In the summer of 2021, Cyprus’s recovery and resilience plan, ‘Cyprus Tomorrow’, was approved by the European Commission. This will give Cyprus access to €1.2bn of EU funds, €1bn of which will be grants and the remaining as loans, for the duration of the 2021-27 Multiannual Financial Framework, the EU’s multiyear budget. As with all EU funds, the NextGenerationEU recovery instrument, the source of Cyprus’s recovery funds, comes with a multiplicity of strings attached. Primarily, it ties national governments to a minimum level of expenditure on green and digital investments, with Cyprus committing 41% and 23% of its funds respectively. Alongside these investments, Cyprus will implement various policy measures aimed at boosting research and innovation (R&I), and assisting SMEs, start-ups and scale-ups.

Part of the recovery plan’s strategy is to modernise traditional industries while facilitating the growth of emerging industries. Traditional industries targeted in the plan include agriculture, with €25m aimed at its modernisation and digitalisation, with the objective to facilitate the creation of innovative agri-tech start-ups. Enhancement of competitiveness for SMEs and start-ups is also attended to in the recovery plan with €52m earmarked for innovative projects, a €4m plan for consulting services for SMEs, €10m for a digital upgrade sponsorship scheme and €8.4m to support the extroversion and export orientation of Cypriot companies. Regarding green specific measures, SMEs will be able to benefit from a €40m sponsorship scheme for energy efficient investments and €20m scheme aimed at CO2 emissions reductions in industry and businesses.

The overall aim of the recovery plan is a transition to a greener economy and a more digitally connected society. However, some of the policies and funds simultaneously aim to address several endemic challenges faced by SMEs and start-ups in Cyprus, mainly lack of access to funds, due to the limited presence of Venture Capitalists and Business Angels. Additionally, research and development expenditure in proportion to GDP in Cyprus, although growing, is considerably lower than the EU average, 0.63% and 2.12% respectively. The small size of the R&D sector is partly due to a lower number of graduates with Science, Technology, Engineering and Math (STEM) degrees as well as a smaller rate of ICT experts as a proportion of the workforce compared to the EU average. Such challenges are undertaken by the recovery plan’s education policies which will digitally upgrade schools for improved digital and STEM skills, along with projects targeted at upskilling and retraining unemployed people with technical and entrepreneurship skills. In total, €94m will be directed to education modernisation, upskilling and retraining programmes.

In no way a panacea for Cyprus’s entrepreneurship or innovation ecosystems, let’s not forget however, that the ‘Cyprus Tomorrow’ plan is largely focused on moving the entire country, not just the discussed sectors, to a greener and more digital future, which include areas less dependent on these ecosystems. Policies involving e-government, energy and mobility will largely depend on public rather than private sector actions or will necessitate the application of existing, more complex technologies from abroad which are not available from Cypriot enterprises. Nonetheless, the allocation of a considerable amount of the plan’s funding towards SMEs, start-ups, research and innovation, demonstrates a great deal of willingness and confidence to build the steppingstones for these sectors and shift Cyprus from an old to a new economy.