Cyprus-Forum.com

[georgios100]

You are right in a lot of things Paphitis but industrial/manufacturing is just difficult and not competitive.
The reason is the availability of raw materials. CY has to import all these materials at high transport costs.
High tech tooling in future factories cost an arm and a leg. Add to that the high cost of CY labor (unionized)
and the additional cost to ship out the finished products. CY can not compete, not even close. Remember, Asian
markets supply more than 75% of consumer goods to Europe. Sweat shops work 24h in China, Taiwan, India etc.

I just can not imagine sweat shops stationed in CY...

[georgios100]

For those who don't know about the Cancun development plan 1970 - 2012.
http://en.wikipedia.org/wiki/Canc%C3%BAn
When development was started on January 23, 1970, Isla Cancún had only three residents, caretakers of the coconut plantation of Don José de Jesús Lima Gutiérrez, who lived on Isla Mujeres, and there were only 117 people living in nearby Puerto Juarez, a fishing village and military base.[5]
"Due to the reluctance of investors to bet on an unknown area, the Mexican government had to finance the first nine hotels."[5] The first hotel financed was the Hyatt Cancún Caribe, but the first hotel actually built was the Playa Blanca, which later became a Blue Bay hotel, and is now Temptation Resort. At the time it was an elite destination, famous for its virgin white sand beaches.
The city began as a tourism project in 1974 as an Integrally Planned Center, a pioneer of FONATUR (Fondo Nacional de Fomento al Turismo, National Fund for Tourism Development), formerly known as INFRATUR. Since then, it has undergone a comprehensive transformation from being a fisherman's island surrounded by virgin forest and undiscovered shores to being one of the two most well-known Mexican resorts, along with Acapulco. The World Tourism Organization (WTO), through its foundation UNWTO-Themis, awarded the Best of the Best award "for excellence and good governance" to the Trust for Tourism Promotion of Cancun on February 3, 2007. This award Cancún ensured the ongoing support of the Department of Education and Knowledge Management of the WTO.

[poppy123]

It certainly does need a new economic business model if the management of Cyprus Airways is anything to go on. Yet again we read that Cyprus Airways needs financial aid or it will be forced to shut down all operations
Cyprus Airways reported a provisional full-year net loss of €55.8 million for 2012, more than doubling its €23.9 million loss reported in the year-ago period. The company is now requesting financial aid of €83.2 million over the next three years.

Cyprus Airways was close to bankruptcy in 2011, but received financial aid of €20 million annually from the tax payer. Now, European antitrust regulators are questioning whether Cyprus Airways illegally received more than €100 million in public support. The European Commission has barred the Cypriot government from providing any further public support to the airline without prior approval while it assesses whether a €31.3 million capital increase and €73 million rescue aid loan falls outside of European law.

Do we even need to ask this question or "shall we throw more good money after bad"

[supporttheunderdog]

It certainly does need a new economic business model if the management of Cyprus Airways is anything to go on. Yet again we read that Cyprus Airways needs financial aid or it will be forced to shut down all operations
Cyprus Airways reported a provisional full-year net loss of €55.8 million for 2012, more than doubling its €23.9 million loss reported in the year-ago period. The company is now requesting financial aid of €83.2 million over the next three years.

Cyprus Airways was close to bankruptcy in 2011, but received financial aid of €20 million annually from the tax payer. Now, European antitrust regulators are questioning whether Cyprus Airways illegally received more than €100 million in public support. The European Commission has barred the Cypriot government from providing any further public support to the airline without prior approval while it assesses whether a €31.3 million capital increase and €73 million rescue aid loan falls outside of European law.

Do we even need to ask this question or "shall we throw more good money after bad"

this is what happened to Malev, the Hungarian state airline

2012 - Financial collapse and cessation of operations
On 9 January 2012, the European Union considered the state aid received by Malev illegal and ordered Hungary to recover from the company nearly Ft 100 billion ( $406 million).[15] At the end of January 2012, Malév announced that it could no longer fund its own operations, and requested more subsidies from the Hungarian government.[16] Malév ceased all flight activity on 3 February 2012, after 66 years of continuous operation. It came after the European Commission ordered Malév to repay various forms of state aid received from 2007 to 2010, totalling 38 billion forints (€130 m; $171 m; £108 m), a sum equal to its entire 2010 revenue.[17] The airline's total debts were 60 billion forints (US$270.5 million) at the time of shutdown.[18] The shutdown occurred at 6 AM Western European Time on 3 February 2012.[19] On 14 February 2012, the Metropolitan Court of Budapest declared Malév Ltd. insolvent. Hitelintézeti Felszámoló Nonprofit Kft. (Credit Institutional Liquidator Nonprofit Ltd.) received the appointment as the liquidator of Malév Ltd

IF the EU rules that state adi was illegal and orders repayment Cyprus airways could well vanish the same way.

In the current circumstances if I were the Chinese I would not invest in Cyprus Airways unless and I knew there would be no similar claw-back

[Paphitis]

Cyprus has a great geographical position making it easier to import raw materials. Such a strategically convenient location, as most of Europes raw materials on the way to UK, France, Italy, Germany et al pass through the Suez Canal.

