THE DISCOVERY of natural gas is a “once in a lifetime opportunity to get it right” for Cyprus, according to one leading international economist.
Despite the doom and gloom scenarios, the island could still get out of this quagmire, balance its budgets, educate its people in the required fields and create a prosperous society with a competitive economy, said the World Bank’s Augusto Lopez-Claros during a talk in Nicosia on Monday.
Cyprus has a lot more going for it today – EU membership and infrastructure- than South Korea or Singapore had decades ago before they set out to become hugely successful and advanced economies, he said.
However, overcoming today’s problems requires a common vision, an end to political bickering, and implementation of that vision, said Lopez-Claros, who was in Cyprus this week to give a seminar to Central Bank staff.
Lopez-Claros became the director of global indicators and analysis at the World Bank in March 2011.
Previously he was chief economist and director of the Global Competitiveness Programme at the World Economic Forum in Geneva.
Before joining the Forum he was an executive director with Lehman Brothers (London), and in the early 1990s the International Monetary Fund’s resident representative in Russia.
He is a much-sought-after international speaker, having lectured in the last several years at some of the world’s leading universities and think tanks.
On Monday night, he gave a talk to a small group of leading business people in Nicosia on Cyprus’ place and its potential as an international hub of doing business.
Lopez-Claros spoke about the current problems in the integrated global economy, noting that today’s financial crisis is different from that experienced after World War II when public debts exploded.
Today countries belonging to the “West” have an ageing population, with pension and health funds putting pressure on fiscal accounts.
Climate change is another factor that will put tremendous pressure on fiscal budgets, said the leading economist, noting that the economic crisis took away the focus from climate change in the last few years, which was “valuable time wasted”.
Regarding the eurozone’s problems, Lopez-Claros rubbished the notion of a “magic number” for a sustainable public debt, noting that in 2007, Spain’s public debt was at 35 per cent, much lower than that stipulated in the EU’s so-called Maastricht criteria.
“Forget about this magic number,” he said.
Lopez-Claros urged countries to adopt the Chilean model of fiscal control, where fiscal policy calls for annual budget surpluses. Chile now has a public debt of 5 per cent.
Balancing the budget and creating surpluses allowed the country to set aside vast resources in a special fund. So when Chile suffered a devastating earthquake in 2010, Chileans reconstructed the country within 18 months, noted the World Bank director.
All countries need to make serious fiscal adjustments in the coming years to bring down debt and confront an uncertain world. This would free them from bondholders and paying millions in interest. Instead, that money could be spent on education, he argued.
In an increasingly “integrated and hypercompetitive global economy”, international companies are looking for an educated yet relatively cheap labour force and a legal framework that’s not bogged down by too much red tape.
Lopez-Claros highlighted that Cyprus does not fare well on the red tape criteria. It takes 733 days to enforce a contract through the courts in Cyprus. In Singapore, it takes around a fifth of that time. Specialised commercial courts could significantly reduce the time needed, he said.
The cost of registering property in Cyprus is also very expensive, and considered a disincentive for investment, he said.
The international economist noted that the Report on Doing Business in Cyprus put the country’s ranking lower than that of Georgia, Latvia, Estonia and Lithuania.
Speaking before energy and telecommunications officials, Lopez-Claros referred to the ongoing debate on privatisations, saying: “Come on. It’s the 21st century.”
He also referred to the “parochial political debate” in Cyprus, driven by a lack of political unity or will to implement the measures that could make Cyprus “the next Singapore in Europe”.
He called on citizens and leaders to go beyond party politics, integrate intelligent women into decision-making processes and work hard towards an agreed vision.
On the prospects of natural gas, Lopez-Claros said Cyprus has “a once in a lifetime opportunity to get this right” and ensure that the hydrocarbons fund set up to manage energy revenues provides a stable anchor for future generations. The country could get it wrong like Nigeria, or do it right like Norway, he said.
Asked what steps Cyprus should take to become competitive again, he said Cyprus needs to balance its budget and- emulating the culture of transparency in Scandinavian countries- explain to the public what it is doing and why.
A second step would be to create links between universities and companies in the fields of education and training to ensure graduates integrate easier into the economy.
Thirdly, the country needs to work on the investment climate and prevailing regulatory framework, with an emphasis on the lengthy judicial system.

Published by: www.cyprus-mail.com