Cyprus stimulus aid should target broadband

Finance Minister Charilaos Stavrakis insists that by accelerating the implementation of a number of projects in the Development Budget, exclusively related to construction of new roads, motorways, marinas and some work at schools, Cyprus will register a 2% GDP growth rate in 2009.

The 10% acceleration of the state budget and an additional EUR 40 mln package will mean a total stimulus package of EUR 150 mln or 1% of the GDP of the country.

The government believes that by spending money on public projects it will absorb the unemployed and kick-start the economy, a quarter of which relies on the construction and real estate sectors.

While this may help bring jobs to a few thousand people laid off in December and boost the cash flow of a handful of construction companies, its real economic benefit to the country as a whole will be negligible.

The new National Theater will cost the taxpayer EUR 20 mln while the Centre for the Arts should set us back a further EUR 120 mln. The two projects may come in handy when Cyprus assumes the EU Presidency from July 2012, but other than that, 99% of the population will not benefit at all.

Building ambitious mega projects with nothing to fill them with is futile, as long as there is no arts culture embedded in this society. But the best way to overcome that vacuum is to fill the digital divide and speed up communication that in turn will boost education.

A better stimulus package that would help both the construction sector and the economy would be to invest in broadband communication.

Among many other things, Cyprus is also a laggard in Internet use and e-commerce in the EU because of its outdated, grossly overpriced and uncompetitive broadband services offered by Cyta, Primetel, OTEnet and the rest.

The best stimulus would be to dig up the whole country, every street in every town and village and lay fiber optic cables allowing Cypriots to surf at the highest speeds and at the best prices available, improving efficiencies and competitiveness.

A government agency could charge every household a nominal fee of, say, EUR 10 per month for the service, which would gradually recoup the cost of the whole project.

The government must to force Cyta, the EAC, the water boards and other service providers to lay their cables and pipes at the same time, so that when the road works are completed, there would be no need to dig up the place over and over again.

Broadband should not be confused with surfing on the Internet to download songs and movies or watch videos on Youtube. As a business establishment, we view our ability to have broadband connection at affordable prices (and not the outrageous charges levied in Cyprus where one eighth of the advertised bandwidth is delivered) as the competitive edge that we need to remain competitive and create new products and services.

The services industry is the backbone of the Cyprus economy and this sector needs foreign customers to survive and attract even more business. This means there is a need to communicate, send and receive data, images and video. Moreover, by investing in broadband, we can become a hub for e-commerce taking advantage of our other strengths such as a favourable tax regime, low VAT and a huge pool of professionals.

If complete towns or counties in the U.S. and some parts of Europe can invest in all-WiFi or all-broadband communities, to make them attractive,

why can’t Cyprus?

If President Christofias diverts a few minutes from his busy daily schedule to this pressing matter, he would agree that Cyprus needs to invest in the future and not waste money on monolithic projects that satisfy the egos of a few.

January 29, 2009 - Financial Mirror

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