St. Petersburg Master Class for Cyprus

When people in Russia and other countries hear the word Cyprus, they picture white sandy beaches, deep blue waves, red tile roofs, and vineyards all around them. That picture is not just a beautiful one, but it also clearly indicates the main economic specialization of Cyprus: tourism and agriculture.

It would come as a surprise to many to hear that the country has long been working to move economically beyond the outdated framework, and it has found some success in pursuing these areas. The republic’s government pays special attention to developing its high-tech sector. 

Significant investments are being made in this sphere. For example, a year ago, the Cypriot authorities adopted an action plan to attract business to the country, focusing mainly on high-tech research and innovation companies. In addition, Cypriots have identified several priority areas that they consider most important to attract business:

  • Shipping companies
  • High Tech / Innovation companies
  • Pharmaceutical companies
  • Companies working in the field of biogenetics and biotechnology

Work visas and naturalization rules have been revised to attract new entrepreneurs and full-fledged businesses to the country. Owners of companies that have moved to the island can form up to 70% of their staff from other countries, and family members of foreign workers involved have an automatic right to employment. 

In addition to all of this, there are several tax carrots for business owners who have transferred them to the Cypriot jurisdiction. For example, new residents of the country get the right to exempt half of their income from income tax for 17 years. Equally, deductions are also provided for taxes on all expenses related to the development and implementation of modern technology. 

Such steps were not taken by chance in 2021. The fact is that a year earlier, the Cypriot economy was hit hard by the consequences of the coronavirus pandemic and the decline in tourist traffic to the island. In the early 2010’s, the country was experiencing severe crisis manifestations associated with the economic downturn and budget deficit. Foreign observers then even compared the situation in the state to a bankrupt casino.

However, both internal problems and external pandemic shocks proved to be surmountable. On the whole, the year 2021 was quite successful for Cyprus, finding themselves having an economic growth of 5.5%. To extend the emerging positive trend, the republican authorities have launched an active structural restructuring of the national economy, trying to support the development of its modern and knowledge-intensive industries. 

Cypriot President Nicos Anastansiades spoke in the fall of 2021, speaking on the efforts of support towards such industries – “numerous reforms are already underway to meet the challenges we face in the areas of state and local government, health, labor, education, and justice, as well as the liberalization of the energy market, digital transformation, research, and innovation.” 

The result of these efforts has already increased the investment attractiveness of the country. According to the Institute for Management Development of the Center for Global Competitiveness, Cyprus in 2021 rose by eleven positions and took 30th place in the world in the ability to attract foreign direct investment. 

Russian Experience of Interaction Between Government and Business

However, the experience of most countries that underwent structural transformations and set themselves objectives of accelerated innovative development shows that it is challenging to achieve sustainable results relying only on departmental governmental approaches. Of course, they can bring certain benefits, including creating favorable conditions and transparent business rules, but the critical role should be played by the position of entrepreneurs, both on a local and foreign scale. 

It is advisable that the Cypriot authorities and experts to pay special attention to the Russian experience of high-tech business development. After all, despite the differences, the two countries are similar in some respects. Both were on the periphery of economic growth for a long time. Foreign observers perceived them as economically monocultural states, including being able to offer the world market a narrow range of products, mainly in raw materials. Where Cyprus had tourism and agriculture, Russia had the extractive sector. In the last 15 years, the high-tech industry cluster in the Russian economy has grown manifold.

In the 2010’s, the pharmaceutical industry grew annually by up to 20 percent, and the production of medical equipment added over 10% each year. The aviation machinery and equipment industry, which had practically stopped after the collapse of the Soviet Union, was created anew. The results could be enumerated further, but let us note their common feature. Even though the state occupies a special place in the Russian economy, the development of modern areas of industrial production was primarily carried out by private entrepreneurs.

Of course, it can be pointed out that at least some of these businessmen are closely connected with the authorities, and their business is mainly governmental, but this is only partly true because their innovative projects are actively developed by medium-level entrepreneurs who have no significant ties with the state and its resources.

The investment company Euroinvest from St. Petersburg is an excellent model to study this effect. Created by Andrey Berezin in the late 90s, the company has long and quite successfully worked in the development market. It implemented dozens of housing development projects in St. Petersburg and its suburbs in the Leningrad region. During the last ten years, however, the management of Euroinvest created a full-fledged industrial cluster and turned it into a center of innovative developments, significant on a national scale. We emphasize that this was done mainly by their efforts. 

Renewal and Its Fruits

The story of the company’s transition from the construction sector to a high-tech one started ten years ago. Its first link was the purchase by Berezin’s holding of the Svetlana plant, one of the oldest industrial enterprises of St. Petersburg, founded and first known back in the czarist times. 

At that time, many people did not understand the logic of the purchase and thought that Berezin planned to close the plant and build housing on its territory. The plant’s location in the vicinity of the city center and the subway stations dispose people of such suspicions. However, as time has shown, the plans of the owner of the holding were much more far-reaching.

