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Country Commercial Guides FY 2000: Cyprus Report prepared by U.S. Embassy Nicosia, released July 1999 Note*

IV. MARKETING U.S. PRODUCTS AND SERVICES

Distribution and Sales Channels;
Use of Agents/Distributors;
Finding a Partner

It is relatively easy to find qualified Cypriots to serve as agents and distributors and hundreds of U.S. companies are already represented here on an agency/representative basis. Cypriot agents/ representatives normally market U.S. products and services under binding agency agreements based on commissions. In general, the Embassy's experience has been that Cypriot agents are reliable and pursue their work objectives aggressively and with a keen business sense. In Cyprus, a Commercial Agent has to register with the Council of Commercial Agents and receive a license with a registration number. Importers/ distributors/dealers are free of any registration.

Franchising

U.S. franchises, particularly in the food business, have been extremely successful in Cyprus in recent years. The following companies have opened franchise outlets in Cyprus since 1990: Blimpie's, Domino's Pizza, McDonald's, Pizza Inn, Pizza Hut, Dairy Queen, Kentucky Fried Chicken, Kenny Rogers Roasters, Henry J. Beans, TGI Friday's, and Subway sandwiches. Non-food U.S. franchises, such as Athlete's Foot and Gold's Gym, are also present and successful in Cyprus. Operation of these ventures results in a substantial outflow of capital in the form of licensing fees and royalty payments (estimated at around USD 20.0 million a year for all foreign franchises, not just American ones).

Present trends suggest that the franchising sector have great prospects for growth in Cyprus. A recent delegation of U.S. franchise companies to Athens, Greece was successful in attracting interest from Cypriot businessmen as well.

Joint Ventures/Licensing; Steps to Establishing an Office

A partnership or a joint venture/licensing agreement with a Cypriot individual or organization is another channel for selling U.S. goods in Cyprus, depending on the nature of business concerned.

Non-residents wishing to participate in a Cypriot business enterprise are required to obtain the services of a lawyer or accountant practicing in the Republic who must submit, on their behalf, an application to the Central Bank with the requisite information. This information includes share capital for the proposed investment, economic activities, financial requirements, confidential references, and a four-page questionnaire, which can be obtained from the Central Bank.

All applications for direct investment by non-residents require the approval of the Central Bank, which considers them in consultation with appropriate government departments. Registration, re-organization and liquidation of businesses must be undertaken through attorneys or accountants practicing on the island. Businesses with non-resident participation must prepare and submit to the Central Bank of Cyprus and to the Department of Inland Revenue annual financial statements audited by accountants practicing in Cyprus. (See also Investment Climate, Section VII.)

Selling Factors/Techniques; Direct Marketing;
Advertising and Trade Promotion

Marketing has been a growth industry for Cyprus in recent years, to the point where many local firms offer their services to customers in the region. Advertising methods for the local market have become sophisticated and the choice of available media is approaching those available in other developed countries.

Direct marketing involving telephone calls to households has been used in recent years and so has tele marketing (advertising through the TV, with call-in numbers to order directly).

The rapid growth in the number of Internet users in Cyprus provides another alternative means for advertising through the web. Several Internet providers specialize on designing web pages.

More traditional advertising channels, such as bill-boards, or the print media, are also used extensively. General and product-specific trade shows take place year-round. Most newspapers are affiliated with particular political parties. The major Greek language newspapers are Phileleftheros, Alithia, Simerini, O Politis, and Haravghi. The major English language newspapers are the Cyprus Weekly, Cyprus Mail and the Cyprus Financial Mirror. There are numerous radio channels and seven television channels: two Government-owned, three private and two paid subscription TV channels.

Pricing Product

The intense effort to harmonize the Cypriot economy with that of the EU in recent years is making the Cypriot market place more open and more competitive. For example, over the last two years, the government has slashed the number of staples subject to price controls from 40 to just five. The products still subject to price controls are the following: common bread, pasteurized cows' milk, coffee and coffee substitutes, cement, and timber. Additionally, the implementation of the Uruguay Round agreement since January 1, 1996 resulted in the abolition of import permits, quantitative restrictions and other non-tariff barriers to trade.

When considering pricing strategy, U.S. exporters should bear in mind that the Cyprus market is small and orders are usually in limited quantities. The usual method of transactions is by Letter of Credit, with 90-days credit.

Sales Service/Customer Support

U.S. companies bidding on various projects in Cyprus should bear in mind that a local representative is a necessity. When evaluating tenders, Government and Semi-Government Organizations will take into consideration the reliability and reputation of the local agent/representative. The Commercial Section of the U.S. Embassy in Nicosia can help U.S. firms locate reputable local agents. Also taken into consideration are after-sales service, maintenance contracts, and the availability of spare parts.

Selling to the Government

The procurement practice of the Government is to announce international or local tenders, depending on the size of the procurement. All tenders of over USD 45,000 must be put out to international tender. U.S. companies may bid directly or through a local agent on any tender. Information on upcoming tenders is available through the Department of Commerce in Washington, the National Trade Data Bank (on CD-ROM or through the Internet: www.stat-usa.gov), or the American Embassy in Nicosia (E-mail address: amembass@spidernet.com.cy).

Evaluation of government tenders is done by committees. Bids are evaluated first on cost and then on technical merit. Bidders on government contracts are advised to offer products/services that exactly meet tender specifications. "Overbidding" -- providing additional technical capabilities or services -- only adds to the cost thus risking low ranking by the financial committee. The Government is required by law to choose the lowest-cost bidder among technically qualified proposals. A number of U.S. firms have had their bids disqualified by quoting prices in currencies not listed in the tender documents.

The Government of Cyprus grants a 20 percent price preference to suppliers of goods and services which have a local content of at least 25 percent. This provision, which discriminates directly against foreign bidders for public tenders, is contrary to EU practice and WTO Government Procurement rules. U.S. companies, particularly in the pharmaceutical and computer sectors, have expressed their concern over this provision. The U.S. Embassy in Nicosia and EU diplomatic missions are trying to convince the GOC to abolish this in the near future.

Protecting Your Product from IPR Infringement

The adoption of a new Copyright Law in Cyprus in January 1, 1994 and a modern Patents Law on April 2, 1998 were important milestones in the island's course towards better protection of intellectual property rights (IPR). The new Patents Law is consistent with Cyprus' obligations under the European Patent Convention and the World Trade Organization (WTO) TRIPs agreement. As a result of these improvements, in 1998 (for the first time since 1990) the United States Trade Representative (USTR) removed Cyprus completely from the "Special 301" list of countries which effectively deny adequate protection of IPR.

Need for a Local Attorney

A local attorney must prepare the constitution of the company and submit the application for registration to the Registrar of Companies. A list of local attorneys is available from the Consular Section of the Embassy, Tel: 357-2-776400, Fax: 357-2-780944.