Gaps, ambiguities and omissions are found in the bill for the establishment of the Cyprus Business Development Organization (KOAE), which was submitted to the Parliament in the nick of time, while the Ministry of Finance is under pressure for its approval.
Otherwise, the Republic will lose European funds amounting to €50 million to €69 million from the Recovery Fund.
The relevant bill, which was submitted to the Parliament at the end of the deadline, will facilitate access to financing for small and medium-sized enterprises and start-ups, self-employed and other businesses facing funding gaps. The Recovery Plan is completed at the end of the year and the Republic should, by the end of August, proceed with the appointment of the Board of Directors of the organization.
This presupposes the approval of the Government's legislative proposal by the Plenary Session of the Parliament next Thursday, in the last session before the summer holidays.
New companies, shares and collateral
During yesterday's discussion of the bill, during which its article-by-article examination by the members of the Parliamentary Committee on Finance began, the ambiguities came to light, which caused a strong reaction from the MPs.
Among the issues on which reservations were expressed are the beneficiary businesses that will have access to the KOAE, as, as the MPs said, the aim is to cover small and medium-sized enterprises. It is noted that, as the bill is worded, all businesses will have access to the KOAE.
In this regard, representatives of the Ministry of Finance argued that the goal is for businesses to access finance in cases where banks do not proceed with lending. They also argued that the beneficiaries are determined under the EU regulation.
Another provision for which concern was expressed by the Parliament is that, in order for the KOAE to proceed with loans to private companies, it must first establish companies and participate in their share capital.
Further clarifications were requested in relation to the non-conduct of a check on the solvency of loan applicants by the Central Bank, through the "Artemis" system. Reservations were also expressed by stakeholders.
Party positions
The president of the Committee, Christiana Erotokritou, expressed concern about the provisions that allow the KOAE to establish companies or participate in them.
DISY MP, Savia Orfanidou, noted that it should be clarified whether the organization will cover exclusively small and medium-sized enterprises and start-ups or even larger businesses.
AKEL MP, Aristos Damianou, criticized the Government for the way it promoted the bill, arguing that it was submitted "in a hurry" and under the pressure of the timetables associated with the disbursement of resources from the Recovery Fund.
ELAM MP, Marios Pelekanos, warned that a possible delay may lead to the loss of European funds for Cyprus.
The MP of the Direct Democracy, Yiannis Laouris, wondered whether the new organization will overlap responsibilities already exercised by the HRDA and the Ministry of Energy.
Brussels proposal
In the meantime, a note from the Ministry of Finance forwarded to the Parliament clarifies that the creation of a new legal entity under public law for the establishment of the Cyprus Business Development Agency was a choice of the Commission, even though the Ministry of Finance had proposed the evolution of the Housing Finance Organization (HOS) into a National Development Agency.
Brussels, according to a note from the competent ministry forwarded to the members of the Parliamentary Committee on Finance, had strong reservations and concerns about the timetable for the implementation of the project, as the process of selling the existing loan portfolio of the OCHS would remain pending.
The concerns concerned the upgrade of the electronic systems of the OHS and whether this would be compatible with its future work as a National Development Agency. At the same time, there were concerns in relation to the banking license held by the organization and whether it would be a disadvantage, due to the increased supervisory requirements of the Central Bank.
However, the Republic has received technical assistance from the European Commission, through the TSI – DG Reform, to conduct a study. For the establishment and operation of the organization, the state will pay a capital of €60 million.
In addition, the agency will cover its financing needs through its activities, such as interest on loans and bank participation fees in its projects, and will be able to borrow from European and international organizations.
