Cyprus’ Deputy Minister of Shipping, Marina Hadjimanolis, outlines industry challenges, strategic security measures and the drive towards decarbonisation
Have the Houthi attacks significantly affected the Cyprus shipping industry? What are the measures that have been taken in order to preserve freedom of navigation?
In the Red Sea, freedom of navigation has been flagrantly abused for almost a year. Attacks by the Houthis on commercial and merchant ships in the Red Sea jeopardise not only the freedom and right of passage, but also the stability and security of the surrounding area. The lives of innocent seafarers are seriously endangered by such attacks; maritime safety and security and the protection of the marine environment are seriously jeopardised; and global trade is disrupted, resulting in tangible negative economic consequences.
Major shipping companies have chosen to alter their ships’ itineraries and suspend cargo shipments in the area in response to these attacks and the threat to ship safety. Despite the fact that no ship flying the flag of Cyprus has been targeted, the shipping industry as a whole has been impacted by damage to trade and the global economy.
As a result, ships are travelling greater distances, resulting in an increase in costs and, of course, an increase in the amount of time needed for a voyage, and subsequently causing delays. Due to the threat posed by the Houthis, merchant ships are now compelled to circumnavigate Africa in order to avoid the Red Sea and the Suez Canal, which is the quickest sea route from Asia to Europe. Ships arriving in the Mediterranean may be delayed by up to two weeks due to this 6,000-mile detour.
Additionally, the lengthier voyage duration of ships shifting routes has an effect on the environment due to increased fuel consumption and emissions. It should be mentioned, that the cost of insurance for ships operating in this region has significantly increased as a result of the attacks and the heightened risk to ship safety.
Another issue, that has emerged from the attacks, is that there appears to be a serious shortage of ships because of the lengthier routes. The Houthi attacks, have prompted the Cyprus Government to immediately adopt specific measures for the protection of Cyprus ships and notify accordingly the shipping community.
Cyprus has promptly offered guidance to its flag vessels regarding the situation in the Red Sea and the Gulf of Aden. Cyprus ships navigating in the area are required to implement specific security measures which have been enacted pursuant to enabling provisions established since 2012 by the national law on the Protection of Cyprus Ships Against Acts of Piracy and other Unlawful Acts.
More specifically, the Shipping Deputy Ministry decided that, in light of the attacks, it was appropriate to take temporary measures to protect Cyprus ships.
Therefore, on 23 December, 2023, an order was issued, extending the high-risk areas to cover the areas of the guerrilla attacks.
The shipping community was also notified of the “Industry Transit Advice for navigation through the Southern Red Sea, the Strait of Bab El-Manded, the Gulf of Aden” issued by several maritime industry international non-governmental organisations constituting in essence the industry recommended best practice.
Lastly, the Government of the Republic of Cyprus welcomes and supports the establishment of the European Union maritime security operation EUNAVFOR Aspides which cooperates closely with EUNAVFOR Operation Atalanta contributing to maritime security in the area of operation.
EUNAVFOR Aspides is an EU military operation contributing to the protection of freedom of navigation, to safeguarding maritime security, especially for merchant and commercial vessels in the Red Sea, the Indian Ocean and the Gulf under the EU Common Security and Defense Policy.
Cyprus has been actively promoting greener shipping practices. What initiatives aimed at aligning with the IMO’s 2050 zero-emissions target have been undertaken?
Cyprus, being an island nation with a long tradition in shipping, is particularly sensitive to issues, such as climate change and the protection of the marine environment. The green transition is one of the most significant challenges that the shipping industry is facing nowadays and a major issue that must be urgently dealt with.
The Shipping Deputy Ministry, has ranked the promotion of greener shipping practices high in its initiatives.
By doing so, it acknowledges that our marine ecosystem is a valuable resource and an integral part of our economy and identity. We feel that we have a duty and responsibility to contribute constructively to the transition of shipping to a low or even zero carbon industry, to achieve the green transformation. Cyprus actively supports the IMO’s 2050 zero-emissions target through the formation and implementation of global standards.
In this respect, we cooperate with the shipping industry to identify actions which can be implemented to achieve the decarbonisation of shipping and encourage the Cyprus maritime cluster to participate and invest in projects which adopt greener shipping practices.