Labour costs are low in Cyprus already compared to Western Europe. Umionised labour force is irrelevant.

You know there is a place in this world for unions, with the exception of the Public Service Union which has too much power. Imagine if there were no unions. Workers could be exploited.

A company I was working for had a $100,000 bond on my contract once. When I left them I had to compensate my company by $100,000 which is about 80,000 Euro. A few letters from my union's lawyers got me out of it as it was an illegal contractual clause. Unions are not bad in themselves except when they get overly too militant and become a nuisance.

Let's say we manufacture cars. It is not so much manufacturing these days. Most of these car manufacturers are mere assembly plants. Engines and parts are pre-made by others and rebadged etc. Production Lines are automated and fully robotic. There are more people behind computers controlling the robotics than there are blue collar workers turning the nuts and bolts. These lines pump out up to 100 cars a day.

Of course you don't have to manufacture cars although it would be nice for Cyprus from a prestige point of view. There are hundreds of smaller things that can be manufactured in Cyprus. Something I think is right up our alley is UAV because Cyprus has access to Israel now. These things can be achieved by Joint Venture.

[Paphitis]

It certainly does need a new economic business model if the management of Cyprus Airways is anything to go on. Yet again we read that Cyprus Airways needs financial aid or it will be forced to shut down all operations
Cyprus Airways reported a provisional full-year net loss of €55.8 million for 2012, more than doubling its €23.9 million loss reported in the year-ago period. The company is now requesting financial aid of €83.2 million over the next three years.

Cyprus Airways was close to bankruptcy in 2011, but received financial aid of €20 million annually from the tax payer. Now, European antitrust regulators are questioning whether Cyprus Airways illegally received more than €100 million in public support. The European Commission has barred the Cypriot government from providing any further public support to the airline without prior approval while it assesses whether a €31.3 million capital increase and €73 million rescue aid loan falls outside of European law.

Do we even need to ask this question or "shall we throw more good money after bad"

What is your solution other than letting a company that employs 1,100 people fold?

Yes, I believe the RoC should support the airline until such time it develops the balls to stand up against the Public Sector Unions and cull the workforce to something that is manageable and lean, and also outsource many areas such as catering just like elsewhere.

Cyprus Airways consulted Air France and Lufthansa who commissioned a report of what needs to be done. These measures need to be implemented for the long term survival of Cyprus Airways for the sake of Cypriots and the Cy Air Workers. Having our Banks decimated and companies like Cyprus Airways fold is not good. In fact if Cyprus Airways goes bankrupt, it will be a disaster? Cyprus does not need that to happen especially at this time.

So yes, spending a few million, even if it needs to be borrowed is not a big price to pay to protect those jobs, an iconic Cypriot Company, protecting a vital industry as long as measures are taken to bring the company back into the black.

The EU is becomming a big hindrance and who are they to say it is illegal? In the US, when big companies like American Airlines or Chrysler are making losses, they declare Chapter 11 and are funded by the US Government and nursed back into profitability.

http://en.wikipedia.org/wiki/Chapter_11 ... tates_Code

[Onegaishimas]

Well actually it's far easier to come back to her feet for Cyprus that for Greece, Spain or Portugal. There are ressources (and I'm not talking about the gas although that comes in handy as well.
The idea of "attracting investors" is kind of ... old fashioned and puts Cyprus into competition with all the other ailing nations - most of them with far more connections into the power core of Europe. But the people of Cyprus can achieve a huge success story if the agree on a common project that all of them share - that is a major difficulty since the former "elite" still holds a lot of important offices & functions. But the level of local corruption still is low - compared to Greece or other countries in the region.
One could think of a modernized use of copper - not just diggin' the ore and sell elsewhere. Cyprus has some manufacturing experience - at least if the avialable information on the internet is accurate. A manufacturing of high class electrical transformation devices for export could make use of the copper and keep the much higher value created in the country. I'm talking about huge transformers - not the tiny electronical ones.
There is a steady international demand for those, they are well payed, since they are vital parts in any electrical infrastructure. Those networks are being build up all over the world and the know how and capability to manufacture these devices is special. And Cyprus has access to the means of transport for those huge machines: sea transport, so the somewhat "distant" location of Cyprus to the developing markets may not be significant for high priced products.
And there is another much larger and more promising project the people of Cyprus could aim for: Make the island a hallmark of beauty. Beautify houses - could help the ailing building sector and unemployment. Gardens, plants, the textiles worn by the Cyprus people - not Chinese or Turkish cheap stuff. It would be a projet of at least 2 decades and the very very very central idea is: it MUST be a goal that the WHOLE (South/Greek) Cyprus people must agree on view as their one most important thing.
No fast solutions that have the attraction of being cheap. Cyprus is small enough - that project "hallmark of beauty" wouldn't work for the whole of Greece. After a few years of progress the people will show up from all over the world to experience an environment where things look ... beautiful ... whereever they look. The climate favours the idea: it wouldn't work in central Spain. And those future tourists will pay.
One of the ressources that might come in handy for this is : Marble. Nice to have it on the island.
And do you know what. The beautification idea could apply for things, you would not normally think of. Manufacturing cars. Beautiful cars. No international car maker can engange in such a thing : They have to create cars that drive 500 km with a fill, perform minimum consumption. The will run on diesel or unleaded gaz. Remember the cars on Cuba: They are old, but tourists love to see them, since they are the elegant 50's cars left by the Americans. I don't mean: copy those. No. Create beautiful design, large & powerful engines are not necessary on an island with no high speed roads. The can have engines either electrical or running on gaz from the sea around. They can be small - but most important they must have the fascinating touch of beauty. Don't care for the question wheather there is a "world market" for that. Production numbers will be small. Yes, they will be more expensive to buy than German or Chinese or Spanish models. But since they can be build in Cyprus, the money will stay on the island, wages, engineering, development. Those cars need not to be financed by exports. That's a major economic difference.
Difficult? Yes? Possible? Yes?
Two things are left to mention: 1.It feels better to work hard for "making Cyprus a beauty" than doing the same to serve some credits.
2. Once achieved, it can not be taken away like money.
I know, the idea sounds a bit crazy. But the conventional economic wisdom certainly has shown that it causes problems and has no solution for Cyprus.

