently being drafted by the Ministry of Energy, Commerce, Industry and Tourism, in cooperation with the Cyprus Chamber of Commerce and Industry, while a law approved in December 2016 includes tax incentives for investing in innovative SMEs and start-ups.

To complement the findings and conclusions of the DESI report, it is also interesting to comment on another recent development that could have a great impact on the future, especially for all of us who participate in the relevant industry.

It is both encouraging and promising to observe that the two most significant stakeholders, namely the government and the Chamber of Commerce and Industry seem to have eventually realized the dire need to accelerate the process of digital development in Cyprus, as they have come to view it as the only way for the country to attain digital maturity and the diffusion of technology into its economy and society, thus allowing it to increase its competitiveness and effectively face the challenges of the new era.

Since the country’s digital transformation appears to have acquired national significance and a consensus around it seems to have formed, it is aspired that plans to form a deputy ministry for digital strategy, research and innovation will soon materialize and that this will give the necessary impetus and boost for the industry, the economy, the society and the country as a whole.

As the country appears ready to jump on the bandwagon we hope that its entrepreneurs, those who still haven’t done so that is, will also be ready to act accordingly. If you are one of them but are still wary, uncertain or puzzled about anything regarding the great digital world, the wonders of e-commerce, online trading, SEO strategies and techniques, digital marketing or any other aspect, our dedicated team of experts is always at your disposal. So, talk to the team today!

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George Milios

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