Service-oriented economy

The dependence of Cyprus on tourism, which is widely recognized, masks a less known but important structural shift of the economy towards service industries. In 1994, services accounted for over 60% of the GNP of Cyprus. Only 20% of the GNP was contributed by agriculture and manufacturing. Between 1987 and 1994, GNP grew by 47% in real prices, while the increase recorded by agriculture was a mere 11% and by manufacturing only 14%. By contrast, service activities achieved increases ranging from 56% for wholesale and retail trade, to 62% for business services and 68% for transport and communications.

As a result of this transformation of the economy, Cyprus is increasingly becoming an internationally competitive provider of a broad range of business services. If a number of ambitious plans materialise as intended, Cyprus will establish itself as a regional hub for services such as transportation and telecommunications, warehousing and distribution, management consultancy and banking, to name just a few.

This structural shift towards services is not unusual. Many other countries are experiencing similar changes. For Cyprus and other countries in comparable circumstances, production of services is an inevitable response to dwindling natural resources, rising labour costs and intensifying competition in manufactured goods produced now more cheaply by many emerging economies. Provision of most high value-added services requires human capital of which Cyprus has plenty.