[Onegaishimas]

The banking sector is not in ruins.
Manufacturing has a future if we change our cultural attitude towards "dirty" jobs. Modern engineering systems, like CNC machining and 3D modelling offer new opportunities, but the problem there is that our politicians do not undersand such things, they are mostly lawyers, political science grads or totally unskilled demagogues.

As for exporting raw natural resources with no local value added, it is worth recalling a quote from Lee Iaccocca, former head of ChryslerQ "what do you call a nation that exports raw material and imports manufactured goods? A colony!"

Yepp I agree mostly. But has the Cyprus banking sector the know how to finance the built up of a clean manufacturing industry ? I doubt it. Cyprus could be the location people turn to, when they search some high class independent energy production & distribution for an island - could be a greek one as some sort of "home market" but there are many many islands that get their energy by fuel tankers.....<:-(( bad
As for the politicans there's good and bad news. Yes, they screwed up, are a pretty wrotten bunch, mostly. The good news is: Cyprus is a democracy. You (I' m not from Cyprus...) can do what you could have done years earlier: kick them out and elect better ones....Many habits will be changed in the coming years, getting rid of the traditional voting habits may prove as the best results of the crisis.....
Yepp, yepp yepp: it#s the value added that is the main road to success.
Example: One of the most successful ship building yards in the world is ... in Germany. Not at the coast. No: dozens of kilometers up a small river. It's there, where they build the huge cruise ships. All the other ship building places once in Germany... all gone, except for some military purpose. No economist in the world would have dreamt to put a shipbuilding company to that place 100 km inland. And yet it's there, and they make money without subvention or something. Why: Because the build the whole ship as a system, very fast, very individual, very high class. And with comparatively high wages in Germany. Every couple of months, when a ship nears completion, they have to dam the river to have enough depth to bring the vessel from the building yard many kilometers down the river to the sea. Value added in Cyprus is much more important than the number of Russians that continue to buy fur in Nikosia.

[Onegaishimas]

There's too much quarrelling about Cuba in here. Yes Cuba has a much better medical sector than any other country in the US back yard. The only thing Cyprus could take from that: there's some pharmaceutical stuff on Cyprus island. Maybe something could be developed by growing medical plants (no, I do NOT mean pot).
And such materials mentioned like marble are by no means unimportant. Breaking it has not made Carrara rich - but how much money has marble brought to Italy, if you take into regard the marble changed into some Apollo before.... DO someting BEAUTIFUL with it. Art, or craft, how about houses clad in marble? Make it known. And the people will show up. And pay.

[poppy123]

Paphitis,
I cannot understand the economic folly of throwing more good money at this dysfunctional airline.
I realise it is an emotional decision for any Government and its citizens, to witness their national carrier folding, but we have to deal with reality here. The latest news that in 2012 it has more than doubled its losses to 55.8 million must surely be the last straw? 15 years is more than ample time to turn a profit or at least break even. Its like a drug addict that needs a regular fix - in this case the tax payers hard earnt money. The airline simply can't keep up with competition from other cheaper airlines and the employees and unions prevent the necessary changes needed, to make it viable. The Government, as usual, buries its head in the sand and appears more interested in the prestige of having a national carrier than the long term financial consequences for its citizens.

What would I do?
Well I can't believe many would be interested in taking over a company that has been losing money for 15 years, unless it is blatently obvious that the only reason for this is total mismanagement, in which case, a sound business approach could easily turn it around so I would sell all assets and forget the drain on the economy.

Failing a sale I would let it fold and make all staff redundent before it goes bankrupt and the staff recieve nothing. Yes it is sad to see a thousand staff lose their jobs but personally I would rather see any available money diverted to new local business enterprises that stand a chance of making a profit, employing local staff and improving the economy.