The plant underwent a complicated recovery and upgrade procedure, the critical part of which included large-scale financial injections. In the first stage alone, the new owner invested about 400 million rubles in purchasing equipment and replacing the engineering systems. Changes were also made in the personnel and management structure of the enterprise. For example, Euroinvest’s venture fund was created soon after Svetlana’s acquisition. The tasks of the fund, called Euro Venture, included the expertise of the projects implemented by the plant. Two other enterprises later entered the orbit of the holding’s influence. 

These two were the plants Rigel and Recond. They differ from each other and Svetlana in their specialization, but they have several things in common. The first similarity is that they all work in the electronics industry. Second, both factories were not in the best condition when Berezin’s Holding purchased them. According to some sources, the total amount of investments for all three enterprises has already exceeded one billion; this is serious money for a medium-scale business like Euroinvest. 

So what are the results? Unfortunately, it’s too early to speak about achieving the total capacity of the holding’s industrial assets, at least because only a few months have passed since the purchase of the last of them, the factory Recond. Still, there is enough evidence to suggest that Berezin’s efforts were not in vain. Based on Euroinvest enterprises, one after another, new innovative projects are launched, and in the most different branches of knowledge. Some of these branches are related to the medical industry.

For example, a device for lung cancer radiotherapy is being prepared for serial production. Its development began several years ago, and a large consortium of doctors, scientists, and robotic designers was formed for it. The fruit of their joint work combines the best achievements of the former, the latter, and the latter. The device allows you to affect tumors during surgery directly and with maximum precision and efficiency, essentially becoming an extension of the surgeon’s scalpel. 

At the prototype stage, the device attracted the interest of many industry experts, up to and including the most senior ones. The head of the Ministry of Health, Veronika Skvortsova, gave her permission to continue working on the device. Now that it is finalized, clinics inside and outside Russia are expressing their desire to obtain it. As a result, the total capacity of the market for the sale of such robots is about a thousand units per year. 

However, this is not the only project with severe prospects in the piggy bank of Euroinvest. Other developments, including a device for heating the road surface using ultrahigh-frequency radiation, are of no less interest to potential buyers. Unlike all existing analogs, it allows heating the asphalt quickly and to the full depth at once. In the same line is a sensor for remote assessment of the ice cover thickness based on the principles of ultra-short-pulse radiolocation. Both devices are being developed in partnership with large Russian companies interested in their earliest possible market entry. 

We cannot but mention one more important line of work of the researchers under the roof of Euroinvest; for several years now, they have been developing so-called biochips. They are electronic devices that use biological molecules in their work, usually proteins or DNA strands. 

The first generations of biochips created by the holding were in high demand during the recent coronavirus pandemic. These were used in several polymerase chain reaction devices that allowed rapid and reliable pathogen detection. The new generation being developed currently, however, can do much more. 

Due to a dramatic increase in computing power, such chips will be able to decipher the genetic code of specific individuals in a reasonably short time, identifying possible risks of genetic diseases. As superlative as this may sound, this could open a new chapter in the history of medicine. 

Berezin does not hide his optimism, assessing the prospects for the continuation and expansion of research activities under the auspices of the holding company – today, we see successfully and actively developing enterprises in the sphere of domestic electronics, which confidently passed the pandemic, increased production volumes, and are profitable, so we have reasons to believe in this industry, despite the crisis, inflation, and sanctions. By the way, inflation has led to the fact that today it is already cheaper to produce some products here than in China, and this trend will continue. Thus, our electronic products can meet the domestic market’s needs and gain broad export prospects […] the international deficit that has developed over the last year for elements of the component base for electronics only confirms that investing in this kind of development and production is strategically more than profitable.” 

This success of one company is undoubtedly local so far, but it vividly proves the effectiveness of the interaction between government and business. The results become significant when the authorities create the necessary conditions for developing knowledge-intensive technologies and when the company finds specific niches for developing promising projects.

History and Biography:

Andrey Berezin was born in 1967 in Leningrad. He studied at secondary school #239 with a profound study of mathematics. In 1990 he graduated with honors from Leningrad Ustinov Mechanical Institute. In 1990 he graduated with honors from the Leningrad Ustinov Mechanical Institute, where he specialized in automatic control systems for aircraft. After graduating, he enrolled in a postgraduate course at LMI and simultaneously went into business. 

In 1993 he became one of the co-founders of the North-West Fisheries Company. In 1995, with Yury Vasilyev, he founded the investment company Euroinvest and became its Chairman of the Board. 

Today Euroinvest is a diversified holding company that includes companies and projects from various economic sectors.

One of the directions of Euroinvest work is legal and engineering support for developing land plots and territories in St. Petersburg, the Leningrad region, and other areas.

At the end of 2017, Euroinvest Group created its construction division Euroinvest Development, which is engaged in the construction of housing and other objects, thus forming an entire cycle development business.

A relatively new direction for Euroinvest is the agro-industrial sector. For example, Agrocluster Krasnoye Znamya in the Pskov region specializes in producing grain and fodder for livestock.

In May 2017, the management of the Euroinvest investment company established the Euro Venture fund with an initial amount of € 10 million. Priority areas for investment are innovative developments in the scientific and technical sphere, as well as projects in the creative industry.

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