Cyprus is an island located in the north-eastern corner of the Mediterranean at the cressroads of Europe, Africa and Asia. This strategic position has played an important role in its development into a shipping centre and base for international business.

The population of Cyprus is 730.000 of which 87.5 percent belongs to the Greek Cypriot community and 12.5 percent to the Turkish Cypriot community. Greek and Turkish are the official languages of the Republic but English is widely spoken and understood, and is regularly used in commerce and government. Apart from the capital , Nicosia with an estinated population of 189.000, all major cities are located on the coast. Limassol is the second largest city ande island's biggest port. Larnaca and Paphos, the third and fourth largest cities, respecitvely, both have international airports.

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Under its constitution, Cyprus is and independent and sovereign Republic with a presidential system of government. The President of the Republic is the Head of State and is elected every 5 years. He appoints the Council of Ministers which is the main executive body of the Republic. Legislative power lies in the hands of the House of Representatives whose members hold office for a period of 5 years. The Republic is a multi-party democacy with an electoral system based on proportional representation.

Cyprus is a member of the United natins and its specialized agencies, as well as the Council of Europe and the Commonwealth. The republic is represented through full diplomatic missions in 26 counties and 98 consulates around the world.

Cyprus also has an association agreement with the European Community, envisaging the establishment of a customs union between the two sides by 1998. In 1990 Cypurs formally submitted its application for membership of the European Union. In 1994 the EU confirmed that the next phase of its enlargement will incorporate Cypurs. Accession negotiations will begin 6 months after the conclusionof the 1996 Intergovermental Conferece.

The island's legal system is modelled on thea prevailing in the United Kingdom and all statutes regulating business matters and procedures are based essentially on English law. The Republic is a singatory to a large number of interantional conventions and treaties including those relating to the protection of foreign investors.

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Cyprus is often aptly referred to as a 'European country in the Middle East.' Its per capita GNP is over US$13.000, one of the highest in the Mediterranean. Considering other socioeconomic indicators such as the excellent housing conditions, the pollution free enviromnent and the low crime rate, one may conclude that the standard of living is betten that that reflected by per capita income alone. Furthmore, the cost of living is substantially lower than in most counties offering a comparabel standard and quality of life. Nicosia ranks as seventh least expensive of the 53 international business centres surveyed in Prices and Earnings around the Glove published by the Union Bank of Switzerland in September 1994.

Cyprus has an open free market eceonmy. The role of the government is limited to regulation and the provision of public utilities. During its short history as an independent country, the island has managed to transform itself from an underdeveloped agricultural economy into one with a high standard of living, thriving tourist ans services sectors and a fast growing export-oriented insudty.

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The legal tender is the Cyprus Pound. Its ultimate market maker is the Central Bak which aims to keep it state against the ECU (CY 1= ECU 1,72). In addition to the Central Bank, the banking system consists of 8 onshore commercial banks, 26 offshore banking units, 4 specialized financial institutions and number of hire-purchase companies. Commerical banking arrangements and

practices follow the British model. Commerical banks have developed a strong network of correspondent relationships with a large number of foreign banks. Most banks are also coneected to SWIFT, an international sytem of telecommunications for the computerized transmission of commerical banks have easy access to the world banking ntework and ae able to carry out traditional and specialized banking services. There is a well developed insurance insustry with all types of risk accepted, mainly thourgh agents and brokers. About 70 insurance companies and insurance captives operate on the island, many of which are incorporated abroad and represent will known multinational insurers.

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There is a wide network of air-routes concecting Cypurs with Europe, Africa and Asia. The island's two international airports are situated near Larnaca and Paphos, some 50 and 150 kilometres, respectively, from Nicosia. They handle over 400 scheduled flights per week served by 33 international airlines as well as flights operated by 41 chartered airlines. The island is rapidly becoming a major international transit station for commercial air transportations with excellent connections within the entire region.

About 100 shipping lines include Cyprus in their regular schedules to and from 5 continents. Over 5.000 ships totalling 15.5 million net registered tons call at Cypriot ports each year.

Cyprus recognizes the importance of telecommunications and has invested heavily in the development of this sector. As a result, the island offers some of the most advanced telecommunications services in the world. Direct dialling is available with almost the entrire world. Services provided include telefax, packet switched data transmission, mobilie telephone (GSM and NMT9000), voicemail, paging, telex, telegraphy, TV transmission/reception, private leased circuits, audiotex and video conferencing. The national network uses state-of-the-art technology such as digital switching and transmission systems and fibre optic cables.

Radiotelegraph, rafiotelephone and telex services with ships at sea are available on a 24 hours basis.

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Cyprus has shown itself to be an ideal centre for the establishment of legal entities by foreign shipowners and other professionals for the conduct of shipping activities and for the rendering of shipping services worlswide. When referring to shipping and related activities a distinction is made between 2 broad categories of legal entities.

The first, restrict their objects to the ownership, bareboat chartering and operation of ships in international waters. Such entities are totally exempt from income tax and are, therefore, not required to prepare of submit accounts to the Central Bank and the Department of Inland Revenue. The usual practive is for each ship to be registered on a separate shipowning company.

The second, restrict their activities to the tendering of a wie range of shipping related services outside Cyprus. Such services include shipmanagement, shipbroling, average adjusting, marine insurance, etc. Due to the fact that these entities are subject to taxation, albeit only 4,25 percent, they are required to prepare and submit audited accounts to the Central Bank and Department of Inland Revenue.