Learn about barriers to market entry and local requirements, i.e., things to be aware of when entering the market for this country.
Last Published: 7/29/2019

Since 1974, the southern part of Cyprus has been under the control of the government of the Republic of Cyprus (ROC).  The northern part of Cyprus, administered by Turkish Cypriots, proclaimed itself the “Turkish Republic of Northern Cyprus” (“TRNC”) in 1983.  The United States does not recognize the “TRNC,” nor does any country other than Turkey.  A substantial number of Turkish troops remain on the island.  A buffer zone, or “Green Line,” patrolled by the UN Peacekeeping Force in Cyprus (UNFICYP), separates the two sides.  Even though the whole island is part of the EU, implementation of the EU acquis communautaire has been suspended in the area administered by Turkish Cypriots until political conditions permit the reunification of the island.

The island's continued de facto division constitutes a significant constraint on economic growth, investment, and trade.  Suppliers of imported products in the ROC typically do not directly serve the market in the area administered by Turkish Cypriots and vice versa.  Additionally, trade between the two areas remains limited, despite the Green Line Regulation approved in 2004, which allows the movement of certain domestically-produced goods across the Buffer Zone provided they meet EU rule of origin and sanitary/phytosanitary requirements.  The Regulation also codifies movement of people across the Buffer Zone, which effectively started in April 2003.  For more information, please see the European Commission website. 
 

Other challenges include:

Confidence in the financial system remains fragile following the 2013 “haircut” of uninsured bank deposits, despite the recapitalization of banks and lifting of capital controls;

Lending remains constrained due to de-leveraging and stricter lending criteria, with non-performing loans at 32 percent in 2018 (compared with 42 percent a year earlier).  

Cyprus’ sovereign credit rating has been improving since 2013 but remains at low investment grade (BBB- by both S&P and Fitch) or just below investment grade (Ba2 by Moody’s);  

High administrative burden and bureaucracy.  The ROC is currently in the process of government restructuring to improve these issues and promoting e-government to expedite services; 

Corruption scandals and investigations against government and municipal officials over conflict-of-interest issues have shaken public confidence in the transparency of important institutions, calling into question Cyprus’ previously good position on transparency (more under Climate Statement/Corruption); and a small market.

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