Our top priorities include accelerating the research, development, and use of innovative technologies, such as the electrification of ships, the development of Renewable Fuels of Non-Biological Origin (RFNBO) as alternative fuels, and the expansion of the use of wind power for maritime propulsion.
Cyprus has introduced measures to support the shipping industry to achieve its decarbonisation goals, by providing green tax reductions to shipowners and operators, encouraging and supporting ships to use alternative fuels.
Cyprus believes that the environmental incentives will strengthen the shift of the Cyprus flag and of the maritime cluster to the use of environmentally friendly ships and mechanisms, which is a main priority of the national maritime policy aiming to establish Cyprus as a maritime state with environmental responsibility.
Cyprus has introduced green incentives that offer up to a 30 per cent reduction in annual tonnage tax for vessels that meet environmental targets. Could you discuss how these incentives are being received by the industry?
Cyprus strongly supports the global efforts for the decarbonisation of the shipping sector. The Cyprus Shipping Deputy Ministry as part of the continuous monitoring of environmental developments, both at international as well as European level, and contributing in the effort of decarbonisation of shipping, announced a new range of green incentives to reward vessels that demonstrate effective greenhouse emissions reductions with effect from January 2024.
Under the new measures, which were approved by the Council of Ministers, annual tonnage tax may be reduced by up to 30 per cent for each eligible ship that demonstrates effective emissions reduction beyond the agreed global levels, ensuring shipowners are rewarded for their sustainable shipping efforts.
The ‘discount’ on the tonnage tax is available to owners of Cyprus and Community ships which comply with the requirements of the environmental incentives.
The Environmental Incentives Scheme, was initially established in 2022, and although it was welcomed by the shipping industry, participation remained low. In response, and with the introduction of revised MARPOL regulations in 2023, the scheme was revamped.
New criteria were introduced, and obstacles were removed to simplify the application and approval process. As a result, participation has tripled in comparison to previous years.
Cyprus has recently seen a resurgence in interest in its flag. What factors do you believe are driving this renewed interest and could you provide figures?
Cyprus is today considered a global maritime nation and over the years, has become one of the largest and most widely known shipping centres in the world. The Registry of Cyprus Ships is ranked 11th in the world and 3rd in Europe and I am very happy to mention, that within the last year, the Cyprus fleet has considerably grown, with an increase of 12 per cent since September 2023.
The Cyprus flag is on the “White list” of the Paris MoU and Tokyo MoU and has recently achieved an impressive rise from 13th place in 2022 to 8th place in 2023 in the Paris MoU White list, which indicates a high level of compliance with international shipping standards.
This rise reflects the efforts Cyprus has made to improve its inspection and control practices, which enhances the reputation and credibility of the Cyprus Register of Ships. Additionally, Cyprus has ratified all international maritime conventions related to seafarer’s welfare, safety, and pollution control.
The Cyprus Ship Registry has a reputation for offering customer-oriented services. There are no ship registration or mortgage fees, and the registration process is fast and flexible.
Cyprus has made significant process to simplify all procedures, reduce bureaucracy and to have a paperless maritime administration, and is in the process of digitalising all its services, in order to optimise its business processes and maximise its operational efficiency.
The group of highly skilled and experienced personnel including maritime affairs officers and marine surveyors, offer reliable assistance 24/7, 365 days per year. Furthermore, the full protection of financiers and mortgagees is an advantage that should not be ignored.
In addition, Cyprus has an attractive tonnage tax system, approved by the European Commission, which provides tax incentives based on the net tonnage of the vessel, thereby significantly reducing the tax burden on shipowners and operators.
Over the past year, the Shipping Deputy Ministry has spearheaded numerous initiatives.
Together with the competent officers and surveyors of the Shipping Deputy Ministry, we have travelled to many destinations in all corners of the globe and have also visited shipping companies in Cyprus as part of our targeted action plan to promote the advantages of the Cyprus flag and the maritime cluster in general. We are very pleased with the positive and promising results as a result of these actions.
How does Cyprus plan to maintain and enhance the competitiveness of its ship registry on the global stage?
Our highest priority is to continue to promote the advantages of the Cyprus Ship Registry. We need to be present in major shipping events, participate at international shipping fora and events and continue our visits in Cyprus and abroad.
To this end, we have created a focused action plan to highlight the benefits of our maritime cluster both domestically in Cyprus and internationally.
Although we are proud of our Ship Registry, we believe there is room for improvement. As a government, our primary objective is to assist the private sector in overcoming the obstacles that lie ahead.
As mentioned above, specific actions have already been taken, such as the ongoing project for the Digital Transformation of the Cyprus Shipping Deputy Ministry.
This project focuses on digitalising all services provided by the Maritime Administration and will promote a paperless environment leading to simplification of procedures, further contributing to improving the competitiveness of the services offered to the shipping industry.
Cyprus is known for its attractive tax incentives for shipping companies. What do you think are the most attractive benefits that draw companies to Cyprus?
Cyprus is a modern, efficient and integrated maritime shipping cluster and has a large resident shipping industry with over 250 companies based or having offices in Cyprus, offering a wide spectrum of shipping related activities such as ship management, chartering, marine insurance, ship repairs and maintenance, telecommunications, IT, finance, bunkering, spare parts provision etc.
It is further noted that Cyprus is considered the largest ship management centre in Europe and one of the largest in the world.
The stable fiscal and business friendly environment, the highly skilled, multilingual and specialised workforce, the expertise and customer-orientated approach of the Maritime Administration, as well as the excellent cooperation between the private and the public sector are the driving force of the Cyprus maritime cluster.
This, in conjunction with a unique set of competitive advantages and in particular the tonnage tax System, which was approved once again, in 2019, by the European Commission, as well as the low operating costs, have enabled Cyprus to grow steadily and develop into a world-class maritime centre.
It is worth mentioning that since the establishment of the Shipping Deputy Ministry, in 2018, the number of companies benefitting from the Cyprus tonnage tax has increased from 317 to 421.
The island’s strategic location provides easy access to markets and the ideal time zone for running international operations.
Cyprus has a simple and effective regulatory structure in place and with English widely spoken by a highly skilled workforce and the wider population in general, cost-effective, yet quality business support services, and low operating costs, Cyprus is an ideal place for companies to develop and excel.
In addition, Cyprus offers a family friendly environment, a high standard of living, excellent weather conditions, international schools as well as the hospitality of its people.
The Shipping Deputy Ministry is set to be fully digitalised by 2024. Are you confident this deadline will be met and what benefits do you expect digitalisation will bring to the industry?
Today, more than ever, digitalisation is an integral part of our daily lives and is becoming increasingly important in all areas of shipping.
Cyprus has made significant progress in simplifying its procedures and is working towards reducing bureaucracy and becoming a paperless Maritime Administration. In this direction the Shipping Deputy Ministry is in the process of digitalising its internal processes as well as the services provided to the maritime industry.
This will not only improve our environmental footprint, but it will provide a more flexible, effective, efficient and high-quality service that will further increase the attractiveness of the Cyprus Ship Registry.
Within the framework of our commitment to green transition, the full digitalisation of the Shipping Deputy Ministry is expected to be completed within the first months of 2025, although by the end of 2024, it is anticipated that some departments of the Shipping Deputy Ministry, will begin the process of becoming fully digitalised. It will be the first Ministry of the Republic of Cyprus that will be fully digitalised.
At the end of 2023 you introduced the ‘One-Stop-Shipping Centre’ to simplify procedures and reduce bureaucratic delays for shipping companies. Have you achieved these objectives?
Could you say that shipping companies are now being offered a faster and more prompt service or is there work still needed?
Last November, the Shipping Deputy Ministry launched the “One-Stop Shipping Centre” as part of the ongoing endeavor to improve the caliber of services provided to the shipping industry.
The “One-Stop Shipping Centre” is a significant achievement since it fulfills the long-standing requests coming repeatedly over the years from the Cyprus shipping industry. The ultimate goal of the Centre is to provide top-notch services on issues entailed within the jurisdiction of the Civil Registry and Migration Department to all shipping companies operating in Cyprus.
The Cyprus shipping cluster has responded to this initiative with great enthusiasm and I am very pleased with the way the industry has welcomed the operation of the “One-Stop Shipping Centre” until now, which is a clear indication that we have achieved our objectives to provide quality and direct services to the shipping cluster in Cyprus.
We are very well aware, that the maritime industry is a significant pillar of our country’s economic growth and we continuously promote policies and actions that serve our strategy for the provision of quality services for the maritime sector.
